Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and APNZ wire agency

Countries no richer hosting big events - NZIER

The NZIER report says that domestic tourism is displaced expenditure that would occur elsewhere in the economy, which significantly reduces the overall benefit from the events. Photo / File
The NZIER report says that domestic tourism is displaced expenditure that would occur elsewhere in the economy, which significantly reduces the overall benefit from the events. Photo / File

Big events like the Rugby World Cup do not make the host countries richer, independent economic research group NZIER said.

NZIER said major international events tended to "suck in" visitors from before and after the time they are held, creating a displacement effect. It said most event analysis doesn't stack up because it missed the displacement effects.

"It means the benefits are often far smaller than people think," NZIER said in a report.

The displacement effect meant the net number of visitors an event generates is much lower than the visitors to the event, and NZIER said the Rugby World Cup 2011 was a good example of this.

"We estimate there was little overall boost to visitor arrivals because there were fewer visitors before and after the 133,000 international visitors that came to New Zealand for the tournament," it said.

"Crucially, domestic tourism is displaced expenditure that would occur elsewhere in the economy. This significantly reduces the overall benefit from the events. "Simply put, major domestic events do not make New Zealanders any wealthier," it said.

Increased spending at the major event is mostly offset by reduced spending elsewhere. This might take the form of reductions in other holidays, spending on takeaways and eating out, or spending on household items such as TVs.

NZIER said most event analyses used multipliers to capture second rounds of spending from the profits and wages captured by local events.

But the multipliers used to capture second round spending also needed to be applied to the reduction in spending that cannot now occur elsewhere in the economy.

"Regional events are more likely to only reallocate spending across regions. They are likely to benefit the region, but at a national level let's be clear - little additional income is generated by these events," it said.

NZIER conceded that large international events like the Rugby World Cup and the Olympics left the host region with better facilities and sometimes upgraded transport links.

"But infrastructure is expensive, and the costs are largely borne by local residents once tourism displacement is considered," it said. 'In addition, the costs of major events typically blow out."

Research by the Said Business School at Oxford University showed that every Olympics since 1960 averaged a cost overrun of 179 per cent. Event analysis needed to consider who pays for the infrastructure, and any likely cost overruns.

For the large costs to stack up economically, the infrastructure needs to deliver lasting dividends long after the major event is finished, NZIER said.

NZIER - established in 1958 as the New Zealand Institute of Economic Research Inc - is a non-profit incorporated society based in Wellington. Its team of economists is one of the largest in New Zealand outside government.

ASB Bank chief economist Nick Tufley said NZIER had made some good points about the displacement costs of events.

But he said there was a risk the loss of visitors due to the Canterbury earthquakes was counted as visitor displacement ahead of the Rugby World Cup because visitor numbers were hit hard in early 2011 and only started to recover from about July.

"The decline was particularly acute within Asia, but key markets such as United Kingdom, Europe, the United States were clearly affected by the earthquakes," he said.

At last year's Rugby World Cup, one of the major sponsors, MasterCard, said the event could generate $782.5 million for the local economy.

Martin Snedden, who headed up the Rugby World Cup in New Zealand and who this year was appointed chief executive of the Tourism Industry Association, said it was important processes were in place to assess the benefits of major events.

In 2005, during the Rugby World Cup bidding process, cup visitors were estimated at 65-70,000.

The Department of Statistics, from July 2011, put a question on the immigration card asking whether the visitor was here for the cup and about about 133,000 people said yes.

"After the event and in early 2012, there were plenty talking about displacement," Snedden said in an email to APNZ.

"As 2012 has gone on, and the 2012 comparative figures have come out, that conversation has changed very significantly, with many now able to see that Rugby World Cup was very helpful in what was otherwise a very difficult year," he said.

Snedden said that just about every way, economic and otherwise, the Rugby World Cup delivered "everything that was promised and, in many instances, far exceeded those promises".

- APNZ

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