Thursday, 16 February 2012

Visitor Impact of the Rugby World Cup - MED weighs in

I’ve just come across this report that I somehow missed two days ago – the Ministry of Economic Development has estimated that the visitor expenditure from the Rugby World Cup was $390 million, a figure claimed by some news outlets as higher than expected. I’m not sure where that has come from – I’m pretty sure the RBNZ estimated around $700 million in new spending, so the MED findings, assuming they are correct, are around 56% of what was predicted.
To assume that the figures in the report are correct requires confidence in the method which was used. The big eye-raiser was the margin of error of +/- 20%. The resulting net visitor expenditure was estimated as being between $220 and $340 million greater with the RWC than without it.
Further figures of interest in the article was the estimated spend per adult RWC visitor of $3400, which was $1000 greater than the average visitor. A crude back-of-the-envelope calculation suggests that if the entire 133,000 visitors that entered the country for the RWC were net visitors to the country (and they were all adults), the total spending from this group would be $452 million.
We have to factor in the crowding out effect into this calculation. A quick glance at monthly visitor arrivals (I know it is not the perfect measure, but I refer to it just for indications sake) show that visitor arrivals to the country in September were 26% up from the same time in 2010, and likewise the October arrivals were 17% up. As an aside, November and December arrivals were up by 1.7% and 5.4% respectively from the year before. If we attribute the total increase in visitors from August to October 2011 over the same period in 2010 to the RWC, then this figure (84,615) might reasonably be considered an optimistic number of net RWC visitors. The revised spending figure becomes close to $288 million, which is in the middle of the MED figures – not too unreasonable.
Some have already pointed out that tourism would have been worse in the absence of the RWC. The largest annual increase during the August-October period between 2007 and 2010 was 26,770 in 2009 and the largest annual fall was 19,433 in 2008. A pessimistic estimate of net visitors could thus be calculated assuming that there would have been an increase of the magnitude of August-October 2009, and an optimistic estimate could be calculated assuming that there would have been a fall of the magnitude of 2008. The resulting spending figures range from an optimistic figure of $354m to a pessimistic figure of $197m. My optimistic figure is a shade over 50% of the initial projected impact – hardly ‘better than expected’ material.  As is the usual, I urge caution – the figures above are very, very crude calculations, based on some pretty restrictive assumptions. I know I've ignored the margin of error - its inclusion would basically show that the estimates could be pretty much anything!
I am yet to see the report itself – no doubt it will make for interesting reading.

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