How not to bid for the America’s Cup
Published on October 20th, 2020
Back when the America’s Cup was simpler, teams would vie for the right to compete, and upon victory, carry the trophy back to their home club to host the next edition. But as the cost to compete rose, the commercial implications did too.
No longer was it just blowing horns and raising flags, but the host needed to create the infrastructure for competing teams and shoreside fans. But unlike the circus which needs only vacant ground somewhere for its tent, waterfront space is needed, and if available, becomes a significant cost, the kind of cost that’s hard to pay for.
This was no longer the terrain of yacht club management, but rather the kind of government investment which must deliver a return. More so, the Defender wants to be paid for the privilege.
When the Spanish port of Valencia won the right to host the 2007 America’s Cup, it began the trend for how the event could be shopped, but after Larry Ellison’s win in 2010, it was assumed the next America’s Cup would be held in San Francisco Bay.
Where else, considering this was the home of his Golden Gate Yacht Club, and the venue was considered to be the premiere amphitheater for sailing? Except guys like Ellison don’t become billionaires by giving away the milk for free… he was going to make San Francisco buy the cow. He even brought in other bidding cities to help his position.
The Northern California city was stuck, as the politicians knew they’d be vilified without cutting a deal. And of course it got a bit shady, but the bean counters did their best to convince the community how the income from the event would make it all worth it.
However, after the 2013 event, the math cratered, with more beans on the floor than the bucket, which is why San Francisco said thanks but no thanks for the 2017 edition which, after San Diego smartly knew when to push away from the table, was held in Bermuda.
Curious how San Francisco got it so wrong, a recent study was published by the Economics Department at Providence College in Providence, Rhode Island. Titled, The impact of the 34th America’s Cup on taxable sales in the San Francisco Bay area, the 20-page paper has some findings that may haunt the 2021 event for New Zealand, namely the lack of anticipated teams.
What was predicted in 2010 to provide 1.4 billion in total benefits, $24 million in added tax revenues to the city of San Francisco, and the generation of 8,840 jobs soon eroded. Just months before the racing, the impact was revised downward to $901.8 million in total benefits, $13 million in added tax revenues, and 6,481 new jobs created. Then in December 2013, about three months after AC34, the estimated total impact was now $364.4 million (about 27% of the original prediction), tax revenues increase to $5.8 million (about 24% of the original prediction), and an estimated 2,863 new jobs created (approximately 44% of the original estimate).
It turns out that when 15 teams are expected, and you only get four, it impacts the math.
However, these numbers all came from an economic think tank that was so sky high in their optimism it was as if Ellison was pouring drinks, because when the City of San Francisco did their own calculation after the event, they counted an $11.5 million net cost to host AC34. Worse, their review could not find any meaningful economic stimulus to San Francisco or nearby Alameda or Marin counties.
Perhaps this is why guys like Ellison are billionaires and cities like San Francisco struggle.
While Scuttlebutt was able to review the study, and the information we share here was paraphrased from the study, we weren’t allowed to share the actual study without paying a fee, which we opted not to do. However, if you happen to find yourself bidding on a special event and want to see how not to do it, click here.
36th America’s Cup
In addition to Challenges from Italy, USA, and Great Britain that were accepted during the initial entry period (January 1 to June 30, 2018), eight additional Notices of Challenge were received by the late entry deadline on November 30, 2018. Of those eight submittals, entries from Malta, USA, and the Netherlands were also accepted. Here’s the list:
• Emirates Team New Zealand (NZL)
• Luna Rossa (ITA) – Challenger of Record
• American Magic (USA)
• INEOS Team UK (GBR)
• Malta Altus Challenge (MLT) – WITHDRAWN
• Stars + Stripes Team USA (USA)
• DutchSail (NED) – WITHDRAWN
Of the three late entries, only Stars+Stripes USA remains committed, however, it is unclear what entry payments have been made, nor is there knowledge of a boat being actively built or sailing team assembled.
Key America’s Cup dates:
✔ September 28, 2017: 36th America’s Cup Protocol released
✔ November 30, 2017: AC75 Class concepts released to key stakeholders
✔ January 1, 2018: Entries for Challengers open
✔ March 31, 2018: AC75 Class Rule published
✔ June 30, 2018: Entries for Challengers close
✔ August 31, 2018: Location of the America’s Cup Match and The PRADA Cup confirmed
✔ August 31, 2018: Specific race course area confirmed
✔ November 30, 2018: Late entries deadline
✔ March 31, 2019: Boat 1 can be launched (DELAYED)
✔ 2nd half of 2019: 2 x America’s Cup World Series events (CANCELLED)
✔ October 1, 2019: US$1million late entry fee deadline (NOT KNOWN)
✔ February 1, 2020: Boat 2 can be launched (DELAYED)
✔ April 23-26, 2020: First (1/3) America’s Cup World Series event in Cagliari, Sardinia (CANCELLED)
✔ June 4-7, 2020: Second (2/3) America’s Cup World Series event in Portsmouth, England (CANCELLED)
• December 17-20, 2020: Third (3/3) America’s Cup World Series event in Auckland, New Zealand
• January 15-February 22, 2021: The PRADA Cup Challenger Selection Series
• March 6-15, 2021: The America’s Cup Match
Youth America’s Cup Competition
• February 18-23, 2021
• March 1-5, 2021
• March 8-12, 2021
AC75 launch dates:
September 6, 2019 – Emirates Team New Zealand (NZL), Boat 1
September 10, 2019 – American Magic (USA), Boat 1; actual launch date earlier but not released
October 2, 2019 – Luna Rossa (ITA), Boat 1
October 4, 2019 – INEOS Team UK (GBR), Boat 1
October 16, 2020 – American Magic (USA), Boat 2
October 17, 2020 – INEOS Team UK (GBR), Boat 2
October 20, 2020 – Luna Rossa (ITA), Boat 2