America’s Cup: Challengers are stuck in irons

There is always uncertainty after the America’s Cup. But when the defender wins, the uncertainty is typically limited to who will compete in the next edition. But following the 34^th America’s Cup, the uncertainty also includes…

– The Rules
– The Boat
– The Venue

The rules may include a nationality clause, which along with the boat type impacts the people you hire, and the venue impacts the sponsors you court.  All three variables are significant, but the uncertainty of the venue may be causing the most problems.

If the rules have a nationality clause, it will likely only pertain to a portion of the crew. Since the boat is likely to be smaller but similar to the AC72, a nationality clause would require each entrant to include perhaps 4-5 sailors from their country. Could be all grinders.

But the venue, that’s a biggee. A challenger now needs significant seed money as the venue is connected to sponsorship. If a corporate partner seeks benefit from its contribution, they must know the audience.

The problem with locking down San Francisco, however, is the memory of the 34^th America’s Cup. Of course, you don’t have to look far to find locals opposing pretty much anything in that City, but the organizing army of defense owner Larry Ellison was an easy target. Over promise and under deliver will do that.

Until the final accounting is released, the local media will assess what is available. Here is a report from the SF Weekly…

Like a maître d’ overseeing a disastrous banquet, the organizers of the America’s Cup kept promising that the next course would be better. The next course would justify the entire endeavor.

The Cup is now complete, with only its economic impact left to digest. And the indicators that have become apparent thus far are looking more like gristle than steak.

Not long ago, PKF Consulting released its “September Trends in the Hotel Industry in Northern California” report — meaning the San Francisco hotel occupancy percentages and average daily rates for the duration of the Cup are now known.

So, in July, August, and September of this year, city hotels were booked at 90.6, 92.8, and 90.4 percent clips. Impressive. But, during the same months last year, those totals were 89.1, 92.5, and 89.9 percent. Glancing back at occupancy rates going back the last five years, they’re always within a couple of percentage points of where they are now. Average daily rates are about 8 percent over what they were last year — but “ADRs” have been climbing all year.

In short, only someone armed with far more information than is currently known — or a charlatan — could isolate the America’s Cup as an economic benefit. In contrast, controller Ben Rosenfield conceded that “at first blush,” it’s safe to say that the Cup was no windfall.

In retrospect, and armed with the PKF Consulting numbers, Cup backers’ promises of a massive financial boon are all the more laughable. Ash Patel, the senior PKF consultant who compiles the monthly reports, could have told you as much long ago. “San Francisco occupancy is pretty much capped out,” he says. “There’s only so many rooms the city can provide during peak seasons, which would be the late summer months.”

San Francisco, then, is bulletproof. There’s only so much we can do to keep visitors away or attract additional ones. People are coming; it’s more a matter of who than if.

The America’s Cup may have helped this year, Patel says. But, next year, there’ll be something else — and, all but guaranteed, similar occupancy percentages and even higher room rates.

As those rates soar skyward, some area visitors will be forced to stay elsewhere. No matter: There will always be someone able to pay.

“Ultimately, the people who are willing to pay the premium to stay in the city are gonna pay it,” Patel says. “There are always enough people to pay the price to stay here — and vice-versa. There will be a ton of people who have to stay 20 miles away and sit in traffic or take BART to commute.”

And that, when you think about it, is the story of San Francisco.