AC35 expectations surpassed in a big way
As the One Bermuda Alliance government minister with responsibility for the 2017 America's Cup, I was pleased to read PwC's independent assessment of the event, which clearly demonstrates the significant contribution that AC35 made to Bermuda's economy over the past three years and will continue to make well into the future.
The teams that guided this event from the negotiating process through execution should be gratified for many reasons. AC35 not only met but significantly exceeded the many objectives we set for the project in 2014.
Three years ago, Bermuda's economy was suffering from a prolonged recession, a spiralling deficit, uncontrolled debt and lack of investor confidence. In December of that year, I laid out the OBA Government's objectives for AC35 in a statement before the House of Assembly and said: “Bermuda's hosting of the 35th America's Cup will bring with it a substantial economic stimulus, including jobs and investment that will begin in 2015 and build to the events in 2017 and beyond.”
PwC's report shows that AC35's economic impact, as measured by contribution to GDP, amounts to $336 million, including more than $90 million of continuing legacy tourism. This outstanding performance exceeded our original projections, and represents a return of more than five times the actual government investment.
In addition, according to the PwC report, additional on-island spending resulting from AC35 amounts to $271 million, including expected legacy-tourism spending. Our original October 2014 analysis projected $242 million, including expected legacy-tourism spending.
In terms of the overall economic impact of AC35, it would be fair to say that the OBA government team from the Ministry of Economic Development and the ACBDA under-promised and over-delivered. It was also gratifying to learn that while the OBA Government's three-year budget for AC35 was projected to cost $77 million, the PwC report indicates that the actual spending was only $64.1 million — a testament to the careful financial management of the ACBDA and the ministry.
Another objective was set out this way: “It is expected that the America's Cup events will help catalyse the development of new hotel and hospitality products, and promote reinvestment and revitalisation of existing properties.”
The PwC report mentioned but did not quantify the catalytic effect that hosting AC35 had on stimulating new tourism infrastructure and hotel development, but with four major hotel developments now completed or under way, including the Hamilton Princess Hotel and Beach Club, Morgan's Point, The Loren at Pink Beach and the St Regis in St George's, the impact of AC35 on investor confidence is not in doubt.
We were certain that AC35 would stimulate and enhance Bermuda's tourism product, and the ACBDA and the Bermuda Tourism Authority worked hand in hand to achieve this. Given the new hotel development, 27,000 overseas spectators, 452 million worldwide viewers, a 135 per cent increase in superyachts berthed compared with the prior year, and more than $80 million in “free” media coverage, AC35 more than met that objective.
The PwC report also indicates that the exposure Bermuda received as the host country is expected to increase visitor spending over the next five years by $76 million, with a potential increase of up to $229 million. We expected AC35 to have a positive impact on local businesses, and surveys completed by the Bermuda Economic Development Corporation indicated that nearly 30 per cent of Bermudian companies had planned to take advantage of opportunities presented by AC35.
The PwC report confirms that as increased spending spread throughout the community, the largest impact — 38 per cent — on GDP was felt in the hospitality sector, followed by the wholesale and retail sector at 14 per cent and real estate at 10 per cent. Hundreds of jobs were created and Bermudians filled them.
We noted in 2014 that AC35 would provide significant opportunities for Bermuda's young people, and we were on target. With the enthusiastic leadership of Sir Russell Coutts, the Endeavour programme, which provided sailing instruction at no cost to students aged 9 to 12, engaged more than 1,500 of Bermuda's children. The programme has received financial support from the community for at least two more years. Along with the Red Bull Youth Team, the Endeavour programme will sustain AC35's legacy impact on a sport that has played a key role in Bermuda's maritime history.
Three years ago, I called AC35 a “transformative moment in our island's history” and said that the benefits to Bermuda's reputation and sense of national pride could not be overstated. In fact, the PwC report emphasises that the “delivery model” used for AC35 could and should be used in the future because it demonstrated Bermuda's ability to deliver a large-scale event to world-class standards.
What were the key elements of that “delivery model”? Simply put, co-operation of the public and private sectors, enthusiastic volunteers — more than 1,000 of them — careful co-ordination by many government departments and service organisations, and superb management. In short, teamwork was essential, and it will continue to be essential into the future if Bermuda is to capitalise on the legacy of AC35.
Together with the America's Cup Event Authority, we delivered an extremely successful event without excessive negativity, but I would be less than honest if I failed to say that there were many in our community who did not support AC35 wholeheartedly. Some have suggested that this represented a failure to adequately communicate its benefits, and there may be some truth in that. But I would also suggest that some critical and inaccurate commentary on social media about AC35 was politically inspired, and this is unfortunate.
It is worth speculating what would have happened had the Government not made an investment in the America's Cup. Without AC35's boost in economic activity and tourism infrastructure, it is likely that Bermuda's economy would have continued to struggle, requiring further public and private-sector downsizing, and even less spending on social services such as education, healthcare and seniors. The alternative was larger deficits, more debt and higher taxes — not an attractive option — but that's exactly where Bermuda was headed in 2012.
The legacy opportunities of AC35 abound. It accelerated the construction of Cross Island for use as the America's Cup Event Village and stimulated the restoration of numerous historic buildings in Dockyard. These structures are now available for future economic deployment by West End Development Corporation and the Government, although PwC's report correctly excluded the economic impact of constructing these facilities in its analysis. Additional legacy opportunities include the decision by the International Triathlon Union to designate Bermuda as the host for the World Triathlon Series events in 2018, 2019 and 2020 and possibly the grand final in 2021; greater investor confidence in Bermuda; and a rejuvenated tourism product.
Any efforts by the new Progressive Labour Party government to dismiss the effective management of AC35 and its benefits will be counterproductive in the long run by negatively influencing the country's ability to bid successfully for other international events and, indeed, to encourage inward investment in Bermuda.
Three years ago, I said: “We will need all hands on deck to realise the full potential of this extraordinary event and to meet the high expectations and standards of excellence set by the America's Cup Event Authority.
From this moment on, every Bermudian will be part of the team that takes full advantage of the incredible opportunity before us. It will require a great effort, but the rewards will be significant.”
With this positive PwC report, let's recognise that we all want Bermuda to be successful and for all Bermudians to reap the benefits.
• Grant Gibbons PhD is the Shadow Minister of Economic Development and the opposition MP for Paget East (Constituency 22)