MoneyMatters
The Economics Of Boat Racing

 

The America's Cup Economic Benefits

By Jeanne Craig
Published: June/July 2012

The America’s Cup races are about to provide a major economic stimulus, not only to the American marine industry, but to states on two coasts that are ready for action, and for their world close-ups

Photo of high-tech fleet of America’s Cup boats
The high-tech fleet of America’s Cup boats is set to inject an estimated $1.6 billion into the American economy.

The 34th America’s Cup is one of the biggest international sporting competitions in the world. “You’d have to live under a rock to not get excited about this,” says Dennis J. Conaghan, executive director of San Francisco’s Center for Economic Development, referring not only to a whole new format for the traditional race, but also to the estimated $1.6 billion that will flow into American coffers as the host.

According to a recent study by the Bay Area Council Economic Institute (BACEI) and Beacon Economics, amazingly, the America's Cup ranks as the world’s third-largest sporting competition. This is true whether measured by the number of spectators or by the amount of economic activity generated by attendees and competitors. The event is second only to the Olympics and soccer’s World Cup, and many times larger than the Super Bowl. It will also be the only major international sporting event held in 2013, by design. Let’s take a look at the financial benefits the U.S. will reap from the world’s most famous sailboat racing series. The three hosting communities will enjoy the richest rewards, but areas beyond these ports will also see spikes in travel and tourism as international sailing teams, world media, and spectators explore the regions outside of the main venues.

Coming To America, A New Format

The 34th Americas Cup is comprised of three main events, each staged in a different location: the AC World Series, already held in 2011 in San Diego, California, and coming to Newport, Rhode Island, in June/July 2012; the Louis Vuitton Cup in San Francisco in July 2013, where the foreign challenger will be determined; and the Finals between the challenger and the American defender, also in San Francisco in 2013.

“The Cup is coming back to the United States after a 26-year absence in a whole new way,” says Tom Huston, chief commercial officer for the America’s Cup Event Authority. He’s referring to the span of time that the America’s Cup has remained “captured” by foreign teams, and held in foreign waters. In 2010, American software magnate Larry Ellison, founder of the Oracle Corporation and third wealthiest American, finally won the Cup back for the United States, securing the right to hold the event in the U.S. once again. He’s chosen to have the next AC World Series exhibition event on the East Coast, in Newport (where he has a home), and build up to the final America’s Cup Races on the West Coast, in San Francisco, the main venue for the final series.

“This is the first time that sports-marketing pros have been put on the project to transform the sport and create a future for the next 100 years.” One of the most significant changes is the addition of the AC World Series, a circuit of regattas designed to bring Cup racing to top venues around the world. These regattas are a proving ground for hopefuls. “We created the AC World Series as a precursor to the America’s Cup,” says Huston. “It’s giving us the opportunity to showcase the event, and to have fans follow the action in between America’s Cup years. It’s like the Formula One of sailboat racing.”

The AC World Series is expected to have a substantial economic impact. John Laun is the president of the Sailing Events Association of San Diego, which hosted the AC World Series in November 2011 that drew 120,000 spectators. Laun’s group provided the venue and basic infrastructure, including docks and city services. “Prior to the event, we did a forecast that reported a $20-million direct impact,” he says. “Our key metric was hotel-room nights, which we estimated at 20,000, with many attendees doing multiple nights. The biggest groups of visitors were AC teams and visiting yacht clubs, along with delegations from Newport and New York.” The AC World Series brought new jobs to the area. Employment was created in local hospitality businesses, at restaurants, and through security companies. “We also hired people to create the villages,” says Laun. “Other jobs went to professionals such as longshoremen, who were needed to off- and on-load 120 ship containers.” This Cup-specific containership travels the world with cargo that includes equipment for a high-tech broadcast production team, all of the sailing team bases, and the boats themselves. “It’s like a traveling road show,” says Huston.

Illustration of America's Cup course
Up close and personal, the America’s Cup World Series will be held just off Fort Adams in Newport in June, and broadcast on network TV.

The AC World Series event that will get underway in Newport in June 2012 is another cash cow, with an estimated economic impact of $72 million, according to the Rhode Island Economic Development Corporation (RIEDC). “Because our goal is to bring world-class sailing back to Newport, we have to appeal to the high-tech future generation, and the AC World Series is extreme sailing,” says Keith Stokes, executive director of RIEDC.

Detailed economic forecasts from RIEDC report approximately $51 million in direct spending and an additional $21 million in indirect and induced spending. Examples of direct spending include accommodations ($18 million); food and beverage ($15.5 million); transportation by air, water, and truck ($3.7 million); construction ($3.98 million); and retail trade and boat repair ($9.5 million). Indirect spending includes additional inventory, setup, and the cleaning required by vendors in and around the venue. Stokes estimates that about 400 new jobs will be tied to the event in the form of wait staff, short-term marine-trade work, and repair work for the event.

The AC World Series is also the catalyst for a major upgrade at Newport’s historic Fort Adams, where the event will be staged. “Fort Adams is a state park and national landmark, and we’ve spent tens of millions of state and federal money improving it,” said Stokes. “Using the AC World Series venue, we decided to build a world-class sailing event center for the future. Fort Adams is fully permitted, and we can plug and play into it like we do for other events such as the Newport Jazz Festival. Other benefits include improved utilities, staging, Internet, additional dock facilities, and an extensive water-shuttle program.” (In last month’s issue, we ran a guide to cruising around Newport; see it on www.BoatUS.com/Magazine. In a future issue, before the AC events in California, we’ll present a similarly comprehensive boaters’ guide to San Francisco.)

Big Bucks For The Bay Area

As the host city for both the Louis Vuitton Cup (July 4 to September 1, 2013) and the America’s Cup Finals (September 7 to September 22, 2013), San Francisco will enjoy the bulk of the revenue from the America’s Cup, an estimated $1.37 billion. “This is an extraordinary opportunity to leverage our region’s resources to generate much-needed revenue for our city and create jobs,” says San Francisco Mayor Edwin M. Lee.

According to BACEI, the $1.37 billion is three times the estimated impact of hosting the Super Bowl, which averages $300 to $500 million. Top projected direct and indirect expenditures include Cup management ($375 million); spending by the international syndicate teams ($367 million), local visitors ($252 million), and non-local visitors ($144 million); and infrastructure ($158 million), among other revenue streams. In addition, BACEI reports the potential increase in employment surrounding the event could be on the order of 8,840 jobs. This increase in output and employment would likely yield $85 million for state and local governments. Plus, additional taxes to the city's general fund are expected to net more than $13 million based on more than $24 million in revenue, and an estimated $11 million in tourism-related costs.

“The major beneficiaries will be those businesses related to the hospitality industry as the community will be hosting spectators and sports people from around the world,” said Conaghan. “There are already people here taking office space in the city to get ready for the events. There’s also a fair amount of infrastructure and heavy-duty construction that has to take place. This will have a very positive impact on the waterfront and the piers, and it will be a big boon for construction. In fact, the $158 million forecasted for infrastructure might be a bit light.” Among the construction projects underway are a new cruise-ship facility and new port infrastructure. Other improvements to the Bay area will include bus services, parking facilities, and yacht clubs. In addition, there are plans to build waterfront venues where VIPs can entertain clients and shop.

Any way you crunch the numbers, the America’s Cup is big news and good business for the three American host cities and for the U.S. economy. It’s bringing an enormous influx of spectators, crews, support people, and money from the countries that are entered, and a high demand for American services, technology, and hospitality once they’re here — extra reason to root for Ellison and Team Oracle as they defend the America’s Cup for the United States.End of story marker


Jeanne Craig is a journalist specializing in boating topics, who lives in Connecticut.


 


Meet The America’S Cup Teams

There are nine teams from eight countries competing for the America’s Cup. Those teams are: Aleph (France); Artemis Racing (Sweden); China Team (China); Emirates Team New Zealand (New Zealand); Energy (France); Green Comm (Spain); Luna Rossa Challenge 2013 (Italy); Team Korea (Korea); and Oracle Racing (USA).

The teams train on high-tech AC45s, and sail AC72s in the America’s Cup events. The number of boats per team varies; teams have one or two of each. For AC races, each boat has a crew of five. The number of support people for each team varies from 30 up to 100.

AC45 Principal Dimensions
Hull Length: 13.45 meters (44 feet)
Beam: 6.90 m (22.6 feet)
Displacement: 1,400 kg (3,086 pounds)

AC72 Principal Dimensions
Hull Length: 22.0 meters (72 feet)
Beam: 14.0 meters (46 feet)
Displacement: 5,700 kilograms (12,500 pounds)

Event Calendar
2011-2012 AC WORLD SERIES:
April 7 – 15, 2012, Naples, Italy
May 12 – 20, 2012, Venice, Italy
June 23 –July 1, 2012, Newport, Rhode Island

Louis Vuitton Cup
July 4 – September 1, 2013, San Francisco, California
America's Cup Match (Finals):
September 7 – 22, 2013, San Francisco, California

Where To Tune In
The television coverage for the races to be held in Newport and San Francisco will include Comcast, NBC Sports, and a prime-time time slot. In addition, all races will be streamed live at www.youtube.com/americascup.

General Information
www.americascup.com