~by: Kien M Lee~
Before I begin my thoughts on why continuing Formula 1 in Singapore isn’t such a straightforward argument, let me admit that I am a BIG F1 fan -‘BIG‘, as in I can tell you who races in the top teams, who’s leading in the championship, etc. But not a ‘HUGE‘ F1 fan, for ‘Huge’ would require an ability to tell you the stats off the tip of the tongue, explain the technology of F-ducts, KERS, DRS, etc.
So I begin…
There’s an adage for folks in the event organization business, “event organizers don’t make money, event suppliers do”. This is my first point.
Now, this isn’t a knock on the good people who do the “supplying” in an event. In fact, my company is co-organizing the upcoming Women’s Fashion Week and we work with some of the best “suppliers” in the business, established and well respected professionals in each of their expertise.
A good supplier is one who gives you a quote for his services, and you both mutually agree to engage aforesaid services, and you get what you expect, you pay what you’re expected to. Nothing wrong with this business model here.
Now there’s another way to make money from Event Organizing, charging tickets and needing to sell at full capacity or getting as much of the funding from sponsors. This is my 2nd point.
The State of Formula 1 in Singapore
The man on the street can make these observations off the bat: Hotels, restaurants, bars are seemingly at full capacity during F1. Overpriced F1 merchandise are flying off the racks in the F1 village stores. Parties are happening all weekend long.
Here’s the Reality
Hotels, especially those in the Orchard Road and Marina Bay area, NEVER have an issue with selling hotel rooms and going near capacity. It’s what the travelers spend on ancillary items that make that stay profitable or not – room charges, in-hotel dining, etc.
Restaurants may seem to be bustling with activity but it’s no Valentine’s Day, with double or triple seatings (rounds) per night. Neither are there too many F1 dining specials that allow the F&B folks to make huge margins.
Bars can always do with good business, but the bar owners in Clarke Quay can tell you that it looks like there’s a whole lot more foot traffic during F1 weekend, but not incrementally that much more sales of bottles (the big margin). Sure more glasses of beer are being bought by tourists but this is no New Year’s Eve.
So Who’s Making the Money?
Formula One Management (FOM) owned by Bernie Ecclestone and Singapore GP Pte Ltd owned by Ong Beng Seng. Now these are both companies that are Event Organizers, and didn’t I say that they don’t make money? Well, here’s the voila moment: It’s because the traveling circus that is F1, brings its own suppliers.
From the entertainment acts you see, to the F1 merchandise you buy (notice you pay in EUROs?), it’s all money that stays with the Event Organizers because they are also Event Suppliers. Think about the expensive hospitality suites and paddock tickets. All these ticket sales go directly to F1 (remember my 2nd point).
So in reality, the revenues made in the F1 circuit (the area you enter with your ticket) are all absorbed into the F1 coffers – money that is made by FOM and Singapore GP Pte Ltd.
How much of that trickles back to the local economy, other than through taxation is anyone’s guess.
What’s In It for the SMEs?
So how does this benefit the average small to medium business owner? I have to guess that it’s not much; and that is why the Singapore government which footed up to 60 per cent of the cost to bring F1 to Singapore has to do some internal analysis before just greenlighting anything beyond the current 5-year contract.
F1 is supposed to bring tourism dollars and local spending up to boost the local economy. And just because a few companies have a good pay day during F1 does not justify the expenditure (remember Youth Olympic Games).
Sure, compared to an average weekend, it is a peak but these weekends aren’t that special compared to Lunar New Year, Christmas, Valentine’s Day and pre-Holiday celebratory spendings.
Now go beyond the parties, beyond corporate sponsorship of special events and client entertainment, beyond seeing F1 drivers up close and in person, beyond having great marketing of “Singapore, Inc” with the races under the bright city lights, what’s in it for Singaporeans?
That is the question that needs to be answered.