Why New Zealand should host the Formula E
New Zealand has a near non-existent history when it comes to playing host to major sporting events such as the Formula E due to factors such as geographical location and small market size. In addition to this, the destruction of our tourism industry due to COVID- 19 have created waves of uncertainty and, as a result, mass unemployment in the sporting and hospitality industry nationwide. Moreso, COVID-19 and the impending economic recession will potentially negate any considerations from the current governing body when requests are made to publicly fund a major sporting event such as Formula E. However, by looking at the proven economic benefits such as hosting the America’s Cup, the leaders of New Zealand should not discount the long term benefits that may be associated with hosting such an event. Moreso, it will be argued below that the hosting of large events such as the Formula E will provide immediate job creation which, if hosted successfully, may turn into a generation of new economic prosperity.
The importance of New Zealand being proactive in attracting Formula E should neither be underestimated nor undervalued when evaluating the economic boost that it will bring both regionally and nationally. Unfortunately for New Zealand, due to minimal historical cases in hosting major sporting events, it is often hard to predict accurate economical data which justifies the large investment required to host events of this variety. However, when looking at economic viability, New Zealand does have the America’s Cup legacy to use as a recent economic ledger by which to evaluate from. According to the Ministry of Business, Innovation and Employment (MBIE), the 2021 America's Cup was predicted to inject between $600 million and $1 billion into the New Zealand economy, pre-COVID. In addition, the MBIE estimated the cost of hosting the event would be approximately $200 million, giving a cost-benefit ratio ranging between 1.2 to 1.8 while also generating upwards of 5,000 new jobs.
Although it could be argued that the profile of Formula E would not attract the same amount of interest as the America’s Cup, the overall costs to host the Formula E could be significantly lower. For example, the 2021 America’s Cup will be hosted in Auckland at a public cost of over $200 million dollars, whereas the hosting of a Formula E race in Queenstown may cost, based on other cities expenditure, in the region of $40 million dollars. In addition, there is a possibility that Formula E may waive the hosting fee as they have done for Rome, giving further strength to predicting a net positive return for hosting the event. Therefore, it is argued that if the New Zealand government committed a strong financial package to the hosting of the event, significant discounts may be applied, resulting in a long term deal with the Formula E.
Understandably, there is consideration to be given when making the case public funding for a major sporting event while the country and its inhabitants are in need of economic assistance across a myriad of other industries. However, by looking at the industries that COVID-19 has most affected in New Zealand, it is clear to see that tourism and hospitality have felt the direct negative impact of border closures and restricted travel. Yet, as the country slowly opens back up there does not seem to be a clear path to how best invigorate an industry which many rely on to survive. Therefore, it is argued that the hosting of major sporting events such as the Formula E could provide opportunities for employers and employees alike, helping to soften the blow of the looming economic recession, while also driving the case for international tourists to once again return to New Zealand.
Moving on, there is a strong case for the Formula E to be held in the Otago region, justified by a recent Westpac report that suggests the region will be the slowest to recover economically with a predicted unemployment rate of 20% by 2021. Although the infrastructure in Auckland may be better suited to hosting the event, the economic importance of diversifying capital around the country to support the broader population should be viewed with equal importance. Moreso, Queenstown already has a reputation for being an idyllic destination for overseas travellers and by promoting the Formula E event to the world through Tourism New Zealand, there is a strong possibility that the Formula E may restart the next wave of domestic and international tourism that it so desperately needs.
Again, the costs and risks involved with hosting the Formula E for the first time would need to be considered and the argument of logistics and costs associated with screening teams and travellers for COVID-19 without a vaccine may be immense. As a result, it could be extremely hard for many to see the economic benefits beyond those associated high costs. However, I would argue that the long term benefits of creating safe tourism infrastructure would benefit the whole region long after the event itself had finished. For example, by establishing world-class testing procedures and hosting infrastructure, the Otago region would be set up to maximise other seasonal tourism activities such as skiing, snowboarding and hiking. Therefore, the initial investment would accumulate net profit as a multiplier as it positively affects other businesses in the region.
Undoubtedly, sports tourism is a vehicle that can drive economic growth for New Zealand and correspondingly, it is the hosting of events such as the Formula E that Tourism New Zealand can exploit to gain new visitors long after the event has finished. As professional sports become more digitized, there is scope for Tourism New Zealand to partner and advertise with Formula E, creating the concept of a desirable destination city to visit. Although the initial marketing promotions may only last for a set period of time leading up to the event, the idea and positive buzz of New Zealand will remain in the consumers mind beyond the end of the race itself. Therefore, the economic benefits of tourism due to the partnership and advertising with Formula E must be calculated as net positives long after the event has finished.
In addition, the increased awareness of Formula E on the global scale as a new and exciting competitor to Formula 1 may also generate new economic benefits not currently captured through traditional sporting events. Firstly, the emergence of new economies such as India means more people are consuming sport than ever before. Although the competition for viewers attention is extremely competitive in the business of sport, the allure of New Zealand’s appeal of being COVID free, combined with easily accessible viewing of the event on mobile devices could spur a tourism rush that could be sustained indefinitely. Secondly, the rise of electric motoring combined with the slow decline in the Formula 1 competition could also see significant growth in the Formula E racing competition over the next decade. As countries such as China increase their investment into electric motoring, there is undoubtedly going to be a surge in car production companies using the Formula E format to promote their brand, much like Formula 1 has done over the last seventy years. Furthermore, by hosting a successful Formula E event could inevitably lead to a new generation of New Zealand motor vehicle producers, engineers and racers such as Bruce McLaren, bringing undiscovered economic and social benefits such as new job creation.
Likewise, with increased attention being given to New Zealand from business leaders in emerging economies such as India through the hosting of a Formula E event, new investment into existing businesses may be created due to the appeal of New Zealand being a forward-thinking nation. As the economies become increasingly digitised, there is a tremendous opportunity for new and existing businesses to take advantage of what New Zealand has to offer in product and intellect and for those opportunities to be exploited for the economic benefit of our nation. Moreso, as digital sports evolves and sport viewership increases in emerging economies, the importance of using the vehicle of sport to maximise opportunity, such as how the NFL and NBA are doing successfully around the globe, should be more than evident.
Ultimately, the potential to secure public approval to fund a major sporting event with no guarantees of economic benefit in the midst of a generational pandemic is difficult at best. In addition, the shockwaves of a global recession yet to be truly felt will potentially negate any public funding for large sporting events in New Zealand for the foreseeable future. However, if New Zealand’s leaders can see that the future of sport and the hosting of large events has the potential for positive economic outcomes, then the arguments listed above should at least encourage further consideration. Much like how Dana White and the UFC seized the opportunity and made things happen amidst a complete global shutdown, I am adamant that New Zealand’s leaders can do the same.
In the meantime, tell your friends!