With the glory of the 2011 Rugby World Cup now a faded memory, New Zealand is once again preparing to host a major sporting event. This year we will welcome not one, but two, international tournaments - the ICC Cricket World Cup and Fifa Under-20 World Cup.

The Cricket World Cup, which we are co-hosting with Australia for the second time, is billed as the fourth-largest sporting event in the world with a global audience of two billion.

Meanwhile, the Under-20 World Cup is Fifa's second largest tournament, and was viewed by over 500 million people when hosted in Canada in 2007.

Securing the hosting rights for these two events bodes well for New Zealand's economy this year - or does it?


To gain some perspective on the potential opportunities, it's useful to contrast the Cricket and Under-20 World Cups to the 2011 Rugby World Cup. That event was said to have a television audience of 4.2 billion people and saw an influx of 133,000 international visitors to these shores, spending as much as $340 million, according to official figures. Rugby World Cup tourist spending was approximately 1.5 per cent of total tourism spending in New Zealand in 2011.

Based on potential global audience size, the Cricket World Cup is half of the size of the Rugby World Cup, and only half the event will be hosted in New Zealand. That means a possible number of 33,250 international tourists might spend approximately $85 million on these shores. Likewise, the Fifa Under-20 World Cup could attract as many as 16,625 international tourists and a $42.5 million visitor spend.

These figures should be considered cautious estimates as precise calculations of economic impact are fraught with difficulty. A 2013 analysis by the Ministry of Business, Innovation and Employment found that projections of economic impact accruing to host cities in New Zealand from major events receiving government funding were three-and-a-half times larger than the actual impacts.

Economic impacts from sporting mega-events can be even more difficult to forecast, as the benefits are often overstated and the costs understated.

There are several reasons why we shouldn't expect economic windfalls from hosting major sporting events.

Event-related tourism is often affected by "crowding-out", where other international visitors postpone or decide not to travel to avoid a major event. This can deflate the actual impact experienced during the event as "regular" tourists, who might otherwise travel to New Zealand at that time, decrease in numbers.

These effects are influenced by the timing of the event in the tourism calendar. The 2011 Rugby World Cup significantly exceeded pre-event expectations of visitor arrivals, partially because it occurred in the off-peak tourism period.

Visitor numbers for events held in peak tourism periods, like the upcoming Cricket World Cup, are likely to experience more pronounced crowding-out effects as greater numbers of tourists choose to delay their travel or not to visit. Also, spending by locals and tourists on the event is substituted away from elsewhere in the economy, such as alternative forms of entertainment and recreation.


And we mustn't forget the public money that is spent on sporting events is also substituted from alternative uses.

Public money carries an opportunity cost which must be counted as part of the cost-benefit calculation.

The 2011 Rugby World Cup was widely considered to be a successful tournament, despite taxpayers having to pick up two-thirds of the $31.3 million operational loss. Infrastructure and expertise was developed for the 2011 tournament that played a part in enabling this country to bid for (and win) hosting rights to the events of 2015 - but serious doubts are starting to be cast on whether hosting mega sporting events is feasible for small countries such as New Zealand.

Political strife dogged the 2014 World Cup in Brazil, while "white elephant" stadiums dotted South Africa following its hosting of the 2010 World Cup. The price tag attached to mega sporting events is escalating to unprecedented levels, and countries have started to balk at the costs.

So, is the hosting of major international sporting events a feasible strategy for New Zealand to follow? Past experience from around the globe has shown that economic windfalls do not arise from hosting even the largest of sporting events.

For New Zealand, events that use existing infrastructure and do not require substantial capital outlay in the form of taxpayer dollars are opportunities worth considering.

Fortunately, both the Cricket World Cup and the Fifa Under-20 tournament will largely use the same stadia as those developed for the Rugby World Cup. While neither are likely to stimulate the economy in any major way, they shouldn't cost us the earth to host either.

-Dr Sam Richardson is a lecturer in the School of Economics and Finance and an expert in the economics of sport.

-Business and civic leaders, organisers, experts in their field and interest groups can contribute opinions. The views expressed here are the writer's opinion and not the newspaper's. Email: editor@hbtoday.co.nz.