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America's Cup: Negative political and media reaction follows release of AC36 analysis

by Richard Gladwell, 20 Jul 2021 00:05 PDT 20 July 2021
America's Cup match day 6 - Luna Rossa Prada Pirelli and Emirates Team New Zealand battle it out in race 9 © ACE / Studio Borlenghi

Separate Emirates Team New Zealand and NZ Government reports have been released today covering the economic and other outcomes from Auckland and New Zealand’s hosting of the 36th America’s Cup.

The Government and Auckland Council AC36 report has been reported very negatively in the New Zealand media, and would appear to have set the scene for the next America's Cup to be held at another venue, outside New Zealand.

One outlet claimed "the New Zealand economy was left $293 million worse off from hosting the 36th America's Cup".

Another had a revised figure "New Zealand made a loss of $156 million from hosting the America's Cup event in March."

Another quoted Auckland's Mayor: "Phil Goff: NZ's economy $293m worse off by America's Cup"

A story by experienced America's Cup journalist Todd Niall was more on the mark highlighting some inconsistencies in the figures and methodology, and noting the big underspend by superyacht attendance - due to the aggressive stance taken by NZ Immigration authorities towards all vessels wishing to enter New Zealand.

The total cost of the 36th America's Cup has been calculated in the report at a massive $776million.

The figures quoted are well out of range with other venues, particularly Bermuda which quoted their cost at USD64.1million and came in USD12million under budget , including the construction of Cross Island to take the America's Cup Village and two Challenger bases, along with the media centre and other infrastructure. Bermuda used the Cup for an extensive tourism program and predicted a five year long tail to the America's Cup influence.

The report does acknowledge that a lot of planned infrastructure works were brought forward to be included in the America's Cup projects, and that the construction was delivered on time and under estimated cost.

The spin put on the reports by the Kiwi media have made it virtually impossible for the financially beleaguered Auckland Council to justify putting investment into the 37th America's Cup, which is now being bid in the open market, after a half-hearted initial offer from the New Zealand Government.

That offer was leaked by the Auckland Mayor, while good faith negotiations were underway between the Council, Government and Emirates Team New Zealand. The initial leak was quickly traced back to the Auckland Council, and was followed by a second statement attributed to the Auckland Mayor claiming that the offer made was $100million, and that the America's Cup champions were seeking twice that amount.

Emirates Team New Zealand didn't release details of what they were seeking however it was made clear that the offer consisted of $30-40million by way of a Hosting Fee, similar to that paid by the NZ Government for AC36 - which went to towards TV coverage and other costs. The balance of $60-70million is said to be "Value in Kind", including $4million per year lease for the Emirates Team New Zealand base.

In its summary the report, does break down the amounts expended for infrastructure, which was already accounted for in Council long-term planning but brought forward, along with $267million of infrastructure spend for the APEC conference hosting in Auckland, which has been turned into a virtual event.

While the America's Cup was similarly hit by COVID - taking place 12 month after the start of the pandemic, at least the event took place - and produced viewership of just under a billion.

The Council and Government summary report says "an evaluation of the 36th America’s Cup shows that, despite being largely successful, the event was significantly impacted by the COVID-19 pandemic and having fewer than forecast challengers."

The effect of COVID is massively downplayed, and the measures adopted were applied by various governmental bodies, made it impossible for Cup fans, sponsors, VIP's and other members of the America's Cup family to enter New Zealand. Those included a substantial number of Australian America's Cup fans who were unable to gain entry to New Zealand. International media were almost non-existent in Auckland, aside from those involved directly in the host broadcast.

The report only judges the viewership in terms of the impact on Auckland tourism, and does not mention the impact of the America's Cup on the NZ marine industry, nor does it calculate the cost to the NZ marine industry of lost business because of the refusal to allow superyachts into New Zealand due to COVID inspired immigration restrictions.

The long term damage to the NZ marine industry for the same reasons is not considered.

Most of the superyachts who had indicated they would attend an America's Cup and over 70 had paid deposits on marina berths, most of which were refunded when the New Zealand borders closed in March 2020. A total of 110 superyachts were turned away - representing a significant loss of revenue for the NZ Marine industry, and spend in the local economy. The reports while totaling the cost of staging the America's Cup, ignore the fact that New Zealand Marine industry has a revenue of over $2.5billion per year - and that impressive spend would have received a massive boost from a full-blown America's Cup being staged in Auckland. That economic effect would have overflowed for several years for superyachts based in the SW Pacific, and needing to head south to escape the cyclone season.

As well as the superyacht events, a trans-Tasman yacht race with over 50 entries, was cancelled which would have been a feeder to the 14 America's Cup related events. Again the impact of the cancellation of that event is not considered. Neither is the Youth America's Cup which had attracted substantial international entries, and would have added significantly to visitor numbers.

The report does make mention of the low number of challengers, but the fleet of four teams in Auckland were all very well and independently funded, and other teams while lifting numbers would not have been funded at the same level for a first Cup attempt, in an event which had changed class five times in the last five America's Cups. That situation was compounded by the introduction of the AC75, a new radical class which received some scathing comment, by those who had never seen one sailing in the flesh.

The America's Cup venue bidding is expected to be cut to a short list of two or three in the next week, with Cork, Ireland and Valencia, Spain believed to be amongst the favoured contenders, with an announcement made on September 17, with a regular multi-challenger America's Cup being held.

Last week Royal New Zealand Yacht Club Commodore, Aaron Young circulated an email to members suggesting that if they had a scheme to fund an America's Cup in Auckland, then those offers needed to communicated well ahead of the September 17 deadline.

The report correctly identifies the spend made on dilapidated Auckland waterfront infrastructure, but the media and political commentary has ignored the waterfront legacy created by the America's Cup expenditure. For any future America's Cup that the infrastructure would remain in place. With open or more relaxed borders, post the COVID pandemic, Auckland and New Zealand would be in a much better position to stage future America's Cups without requiring a spend on infrastructure and facilities.

Media and political reaction to the Government report has created an environment that ensures that the hosting of AC37 is unlikely to be staged in Auckland, and if the Council follow the same path from the 2000 and 2003 America's Cup facilities development, then the area now cleared, which has housed fuel tank and hazardous substances storage on Wynyard Point for over 85 years, will be sold off to developers for apartments and office buildings.

The key findings from the Council and Government reports include:

Findings include:

* 36th America’s Cup attracted 38,745 visitors to Auckland, who stayed 377,765 nights around the region.

* 36th America’s Cup created an additional $298.2 million of expenditure in Auckland through the costs of event operations, purchases of tourism goods and services, and other goods and services.

* It was the most watched America’s Cup of all of time with a total global audience of 941 million people and a dedicated audience of 68.2 million viewers across the world, who watched 52 hours of the live broadcast in 236 territories.

* The overall economic return of the event was lower than forecast. This was due to the significant impacts of COVID-19, restricting international visitors, media and superyachts as well as public race days in the race village. This was further impacted by a lower-than-expected number of challengers and the costs being higher than initially forecast.

* The cost-benefit analysis (CBA) for Auckland has identified a benefit-cost ratio of 0.85. In other words, for every dollar put in Auckland got 85 cents back. When considering financial returns only, Auckland got 72 cents back for every dollar put in. The CBA considers social, environmental and cultural factors as well as financial.

* Legacy infrastructure includes upgraded and expanded superyacht berthages, upgraded wharves, new public spaces and event spaces in Wynyard Quarter, calm water spaces for future water-based events.

* 23 supporting events and activations were held throughout Auckland as part of the Summernova Festival which attracted more than 70,000 unique attendees, separate from the America’s Cup events.

* 94% of attendees were satisfied or very satisfied with their overall AC36 experience.

* 89% of attendees living in Auckland said that hosting AC36 increased their pride in Auckland and 85% thought it made Auckland a more enjoyable place to live.

Over a four-year period, a mammoth multi-agency effort was required to deliver the AC36. Representatives from across the Crown, Auckland Council, and mana whenua worked alongside America’s Cup Event Ltd (ACE), defender Emirates Team New Zealand (ETNZ) and the Challenger of Record (COR) Luna Rossa Prada Pirelli.

To ensure the safe and successful delivery of the 36th America’s Cup, the Auckland Council group invested $215.2 million over four years across operating and capital expenditure*. This included $106.3 million spent on the development of key event infrastructure, and $14.3 million spent on city operations aspects such as transport services, crowd management and security, marketing and promotion and supporting peripheral events through the Summernova Festival.

Auckland Council also brought forward $92 million of already planned works that were set to take place in the city to reduce future disruption and duplication of efforts. The 36th America’s Cup Impact Evaluation by Fresh Info estimates that delivering this infrastructure early will result in future savings of $67 million. This included the removal of the tanks in Wynyard Quarter, upgrades to toilets, new biosecurity signage and cleaning stations, extension of CCTV and other costs such as the relocation of SeaLink and fishing fleet.

Auckland Unlimited Chief Executive Nick Hill says, on behalf of Auckland Council, major events like the America’s Cup often help to underwrite the amenities of a city, providing a catalyst for the development of lasting infrastructure and accelerating longer term projects.

“The America’s Cup has further transformed Viaduct Harbour and Wynyard Quarter, opening up new public spaces, artworks, calm water spaces and infrastructure that will be enjoyed for years to come,” he says.

“The event helped to inject vibrancy, colour and fun across the city, and created a buzz that was felt Auckland-wide. Nearly 280,000 people attended the event at least once – down at the Village, on water, or from one of the great vantage points that our unique landscape provided.

“The challenge was laid down by COVID-19, and Tamaki Makaurau Auckland responded by putting on a great show as one of the only major events with spectators to happen globally during 2020 and the start of 2021.

“Record numbers of people tuned in from around the world to watch the AC75s fly across the Waitemata, and New Zealanders came out in the tens of thousands to show their support. Those stunning images will remain in people’s minds for years to come and we look forward to welcoming these visitors back when our borders allow.”

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