Tuesday, 22 May 2012

RWC in Manawatu - an "economic disaster"

At long, long, last! A city council has produced an objective analysis that considers not the ex-post gross impacts but the ex-post net impacts! And guess what the outcome is? The headline from the Manawatu Standard says it all.

From the report:
Far from producing a windfall, predicted to be worth between $750,000 and $2.2 million to the city, economic growth actually slowed during last year's tournament.
Proponents of the city's involvement, which included two matches, were "overly optimistic", said economic policy analyst Peter Crawford, and some city councillors are asking whether hosting large events is worth it.
The estimates process got it so wrong because it did not balance the likely benefits against the costs, he said.
One of the costs was the extent to which such a major event crowded out other activities.
Predictions were also based on expectations of hosting more high profile teams for longer.
In particular, it was hoped a European team would stay for several weeks, providing a $188,500 boost to household income.
Instead, Argentina stayed five nights, and the low profile Georgian and Romanian teams stayed a total of 10 nights – worth about $40,000 to household incomes.
I have to take my hat off to Peter Crawford - he has produced an answer to the question that people are wanting to know - did it benefit the local economy or not? I've read five post-RWC analyses for individual cities (some of which are publicly available, others of which I have asked for and been given with the condition I don't identify the reports individually) and every single one of them has been produced by outside consultants that use the economic impact methodology to come up with a dollar figure for the impact of the event on the host city. Economic impact analysis measures gross impact, not net impact. What Peter Crawford has produced is a net impact analysis - and it makes for sobering reading, if the tone of the news report is anything to go by. It was a gutsy report to present, but it actually answers the questions that councillors want to know - was it worth it?

I would like to think that other councils around the country will take the opportunity to evaluate the actual net impact that the tournament had on their local economy in light of this report. The Palmerston North City Council should be commended for producing this report in-house, and looking at the situation objectively. Objective analyses that consider all benefits and costs would be a good step forward for event analysis in this country.

I'm presently putting the finishing touches on a paper on the realised impacts of major sports events hosted in this country that I am presenting for the upcoming New Zealand Association of Economists Conference in Palmerston North in late June. Once it is ready I will post it up on the blog. Basically, major events are often underwhelming as far as their net impacts on local economies are concerned. Projections of substantial economic impacts do not materialise in the vast majority of cases - a result consistent with much of the independent international literature on mega and major sporting events.

Next on the agenda: Writing up an analysis of stadium construction and its effects on local economies, and then I'll look into the realised impacts of the Rugby World Cup on host economies. Both should be interesting analyses given what has unfolded to date.


  1. I'll be interested to see how you quantify the intangible benefits. Not all benefits can be easily measured in dollar terms - therein lies your real challenge. Businesses often fail because they only look at dollars and not the sense. The same must apply for communities.

  2. I absolutely agree - the intangibles are always the most tricky benefit to quantify in an ex-post fashion. I suspect if you were to ask NZers whether it was worth it, many would be swayed by the fact that the All Blacks won the tournament. If we had lost, it might well have produced a different answer.

    My view is that if economic impacts don't materialise, then we may be able to infer what the value of intangible benefits would have to be to make it a worthwhile exercise. From there we could consider the various intangibles and consider the feasibility of meeting the expected values.

    Because communities were swayed by the economic impact figures presented to them, they believed that it would have an impact on the local economy. What we have so far is one report that suggests it hasn't had an impact, and other reports that don't really answer the question. A single report isn't enough to write the RWC off as a bad investment - more work needs to be done. I can see this is going to be an interesting topic!