Businesses not afraid of losing the Cup

By TIM WATKIN and BERNARD ORSMAN

Out on the Hauraki Gulf Team New Zealand and Alinghi have succumbed to a lack of wind and turned for home. It's Thursday afternoon and the winds have been too shifty for racing today.

In Pakenham St, behind Syndicate Row, the workers at Southern Spars are still racing to finish a 59m mast for a replica of the 1937 America's Cup Ranger ordered by a wealthy American client. While there's been a rare lack of yachting action on the TV sets scattered around the workshop, in here the sparks are still flying as Southern staff work on a length of carbon fibre so finely tuned it will sell for $3 million.

Upstairs, director Terry Gillespie has been working on quotes for other foreign clients and is due at a meeting on plans for a new factory.

Round the corner in Fanshawe St, the team at shipchandlers A Foster & Co are loading up the Harken hardware they import from the US to be used on the super-yachts being built not only around Auckland, but in Wellington and New Plymouth as well, for European royalty and American magnates.

Down in the Viaduct itself, Judith Tabron, one of the country's most awarded chefs and now co-owner of Soul Bar and Bistro, is mucking in on tables and in the kitchen to feed the hungry masses flooding her restaurant. There were 300 customers in for lunch tables in the bar and don't expect to find one empty.

And although the thought will not yet be put into words and their yachting loyalty is unquestioned, at the back of their minds and the minds of all the business owners, apartment dwellers, race fans and curious gawkers with a vested interest in that little patch of harbour, a question is forming: What if?

What if those shifty winds stay in Alinghi's favour? What if Team New Zealand can't fight back? What if Auckland loses the America's Cup to a European venue? What then?

It's not a polite question given the mood of many in the city right now, but it's a very real one. What might be of concern to Aucklanders is that it's not a question anyone seems to have asked before now.

Investigations suggest no one has developed a contingency plan for picking ourselves up and carrying on cup-less. Not the City Council, nor the Chamber of Commerce.

The Government and the Boating Industries Association won't even discuss the possibility of life without the cup for fear of being seen as treacherous. America's Cup minister Trevor Mallard had his staff refuse to confirm or deny the existence on contingency work, and BIA executive director Peter Busfield told the Herald "the worst thing would be for a Team New Zealand member to pick up the paper on Saturday and see the industry planning on losing the cup".

Michael Barnett, chamber of commerce chief executive, says, frankly, no one expected to lose.

"I think we might have been a little slow with new plans coming forward," he sighs. "There should have been more work done and [more] risk management undertaken. We've always known that at some point we will lose it and we will need to prepare ways to replace that revenue and profile."

As politicians and yachting folk have continually told us, that revenue is very, very important. The oft-quoted economic impact report from the 2000 regatta found it generated $640 million of value-added in the national economy, $473 million of that in Auckland, and created 8070 jobs in the city.

John Street, a director of the Marine Export Group and owner of A Foster & Co, supplied industry figures to the report's authors and describes it as "so conservative it's unreal". All kinds of indirect wealth creation was left out.

"The implications [of losing the Cup] for New Zealand at large are enormous," he insists.

A follow-up report for the Ministry of Tourism in September last year showed that the presence of the Cup during the in-between years had been worth $46 million in value-added and the equivalent of just over 1100 jobs.

No one expects this summer's spend to be as large as last time because in 2000 much of it was on one-off infrastructure. Economists are estimating an economic value of around $325 million this time, or about half of the 2000 value. The three-millionth visitor to the Cup village is expected this weekend, down from an estimated 4.2 million in 2000.

Still, indicative figures hint that the impact is not to be sneezed at. Heart of the City CEO Alex Swney says those regattas boosted retail sales by 12 per cent or $19 million in December.

"We all know tourists spend money, but these [Cup] tourists really spend and we are sure going to miss them."

John Ingram, general manager of the Hilton Hotel on Prince Wharf, says to them the event "represents about 4000 room nights over the past 12 months".

For the Ports of Auckland, it has meant $500,000 in extra revenue from the rental of berths to the super-yachts, chief executive Geoff Vazey says.

Then there's the publicity the regattas attract through the presence of 1200 accredited journalists from all over the world. As Auckland mayor John Banks, who had four minutes on CNN Asia on Thursday, and any Cup cheerleader will tell you, "money can't buy that". It promotes everything from our national character, through businesses to tourist attractions.

The regattas add up to one gigantic display case and a harbour full of bargain-price advertising, and losing that would undoubtedly hurt.

"The America's Cup has done more to transform Auckland than any other single event," says Barnett. And if we lose it? "I think it's going to take some of the icing off the cake," he says.

Judith Tabron is laughing. "I'm not going to cut my wrists. I've got to get back to work."

It's an attitude common among most of the businesspeople down at the water's edge. They're confident that a loss will be a minor wound, nothing life-threatening - even if we lose the Cup, our economic cup is not about to run dry. Auckland's not about to follow little Freemantle's slide from hype to ho hum.

Even Banks, who has never failed to stress the economic importance of the Cup to Auckland, is feeling resilient. "It might bring us to our knees for a while, but we will get up quite quickly."

Let's get a little perspective. ANZ chief economist David Drage says the 2000-02 build-up contributed less than 0.1 per cent of GDP and the $325 million from the regattas works out at about 0.2 per cent of New Zealand's $125 billion economy.

"One way or another, it's going to end in a week or two and win or lose it will cease to be a strong influence on activity for at least a year or so," he says.

The Auckland economy has been strong in recent months, but the Cup is "a relatively small part" of that. "That health has in large part been down to immigration, low interest rates and a strong labour market." If Aucklanders want to worry about economic growth, falling immigration, low commodity prices or the prospect of war would be more relevant.

And don't forget, adds Rob Mercer, head of research at stock brokerage Forsyth Barr, those figures of the Cup's worth are revenue, not profit. Companies aren't necessarily raking it in. Both Drage and Mercer agree the stockmarket may slip due to "sentiment", but the fundamentals here remain healthy.

Look at it this way, suggests Tourism Industry Association chief John Moriarty: the average stay for travellers in New Zealand is 20 nights. Raising that by just one night is worth $700 million, more than compensating for the $640 million the 2000 regatta brought in over several years.

The tourist operators are the most bullish of the industries connected with the Cup. They will feel the loss of publicity, but as Ingram says, "once you've got the publicity from an event of this size the spin-off in terms of awareness lasts at least 18 months to two years".

With tourist numbers expected to double in the next decade, operators are confident of continued growth. For them, war, not a yacht race, will determine their short-term prospects.

Perhaps the most important point to remember is that even if the Alinghi crew sails away with the Cup, they can't take the infrastructure, skill-base and business relationships the Cup brought with it. The Viaduct wouldn't have become what it is without the catalyst of the America's Cup, but after two regattas it is confident it can stay healthy off the Cup life-support machine.

"I'm not worried," says Mercer. "There's a huge amount of skills it's brought in that are not going away. And we've branded ourselves. We are on the map as being a place to go for people who want to spend big money in [the marine] sector."

Street says the marine industry expects to double its export income within two to three years, Cup or no Cup. Business in the $700 million-a-year industry will slow, but not significantly.

Southern Spars, which supplied the rigging to all the syndicates except Alinghi, is building a new factory in Auckland this year and expects to increase staff numbers by 60 to 200. Gillespie says the order book's not quite full, they have deals through to 2006.

"The affect of the Cup is minimal in our business plan and I feel the marine industry overall is in a very similar position. Super-yachts-wise, not much [impact] because there's some great boatyards here. America's Cup-wise, they buy for product rather than location," he says.

Next door at North Sails, which made sails for Team New Zealand and Oracle, general manager Richard Bicknell takes much the same view.

"We can still build sails if the Cup is held overseas. We can have designers and sailmakers on site but still build the sails down here."

Tony Bouzaid, who owns businesses around Westhaven Drive, sums up the feeling: "Just because we have lost the rugby world cup several times, it doesn't alter the reputation of the All Blacks". Thanks to the America's Cup, the industry has a great infrastructure, enhanced reputation. The dollar is still low enough to make them cheaper than their European competitors.

Those in the marine industry say the biggest threat to their continued prosperity is not Alinghi, but the new wave of apartment building planned around the Viaduct. Bouzaid says "the worst thing that will happen [if Team New Zealand loses] is that the Ports of Auckland and the City Council will sell off the syndicate bases and build apartments".

The potential for more events would be limited and increased rents - Bouzaid expects by as much as 400 per cent - would drive marine businesses away.

"If we win the Cup the public won't allow it. They'd be outraged. But if we lose, the public voice will be muted and we'll lose the industry."

Developers such as Nigel McKenna, building the 200-apartment Lighter Quay on Halsey St where four of the syndicate bases now stand, remain cock-a-hoop about the waterfront suburb they're creating. "Everyone who has bought into the Viaduct will have purchased for the lifestyle, recognising there's limited available waterfront land in the CBD. I don't see beyond the Cup how that would change."

Estate agents echo McKenna. They don't expect a Cup loss to undermine the Auckland property market. Like the economists, they say the more pressing issue is immigration.

Yet the future of that waterfront land remains the most uncertain feature of post-Cup Auckland. A 50-year vision for the area prepared by the Auckland Waterfront Advisory Group is due in the next few months and is sure to spark more cross words between developers and the marine industry.

Already frustrated, Southern Spars will build its new factory in west or south Auckland because it can't get the space to grow around the Viaduct.

Banks, meanwhile, is trying to walk the line between the two, enthusiastic about more residential growth but also planning to keep the six syndicate bases on publicly owned land to remain for future yachting events.

Street believes other events will be lured here. Without having to worry about a clash with the America's Cup, the Volvo Ocean race is almost certainly returning. And The Millennium Cup race for super-yachts is intended as an annual event.

While a loss would be a psychological blow to business and leisure in the city, the America's Cup has already given us the best it has to give. It has afforded the inner city a focal point, boosted our marine industry, and won the country international attention and accolades.

It's done enough.

And yet, one or two more regattas would be nice, wouldn't they? Hey, it's not over yet you know.

nzherald.co.nz/americascup

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