Adding up cash benefits of hosting Cup

The economic benefits of the 2011 Rugby World Cup will be "bigger than Ben Hur" says one economist, but smaller than the America's Cup according to another from the firm which prepared estimates for the Government.

Sport and Recreation Minister Trevor Mallard excitedly described the event yesterday as "the biggest thing that's ever happened to New Zealand".

A detailed economic impact study forecast the cup would attract 60,000 overseas visitors and add $408 million to GDP. But ANZ National Bank economist Cameron Bagrie said that estimate was "very light".

His own "back of an envelope" calculations allowed for 50,000 to 75,000 visitors, each spending about $10,000. Second-round effects, as that cash filtered through the economy, would multiply its impact.

"You're looking at a total bang for your buck of about $2500 for every $1000 spent". That adds to a mighty big bang of $1.25 billion to $1.88 billion.

When the impact of infrastructure investments such as roading, public transport and stadium capacity were added, "... what you're collectively talking here is an event that's bigger than Ben Hur".

But economist Doug Fairgray of Market Economics, the firm which prepared the economic impact report for the Government, said the $408 million figure already included second-round effects.

Market Economics is experienced in producing economic reports on large sports events, having conducted studies on the Auckland street race proposal and the 2000 and 2003 America's Cup regattas, both of which easily outstripped the projected gains from the Rugby World Cup. The firm's final tally for the first America's Cup regatta in Auckland of $495 million was within 0.5 per cent of its rough estimate before the event. The second regatta brought in $529 million.

Mr Fairgray said his firm had been conservative in its Rugby World Cup estimates."If you've got two sets of figures you'll usually take the lower ones. We don't want to be seen as away with the fairies and overly optimistic."

He said Market Economics had begun with estimates of total expenditure associated with the event. While some of that was just a transfer of spending that would have taken place anyway, a lot was extra cash from television rights and overseas visitors. "We identify all the extra money that is going to be spent that wouldn't have been otherwise."

The firm then ran economic models to determine how much of that would contribute to GDP, "often it will be in the 25 to 40 per cent range." After that the second-round effect was calculated. "That's where we get to the $408 million."

Although America's Cup regattas generated more economic activity, that was over long periods leading up to the events as the competing syndicates prepared. The benefits also tended to be concentrated into particular sectors and the Auckland region.

Mr Fairgray said the Lions tour provided good data on what to expect in spending from visiting rugby fans. A report by independent consultancy Covec showed the tour was worth $135 million with more than 20,000 international fans accounting for $123 million of that. In Auckland alone the tour added 144,000 visitor nights and an extra $50 million in spending including more than $11 million on food and drink.

Mr Bagrie said estimates of the direct benefits of the World Cup would "massively understate the total impact on the economy".

He believed investment associated with the tournament would be a key driver of the next economic upswing, "which we suspect will be around 2008/09".

"It similar to what the Olympics meant to Australia in 2000. That drove Sydney for a number of years."

Mr Fairgray said big events such as the Rugby World Cup produced "flow-on, feel-good social impacts which don't measure up in dollar terms".

"People often feel more buoyant and more confident so that also speeds up the economy a bit, but we don't count that because it's pretty intangible".