Formula 1 in Las Vegas: The Race That Hopes You Don’t Sleep
Brent Shockley, Director at ValueScope
November 17, 2023
Formula One/1 racing returns to Las Vegas this weekend for the first time in over 40 years. The Heineken Silver Las Vegas Grand Prix 2023 is the start of a three-year contract with the city; although Formula 1 intends to support the race for at least 10 years and the entertainment and gaming hub of the U.S. intends on a “lifetime partnership” with the top class of international racing. The nearly four mile track will wind through Las Vegas landmarks, hotels, and casinos with a straightaway section down the famous “Strip” at speeds reaching 212 miles per hour in cars that can range in cost from $12 to $20 million. The Las Vegas Grand Prix is the next to last F1 race on the 2023 circuit.
The race promises to be a visual spectacle….for those in the U.S. that stay up to watch the event. The Las Vegas Grand Prix will start at 10pm Pacific time on Saturday night, which is midnight or 1am for half of the U.S. Typical F1 races are designed for 90 minutes but can often go up to two hours with delays. To prep the drivers, practice runs are set for late Thursday and Friday evening with qualifying from 12am to 1am local Vegas time on Saturday ‘morning.’
The two F1 races in the U.S. this year (Miami and Austin) started in the mid-afternoon local time but this race was set later for the nighttime atmosphere of Las Vegas Strip and to appeal to international viewership, which greatly exceeds that of the U.S. Global viewership for F1 races averaged 70 million in 2022. By comparison, U.S. viewership averaged just over 1 million. F1 interest in the U.S. has seen a significant increase since the debut of the Netflix series “Drive to Survive” in 2019. Average U.S. viewership of F1 races jumped about 545,000 in 2017 and 2018 to 672,000 to 949,000 in 2021 and 1.2 million in 2022.
Formula One Group, founded in 1950, was purchased for $4.4 billion in 2016 by Liberty Media. It operates as subsidiary of Liberty under the Nasdaq ticker FWON.K. The subsidiary reports $2.8 billion of annual revenue and $560 million of EBITDA. It’s current market capitalization is approximately $15 billion. It is reported Liberty Media spent between $400 million to $500 million to stage the race, which included $240 million for a purchase of 39 acres on the northeast corner of Harmon Avenue and Koval Lane for the construction of part of the track and a three-story, 300,000 square foot paddock building constructed in less than a year. The building is a permanent structure as the hub for future F1 races.
Despite the marketing hype beyond any Vegas headliner show or prior sporting event, preparations and demand for the race have hit a speed bump. Locals, tourists, hotels, and businesses along the Las Vegas Strip have been frustrated throughout 2023 by construction to turn one of the World’s most famous streets into a racing circuit. Hotels and casinos initially sold high priced ‘experiences’ in the thousands of dollars to include parties with A list entertainers, celebrity chefs and club type accommodations to view the race. Joe Pompliano reports hundreds of private jets are set to descend upon Las Vegas paying overnight parking fees of $1,500 to $7,500 per night. However, as the green light gets closer, general ticket sales have been disappointing, with prices dropping by 60% and hotels slashing room rates by up to 80%.
The city of Las Vegas continues to add major sporting events to its list of entertainment options and attractions. The $2 billion Allegiant Stadium opened in 2020 as the home of the NFL’s Raiders franchise and will host Super Bowl LVIII in February 2024. The Vegas Golden Knights, founded in 2017, are the defending National Hockey League champs. The Las Vegas Aces are back to back WNBA champions and the city is host to part of the NBA’s Summer League. On Thursday, Major League Baseball owners approved the relocation of the A’s franchise from Oakland to Las Vegas. A new baseball stadium along the Las Vegas strip is expected to be ready for the 2028 baseball season. The city had no major sports franchises prior to 2017.
*The ValueSport blog is a look at the hybrid world of sports and business. It is published by the professionals at ValueScope, a leading business valuation and advisory firm headquartered in the Dallas-Ft. Worth area.
