Melbourne could lose F1 grand prix

The conversation regarding the Australian Grand Prix has been ongoing for quite a while now. This debate has circled around the government’s investment or subsidization of the race, the local economy’s return on that investment and the value to the Australian population as a whole.

There is nothing inexpensive about Formula One. From the cars, the team operating expenses, the promoter sanctioning fees and even the tickets to the race. A weekend pass for the United States Grand Prix is $300 and when coupled with hotel and travel expenses, the average fan needs to factor that into their yearly budget very carefully given the current economy.

In Australia, the Victorian Government’s Tourism Minister, Louise Asher, isn’t offering any guarantees that they will subsidize the race when the contract expires in two-year’s time saying:

“I have asked the chairman of the Grand Prix Corporation, Mr (Ron) Walker, to commence preliminary discussions with (F1 supremo) Mr (Bernie) Ecclestone over our future contract,” Asher said.

“There’s no rush on this, obviously, because there’s still two events to go and the government will not be signing up anything if it does not represent good value for money for taxpayers.

“I don’t think it’s the right thing to do by either the Grand Prix, the Grand Prix Corporation, or anybody for me to start putting limits in a public sense on what the government would be prepared to subsidise.

“But generally the driver of all government activity on this will be we will only sign a new contract if it represents good value for money.”

There are two more events to host but who knows how many AsiaPac races could join the calendar by then? As Australian Grand Prix CEO, Andrew Westacott, says, the competition is getting stronger with races in Singapore, China, Korea, Japan, Malaysia and India:

“Now there’s seven events in Asia and we go into Asia in prime time.

“So with a 5pm time slot, Melbourne is broadcast into Asia on free-to-air at lunchtime and into the European market at breakfast.

“So there’s huge competition.

“Bangkok is looking for a street race in the future, so if Melbourne wants to retain a profile internationally, it is competing against these cities, whether it be Singapore, Abu Dhabi or Bangkok and other Asian locations.”

The Victorian Government has to assess the feasibility and overall impact of the race. In 2010, the Australian Grand Prix Corporation’s annual report revealed a $50M loss and that’s not pocket change by anyone’s measure but the key is Asher’s interpretation of what a “good value” is for the Australian people.

The truth of the matter is that the city of Melbourne was just voted the top city in the world in which to live. In fact, Australia claims three of the top ten cities in the world to live in. Surely the grand prix is an additive to this financial and cultural equation?

Formula 1 boss Bernie Ecclestone has suggested that the Albert Park venue is the least viable of all the venues around the world. The isolated nature of Australia adds to the complexity of taking the F1 circus to town and the temporary circuit requires a tremendous amount of labor to stage seating and amenities as well as safety for the cars.

In March of 2012, Ecclestone did suggest that perhaps Formula One Management could subsidize a portion of the grand prix. The historic nature of the Australian event has always been the lead-off pitch for the F1 season and a fan favorite.

The Australian Grand Prix Corporation is a well-oiled machine and Chairman Ron Walker does a tremendous job. A long-time friend of Ecclestone’s and once thought to be a possible successor for the role of F1 boss should Ecclestone retire, Walker knows how to run a race. In fact, Austin’s own Circuit of the Americas (COTA) hired staff from the Australian Grand Prix Corporation to run its FIA media center to provide a cohesive and error-free process for its inaugural year. Other circuits have done the same including Abu Dhabi.

The cost to host a Formula 1 race is large and many governments do subsidize the event for the tax revenue brought into the region via tourists seeking hotels and amenities surrounding a race weekend. The Circuit of the Americas is subsidized by a state trust fund for major events that the state of Texas has created. Even still, the folks at COTA recently announced a new investor to help the track economics stack up.

Can Australia continue to compete with the AsiaPac races? Will the government continue to investment in a loss and is this impact actually a loss-leader for revenue generated? We have two more races to figure it all out.

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