F1 News: Las Vegas GP Costs Starting To Build Up To Worrying Amounts
Just as the Las Vegas Strip is being set up for the Grand Prix in November, there have been a few concerns surrounding the inflationary environment. Organized by Formula 1 and Liberty Media with the help of the main casino organizations and the city authorities, the Las Vegas GP is bound to be one of the biggest sporting events in the world.
The majority of the expenses incurred by Liberty are for the purchase of a site meant solely for the construction of a permanent paddock and pit infrastructure which is being built at 'lightning speed.' Apart from that, Liberty is also focused on resurfacing the roads that become a part of the Grand Prix circuit which again, involves a lot of money. In addition, a large-scale event such as this demands a lot of security coverage. And that takes away a pretty big chunk of money.
Liberty CEO Greg Maffei has told Wall Street Analysts that despite the rising costs, he is confident of receiving fruitful returns. He said:
"I am pleased to say preparations are running on schedule.
"Despite inflationary cost pressures, we expect no change in revenue and profitability assumptions that we laid out previously. We are increasing CapEx estimates for the paddock building and track work.
"We remain confident in the return profile of this incredible project, which will support the incremental capital investment that we are making.”
Delving further into the nature of expenses, Liberty chief financial officer Brian Wilding said:
“Our paddock building is now 85% complete. We expect CapEx related to the Vegas race including both the paddock building structure and track-related CapEx to be close to $400m, of which approximately $155m was incurred in the first half of the year.
"Our team has managed this project on a compressed timeline, and in an inflationary environment. Much of our cost increase is attributed to track-related expenses incurred to be responsive to the concerns of the local community, such as minimising disruption to businesses along the Strip.
"We have also invested in security enhancements and expenses incurred to ensure the quality of the fan experience with infrastructure changes to improve sightlines.
"We are working closely with our local Vegas partners, and the speed and efficiency with which we have completed this project is a testament to these relationships.”
However, other unprecedented expenses have cropped up lately. The cables laid beneath the asphalt were posing a problem so they had to be dealt with apart from the removal of overhead wires and requests from the stakeholders to enhance security.
Liberty legal expert and CEO of the Las Vegas event Renee Wilm throws light on the challenges faced. She said:
"We've entered into a couple of challenges as we've uncovered asphalt, cables under the ground that needed to be addressed, there have been wires overhead that needed to be moved.
"A lot of this was driven by the requests and quite honestly requirements of the local stakeholders as we began this process of preparing the track for actual usage.
"We've also encountered some additional requests from the local stakeholders such as the casino properties, around enhanced security, around opening and closing the track. So this has led to additional equipment that was needed, as well as additional actual road work.
"With regard to the paddock building, it is being built at lightning speed in an inflationary environment. So as you can imagine, there have also been some additional costs along the way in that regard.”
Liberty Media is also looking at other ways to utilize the pit and paddock facilities after the Las Vegas GP. Using them as an additional source of income is a great idea to make the most of the existing infrastructure. Wilm said:
“We are just beginning to really scratch the surface on what is available for us on a go-forward basis with the building.
"We have had a number of inbound requests. Think about Super Bowl parties, think about something related to racing, maybe karting, high-end supercars.
"Of course, Las Vegas is the convention centre of the world, so there’s lots of interest in our state-of-the-art LEED [leadership in energy and environmental design] certified building.
"Many of our partners in the F1 ecosystem are very interested in working with us throughout the year. All I can say is a lot more to come over the next few months.”
The rise in expenditure looks more like an initial hurdle that can be dealt with in many ways. On the contrary, with a facility like that where the potential to do business is limitless, the returns look most promising, especially in the long run.