Sailing to Success

As Valencians watch some of the world's most high-tech sailboats run sprints on the Mediterranean, they hope to blow past a group of perennial losers: the hosts of sports spectacles. Spain outbid Marseille, Porto and Naples to win the right to host the 2007 America's Cup for Valencia, promising to spend about ¤1 billion, largely for port improvements. That's more than the take of the two previous America's Cup races in Auckland, New Zealand, combined. "There's a lot of money coming in," says Rosa Mari Roig i Berenguer, a cabinet member in the regional government, "more than most people have ever known."

So what's the chance Spain will recoup its money? The record is pretty grim. Montreal will pay off the last of its 1976 Olympic debt only at the end of this year. The ¤8 billion Greece spent on the 2004 Olympics left the most indebted country in the EU saddled with even more debt, and an ¤80 million annual maintenance bill. Yet big cities still line up to host these events, no matter how unclear the benefits. Bidders for the 2012 Olympics included London, Paris, Madrid and New York. Says economics professor Victor Matheson at Holy Cross University in Massachusetts, "These cities just don't need more tourists in the summer."

On the other hand, the little-known regional capital of Valencia fits the profile economists look for: it's a small city on a roll. The America's Cup is about the right scale for Valencia (population: 800,000). The city can count on at least ¤600 million in funding from the 12 competing teams and their corporate sponsors--far more than Auckland. And the Cup highlights summer water sports in a coastal city where tourism makes up one eighth of the local GDP, after a 50 percent rise in the first half of 2005 alone. A dozen low-cost European airlines fly or are preparing to begin flying into Valencia, and work is nearing completion on a ¤400 million arts-and-sciences park (launched well before the America's Cup) that includes a maritime museum, a music center and Europe's largest opera house.

Valencia resembles Barcelona before the 1992 Summer Olympics, which became a coming-out party for that formerly insular port city. Ever since, host cities have struggled to re-create the "Barcelona effect." Winning the bid brought a cash infusion from Madrid and attracted top architects and planners to overhaul Barcelona's transportation system and entire neighborhoods, not just swimming halls and velodromes with little practical use after the Games. Valencians sometimes talk as if they've already repeated the trick. "Valencia no longer needs to envy Barcelona or even Madrid," says Elena Gala Muñoz of Valencia's Cup organizing committee.

No doubt, Valencia looks like a city on the rise, rerouting streets and bridges through neighborhoods once steeped in decay. Much of the America's Cup money is going to improve the airport, roads, subways and especially the 19th-century fishing and ferry harbor. This once forgotten backside of the city now boasts a seafront park, fine restaurants and shops, a 700-boat marina and slots for 42 megayachts. Much of the area was custom-built for America's Cup 2007, says organizer Marcus Hutchinson, "but when we're gone, they'll do what they want with it."

Still, there are risks. A security scare, spiking gas prices or even bad weather could turn the Cup from a televised postcard from Valencia into a docudrama on a place not to visit. Warns U.S. economist Craig Depken: "The Barcelona effect is the exception to the rule." But Valencia has asked the right question: would the Cup money be well spent in the absence of a big sporting event? And it can be pretty comfortable with its answer.