And there's more - spending is up!

Results from the December 2011 Retail Trade Survey are out from Statistics New Zealand - and they are all pointing in the right direction if we wanted the Rugby World Cup to have had the desired effect. And yes, Statistics New Zealand has attributed the positive figures, at least in part, to the presence of the RWC - notably those of supermarket and fuel sales. I wonder what happened to accommodation, and cafes/bars/restaurants? Takeaways? Movies? Oh yes - we spent less on movies during the RWC (the substitution effect).

I took the aggregate seasonally adjusted figures from the HOTP release and did a quick calculation - the graph below shows the quarterly and year on year percentage changes in retail sales.




A quick glance sees that although there has been a healthy 2% increase from quarter to quarter throughout 2011, the yearly percentage increase has grown since December 2010, and has been slowing since March 2011. Yes, it is still positive, but when you bear in mind that the yearly percentage increase in the December 2011 quarter is compared directly to the impact of the first Christchurch earthquakes, then it takes a little of the sheen off.

More RWC statistics - Wellington wins!

This just in from stuff.co.nz - Wellington has enjoyed a substantial economic windfall from the Rugby World Cup. 268,000 bums on seats for the eight RWC games in the capital, 92,000 international visitors and a 'conservative' economic impact of $94 million. The mayor describes the result as a three-way win, with economic impacts exceeding expectations, and visitors and locals happy with the experience. At the risk of sounding like a killjoy (and like a broken record) what matters not is what the gross impact is but the net impact. Sure, some businesses did exceptionally well, but others suffered - that's basically the same story as in Auckland (although they are yet to release details of their economic wins). This fresh report cannot tell us whether there has been a net impact. What we really need to know is how regular business was affected during the RWC period.

The mayor castigates those who lost out, claiming they suffered from "inflated expectations" in the face of lower consumer spending. Should we wonder why? Oh yes, perhaps that had something to do with the "economic benefits" being trumpeted all over the country as being a boom for everyone concerned? That is, of course, an exaggeration but many believed that everyone in the retail, hospitality and tourism sectors were going to do well from the event.

Personally, I'd wait a while for other statistics to reveal themselves before declaring the Rugby World Cup Wellington as an economic windfall. We mightn't see the true regional net impact until much later in the year.

Hamilton headache: Claudelands claims 'overly optimistic'

This just in from the New Zealand Herald... the $68m Claudelands Events Centre in Hamilton is facing a $1.5m deficit in its first year of operation (and projected deficits until 2014/5) and questions are rightly being asked after the initial projection was for a $1.1m surplus in its business case. It is a sorry state of affairs, but by no means an isolated event. Hamilton ratepayers don't have to look too far to see a similar story with the V8 supercar race a prominent example. Unfortunately the same story has been repeated all around the world - overstated measures of benefit, understated measures of cost and a projected bottom line that is much more palatable than what actually eventuates. I wonder if the $30,000 cost of the peer review currently being conducted into the issue was included in the forecast as well? The good news: it isn't going to hit ratepayers in the pocket, according to the mayor. Unfortunately, even if rates don't rise, the need to bail out a facility shortfall will certainly result in funds being re-routed from other city services - and this will hit ratepayers. Is bailing out the Events Centre the best use of these funds?
There was a particularly interesting comment in the article above attributed to Councillor Dave Macpherson:

...the council had been informed by trained professionals who were good "talkers and persuaders".
"I think it's sort of an events industry culture; seeing things through rose coloured glasses," he said.

Hmm. Did the V8 experience not ring any alarm bells? Heck, didn't the experience of the Canberra V8 supercars in the early 2000's at least raise some eyebrows? What about the volumes of research that have questioned the accuracy of claims of economic benefit, of which this paper (and also this one) make important contributions. Forget the rose coloured glasses - put some prescription lenses on, read things carefully and ask serious questions.

There is still a small glimmer of short-term hope on the horizon as the Sonny Bill Williams boxing show heads to the venue on Wednesday for his NZ title fight versus Clarence Tillman. Will Hamiltonians get in behind their boxing chief?
UPDATE: They're trying to drum up support with a bit of push and shove in the pre-fight weigh in.

The accommodation effects of the RWC

This came out yesterday via TVNZ. Apparently the October month was not kind to the accommodation sector, even with the RWC. A quick glance at the article reveals that while international guest nights in October 2011 (when compared to the same month in 2010) rose 7.1%, domestic guest nights fell by 6.5%, leading to an overall fall in guest nights of 1.5%. I wondered whether this was a blip or part of a recurring theme - so I dug a bit deeper.

I took the liberty of taking a closer look at the data from Infoshare and did the same calculations for several periods. What I found was rather interesting. From a national perspective, I calculated the year on year percentage change in guest nights for domestic, international and combined. For the March-August 2011 period, the national change in guest nights was -0.39% when compared to the same period in 2010. The domestic guest nights for this period in 2011 were up by 6.25% on the same period in 2010 while the international guest nights were down by 9.75%.

I wondered if the aggregated March-August period results were influenced by the March month results (when the immediate effect of the Christchurch earthquakes), so I separated out the year on year percentage changes. These were the outcomes:
March: Total guest nights: -5.44%; Domestic guest nights: 1.65%; International guest nights: -13.1%
April: Total: -3.76%; Domestic: 0.41%; International: -9.91%
May: Total: 0.90%; Domestic: 6.41%; International: -7.54%
June: Total: 0.29%; Domestic: 3.83%; International: -6.25%
July: Total: 1.99%; Domestic: 8.55%; International: -8.86%
August: Total: 8.4%; Domestic: 14.39%; International: -1.01%

It is clear that the March and April months are influential in the aggregated period - the other months had increases in total guest nights. What is interesting about these monthly figures is how the change in domestic guest nights was positive and growing in July/August, suggesting a time-shifting effect is occuring when compared to the October figures. It appears that domestic travellers decided that they should do their travelling before the RWC rather than during it. Without question the school holidays being shifted to accommodate the timing of the RWC will have contributed to this effect. Also of note is the negative change in international guest nights for all six months - although there was a marked improvement in August. The negative year on year percentage changes in international visitor nights seen above actually began in September 2010.

The September 2011 period saw a small increase from 2010, with the change in total guest nights an increase of 0.23 percent. International guest nights were up by 20.72%, although this was almost offset by a fall in domestic guest nights by 11.8%.

When the RWC months of September and October are aggregated and compared with the same period in 2010, overall guest nights were down by 0.69%, with the 13.45% increase in international guest nights being more than offset by the 9.03% fall in domestic guest nights. It would appear that the overseas visitors did come for the RWC, but locals decided to travel before the influx of international visitors, resulting in a dampened effect on the accommodation sector (and. most likely, on the net economic impact of the tournament) during the RWC period.

A quick look at the total guest nights for regions for the RWC period reveals that each region experienced:

• Northland: a fall of 2.53% compared to an increase in the March-August period of 2.62%;

• Auckland: a smaller increase (12.5%) compared to the March-August period of 14.06%;

• Waikato: an increase (6.32%) compared to the March-August period of 5.05%;

• Bay of Plenty: a fall of 1.58% compared to an increase in the March-August period of 4.13%;

• Hawkes Bay and Gisborne: an increase (9.47%) compared to a fall during the March-August period of -5.51%;

• Taranaki, Manawatu and Wanganui: an increase (0.36%) compared to the March-August period of 0%;

• Wellington: a smaller increase (6.5%) compared to the March-August period of 13.48%;

• Nelson, Marlborough and Tasman: an increase (7.35%) compared to the March-August period of 5.17%;

• Canterbury: a smaller fall, (-25.1%) compared to the March-August period fall of -26.06%;

• West Coast: a larger fall, (-9.87%) compared to the March-August period fall of -7.29%;

• Otago: a smaller fall, (-1.3%) compared to the March-August period fall of -2.66%; and

• Southland: a smaller fall, (-2.04%) compared to the March-August period fall of -8.09%.

Only four of the twelve regions experienced an increase in guest nights during the RWC period that bettered change in the six months leading up to the tournament. 

It will be particularly interesting to see what happens to these figures in the November and December months.

RWC and Tourism - more thoughts

In my last post a couple of weeks ago I looked briefly at the October month effect of the RWC in comparison to the previous October months. By way of a recap, where the average net (total) passenger arrivals in the October month between 2000 and 2010 was a shade under 54,000, in 2011 the corresponding figure was -4,337. In the September month (when the pool phase of the tournament was held across the country), the average net passenger arrivals between 2000 and 2011 was approximately 2,917. The corresponding figure in September 2011 was 51,174. In comparison with the average figures, it would appear that while the RWC is likely to have boosted September month net arrivals by some 48,000 visitors, the effect in October was actually a worsening of some 58,000 visitors. The combined effect of the RWC in the two months in question suggests a net outflow of some 10,000 visitors when compared to the averages for those months.

It would appear that the 133,200 visitors that arrived in the country for the RWC were offset by rather substantial crowding out. The effect of their spending on the economy will be dependent on whether the amount spent by the RWC visitors outweighed the loss of spending from those who left. Either way, it doesn't seem very likely that it will be $400 million, let alone $700 million. More will unfold in the coming months, I am sure.