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GP Week : Issue 216
It would also bring F1’s tally of races in the Middle East to three and there is a premium price for becoming a member of this exclusive club. Sources suggest that Qatar would have to pay around $75m annually for a race. It would almost match the current record of $80m paid by Abu Dhabi and would bring the total fee to around $700m as contracts typically run for ten years. Qatar’s 3.4-mile Losail circuit has hosted F1’s feeder series GP2 and is home to the motorcycle championship MotoGP (see lead pic). However, Ecclestone isn’t ruling out an F1 street race which would differentiate the Grand Prix from the others in the Middle East. “We are looking at all possibilities there. Qatar is not signed but they are ready to go,” he says adding that he doesn’t think three races is too many in the Middle East. Losail is fully floodlit, as the MotoGP race takes place at night, so an F1 race there could follow Abu Dhabi’s format of starting in twilight. It is thought that if the race gets the green light it would take place by 2017 at the latest. In 2013 Qatar was reportedly under consideration as a venue for pre-season testing but its ambitions have grown since then. There are currently 20 races on the F1 calendar and next year it will exceed this record with the addition of a Grand Prix in Azerbaijan. For years 20 races was the limit because team staff refused to spend more time at the track away from their families. However that changed in 2013 when the teams signed new contracts which require majority consent from Ferrari, McLaren and Red Bull Racing if the calender exceeds 20 races. Over the past decade F1’s turbocharged television viewing figures have brought the sport to the attention of emerging markets looking to increase their global profile. Hosting an F1 race puts them on the sporting map alongside developed nations such as Australia, Britain and Monaco. The tremendous visibility promotes tourism so governments of nations in the Middle East and Asia are prepared to directly fund the hosting fees for their races. Interest from them has fuelled an arms race in hosting fees as emerging markets battle each other for slots on F1’s calendar. Ecclestone has added to the effect by giving exclusivity to certain races. For five years Bahrain had the status of being the only race in the Middle East until Abu Dhabi joined in 2009. Likewise, Singapore is currently the only night race on the calendar. With deep-pocketed governments on the hook Ecclestone has been able to hike up the hosting fees with the price paid by organisers increasing by up to 10% annually. It has boosted the cost of the average annual hosting fee by more than $15m over the past decade. In turn, many races in F1’s European heartland have been priced out of the market. European countries don’t need to use F1 to promote tourism so their governments tend not to fund the hosting fees. This season there will be seven races in Asia, compared to just two 15 years ago. Using sports campaigns to promote a country pulls at the viewers’ heart strings more than typical advertising and F1 offers perhaps the most emotional link of all as tourists can stay on the same streets where their heroes have raced. This effect is magnified when the circuits are on city streets as local landmarks can become inseparable from the racing action. It isn’t the only benefit as although purpose-built tracks take years to build, street circuits take just over a year to prepare. This gives their hosts quick access to the attractions of F1 and means that there are no fears of being left with a white elephant if they decide to quit when their contracts expire. Location of the host city is even more important than the location of the track itself. On average 40% of spectators at F1 races are not from the local area and the higher this figure, the wider the promotion and the bigger the spending on local hotels. The more populous the local area, the fewer the tickets that are likely to be sold to people foreign to it. So whilst a race in a densely-populated renowned city makes a great advertising flagship on TV, one in an area with outlying cities stands a greater chance of having higher visitor spend. With a population of just 1.8m the city of Austin in Texas is the best example of the latter. The race there joined the calendar in 2012 and its race-day attendance was the second-highest after the British GP with 117,429 spectators in the stands. It brought an estimated $347.4m of local economic impact because although Austin is only the 33rd-biggest metropolitan area in the United States, there are much bigger cities nearby including Houston and Dallas. Smith Travel Research reported that over the five-day period ending on Sunday 18 November, when the race took place, hotels in the Austin area took in $32m - triple the amount made during the same period the previous year. Hotel occupancy in downtown Austin the night before the race averaged at 97.8% with guests paying an average rate of $300.44. In comparison, on the closest Saturday the previous year the average rate came to $111.40. Although the average rate dropped to $266.16 on race-day this was still far higher than the $86.52 achieved the previous year. Even beverage takings got a sharp boost as Austin alcohol sales for November 2012 were 23% higher than the same month the previous year. The Circuit of the Americas, which hosted the F1 race, sold more beer, wine and mixed drinks in November than any other venue in Texas and made $2.8m from this alone. Perhaps the clearest indication of the power of hosting a race is that according to the United Nations World Tourism Organisation, countries that have joined F1’s calendar since 1999 had an average rise in tourism of 84% by 2012. The best performer has been Malaysia which experienced a 351% increase in the number of international tourists visiting annually since it hosted its first F1 race in 1999. However, the benefits to emerging markets fuel a vicious circle for F1 as the more they pay to host it, the higher the average cost which in turn puts more pressure on European races. This ultimately means that more European races are likely to be replaced by ones in emerging markets and the cycle begins again. Races in Thailand, Mexico and Hong Kong are understood to be under discussion but one obstacle is in their way. Ferrari, McLaren and Red Bull Racing also have clauses in their contracts requiring their consent if more than 60% of the races are held outside Europe, the United States or Canada. It currently stands at 55% so these teams really do hold the keys to F1’s future. F1 >>> BUsinEss 33 GPWEEK.com // 33 GPWEEK.com // PARTNERS: