Peter Lyons warns of taking Rugby World Cup hype too much to heart.
It could lead to poor decision-making.
WE should be wary of politicians who talk of the "national interest" and showcasing the country when they are referring to the Rugby World Cup (RWC).
There is a risk of bad decision-making and poor financial judgement as a result.
This is a major international sporting event and the vast majority of New Zealanders want it to go well.
But let's keep it in perspective.
Recently, the Ministry of Education stated that the school year will be changed to fit in with the World Cup.
This is despite the fact that most games will be held at night.
There has also been concern that any changes to liquor licensing laws not impede the celebrations of rugby fans.
Our government has also shown a willingness to fund a party central while slashing funding in health and education.
This is ridiculous stuff. The RWC is a commercial venture.
It has become a cash cow for the International Rugby Board.
The commercial arrangement that the New Zealand Rugby Union (NZRU), the Government and the IRB entered into in 2005 ensures a major windfall for the IRB.
The financial risks associated with hosting the cup are entirely borne by the host nation.
The New Zealand Government will cover two-thirds of any loss while the NZRU covers the rest.
Currently the projected loss stands at $39 million and is climbing.
Martin Snedden is the CEO of the RWC 2011 company which is the vehicle being used to organise the event.
The key source of revenue for this company is ticket sales.
The IRB gets all the other revenue from sponsorship, broadcasting rights, corporate hospitality and travel packages.
It is a no loss-all gain scenario for them.
This is the agreement that we accepted in our bid to host the cup.
It is important that we do not lose sight of these financial realities of hosting the tournament.
We may be left with a very nasty financial hangover.
Organisers are likely hoping that the euphoria of an All Black victory will overshadow these potential losses to the taxpayer.
A recent article by Mr Snedden lamented the apparent price gouging of hoteliers in pre-bookings for the cup.
He called for them to charge a fair price, whatever this means.
Mr Snedden's concern is that high prices for accommodation could deter fans as seems to be occurring in South Africa for the soccer World Cup.
This will lead to poor ticket sales.
What he failed to point out is that the ultimate cost of poor ticket sales will largely be borne by the New Zealand taxpayer.
There is little point in looking to the IRB at this stage to shoulder more of the financial risk.
Fifa has recently provided additional funding to South Africa.
It is very unlikely that the IRB will be so benevolent.
A recent IRB vote in Hong Kong requires future hosts to pay an up front fee of 100 million ($NZ215 million) for hosting rights to the World Cup.
The IRB is not a charity. However there is a risk that a major loss in 2011 may deter future bidders for the hosting rights.
So amidst all the hype and slick TV promotions it is essential that we retain a sense of perspective.
We all want this event to be a success but not at any cost.
Overexuberant politicians could leave us with a big debt hangover.
The economic stimulus of hosting the cup will be largely transitory.
A back-of-the-envelope calculation suggests that the taxpayer and ratepayer largesse so far could have paid the airfares of more than 100,000 tourists to New Zealand.
Public funds have gone into stadiums, road and transport upgrades and now a party central venue.
We risk becoming an Easter Island of oversized rugby stadiums.
New Zealanders see themselves as friendly hospitable people and are generally proud of their rugby heritage.
Our reputation internationally means a lot to us.
Many will open their homes to visiting fans with the bonus of making a little extra income.
It is the actions and hospitality of thousands of average New Zealanders that will make this event a success.
• Peter Lyons teaches economics at Saint Peters College in Epsom.
