The Race That Stops A Nation (copyright!). Yea. I’d say so…
If I haven’t made it clear before, then let me make it clear now: I am of the belief that large scale events have little to no economic impact. I do not believe the benefits outweigh the costs. This tends to be the view of most sport economists (with a few exceptions – those who are wrong).
The Melbourne Cup is no exception. Here’s why.
We’ll start with the apparent benefits.
The first is that the high number of visitors brings extra money to the area. There are over 120,000 international and interstate visitors to Melbourne during the event. These people pay for flights, accommodation and food. They also buy souvenirs and spend money in other local businesses. When I was studying in Sydney, a few of my American friends flew to Melbourne for the races and stayed to go on the Great Ocean Road tour as well as visit some of Melbourne’s other attractions.
The people who attend the event need to look the part. I mean, show up to the event without a fascinator?! Are you crazy?! This dress code, and the desire to appear on blogs and in newspapers because of your amazing fashion sense, means there’s a lot of money spent on clothing and grooming. Almost $30 million… WHOA.
Those who don’t attend the event (the majority of the nation) usually watch it on TV. These high numbers (over 95% of metropolitan residences) mean increased TV revenues, which are then spent in the Australian economy.
The hospitality industry gets a huge boost around the nation. If you’re one of the 95% who watch it on TV (which is what I’m doing at this very moment) then odds are, you’re having a cold beer or snacking on something that you specifically bought for the event (which is what I wish I was doing at this very moment). Lots of people host Melbourne Cup parties, which give an increase to food and beverage sales. Those who watch at work, typically watch at a bar and I don’t need to tell you what types of purchases are made at that venue…
In this case, I have to ignore the idea that increased tourism keeps locals away. I don’t buy it. Victorians love them some Melbourne Cup. If this were an issue, I would be shocked.
But what about the costs? Ah, yes. The overlooked part of the economic analysis.
People sometimes forget that it costs money to host an event. Especially one like this. Emirates spends over $6 million dollars on the event, which is private money. That’s a great start, because it’s essentially a private company footing the bill for all these great things to happen to the Australian economy. But it’s just a start… Melbourne has to spend the money to implement different transportation for the day including altered road rules/direction, use of public transport and security for the event. Now, I don’t know the costs of all these things, but the bottom line is that it’s not free and the money spent on it is public.
Most importantly is the loss in productivity on that day. I found an article that hypothesizes that Australia loses $1 billion in productivity on race day. This is due to people taking half or full days off work, the time spent talking about/watching the event instead of working, whether work sponsored or not. I can attest: both my previous work places take time off (one takes the entire day to wine and dine – jealous!) during the Melbourne Cup. Considering the total benefits aren’t expected to be more than $728 million (gross, not net), then this is a high cost. An absurdly high cost. A cost of $650 million, if we’re being specific.
Then there are aspects that are not quantifiable. Like traffic congestion, vandalism and environmental degradation. Those costs add up, especially when you consider who pays for them (the Victoria locals, that’s who). I’m also going out on a limb and saying that buying new clothes can produce a negative externality. If you would have seen my insanity at the shopping centre the day before Randwick Races trying to find a dress, you would understand.
I will admit, though, that there is a seriously huge positive externality: unity. How awesome is it that nearly everyone in Australia watches this event? It’s a great thing, ain’t it?
But in terms of cash, I call it a fail. It is not economically beneficial. And don’t let anyone tell you any different!
What do you think? Have I made my point that it’s not beneficial? Or are you still letting Emirates convince you this is good for Australia? Thoughts?