COVID-19: Economist says America's Cup will be left with cost overruns

America's Cup was predicted to bring in $1 billion to our economy, but there's a fear the $250 million funded won't pay off.

The Government and Auckland Council committed to spending $250 million in July, but economists are now saying this amount of money "shouldn't have been funded".

The marine, hospitality and tourism sectors were all set to benefit massively from the event with the country flooded with uber-wealthy jet-setters.

But with COVID-19, there's a lack of syndicates, superyachts and international tourists.

"It was always nonsense to fund it, it shouldn't have been funded," NZ Initiative chief economist Dr Eric Crampton tells Newshub. "It shouldn't have been continued - now because of COVID, it's worse than we were expecting. 

In 2017, the Ministry of Business, Innovation and Employment predicted the event would bring in $1 billion to the economy.

"The case for these events have never made a lot of sense," Crampton says. "It's similar to the economics of hosting the Olympics.

"Everybody always figures there will be huge benefits that come with it, then they're left with white elephant facilities and cost overruns." 

This is due to several factors. There are only three challengers - Ineos Team UK, American Magic and Italy's Luna Rossa - after several pulled out.

With the borders closed, superyachts and their billionaire owners are no longer able to enter the country. At least 160 were due to sail here - now, less than 30 are expected.

The Youth America's Cup, with 20 teams competing, has also been cancelled, as immigration won't let the international teams into the country.

Destination Auckland general manager Steve Armitage remains optimistic.

"We think the returns will be there, it'll just be a longer burn," he says.

"It's not necessarily the sweet sugar hit you get from delivering the event in the moment - it's creating that space in people's minds through the events and broadcasting that to the world."

Grant Dalton, the man in charge of both America's Cup and Team New Zealand, has spent more money on the television product than anything else to bring in international viewers.

"The product you're going to see on the screen will be first-rate and you couple that with these boats, which are spectacular," he says. "It's going to be a great spectacle to watch on the water.  

"What would deem it a success? People... that people come here.

"It's summer, they're able to experience the atmosphere with the teams and the boats."  

And that's what will set America's Cup apart. An international event - with an audience, up close and personal.