Formula 1 races could have more economic impact than UT football, SXSW combined

By Eric Pulsifer Friday, 23 July 2010

In late May, Formula One World Championship Limited and its partners announced plans to use Austin as the host city for the Formula 1 United States Grand Prix between 2012 and 2021. This would mark the first return of the racing series to the states since it left Indianapolis in 2007.

Critics have been skeptical about the Grand Prix coming to Austin, citing concerns about taxpayer dollars being used to lure in the event, the possibility that the track cannot be completed in time and claims the event does not fit Austin’s “weird” culture. But it is not all gloom and doom: Races in Austin could have a colossal economic impact, and the international event could mean serious worldwide exposure for Austin and the Lone Star State.

Though Texans may not yet be F1 fanatics, Trey Salinas, a spokesman for Austin-based Grand Prix promotion company Full Throttle Productions, said being located at the epicenter of about 20 million people makes Austin an ideal location for F1 fans from around the world.

“We’ve got to look at this on a bigger scale than just Austin; it’s really the state of Texas,” Salinas said. “We have good access from North America, South America and Europe.”

Initial estimates indicate attendance of a race in Austin could be between 90,000 people to more than 200,000.

The money

Grand Prix events in 2008 generated approximately $221 million in Malaysia and $394 million in Bahrain. The Texas Comptroller’s office projects an economic impact of around $300 million annually if the race were to be held in Austin—a larger windfall than that of South by Southwest and an entire season of The University of Texas football home games combined.

That is an impact on the local economy of World Cup proportion. Arguably the biggest sporting event in the world, the 2010 FIFA World Cup was projected to have generated about $1 billion over 30 days, or $35 million a day, while F1 races often bring in more on a day-to-day basis. The impact is comparable to Austin landing the Super Bowl for 10 years in a row: Though numbers vary depending on the source, it is estimated the last two Super Bowls created an economic impact of between $300 million and $500 million.

Salinas said that figure does not even take into account anything beyond the race itself. Other tracks around the world often become the site of development or hubs for nearby growth, including condos, amusement parks, driving schools, concert venues and technology centers.

The cost

Though they have yet to apply for it, race organizers could receive around $25 million a year for bringing the Grand Prix to Austin. The Texas Major Event Trust Fund has been used previously for bringing the Big 12 Championship and the 2004 Super Bowl to Texas. The fund can normally only be used to reimburse the host community or event organizers after the event has occurred and the tax revenues have been collected, though prepayment could be authorized for the Grand Prix. The local government would be required to contribute $1 for every $6.25 contributed by the state.

“It’s basically a reimbursement,” Salinas said. “After the race is set, the first $25 million will go to F1 before the event. Then, it’s a reimbursement every year after that.”

Don Hoyte of Texas Trust Funds, a private company that helps event organizers apply for money from the state fund, said the money would not have existed without the event.

“It has to be an event that comes to Texas that could have gone to another state,” he said. “[If event organizers] can show that the event is a gain to the state, ... then that amount of money is available to go into the fund.”

As the former director of regional fiscal analysis for the Texas Comptroller’s office, Hoyte developed the means for calculating the tax impact of events that pull from the Texas Major Event Trust Fund. He said the amount of money organizers would receive from the state would be based on results of an economic impact study, which would primarily focus on visitor spending rather than locals attending.

“The gain to the state generally does not include people in Texas spending their own money,” he said. “What tends to count for the economic impact is just the people you bring into Texas from outside the state.”

The timeline

Building a world-class racing facility in less than two years would be no simple task, and a purpose-built F1 track has never been constructed in the U.S.

However, a track in Bahrain by Hermann Tilke—who is also the designer of the Austin track—was constructed in similarly short time frame. Construction of the Bahrain International Circuit began in December 2002 and was completed for the Bahrain Grand Prix in April 2004.

Salinas said promoters have been planning the Austin track with Formula One for two and a half years, and ground will be broken on the project this year.

“It’s a very aggressive schedule, but it’s absolutely a doable schedule,” he said.

In an interview with SPEEDtv, Tavo Hellmund of Full Throttle Productions said preliminary work is already completed, including site selection, which has not been announced as of press time, some design and arrangements for utilities.

Formula 1 FAQ

Who watches F1 racing?

Formula 1 races are said to be the most watched annual sporting event in the world, pulling in around 600 million viewers in years past.

“The best comparison I’ve heard is that, this year,153 million people watched the Super Bowl live, and, on average, each Grand Prix event is watched by almost 600 million people,” said Trey Salinas of Full Throttle Productions.

How is F1 different than NASCAR?

Though they both involve racing, NASCAR and F1 are drastically different beyond the surface. While NASCAR tracks are typically oval shaped and only include left turns, F1 tracks zigzag across the ground with a mix of sharp turns and straightaways and are often based on city streets. Unlike NASCAR’s stock cars, which are loosely based on production car model frames, F1 teams design and produce their own chassis and cars and can therefore be drastically different from one another. They are open-wheeled cars, meaning there are no fenders, and feature large wings to produce downforce.

How is F1 like other team sports?

F1 has a season, which runs from March to November. During each season, there are multiple races. Each race, called a Grand Prix, is like a game in the season. These races take place in locales including Bahrain, Abu Dahbi and Brazil. As for the teams, rather than being based out of a city, F1 teams are named for sponsors and/or the manufacturer of their cars. Teams include Red Bull, Ferrari, Virgin and McLaren. Each of the 12 F1 teams has two drivers. While the same 24 drivers typically race the entire season, if someone is unable to race, a backup driver can take over. At the season’s end, two awards are given, one to the driver with the most points and another to the team with the most points.

Since when is driving a car a sport?

It might be easy to assume drivers are not “real” athletes, but because of gravitational forces on the body while hitting speeds of more than 200 mph, extreme temperatures and other conditions, drivers must be in peak physical condition. These are not average joes but rather trained drivers with hours of time spent behind the wheel and in the gym. Like jockeys in horse racing, F1 drivers are typically smaller in size and weight to help keep the cars light and fast.

What will the cost be for people to attend?

Ticket prices typically start around $25 for general admission but prices range depending on the country. As for the exact cost of the race in Austin, event organizers are still working out the details.

When will the U.S. Grand Prix be held?

“They don’t actually set the schedule until about 10 to 11 months out, so they won’t set the actual date until around September or October of 2011,” Salinas said.

Historically, the U.S. Grand Prix has been held around the Canadian Grand Prix. Traditionally, the Canadian Grand Prix is in June, so it is likely Austin’s Grand Prix would be a couple weeks before or after.