New Zealand already a winner from the Rugby World Cup; but bigger things await
Paul Kane, a partner at accounting firm Grant Thornton, looks at the financial boost that both the 2007 Rugby World Cup and 2010 FIFA World Cup delivered to their respective countries, and puts this into a New Zealand context.
Irrespective of how the All Blacks perform on the playing field, New Zealand will be a big winner during and following the Rugby World Cup.
Yes, we all want the All Blacks to win and for the team to get rid of the “choker” tag and bury forever George Gregan’s famous retort “four more years”, but there can be little doubt that this country will score heavily not only come September and October, but next year and the years following.
There has been much debate already about the cost of the Rugby World Cup (RWC), the expected $40 million loss (two thirds of which will be covered by the Government in what I prefer to call an investment), the validity of estimates on television viewing numbers, price gouging by hotels and those offering private accommodation and the pace of ticket sales. On the flip side there is the fact that the Government will receive approximately $112 million in extra tax revenue.
This is the norm before events like this – before visitors arrive and start flashing around their foreign currency. The scale is different, but the same debates were voiced before the last Rugby World Cup in France in 2007, the FIFA World Cup in South Africa last year and even the upcoming Olympics in London next year.
We can only crystal-ball gaze as far as London is concerned, but both the 2007 Rugby World Cup and 2010 FIFA World Cup gave their countries significant economic boosts.
The Rugby World Cup in France was estimated to deliver a total economic impact of $NZ5.7 billion, while South Africa received a $3.1 billion boost.
To see how major events impact on a local economy, we should look at the recently completed Grant Thornton International report entitled “South Africa 2010 FIFA World Cup, a year in review.”
During last year’s event in South Africa, 350,000 foreign visitors spent around R8 billion ($NZ 1.4 billion), resulting in hotel average room rates being up 61%, hotel occupancy up 18%, Visa card spend up 55%, retail sales up 7.4%, food and beverage industry income up 10.4% and the beer market grew 12%.
This is the type of spinoff that puts money in many different pockets, not just the corporates. There’s the extra bar and restaurant staff that are employed, the hotel staff that work longer hours, the taxi drivers who ferry people to and fro, and the shops that will host them at different times throughout the competition, to name but a few.
Those were the short term benefits for South Africa. Where the longer term growth will come in is in tourists attracted to South Africa. Ninety two per cent of the visitors indicated they would recommend South Africa to friends and relatives and 90% said they would visit again.
Even before the first rugby ball is kicked in the 2011 cup, New Zealand, thanks to the much needed infrastructure spend that has occurred, is well ahead. Would development’s such as Dunedin’s magnificent new enclosed stadium and the upgrading of Eden Park, Queen’s Wharf, Auckland’s waterfront and parts of Auckland motorway have occurred without the Rugby World Cup? Highly unlikely, with a cumulative spend of over $NZ1 billion and business activity low during the middle of the world financial crisis.
Just as the RWC has been a catalyst for infrastructure spend, it will also act in the same way for New Zealand business. New opportunities have or will be created, especially in the service and professional services areas via various expos and trade functions and the myriad of hosting opportunities that will be available during the event.
Auckland will be the big winner. By hosting quarter finals, semi-finals and final, along with other pool games, Auckland will be the hub for nearly all overseas visitors, especially now that Christchurch, the gateway to the South Island, is unfortunately no longer an option.
The Reserve Bank governor, Allan Bollard, predicts that hosting the World Cup will bring $700 million to the New Zealand economy, there has already been in excess of $1 billion spent on RWC-related infrastructure upgrades, up to 80,000 international visitors are heading this way and the positive spin off from the event will continue for many years.
If we could just guarantee that the William Webb Ellis Trophy will remain in New Zealand after 23 October then the guaranteed financial windfall combined with a psychological boost will surely test Mr Bollard’s growing fears for inflation, and the levels of confidence will envelope this country.
Further enquiries, please contact:
Paul Kane
Partner, Privately Held Business
Grant Thornton New Zealand Ltd
T +64 (0)9 308 2576
E paul.kane@nz.gt.com