Review of the Direct Financial Benefits from Securing the 2011 Rugby World Cup

The purpose of this report is to evaluate the New Zealand Rugby Union and New Zealand Government's bid to the host the Rugby World Cup in 2011.

Two strategies are available to the partnership:

* Submit a stand-alone bid, whereby New Zealand hosts all matches of the tournament and bears all associated costs and risks.

* Submit a joint bid with Australia, whereby matches are hosted in both countries (with major finals staged exclusively in the primary host and all associated costs and risks are shared.

This report will show that a joint bid with Australia significantly increases the probability that New Zealand succeeds in its goal of hosting the RWC 2011. Critically, the inclusion of Australia overcomes New Zealand's perceived weakness in the areas of population and stadium capacity.

The estimated value of a joint bid takes into account the associated risks of failure at either stage of the bidding process and potential variation in match attendance figures. The amount stands at NZ$ 26.23 million.

Estimated value of a stand-alone bid, under the same criteria for evaluation, stands at NZ$ 26.97 million.

Under a joint bid strategy the incremental taxation benefit to the New Zealand government is decreased, therefore this analysis recommends the following stipulations be included in the decision to pursue a bid:

* NZRU agree to abandon their attempts to form a joint bid with Australia.

* The Government agrees to the NZRU's proposal to share any direct profits on a 50:50 ratio and split costs at a ratio of 67:33, with the government incurring the greater expense.

* The government agrees to support the funding of stadium upgrades and administrative costs incurred in the short term, if the NZRU agrees to pay all ticket revenue to the government as reimbursement for these costs.

A slight increase in the mean expected attendance would reinforce the decision to submit a stand-alone bid, whereas a marginally lower mean attendance would change the optimal strategy to one of a joint bid with Australia, as costs of hosting the tournament are defrayed.

Similarly, in relation to these costs, a marginal increase in required capital expenditure would change the optimal strategy from one of a stand-alone bid to a joint bid. As a result costs need to be closely monitored and risk exposure to cost of raw materials and energy factored into forecasts as the process continues.