Professional Skipper – January 99 issue          back to articles menu

"The Cup runneth over"
As people travel to NZ to witness the Americas Cup, the cost of just about everything they need - both here and while they're on their way - is sky-rocketing, a cynical practice called 'gouging'. If you have a captive buyer then you can charge what you like. And they are. The prey is on the run, the predators lie in wait.

I was watching Discovery channel the other day, a documentary about the African great plains – Serengeti I think, no matter – which focussed on the migration of the Gnu and the Zebra, countless thousands of them moving like a black shadow over the earth. Apparently they do this twice a year (it’s a return ticket) and have been for millions of years. The documentary focussed on the activities of a group of predators that follow the migration, and other predators who lie in wait. It seems the Gnu and Zebra, these Great Plains Travelers, have no option but to migrate using the route they do – it’s built in to their genes. Therefore, the predators have a guaranteed food supply twice a year, and they make the most of it. Lions, Cheetahs, Hyenas, Vultures – you name it. The feast is on, make hay while the sun shines. These predators only exist because the food supply is there. At other times of the year, they may starve. So it is built in to their genes too, to stuff themselves as full as their stomachs can cope with, trying to pack on the fat for the lean times. They can’t bank the stuff or chuck it in the freezer.  From starvation to gluttony back to starvation, Nature’s way. Enter Mankind, Homo erectus. 100,000 years ago, man was a predator and in order to survive would have lived off the migrating herds too, in much the same way. However, we’ve come a long way since then. Er, I think. There will shortly arrive in this fair Country another kind of Great Plains Traveler, some of them already here, and the predators are ready. Once again, the Travelers have no option but to come here. If you want to participate in the Cup, this is where it’s at. The traveler can only choose whether or not to travel. The destination is set. Feeding off this migration are three types of predator – those who travel with them, feeding off them ‘en route’, those who are already here in the disguise of existing service providers, and those the situation will create – the opportunists. Now I’d like to leave the Migration analogy behind and lead out with a question. What happens on the Serengeti is a function of Nature carried out by Animals. If a little cruel, we accept it as Natures Way. My question is, can we apply the same analogy to the various suppliers of products and services aimed at those associated with the Americas Cup? I think we have to – it appears to be happening. If so, is it wrong? It would appear that for the period leading up to (and for the duration of) the Cup, airfares from London (and presumably every other destination) will rise by about 300%. A hotel bed, which currently goes for $150.00 per night, will cost $900. Charter operators who used to be able to afford berthage now no longer can – and it’ll get worse. I am reminded of the Western tourist, lost in the desert, staggering from dune to dune. He meets an Arab riding a camel. “Water”, he cried. “Sorry”, says the Arab. “No water. I have some lovely ties though. Would you like to buy a tie – only $1.00?” “No!” says the tourist, and staggers on. Repeat this event three times (we don’t have room here). Each time he is denied water and offered a tie for a dollar. Each time he refuses. Eventually, nearing death, he climbs a high dune, and sees before him an oasis, surrounded by a security fence. He asks the guard to let him in. “Sorry”, says the guard. “No admittance without a tie… I have some here at the measly price of $1000.00, and Amex will do nicely, thank you”. The price of something is determined not by its cost of manufacture plus its cost of sale or supply, and a margin on top. The price is never determined by ‘what is fair’. The price is determined by what the market will pay – or not pay, as Housing NZ has learnt, with the high number of houses vacant and yet the number of homeless families is high. Housing NZ thought they had a captive market – and they do, but in many cases the target market simply can’t raise the readies, and the social conscience issues seem to be being ignored. The predators in the Cup market also know that they have a captive market and there appear to be no social conscience issues. The Cup participant or attendee must come here. Therefore the question is – how desperate are they, and how deep are their pockets? Perth showed us how opportunists will create a business driven purely by Cup Fever, which survives during the event but then can’t pay the creditors – from boom to bust in 12 months. It will happen here, because the driving forces are constant. If a restaurant owner, seeing a sudden influx of wealthy tourists, lifts his menu prices by 100% - is that wrong? If you throw money at me, should I not take it? The fact that we locals will not patronise his restaurant because we can’t afford it, will not have an effect during the Cup. So after the Cup, market forces will bring the prices down again. If I own a property overlooking the Cup race area, and sell it for three times its normal market price to a Texan who lights his cigar with $100 notes – am I wrong to do this? He will on-sell it after the Cup at a huge loss, but to him that loss is just another cost of being here. It’s factored in. Money talks, and if you’ll pardon me for being cynical, the human is basically a greedy sort of beast. But there is a caveat here. The business and community leaders – and even the proprietors of various waterfront service and supply industries – should remember that the local operators who need your services are, if you like, your seed crop. In the headlong rush to cream off the windfall, you may be damaging the local operators to the point that – when the party is over, the big money has all gone home and the hangover is thudding away, the core businesses that kept the waterfront alive in normal times, may simply have died away. What will you do then?  Has anyone given any thought to the long-term damage to our Tourism industry, as people learn they can’t afford to fly here and even if they could, they couldn’t afford to stay?  I guess the gamble is whether these tourists will try again later. People have long memories about some things. Interestingly, these days you hear much use of the word ‘sustainable’. Sustainable fishing quotas – enough to earn money without damaging the stock to the point where it cannot recover. Sustainable logging – taking enough, without wiping out the forests. It would appear that this ‘management’ –or husbandry if you like – is an inconvenient concept when considering the local marine industry in the context of the Americas Cup. For some, thinking long term is obviously not in vogue. One thing’s for sure. After it’s all over, there will be plenty of cheap boats around. The Banks will feel it a bit as they foreclose on mortgages and bankrupt the unlucky. But then, they’ll be enjoying the deposits from those doing the creaming, so I guess it will balance out for them. Banks don’t usually lose, do they… Maybe that’s when I’ll buy my boat. Mortgagee sale, or desperate vendor. Does that make me a predator? Or an opportunist? Should I have a social conscience in this? 

As a final point, in a small village there was a butcher. The only butcher. The only butcher for 30 miles. Realising the power he had, he started raising his retail prices and dropping the price paid to the farmer. People complained, but they had no choice. Until a group of farmers started talking together, and realised that they too had power. They quietly formed a cooperative, pooled enough stock to supply the village, and contracted in a butcher two days per week. By the time the butcher realised his mistake, it was too late. AFFCo was born, and he was out of business.

Carpe Diem

Steve Punter ANZIM, Dip Bus (PMER), FHRINZ
Staff Training Associates Ltd, Auckland, New Zealand.
© Steve Punter 2001 All rights reserved by the author.

steve@sta.co.nz                                                                                                                       back to articles menu