The Bermuda Tourism Authority today released statistics covering the America’s Cup period and people are already up in arms trying to prove America’s Cup was a failure because it didn’t live up to the hype. Why?
The America’s cup was to be so big that all the hotel rooms would be full and there’d be so much demand that they’d need to bring in a chartered cruise ships to host all the extra people.
One word: Hype. If you believe the above, you were sold on hype, not reality.
Smart financial decisions are not based upon hype. They are based upon conservative projections of a return on investment. America’s Cup was not brought here because of hype, it was brought here because conservative projections suggested it was a good investment.
What we really need to do is take a step back and compare the results that we’re seeing against the projections to prove if the investment was worth it. The conservative projections suggested that based upon the invested amount we would generate $235 million of direct spend on the island. We need to figure out if the returns generated met or exceeded that estimate. If you expected it to bring the second coming of Jesus then I can only shake my head that you bought into such hype and suggest you’re reading the wrong blog.
Yes, hotel occupancy was down for June.
Yes, the original projection suggested hotel occupancy to be 10% higher
Does that make it a failure? Well no. It was a projection.
You see, the government has no control over how Hoteliers run their businesses. If hotels decide that they want to push their prices up to keep occupancy levels the same, government can’t do anything about that. It is a business decision on the part of hoteliers.
So, what we saw was room prices being $133 more expensive on average in June than they were during the same period in 2016 while occupancy was slightly down. What does that mean? Well if you look at it from the perspective of bed nights (you know, nights that a hotel bed had someone in it), there were nearly 98,000 bed nights for June which was down from 107,055 for 2016. However, if you consider that each one of those bed nights cost $133 more on average, then by a rough back of the envelope calculation we’re looking at about $13 million in additional revenue. Assume that the 10k less bed nights accounted for a guess of about $300 a night on average in 2016 and we can subtract $3 million from that number. So, for hotels that’s about $10 million in extra revenue.
So, look back up at the assumption snapshot above and you’ll note that $5.485 million was the projection. If for June we honestly cleared $10 million in revenue (not counting May) then it suggests the event beat the projection.
How about Superyachts? The original estimate? 40. The final number? 100. So that is looking positive as well but we won’t have good estimates of what they spent until the impact assessment comes out in October.
Cruise visitors? This is an area that raises perfectly reasonable questions. The projection called for 3,850 static cruise ship passengers though admittedly a caveat was included that this plan could change. Ultimately $18 million was the estimated direct spend so we can work with that as it forms part of the $234 million total. The question is, compared to the estimate, how did cruise do in spending? To be honest, I have no idea. The America’s Cup summary of the tourism statistics suggests there were roughly 13,000 additional cruise visitors. The problem is that the statistics numbers provided are weak so it is very difficult to put together an idea of whether or not cruise measured up. No cruise nights are listed, no expenditure is listed, so there’s really no good way to compare the cruise projections to the actual results at this point. So I’m left suspect of the cruise number and will wait to see if more info is released to help clarify the numbers.
So. Was the America’s Cup event a complete failure overall? It isn’t looking like it. Was it a wild unbridled success that yielded the second coming of Jesus? Well no, it doesn’t look like that either. Did it likely meet and possible surpass the original projections? Probably, but we won’t know for certain until the impact assessment comes out in October.
Here’s the thing. If you’re desperate to prove the America’s Cup is a failure without fairly looking at the original projections and the actual results then I have to question whether you actually care about Bermuda’s future. Great if you were so caught up in the hype of the election that you wanted your team to win over the other. If your team won, great. If your team lost, too bad. Either way, take a step back, recognize someone won, and deal with that is the way it is going to be for the next few years. Given that it’s over, isn’t it time we step back from the hype and cheerleading and rationally focus on a better Bermuda? A first step would be to stop trying to prove the outcome you wanted and instead taking a serious look at the stories the facts are telling.