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Companies bet on rugby's Olympic appeal

By Ramy Inocencio, CNN
March 30, 2012 -- Updated 0308 GMT (1108 HKT)
The new HSBC logo for the Hong Kong Rugby Seven tournament on the arm of New Zealand captain DJ Forbes.
The new HSBC logo for the Hong Kong Rugby Seven tournament on the arm of New Zealand captain DJ Forbes.
STORY HIGHLIGHTS
  • Despite cuttings tens of thousands of jobs, HSBC returns to sponsor the Rugby Sevens
  • Profile of rugby growing with the sports inclusion in the 2016 Summer Olympic Gamers
  • HSBC says it expects a 3-to-1 rate of return for its sponsorship investment
  • Analyst: Returns for companies on sports sponsorship are "notoriously iffy"

Hong Kong (CNN) -- As the attention of the rugby world is drawn to Hong Kong this weekend for the Rugby Sevens, corporations are looking to capitalize on a sport that soon will become an Olympic event.

Two dozen teams will pound the pitch, put in flying tackles and perhaps lose teeth in an effort to claim the 2012 championship trophy.

For the New Zealand Sevens team, it's time to defend last year's victory. For spectators, it's a chance to run up a credit card bill on beer and bizarre costumes. But for HSBC, this year's tournament marks its return to the stands as a sponsor after a 17-year hiatus.

"There's more to sports than just the players on the field -- there's the financial funding," said DJ Forbes, the captain of the New Zealand Sevens. "If a sponsorship deal is held in high esteem, potential sponsors are going be sure the money they invest is put in the right places."

But is the right place the Hong Kong Rugby Sevens? HSBC thinks so. Even as the bank is cutting tens of thousands of jobs worldwide, HSBC is investing in rugby ahead of the sport's inclusion in the 2016 Summer Olympic Games.

"Rugby has changed enormously. The HK Sevens is a very popular tournament but was much more standalone than it is now," said Giles Morgan, HSBC Group head of Sponsorship and Events. "That and its upcoming inclusion in the Olympics in 2016 in Rio de Janeiro have made the game much more international and much broader. "

This is not about a fun investment. We (target) key demographics and key geographies
Giles Morgan, HSBC

But while HSBC has ramped up its sponsorship investment in Hong Kong, the "world's local bank" is winding down some of its Asian retail operations -- notably in Japan and Thailand, while cutting 30,000 workers worldwide by the end of next year. All of this is a cost-cutting plan as laid out by HSBC's Chief Executive Stuart Gulliver to save some $3.5 billion.

Morgan quickly defends HSBC's sponsorship as a calculated strategy. "We very much regard our sponsorship as a business -- with business objectives," he said. "This is not about a fun investment. We are targeting key demographics and key geographies.

"It made sense for HSBC to come back," he added. "We didn't know rugby was going to grow the way it did."

And it has grown. From the Hong Kong Sevens first tournament in 1976 that featured just nine teams, it now invites 24 teams spanning every continent except for Antarctica. It now pulls in profits for Hong Kong on the order of hundreds of millions of dollars.

Morgan declined to comment on how much HSBC actually invests in sponsoring this year's Hong Kong Sevens but he says the bank aims for a three-to-one return on sponsorship investment.

But it is rare for any company to know its rate of return on investment, according to one Hong Kong advertising firm. Not only that, companies may pay a prestige premium that comes with being a title sponsor for high-profile sporting events because there are so few of them. In American football there's only one Superbowl. In international football, there's only one World Cup. In Hong Kong, there's only one Rugby Sevens Championship.

So why invest in the Sevens then? For HSBC, it helps target specific clients in markets like Hong Kong, Shanghai and Singapore --hub cities the bank is targeting for growth, even as it streamlines elsewhere, Morgan said. "With strong expat communities you'll be looking at strong growth."

HSBC is sharing title sponsorship of the Rugby Sevens with Cathay Pacific, whose global hub is Hong Kong.

"We're looking for sponsorships that really help build Hong Kong and help bring people in to make the city a tourist destination," says Camilla Taylor, Cathay Pacific's Marketing Manager-Events. "We target a lot of different groups, including average rugby fans around the world. We're trying to promote the Sevens to a wider audience."

Cathay has been investing in the Hong Kong Sevens for much of the last 35 years. Aside from a seven-year break from 1997 to 2004 in the wake of the Asian financial crisis, the territory's flagship air carrier will likely not fly away as a Sevens sponsor soon, Taylor said.

While HSBC, Cathay Pacific and other sponsors refuse to divulge their investment or returns, Hong Kong gladly throws its books wide open.

The Hong Kong Tourism Board says last year's Rugby Sevens drew in more than 21,000 spectators from overseas. The average Sevens spectator from abroad spent $1,650 over the course of six days. In total, Hong Kong raked in more than $289 million in direct economic benefit.

Companies are counting that as thousands descend on the city, more spectators may notice that DHL ad on the Jumbotron in Hong Kong's Central bar district, notice the Cathay Pacific billboard streak by on a Citybus, or notice that red-and-white HSBC banner flutter in the Sevens stadium breeze.

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