Ruling Could Deprive S.D. of $1.2 Billion

Times Staff Writers

If it stands up to appeal, a New York judge’s decision giving the America’s Cup to New Zealand will deprive San Diego of the estimated $1.2 billion the 1991 defense was expected to generate.

A full-fledged America’s Cup competition held here would have had nearly nine times the economic impact of Super Bowl XXII, which was held in San Diego in 1988 and pumped $136 million into the local economy, said Max Schetter, research director at Greater San Diego Chamber of Commerce.

Described by boosters as the third-largest sporting event in the world after the Olympics and the World Cup soccer championship, the America’s Cup would have drawn hundreds of thousands of visitors to San Diego spending an average $150 a day each in food and lodging for a total of $369 million, according to a study completed in late 1987 by CIC Research of San Diego.

The 20 or more racing syndicates expected to participate in the races were expected to spend $90 million on food, housing, services and other purchases over the two-year period preceding the race. It was projected that public and governmental bodies would spend $85 million in building racing and spectator facilities.


To come up with the $1.2-billion total windfall, CIC factored the anticipated direct expenditures by a “multiplier effect” of about two to take into account the indirect effect of new dollars filtering through the economy. According to the study, which was commissioned by the America’s Cup Task Force, the race would also have created about 9,000 jobs.

According to Warren L. Hull, a director at CIC who worked on the 1987 study, the conclusions were realistic given that the 1987 America’s Cup race drew 1 million visitors to remote West Australia, generating more than $500 million in economic benefits to the region.

“Western Australia is not the end of the world, but you can see it from there,” Hull said. “San Diego is not anywhere near the end of the world, and is much more accessible in terms of the other developed nations.”

Summer Arrival Expected


Some of the racing syndicates were expected to arrive in San Diego as early as this summer, two years in advance of the final, Schetter said, spending “millions on maintenance, repair, cranes and quite a bit on local services.”

Just as important as the immediate spending of more visitors, the race would have focused worldwide attention on the area, stimulating tourism and business activity, said Schetter. “It’s quite a blow to the region,” Schetter said. “It’s quite a shock, and, judging from the people I’ve talked to, almost totally unexpected.”

The money spent so far by local businesses and government agencies in anticipation of the race has been relatively small. The San Diego Unified Port District is among the losers: it spent $300,000 in engineering studies and significant staff hours planning for the event, Port Director Don Nay said. Most parties have awaited the New York court’s decision before making investments.

“We’ve been waiting to go full-bore in marketing the race until we knew the outcome of the legal challenge,” said Al Reese, spokesman for the San Diego Convention & Visitors Bureau. The bureau had planned an aggressive campaign to market San Diego tourism in countries with syndicates mounting America’s Cup challenges, Reese said.

Immediate Effect on Boatyards

The decision’s most immediate, damaging effect could be to boatyards that ring San Diego and Mission bays and had hoped to play host to the 20 or more syndicates expected to take part in the 1991 America’s Cup race.

“All of the small boat yards in San Diego spent an enormous amount of money” preparing for the 1991 cup defense, according to John Sawicki, a Coronado boatyard owner. “And they’re all left holding the bag right now.”

In preparation for the 1991 race, the yards--such as Knight & Carver, Kettenburg Marine, South Bay Boat Yard and Shelter Island Boat Yard--have financed engineering and architectural studies to determine the needs of those syndicates. Sawicki spent an estimated $20,000 on studies at his Coronado boat yard and made a $20,000 donation to the America’s Cup Task Force.


San Diego charter boat owners, however, didn’t view the 1991 race as a sure economic boon, in part because of the disappointing business generated by last September’s race between New Zealand and American yachts. The race “had a fairly limited impact on the fleet,” San Diego Sportfishing Council spokeswoman Catherine Miller said.

Sportfishing Firm Needed Only 1 Boat

Point Loma Sportfishing planned to use four of its boats to carry race observers during last year’s race between New Zealand and the United States. “But there wasn’t much interest, and we only ended up using one boat,” Hecht said.

The news was disappointing for North Sails, a Point Loma concern that has made sails for Dennis Conner’s boat, Stars & Stripes. “We were pretty much assured some sort of association with a defender or a challenger,” according to spokesman Gary Weisman.

With the race evidently headed for New Zealand, the North loft in San Diego “will most likely have to go looking for some part of the business,” Weisman said.

In anticipation of the San Diego defense in 1991, Australian financier and yachtsman Alan Bond last December bought a 75% interest in the Kona Kai Club and Kona Inn hotel and resort on Shelter Island on San Diego Bay. He then announced plans to play host to the Australian syndicate on the site as well as build a $50-million, 318-room addition.

Bill De Leeuw, a minority owner with Bond of the property, said the expansion will continue regardless of whether the race is held in San Diego.

Missing ‘Shining Jewel Opportunity’


“I don’t think (losing the cup race) will hurt any one individual,” De Leeuw said. “The main negative is that San Diego does not get to be a shining jewel before the whole worldwide press. It doesn’t get the opportunity to become a worldwide city with a monthlong barrage of publicity. That’s the long-term impact.”

Saying that most San Diego hotels in the county would have “benefited dramatically” from the event, Tom Vincent, general manager of San Diego Princess Resort and vice president of San Diego County Hotel-Motel Assn. said: “I don’t have my crying towel out yet, but I may in a while.”

“It’s hard to draw the $1-billion figure, but even if they are half wrong, it’s still $500 million (in economic benefit to San Diego), which is still pretty significant,” Vincent said.

Nationally, sports marketing professionals had mixed opinions on what the New York Supreme Court decision meant to America’s Cup syndicates that rely almost exclusively on corporate donations to build their multimillion-dollar sailing boats.

“Companies were dying to become involved with America’s Cup after the race in Australia,” according to Lisa Ukman, executive editor of Special Events Report, a Chicago-based newsletter that monitors corporate support for various events. “But it’s been such a mess (since Conner’s 1987 victory in Australia) that (the San Diego syndicate headed by Dennis Conner) has become somewhat of a joke. And this court decision puts a further damper on sponsor viability.”

Syndicate ‘Kind of Blew It’

Conner’s syndicate and the San Diego Yacht Club “kind of blew it even before they lost the cup,” Ukman said. “The event really had momentum when they came back from Australia. They were riding a real wave. But they lost all of that momentum, and it’s become something of a joke.”

In contrast, Charles Ward, who handled Conner’s marketing campaign from 1985 to 1987, said the court decision “is an excellent move from a marketing standpoint. . . . We’re back to the stage where we were in 1984, when America wanted to win the Cup back from a foreign country,” said Ward, who now operates a sports marketing firm in Hawaii.

“I predict there will be more enthusiasm from the American people now that someone else evidently has the cup,” Ward said.