Motorsport News

THE REAL COSTS OF RUNNING A SUPERCAR ROUND

HOW MUCH does it cost to promote a round of the Virgin Australia Supercars Championship? The Race Torque has crunched the numbers and can reveal the real costs of putting on a race meeting for Australia’s top category.

WORDS: Richard Craill IMAGES: Mark Walker

AT EVERY level Motor Sport is an expensive game. We all know it. From $1m cars to $100 tickets it is expensive for both the participant and the punter. But how expensive is it for the promoter?

While the business of promoting a race meeting at a national or state level has changed over the years, the concept at the top-end of town in most cases remains the same as it has always been. A circuit, organisation or an entrepreneur (or a combination of those) pays a major championship to visit with the goal that it will attract paying customers on which they will make a return all the while promoting their venue, town, city, state or country.

At a high level it’s why cities like Melbourne spend $40m each year on Formula One.

At a lower level it’s why several state governments and city councils pay for Supercars events and while independent circuits like Winton and The Bend Motorsport Park do the same.

But how much does that exactly cost? And is it worth the expense and the ridiculous amount of work involved?

That’s what we’re going to find out.

THE SCENARIO:

YOU’VE just taken over a new circuit and reached a deal with Supercars to join the calendar next year.

The track is a nice, permanent facility. It’s outside of the city limits but in a regional area with plenty of potential customers within a not-too-far drive or bus ride from the venue so there’s potential to attract both spectators and corporates to the venue.

You’ve decided to promote the event yourself, rather than hire the circuit out to Supercars and let them run the show. Supercars’ own events business is at capacity and, quite frankly, they’re quite happy to take the sanction fee rather than pay to put on another event anyway.

So with your management team and organising committee you sit down, fire up a blank Excel spreadsheet and start with the stuff that will probably keep you up at night first..

OUR WORKING:

RACE PROMOTERS aren’t exactly jumping up and down to throw their detailed accounts to the media, but then again it’s not that difficult to a) find the info we needed and b) work out the rest.

On things like the Sanction Fee paid to Supercars and the CAMS permit we’ve taken a stab based on what we understand are the going rates. Placing a dollar figure on marketing is entirely dependent on how much people want to spend, and what existing deals are already cut with the media. The remainder of the figures we’re very confident are, pardon the pun, on the money.

As for income – well you don’t need to be a rocket scientist to work out revenue from camping (number of campgrounds sold times the price charged) and gate sales.

Finally, it’s not like we’re new to this game. Spend enough time around circuits and their promoters and you don’t need to listen too carefully to find out what things cost..

EXPENSES

SANCTION FEE – $800,000

THIS IS the fee paid to the headline act to bring them to your venue. While Supercars don’t charge the tens of Millions that Formula 1 events command, it’s not an insignificant part of revenue for the championship.

We’ve taken a stab at this figure, the largest single expense in promoting a Supercars round, because sanction fees vary from circuit to circuit. Government-backed events pay more, but those deals are often wound into a host of other opportunities like marketing, corporate and promotions.

At the lower end of the scale it is generally accepted and has been reported in the media that Winton is believed to have been paying in excess of $500,000, while other stand-alone events and those backed by governments are in the seven figures-range. We’ve gone somewhere in the middle.

EQUIPMENT HIRE – $150,000

SEEMS like a lot, right, especially given you’re a permanent circuit and should have everything already there.. but think again. There’s several hundred meters of temporary fencing to erect. Marquees for corporate suits, support categories and officials. There’ll be demountable buildings to install for extra office space and you’ve sold lots of camping tickets, so you’ll need to spend at least $50,000 of that on temporary shower and toilet facilities to cater to several thousand hardy souls staying under canvas. Then there’s the stage for the entertainment, kids area, food vans and more. Oh, and a couple of big screens so the paying customers can see the bits of the race track you put behind a hill.

MARKETING – $90,000 – $130,000

YOU HAVE to get the word out! You could have the best event in the world but if no-one knows about it then what’s the point? Your dedicated in-house PR person will be activating key stories in the media, creating digital content that engages fans and bribing journalists to cover the event with a few tickets or a hot lap here or there.. but you need to back that up with a dedicated spend. Hit the local newspapers and radios with advertising and some targeted TV spots during an AFL or NRL game a few weeks prior would also do the trick. These days, there’s also cash to be spent on digital media, targeting ads right to your potential customers Facebook feeds.

Of all the expenses, this one is possibly the most fluid and is dictated by the expected results. If ticket sales are up and you look like you’re going to be packed you can ease up. But at the same time if things are not going well and you’ve got a couple of hundred grandstand seats to sell, then you need to get on the phone to your advertising guru and hand over the credit card.

Once relationships with local media have been built and the event has recognition in your area this number will come down slightly as better deals are reached.

PERMIT – $50,000 – $100,000

THIS fee to the governing body basically allows the event to occur under the nominated sporting authority’s guidelines, rules, regulations, insurances and more, plus supplies the key CAMS officials for race control, stewards and technical requirements. It’s a big expense for a piece of paper, but without it the categories sanctioned by that governing body can’t compete, you won’t have insurance and you don’t have a race meeting. And in this case, you can’t use the alternatives, either.

SECURITY – $60,000

SOMEONE has to make sure no one gets in to the venue without a ticket and that spectators stay in the areas that they’re supposed to. Over-officious pass checkers can be a pain, so find a company with good people, but they’re a necessary evil and an expensive one at that.

WAGES & CONTRACTORS – $60,000

IF your staff are on a contract or a salary then you won’t need to worry about paying them for the extra hours and the weekend work; but you can bet that you’ll have to fork out for some so your wage bill will go up. Then there’s an array of contractors hired just for the weekend, so you’ve got more boots on the ground, and probably some last minute costs for employment when things inevitably go awry and you need another pair of hands.

TICKETING – $30,000

TALK ABOUT spending money to make it. Paying a decent ticketing vendor to manage sales is critical in the customer experience. Grumpy people who can’t work out the online system (because it’s crashed) or don’t like booking online are not good for business, so pushing this out to a third party is the way to go. Their call centre can handle the irate customers who weren’t able to book their traditional camp site because they left it too late, and can be the ones to explain why your grandstand seats cost three per cent more this year than last. Trust us, your staff will thank you.

MEDICAL COSTS – $25,000

THERE are a number of motorsport-specific medical and first response providers in Australia, including Race Solutions Motorsport and Team Medical Australia. These providers staff the circuit medical centre, provide the on-track response to any incidents and can also help render medical assistance to event attendees.

OFFICIALS – $10,000

‘YES, but aren’t they all volunteers?’ Event officials generally are volunteers and the sport wouldn’t happen without them. But they still need to be fed and watered each day, and in some instances provided with a place to camp for the weekend. Making sure they get good meals, a few T-Shirts, hats and souvenirs and have a great time will ensure they keep coming back year after year.

SITE PREPARATION – $10,000

YOUR venue is going on the big stage with a big crowd and live, international TV so you have to make it look nice. Kerbs need to be painted, signage erected, lawns mown and the circuit prepared to host its biggest event of the year.

IT / TECHNOLOGY AND COMMENTARY – $10,000

EVEN if you don’t have wi-fi to the whole facility, you’ll need it for race control, the media centre (though this seems to be a delete option, these days) and other areas. You’ll need TV monitors throughout the venue – in corporate suites, especially – and you’ll need to pay for a couple of taking heads to call the action for the big screens and circuit public address (which you’ll probably need to spend money on making better, too).

CLEANING – $10,000

THERE’S nothing worse than race track bathrooms, so the least you can do is have a crew of cleaners on hand to try and keep them decent throughout the weekend. Then there’s the catering kitchens, corporate suites (lots of empties to remove) and the hundreds of rubbish and recycling bins around the venue that will need emptying several times per day.

TOTAL COST: $1,400,000

IT’S going to cost you, give or take, $1.4 million dollars to put on this show, all in. For your sake, we hope the fans come and support it so you can get some of that investment back!

REVENUE

GATE – $450,000

THE ‘gate’ is term used for the paying spectators who come across the weekend. As the football codes show, paying attendance is a fickle thing with variables like weather, especially, playing a massive role in how many people show.

Given the factors here and that you’ve done a good job marketing the event you can be hopeful of hitting this revenue target based on a real attendance of approximately 15,000 unique, paying spectators across the weekend.

CAMPING – $350,000

CAMPING is a core strength of several motorsport events in Australia and in many cases it’s key to the bottom line. Because this circuit is not that far from a major population base and there are other accommodation options around, budgeting on approximately 500 campsites for a total of about 2,000 campers across the weekend seems safe. This, though, is an area of growth and often becomes tradition for those who attend each year so it can an avenue to grow and a key revenue stream each year.

CORPORATE – $250,000

YOU HAVE a nice pit building and some great spots to entertain guests so it’s wise to expect a decent return on corporate hospitality tickets over the weekend. Between the circuit’s own sponsors, local business keen to embrace a major event and the sponsors of both the sport and the teams this is a strong revenue stream for the event.

SUPPORT CATEGORIES – $150,000

WHILE you pay Supercars to appear, the support categories pay to be on the big program. There are generally four or five support categories on any given program and in this case you will be budgeting on about 120 cars in total, each paying $1200 entry fee and garage / marquee hire. This is an affordable entry fee for a Supercars round, but you want good fields and good racing for the paying spectators so we’re being generous. Hint: get Excels on the program.. you’ll get 40 of them without even trying.

OTHER INCOME – $80,000 – $120,000

FOOD and beverage sales, income from trade alley stalls / stall fees and event-specific sponsorship (it’s always good to sell a few extra pieces of trackside signage or another billboard) are filed here.

GOVERNMENT GRANT – $300,000

BECAUSE you’re far enough out of a major population base to be considered a ‘regional’ event, the state government has graciously tipped in $300K to help you along in your first year, which ultimately tips the event into the black. It requires plenty of hoop-jumping, paperwork, proposals and promises to ministers that they can present a trophy in front of their constituents, but it’s definitely worth it.

TOTAL: Approximately $1,600,000

CONGRATULATIONS! Your event is in the black to the tune of about $200,000, once all the bills are settled and the dust has cleared. Supercars are happy because they’ve got an ace new event on their calendar, your circuit has got a marquee, flagship event on their program on which you can build the remainder of your schedule, sell to sponsors or members and other candidates keen to use your circuit.

SUMMARY

ON PAPER making money from an event like this is a good outcome but, and you’ll pardon the pun, the bottom line is that circuits don’t promote Supercars rounds because they make plenty of money.

In fact, when you take into account the fact that you lose opportunities to make income from the circuit while the event is on, hosting something like this is a break-even proposition at best.

When you consider that the circuit is generally consumed in pre-event preparations and post-event teardown for seven days, that’s somewhere in the vicinity of $100,000 in potential circuit hire revenue for track days or private hires out of the window.

What’s more, the risk is immense. What if there’s torrential rain all weekend and people don’t come? Even with a solid base of pre-booked campers propping up the bottom line, even a 25% drop in attendance year-on-year can tip an event operating into the black into the red very quickly.

However, and it is a big ‘however’, these events are also often the only thing that truly draws paying spectators to circuits these days and as such remains a huge shop window for what the place has to offer. From using it to promote other events at the same venue, to hand-hold local politicians in the hope that they’ll tip more cash in down the road to building relationships with local media it’s all valuable brand-building.

So while there are question marks involved, the question independent promoters have to ask themselves continually is this: Is the risk, worth the reward?

Editors Note: This story is based on being an independent promoter, running their own round – much in the same way Winton Raceway, The Bend Motorsport Park or, in many ways, Darwin and Perth do. Supercars Events-promoted rounds utilise a different business model because they can rely on economies of scale, better deals from suppliers, joint marketing efforts and, of course, government funding in many cases. We’ll look into that model at some point in the future.