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America's Cup: Irish officials advise Government to back away from Cup bid

by Richard Gladwell/ 15 Sep 08:02 PDT 16 September 2021
The leading boats in the Beaufort Cup Fastnet Race for military and rescue service crews on day 1 of Volvo Cork Week © David Branigan / Oceansport

With an announcement on the preferred Host Venue expected on Friday September 17, several Irish media are reporting that officials from the Department of Sport are advising the Government to withdraw their bid to stage the 37th America's Cup in Cork.

The Irish Examiner says that it has learned that the government in recent days requested more time - with some suggesting they asked for another six months - to consider the costs and potential financial benefits. Sources said there appeared to be no political will to back the event.

The bureaucrats advice follows consideration of a report from Ernst Young stating that the Infrastructure brought forward, and created for the Cup would cost €100million and Event costs €50million - for a return the consulting firm projects at over €450million.

The chief backer of the Irish bid, Foreign and Defence Minister Simon Coveney, had put together an ambitious plan linking the America's Cup hosting to the Global 2025 initiative. Designed to get Ireland back on its feet after the trauma of the Global Financial Crisis in 2007-2008, Global 2025 planned to expand significantly Ireland's place in the world and draw on its diaspora of 70million who had left for other pastures at various stages of Ireland's turbulent history.

In a piece of unfortunate timing, Coveney, from the second generation of a Cork yachting family, was chairing the UN Security Council meeting on Afghanistan, at a time when he came under political attack in the Irish Parliament over an appointment he had made to the UN, which has been used by his political opponents to call for a vote of No Confidence in the Senior Minister, who hails from Cork.

The no-confidence motion was lost by with 92 of the representatives supporting Coveney with 59 against.

Earlier this week the Cork Chamber of Commerce were reported the the America's Cup hosting was an opportunity not to be missed.

Chamber President Paula Cogan said: “Now is the time to focus the gaze of the world on our region and the America’s Cup offers the perfect vehicle for doing so.

"As we move beyond the pandemic, we have an opportunity to send a strong signal to the world, and the 900m viewers of this event that Ireland has successfully navigated the pandemic and is open for business.”

Spend mostly already planned projects

The Irish Examiner reported earlier this week that the most of the €100million of infrastructural works attributed to the America's Cup were "planned anyway, and would simply be fast-tracked, including the electrification of the Cork to Cobh rail link, the upgrading of the Cobh to Cork road, including the bottleneck Belvelly Bridge, as well as infrastructural upgrades to Kennedy Quay in Cork city which has been earmarked as the racing village - the potential of this area was highlighted during lockdown when it became one of the go-to city centre outdoor spaces.

"The spend would also include the development of new marina facilities in Cobh," The Examiner said. Also included in the infrastruture spend is the "the development of new on-shore technical facilities for the racing teams, who base themselves in the host city for up to two years in advance of the race to design, build and test their racing yachts. Two sites are being considered - the former IFI site and the Doyle shipping yard site - both near Cobh"

The timing of the Irish bureaucrats' reported advice is at odds with earlier statements by the Minister for Public Expenditure and Reform Michael McGrath that he does not expect a final decision to be made this week on whether Cork will play host to America’s Cup in 2024.

Speaking in Cork on Monday morning, the Minister said that “an extensive process of due diligence is underway” and that he does not expect the process to be completed this week. He said that it is “critically important” that the process of due diligence, which is being led by the Department of Sport and Tourism, is completed where “a significant amount of public money is involved”.

On a value for money basis, the Irish costs are comparable with that expended in Auckland for the 36th America's Cup. The costs were clearly identified in the Auckland Council's own report as being $106.3million on wharf and harbour construction plus another $92million on planned works brought forward, with an estimated cost saving of $67million through being combined with the America's cup project. The works for the Cup included harbour development, removal and remediation work on a disused fuel storage and hazardous substances area. The NZ Government contributed a $40million Hosting Fee with America's cup Event Ltd raising the balance of the hosting cost.

The Auckland Council spent $17million on Cup related activities and promotion - out of an original budget of $40million, reduced to $20million.

A post Cup benefits analysis produced by a consultancy on behalf of the NZ Ministry of Business, Innovation and Employment (MBIE) used a template that had never been used previously for an America's rendering it useless for accurate comparison with previous and future America's Cups, in New Zealand and elsewhere.

Of course if the €100million infrastructure spend is an issue, then it can simply be reduced by not bringing forward the surrounding works that are "nice to have " but not essential for the Cup. Auckland did a similar exercise when the 2021 facilities plan was given the green light, but a subsequent re-estimate resulted in the price escalating by $100million, however a re-design got $70million out of the equation and the Government and Council initially wore the difference. However the finished project came in ahead of time and $17million under budget.

Following the outbreak of the COVID-19 pandemic in March 2020, the NZ Government elected to close borders, order a nationwide lockdown and pursue an elimination strategy for COVID-19. Provision was made for America's Cup teams, and essential services to enter New Zealand via a 14 day quarantine, and the racing in the Cup continued as planned, attracting a viewing audience of 941million global audience, and broadcast to 236 Global territories, according to a third report produced for America's Cup Event Ltd.

Very relevant to the Cork hosting is that the America's Cup hosting in Auckland was put to air at 4.00pm in the afternoon in New Zealand or 3.00am in Ireland and 4.00am in Italy and 11.00pm in New York. Obviously a much bigger audience could be expected in a more favourable time slot in Europe and USA.

Nielsen estimated the gross media of the event at €832million, and then applied a different measurement method which valued the coverage over a four month period at €211million.

America's Cup media exposure meter can be started at the time the venue is announced and continues for a week or so after the completion of the Americas Cup. Indeed some stories in the buildup to the Cup, such as a capsize, or a dramatic speed image, launching of new AC75's will attract higher story ratings than for the Cup itself. (Sail-World's highest ranking story was when American Magic capsized, and the second highest when the repaired Patriot raced again.)

The period of measurement (ie regatta only or over the four year Cup period) usually accounts for variance in reported audience sizes.

Next Cup bigger than Auckland

The America's Cup proposed for Cork is expected to cover a more substantial period than the Auckland event, with teams expected to move on site earlier believing they would have a less disrupted testing and speed development period than for the Auckland event. That will increase readership interest in the host venue - relevant to generating increased tourism by Cup fans.

Assessment methods used by consultants with no America's Cup experience produce arguable figures, particularly in the use or not of spend multipliers.

However there are some "rule of thumb" measures which give an insight into spend.

Typically an America's Cup team budget runs out at€75million of which about 50% is spent at the venue. As well as increased local business revenue, there is increased tax revenue, often completely offsetting the amount of the Event or Hosting Fee. The Cup "super teams" spend €120million. At least six teams are expected for the 2024 America's Cup. In addition to the same three events that were staged in Auckland, a Youth America's Cup and Womens America's Cup are scheduled - bringing more teams to the regatta.

The Youth America's Cup scheduled for Auckland had attracted 19 teams from 13 nations, who had paid entry deposits at the time of the cancellation by the NZ Government as part of its COVID measures. The Event was expected to generate a spend of NZD$10million or €6million.

According to the New York Times 159 superyachts were expected in Auckland for AC36 which would have spent NZ$300million or €181million - calculated by compiling an average spend per boat (across different boat lengths) sizes from accounting records.

The intention for Cork was that it would be a "Free" regatta as in Auckland in that there would be no entry charge for spectators to the Cup village or land-based vantage points. In addition the TV broadcasts would be free to air in all territories except possibly USA where in A36, the territorial rights holders all insisted on blocking free to air coverage. Free to air coverage greatly increases the audience size giving much higher viewership and more exposure to team sponsors and event investors.

Initially, a long list of 35 expressions of interest in hosting the 37th America's Cup was whittled down to five being: Jeddah, Saudi Arabia; Valencia, Spain; All Spain/Barcelona; Cork, Ireland and with Auckland, potentially still an option despite being unable to negotiate an agreement in their three month exclusive negotiation period after the conclusion of the 36th America's Cup in mid-March.

If the advice of the Irish bureaucrats is accepted, then it is expected that Emirates Team New Zealand and Royal New Zealand Yacht Squadron will consider the other bids, which are rated against a set of 15 criteria with a weighting scale applied in the evaluation process. Only three of the 15 points hinge around financial undertakings, with the remainder covering Team base sites, weather and racing area, attractiveness to team and event sponsors, media considerations and related issues.

The regatta could also fire up interest in New Zealand, despite the country being in yet another COVID lockdown.

Public opinion appears to have shifted in favour of the Government funding the event to a greater extent than the $31million initially offered in their three month exclusive negotiation period. Auckland Council proffered "value in kind" of $68million - while detail of that offer was not disclosed, it is believed to be an inflated figure that will be revisited using a more realistic lens.

It is more likely that money private sources could be used. While the proposals put forward by a New Zealand group of unnamed investors will probably be revived, a requirement of the group for ETNZ CEO to be kept away from "the purse strings" is likely to push the team in the direction of a less hostile group.

Another alternative is for the teams to carry a greater share of the financial burden, or run the regatta without making it a free show for the public and free to air TV.

In America's Cup Regattas prior to 2007, the Challengers came away from the the Challenger Selection Series with a dividend.

In the 2007 America's Cup when the Swiss team Alinghi defended and the regatta was run by their event arm America's Cup Management, a surplus of $48million was distributed amongst the Defender and Challenger teams. That amount was paid ahead of the due date, and the full amount of the surplus was reported to be $100million, giving lie to the notion, apparently echoed by the Irish bureaucrats, that the event is a financial black-hole.

The citizens of Cork will be hoping that like in New Zealand, politicians with an eye on their constituents and voters, often do not follow the conservative advice of their officials.

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