Liberty Media managing director Greg Maffei plays down the increased costs for the first Formula 1 Grand Prix in Las Vegas and emphasizes that the investment will pay off in the long term.
The event is the first to be promoted directly by Liberty Media, the owner of Formula 1, and the company has covered the costs of purchasing the site for the pits and paddock as well as constructing the permanent buildings on it.
These capital costs have increased over the course of construction, as have other expenses related to running the race. However, Maffei emphasizes that some of these costs are one-time expenses and the event will be more profitable in future years.
“We are looking forward to the first race in Vegas in less than two weeks,” he said in a conference call with investors. “The pit building is ready and we have received the operating permit for the race.”
“It will be the largest pit building in the Formula 1 calendar. The roof terrace and the surrounding balcony offer a 360-degree view of the race track. The temporary structures are in place, the bridges are finished, we can get started.”
“The first-year launch in Las Vegas involved significant costs, including additional security and traffic planning arrangements required by local authorities,” said Maffei.
“We also had some one-off expenses such as our opening ceremony, which will only take place in the first year, the development and launch of our multi-purpose app and the creation of a fan database.”
“We remain very confident that we will be able to work more efficiently and increase our profitability in the second year and beyond,” said the Liberty Media boss. “And we remain optimistic that the increased value of the Las Vegas GP will far outweigh the increased investment and start-up costs.”
Formula 1 races are already more expensive than planned
When asked about the increased costs, he added: “Some of them I’ve already mentioned, like the increased security and one-off things like the opening ceremony, but there were others too, like consultants who helped us set up, unusual permitting costs and Something similar.”
“So there are a number of initial costs that are probably higher than we had originally estimated. I, no we, remain very optimistic about, as I said, the impact of Las Vegas on Formula 1 as a whole and the potential for this race itself to be a profitable venture.”
Liberty Media CFO Brian Wilding gives an insight into the rising investment costs. In August, he said the company expected to spend “close to” $400 million on the project and that $155 million had already been spent in the first six months of 2023.
During Friday’s conference call, he said that “we spent approximately $280 million in the third quarter on investments in the pit building and track preparation.”
This would bring the running total for 2023 through the end of September to $435 million, already around $35 million above its previous estimate, excluding spending from October.
“…then this is a very profitable race for us”
Maffei has already suggested that Las Vegas will be among the five most profitable Formula 1 races from the start, and he stands by it: “That’s still a reasonable estimate for profitability,” he says. “I think I mentioned earlier that we had some one-time costs and startup costs that were perhaps higher than expected.”
“But if you consider what this means for us, not only directly but also indirectly, then this is a very profitable race for us,” said Maffei.
“As far as the top five rating goes, we don’t tell the world what the top five is. But we found that this race will have that influence. I think that’s still the case. Especially when you “Looking at the bottom line of FWONK (the Formula 1 share; editor’s note), it will have this impact overall.”
“And I think we will see that profitability. As I said, it will increase once we get past the initial startup costs and optimize,” he reiterates.
“To be clear, this year we focused on being on time and having a good race,” Maffei continued. “That doesn’t mean we won’t continue to pursue these goals next year. But I think we will be able to optimize other variables and increase profitability.”
Maffei also played down any possible disruption to the event from a looming labor dispute by hotel workers in Las Vegas: “We have been working with the unions and I don’t think our race will be directly affected,” he says. “We are of course monitoring the impact on the entire Las Vegas market.”
Formula 1: “Handful of tickets left”
Liberty Media also stresses that the first race will be sold out and suggests there will always be a late rush of fans.
“We still have a handful of tickets left,” says Las Vegas promoter Rene Wilms. “And since we know that the Las Vegas market is a last minute market, we have reserved tickets for this purpose. We are very excited. And we will be sold out at the time of the event.”
Maffei adds: “A lot of people from Los Angeles book relatively late for Las Vegas.”
Formula 1 boss Stefano Domenicali also remains optimistic about the race and emphasizes the impact on the city: “We are committed to the race in Las Vegas in the long term,” he says.
“The total local economic benefit of this year’s Grand Prix is estimated to be over $1.2 billion, including Formula 1’s direct spending on organizing the race, additional spending by visitors and the impact on local suppliers and businesses.”