$507 million mystery

BY JOHN HARTEVELT

It's the $507 million mystery.

Somehow, we are told, the 45-day rugby festival this country is hosting a year from now will net half a billion dollars for the Kiwi economy.

That's $115 for every man, woman and child.

You've probably heard the $507m figure before from the tournament organisers, Rugby New Zealand 2011.

The figure started life in a report made public in June 2006. But the head of RWC 2011, Martin Snedden – who is not shy to quote the figure – said he did not know who commissioned that report and it has been a while since he read it.

"It's done five years before an event takes place, so you actually have to have a reasonable amount of tolerance in some of the things you're estimating at that stage," Snedden said.

Greg Akehurst, a director at Market Economics, who was heavily involved in the report, said $507m was a top-end figure and the reality would probably be lower.

"If anyone actually takes the time to delve into the reporting and the generation of these figures, they will find that they are all caveated," Akehurst said.

"It's not a figure that can be taken in isolation."

Sam Richardson, an economics lecturer at Massey University, said the $507m figure was fanciful.

"I wouldn't say it's grossly overstated, but it's not likely to be that big."

If the rewards from the Rugby World Cup are not what we have been led to believe, should we start getting more concerned about the risks? One year from kick-off, what could go wrong? And what will it cost us?

Late last year, Waitakere residents noticed a new line on their rates bill. It was a "Rugby World Cup levy" charged to help recoup the $2.84m that the Waitakere City Council will spend on RWC-related things over three years. If central government did the same with your annual tax bill, every taxpayer would see something like $89 charged against their name.

Costs to the taxpayer for the RWC include $190m on a revamp of Auckland's Eden Park, $20m on the joint purchase of Queen's Wharf, and liability for an estimated $26m worth of losses from hosting the tournament.

The cost could have been much higher, of course. South Africa has just been left with an eye-watering $12 billion bill for hosting the Fifa World Cup.

Snedden said Auckland would be left with a much smarter sports stadium and vastly-improved transport infrastructure. The country would also cash in for years to come on untold riches as a result of the international exposure.

"It's very hard to put a firm dollar figure on that, if you like, but instinctively you know that it probably stacks up pretty well," Snedden said.

Richardson's instincts are different.

Yesterday, he lodged his PhD, in which he joins the growing ranks of sports economists worldwide who have consistently found that major sports events fail to generate much, if any, of the promised economic rewards.

Richardson analysed the economic impact of 11 major sports events hosted in New Zealand over the past 10 years. Only two made any kind of a splash.

The RWC will be a major event but the lion's share of the profit – from broadcasting rights, merchandise and advertising – is sucked up by the International Rugby Board in Dublin.

New Zealand is left trying to cover its costs through ticket sales.

The only other way to get our money back is by soaking up the cash spent by foreign visitors here for the tournament or who come later after watching it.

If money is to be made – or at least losses minimised – from the RWC, several things will have to break in New Zealand's favour.

A single security glitch, a major traffic snarl-up or a drunken brawl could cancel out scores of glowing international media reports.

"The higher the profile, the more exposure, the greater the risk," Snedden said.

Fears raised by health advocates about the tournament turning into a World Cup of Drinking, were unfounded, he said.

Like the head of the police operation for the RWC, Superintendent Grant O'Fee, Snedden said most people were paying significant amounts of money to attend matches and they would not be inclined to get themselves into trouble.

"What is anyone relying on to say that it's going to become an uncontrolled booze-up for RWC?" Snedden said.

During the America's Cup yachting regatta in 1999 and 2000, Auckland University's Michael Barker and two others studied the effect of the event on crime. Drawing on police statistics, the study revealed a high proportion of drug and anti-social offences, drunk and disorderly behaviour and violent offences during the event.

"The nature of offences during this period was largely hedonistic, arising from the event celebrations and an increased consumption of alcohol," a paper by Barker on the study stated.

Barker's paper noted the upside of positive marketing on the back of major events but added: "Similarly, sporting events and host destinations can gain an unworthy reputation if associated with occurrences of crime."

O'Fee said a rugby test match generally coincided with "a small blip in disorder".

He was more worried about the police's job protecting visiting dignitaries and managing the movement of people during the tournament.

While Auckland's Eden Park will have test-runs, Dunedin's new $198m enclosed stadium will not.

In fact, Otago Stadium – as it will be called during the tournament – will not be finished by the time the tournament starts. While organisers have August next year as a scheduled completion date, the internal fit-out will almost certainly not be finished until December next year.

So, will the country still be willing to pay for another major sporting event?

"A year ago, my view was no, there is no chance," Snedden said.

But now, he thinks it might be possible.

"If New Zealand is able to use the hosting of the tournament as a catalyst to do some wider things that are of benefit to New Zealand in the longer term, then maybe in the end it is worth doing.

"That's a decision I guess the Government of any time in the future is going to have to assess."

CRUNCH ON HOTELS AT BUSINESS END OF CUP

There are no concerns about accommodation for the first part of the Rugby World Cup, but at the sharp end some fans looking for hotels will have to settle for a lower standard.

The Official Accommodation Bank was wound up this week, with $60 million worth of lodgings booked for players, officials and VIPs. The inventory left over from the bank is being returned to providers and more and more bed nights will become available as the tournament kick-off comes closer.

"What happens now is that the free, independent travel market gets activated," Rugby World Cup 2011 chief executive Martin Snedden said.

"We haven't got an accommodation issue at all for the pool phase of the tournament... The issue is the final three weekends."

About 10,700 World Cup tourists are expected to be in New Zealand on the day of the opening match: September 9, 2011. This number is expected to grow to about 43,000 for the semifinals and final. Of the total, about 9000 will be expat Kiwis, easing the burden on accommodation.

Three cruise ships with a total 5500 berths will be based in Christchurch and Wellington for the quarters and then Auckland.

"The demand for high quality hotel beds will exceed supply significantly so that's why the cruise ships come in to play," Snedden said.

Those that miss out on the cruise ships or a hotel room will have to re-adjust their expectations.

- © Fairfax NZ News