Gladwell's Line- America's Cup investment a smart move for New Zealand

by Richard Gladwell on 30 Apr 2011
On the back of the Emirates Team NZ funding and America's Cup challenge announcement there has been a lot of media comment, most of it negative on whether NZ Economic Development should be investing in the New Zealand team.

Most of this comment has been negative and ill-informed and comes off an 'eat the rich' mentality that pervades so much of what passes for media commentary in New Zealand on pretty well any topic.

In New Zealand, earning more than the average wage makes you a 'high earner'; anyone who earns more than $100,000 per year is considered to be 'wealthy'; and houses of more than a million dollars are 'mansions'.

And so the cliches go on.

Much to the socialist media's dismay the public support for the NZ Govt/Economic Development investment in the AC has been fairly good, and the beat up has been confined to those who believe that in hard times, hand-outs come ahead of investment.

The economic return on the AC is reckoned to be about $70 million for a challenge and $800 million for a Defence, of which NZ has enjoyed two. The latter does generate additional tourism and 'walk-up traffic' that has a downstream effect on business.

During the week on Radio Live Emirates Team NZ CEO discussed the economic impact of the New Zealand investment. http://www.radiolivesport.co.nz/Audio/Emirates-Team-New-Zealand-chief-executive-Grant-Dalton-talks-to-LiveSPORT-about-their-government-funding-for-their-Americas-Cup-challenge/tabid/252/articleID/8353/Default.aspx!Click_here to listen

Began in the early '80's

The superyacht industry was in its infancy when NZ entered the America's Cup game in 1984, now it is a major industry in NZ with some ambitious targets. Currently it is a $1.7 billion a year industry and plans to grow to $2.6 billion in 2015, 70% of its output is for export. It employs more than 10,000 people in 1300 companies.

If you hark back to the early eighties, in fact 1980/81 to be precise, when Ian Gibbs had Swuzzlebubble built by Cookson Boats, with some very innovative interior design by Bret de Thier and - she was probably the beginning of the international marine industry, that is now measured in the billions of dollars.

Gibbs' boat went onto win be the top scoring yacht in the 1981 Admirals Cup - then the world championship of offshore racing and was subsequently purchased straight after the event by the CEO of Volvo, who would be expected to have an eye for a quality product.

Other top race boats were built around that time, but mostly by a project building process where a large warehouse/factory was leased, a building team assembled and the boat built - before the infrastructure evaporated.

It was not until the 1986/87 America's Cup that the ongoing boat building facilities really started, with McMullen and Wing (who had built Peter Blake's Ceramaco) and Marten Marine coming together to built and fit out the first two fibreglass 12 Metre, sailed in the 1985 World Championship and then Kiwi Magic, KZ-7.

That relationship continued with the building of KZ-1 for the Big Boat Challenge for the 1988 America's Cup.

The next step was the construction of Fisher and Paykel for the 1989/90 Whitbread, by Marten Marine, along with Steinlager 2 under the oversight of Tim Gurr.

Behind those projects a large group of builders, designers, sub-contractors and suppliers were created, which rolled from project to project.

New Zealand punches above its weight

Their products were also developed to compete, or be the best in the world and give New Zealand the reputation of being a small country that could punch well above its weight, to the point of being unbeatable, on the world's grand prix yachting circuits.

Between these campaigns the superyacht construction and servicing developed trading off the reputation earned in the racing circuits for innovation and excellence. New Zealand got a reputation for building fast, high quality boats that worked.

Home grown designers like Bruce Farr, Ron Holland, Paul Whiting, Laurie Davidson, Greg Elliott, Brett Bakewell-White and others made their mark on the international scene and were able to direct racing and other work back to New Zealand

The wins by the New Zealand Olympic Yachting team in the 1984 Olympics, helped the industry's reputation, as did success on the world match racing circuits with the great Russell Coutts vs Chris Dickson rivalry.

Behind all this sporting success the superyacht and marine industry continued to evolve, but made the transition from using project contractors to building the boats completely in-house - giving better control over quality, developing intellectual property and know-how, and being able to achieve delivery deadlines. All of which was reflected in a higher quality product, built by people who understood yachts and racing, and could deliver on budget.

In 25 years an industry had shaken off its cottage industry root, and developed into an industry that has a turnover of $1.7billion and will be worth $2.5 billion, 30 years after its revitalisation.

The backbone of that growth, some now call an arrowhead - because the industry has outgrown the event - is the America's Cup.

High added value industry

Every economic strategy session we have every attended has always espoused the need for New Zealand to be involved in export industries with a high local content and added value. What could have a higher added value than the superyacht and marine industry?

The NZ tradition of chopping down trees and exporting logs, or exporting coal and semi-processed meat and dairy products are not high added value exports although they do provide some employment.

The NZ Marine industry now employs 10,000 people and trains over 500 apprentices a year. The industry is competitive but well organised, and ably led by the Marine Industries Association.

The America's Cup and Whitbread RTW and to a lesser extent the Volvo Ocean race have been the shop window of the marine industry as the technology and know how developed for these events flows back into other areas of the industry, and particularly superyacht production.

In good times, NZ builds about 12 superyachts a year, which is only a small percentage of the world production, however most of the craft are at the higher end of the price and size scale - again punch above its weight. The revenue earned from the superyacht industry is substantial - regardless of whether the boats have been built in New Zealand or offshore.

Many of those who are now marine industry leaders, were sailors in the various campaigns and have come ashore and applied their skills and know-how to develop business within the industry.

Mention was made at the Emirates Team NZ AC Challenge announcement last week of the involvement of hundred of NZ suppliers to the team, underlining the real value that this shop window brings to the industry.

And if the tent had folded?

What would have happened had Emirates Team NZ folded their tent and said it was all too hard?

Not only would NZ have lost one of its sporting icons but the NZ marine industry would have lost its shop window. And, if you do the maths off the numbers quoted above the chances of bumping exports by $630million a year in 2015 would have been greatly reduced.

New Zealand has two iconic teams - the All Blacks are one and Team NZ are the other. While many are quick to rag the sailors about losing the America's Cup in 2003, they tend to overlook that the All Blacks have only ever won one World Cup - almost 25 years ago.

Both the All Blacks and Team NZ offer NZ trade and tourism opportunities that others cannot - because they have the mana (prestige/respect) of being very well performed teams on their respective world stages and most of the movers and shakers of world industry are happy to be on the same stage as people who are perceived as being winners.

Yes, New Zealand has been hit by some pretty hard natural disasters lately. But the road to recovery comes through investment and some hard marketing.

On TV the other day there was a news item about a South Island tourism operator saying that their business had dropped by 50% after the earthquakes (and she wasn't based in Christchurch). How do these people get back on their feet - by getting a Government handout?

Or, by being part of a hard focussed marketing program funded partially by the Government to get tourists coming back into NZ - as can be done off an America's Cup World Series travelling to probably a dozen locations, plus the exposure off the America's Cup itself?

It is an economic reality that left to the small operators, promotion of the New Zealand brand and destination doesn't happen, for obvious reasons. The only way to get the tourism and export growth for the small operators is for the Government to invest on a macro level and get the benefits back at a micro level in terms of employment and tax revenue.

Without the New Zealand investment in itself the country won't get the dividend.

Maybe some would be better to open their eyes before they engaged their jaws or picked up their pens.