How Bermuda landed the America’s Cup

Organizing a yacht race here seems an obvious enough idea: Water views are inescapable — and routinely stunning — on this archipelago shaped rather like a fish hook. The Newport Bermuda Race already arrives every two years.

But staging the 2017 America’s Cup was much more of a stretch considering that Oracle Team USA, the syndicate that holds the trophy, is American, and that Bermuda, despite accepting U.S. dollars in its shops and restaurants, is a British overseas territory with a population of only about 65,000 and was bidding against major U.S. cities like San Diego and Chicago.

When Russell Coutts, the former star helmsman for Oracle who is now head of the America’s Cup event authority, first suggested that Bermuda bid for the Cup, local leaders said they were incredulous.

“It was, ‘You’ve been hit in the head by the boom too many times. What are you talking about, man?”’ said Peter Durhager, now chairman of the America’s Cup Bermuda Development Authority, the ACBDA.

At that stage, the Bermudians were only aspiring to hold a warmup event, but urged on by Coutts and by their research, they were soon in the hunt for the main event.

“We actually thought we were the stalking horse, that we were there to encourage the U.S. cities to be serious,” said Michael Winfield, ACBDA’s chief executive. “When they actually wrote to us confirming that we had won, we actually had the lawyers check the letter because we couldn’t find the loophole. It took the lawyers two days to go through a two-paragraph letter and say in fact that there was no loophole. You’ve got it.”

If sailing were a major sport in the United States instead of a niche diversion, the decision by Coutts and Oracle’s billionaire owner, Larry Ellison, to take the regatta outside the country might have caused a nationalistic uproar. Instead, the surprise move reverberated mainly inside yachting circles.

Malin Burnham, the U.S. businessman who led San Diego’s unsuccessful bid, was outraged.

“It’s confidential, so I can’t relate the party’s name,” Burnham said. “But one of the America’s Cup backers who was a nationally known figure wrote Russell a note, and among other things this party said was that this was the first time the America’s Cup had been prostituted.”

Asked if he thought “prostituted” was too strong a term, Burnham answered: “Not at all.”

The America’s Cup is the oldest major international sporting event. Since it began in 1851, only one team had chosen to defend the trophy outside its home waters. That was the Swiss syndicate Alinghi, which chose Valencia, Spain, in 2007 but only because Switzerland is a landlocked Alpine nation with no seacoast. Oracle’s choice was different and entirely optional.

“I think there was in all honesty some complacency with the U.S. venues,” Coutts, a New Zealander, said in an interview last week in Hamilton, Bermuda’s capital. “They never thought, frankly, we would have the guts to take it outside the United States, and we just looked at it logically. And I’m absolutely convinced it’s the right decision.”

Though the choice has its potential negatives, including the ocean that separates Bermuda from any major population center, one can understand the mutual attraction.

For Bermuda, which has had to muddle through uncharacteristically lean times in recent years, this is a chance to stimulate its economy, inspire its populace, raise its global profile and boost high-end tourism — including the affluent super-yacht community if new facilities prove an effective magnet after the Cup.

“My interest in doing this is it’s one part about a sailboat race and nine parts about other stuff,” Durhager said.

For Coutts and Oracle, this is a chance to come to a venue where the Cup and its challenger series will be the main attraction instead of the sideshow it was in booming San Francisco in 2013.

“The people here are just so into it; it’s like going to Augusta where it’s all about the golf,” said Jimmy Spithill, Oracle’s skipper.

The government and business community in Bermuda is also easier to navigate than in San Francisco, with its difficult political climate for waterfront initiatives. Bermuda is in the process of building an America’s Cup event village on about 10 acres of reclaimed land in the harbor at the Royal Naval Dockyard, although there has been some concern expressed about the project by local environment advocates.

Though crowds are expected to be much smaller than in San Francisco, the time zone is advantageous for television: one hour ahead of New York and five behind Paris and much of Continental Europe (with challengers from Britain and France, European prime time is particularly important).

A U.S. venue like Newport, Rhode Island, could have provided some time-zone benefit. But the American venues were not offering the same incentives as Bermuda, which agreed to pay $15 million as the cost of entry over a three-year period as well as underwrite a $25 million guarantee against commercial sponsorship.

“We get a certain percentage of anything Bermuda introduces so there’s a way to claw back that guarantee, and that’s been happening already,” said Grant Gibbons, Bermuda’s minister of economic development.

Gibbons estimated Bermuda’s capital and operational expenditures at $35 million to $40 million.

Though some in the Cup community maintain that Bermuda overpaid, Durhager disagrees and said initial projections in 2014 were that “we were going to spend roughly $75 million and we’re going to earn somewhere around $250 million on a direct impact basis.”

“Everyone has to keep their own counsel,” he said. “What is another event worth in a city the size of San Diego, where you have professional sports teams and major conference business with millions of people a year going through your city? What’s that worth compared to a country that is 22 square miles? It’s very different, so one is an apple and one is a pomegranate, not even an orange. So you can’t compare the two.”