I WRITE this column update on what could have been Race Day for the 2011 Bahrain Grand Prix. The first race of the 2011 season and we would’ve known who is on the pace and who is not. It would have revealed form and flaws of all the teams that were probably masked in pre-season testing. However, the Bahrain Grand Prix was forced into cancellation due to the political unrest in the Middle Eastern country. I have mentioned this in several forums and at the cost of being repetitive, Formula1 is not priority for the state of Bahrain, restoring normalcy is.
Bernie Ecclestone waited and eventually announced the cancellation of the Bahrain Grand Prix. The delayed announcement didn’t go down too well with global media, with a few even accusing Mr. E of being ‘greedy’. However, the stakes involved were so high, that it was important to take the correct decision rather than a hasty one.
So what were the stakes? Before I go about answering that, in the course of a cancellation the three biggest losers would be – the organizers (or the organizing country), Formula One Management (FOM) and the participating teams.
Bahrain’s loss was already pegged at $100 million due to the cancellation of the Grand Prix. Do note, this loss was to the country of Bahrain, primarily down to a loss in tourist revenues. F1-led tourism is a big source of revenue for the host countries and Bahrain saw an influx of almost 100,000 spectators to watch the GP in 2008.
Of these 100,000 tourists, 22% visited from the United Kingdom followed by visitors from the Middle East. The National daily from the UAE states that tourists generated $116.8 million of income from visitor expenditure on accommodation, food and travel. Additionally, $13.8 million was revenue from ticket sales of the Bahrain International Circuit (BIC). The race goers spent $36.7 million at the BIC on merchandise, food and beverages over the three day Grand Prix weekend.
The more astonishing fact is that all hotels in Bahrain would have experienced 100% occupancy for the entire duration of the Bahrain Grand Prix. The hotels usually double their rates during the GP time, which is also the single most important annual event for the hospitality sector.
While Mr. E announced the cancellation of the GP, he also announced that he would waive of the hosting fees from the Bahrain GP organizers. This alone would cost the FOM about $40 million. Bahrain’s royal family pays an estimated $25million to host the ‘Bahrain Grand Prix’ and an additional $12 million to ensure that it is the first race of the season. Why would they want to be the first GP of the season? F1’s global TV footprint would mean huge international exposure for the country of Bahrain, which would now be lost due to the cancellation.
The FOM also pays for limited freight for the top 10 teams on the grid. Tons of freight would have left for Bahrain by end of January and would now be redirected to Australia. However, millions of dollars spent on freight to Bahrain would have gone waste and added to FOM’s loss.
The F1 teams would have had a mixed bag of reaction to the cancellation. On one hand, they would have an extra fortnight to prepare for the 2011 F1 season and on the other hand, most teams would have suffered from a loss of sponsorship.
Teams are contracted to the sponsors and missing a race would trigger a penalty clause, which would basically mean a cut in sponsorship money. According to Formula Money, the cumulative loss of sponsorship for all the 12 F1 teams would be around $40 million; Ferrari being the biggest losers with an $11 million loss in sponsorship revenue.
Just to bring the numbers in perspective, Gulf Air sponsors the Bahrain Grand Prix, this comes at a cost of about $6 million. While the airline might not lose its sponsorship money, it will surely lose out on revenue generated from extra air-traffic during the GP. In 2008, of the tourists that attended the Bahrain Grand Prix, 49% travelled with Gulf Air.
With Bahrain out, the focus is towards Australia and the start of the 2011 season. The only time Bahrain will occur again is when it reflects in the year-end P&L statement of all stakeholders involved.
