Business | Opinion
Formula One still a cash cow
This afternoon, some 500 million people from around the world are expected to watch the fourth leg of Formula One's 2009 season following the races in Australia, Malaysia and China.
- By Dr Jasim Ali, Special to Gulf News
- Published: 22:44 April 25, 2009
This afternoon, some 500 million people from around the world are expected to watch the fourth leg of Formula One's 2009 season following the races in Australia, Malaysia and China.
This marks the sixth time that Bahrain has hosted a Grand Prix. Bahrain's deal with the Federation International Automobile (FIA) to host a round of the Formula One World Championship extends until 2013. Formula One is the third-most famous international sporting event, following the Olympics and football's World Cup. Yet, unlike the other two events, Formula One takes place annually.
However, the ongoing global financial crisis is increasingly leaving its mark on activities related to motor racing in Bahrain and elsewhere. This is evident in the slowing growth of the monetary value of Formula One, which increased by 40 per cent in 2007, by 10 per cent in 2008 and by eight per cent this year. Certainly, most people tend to cut back in a time of crisis.
At any rate, Formula One is a contributor to Bahrain's economy. A study commissioned from Dubai-based Godo Research and Marketing Consultancy puts the economic value of the 2008 Grand Prix at $600 million (Dh2.2 billion). The amount represents an increase of $52 million over that recorded in 2007.
The figure is made up of spending on items such as ticket sales, TV coverage, transport, accommodation, food and beverages, merchandise and souvenirs and other leisure activities. It includes about $14 million in ticket sales and $37 million expenditure on merchandise, food, drinks and other items at Bahrain International Circuit during the three-day event.
Bahrain's economy benefited by nearly $107 million from spending on accommodation, food and beverages, other retail items and travel services. TV rights, commissions, facility rentals, sponsorship referrals and catering commissions brought in almost $8 million. Other activities carried out by organisers brought in $30 million. The tally of nearly $200 million translates into $600 million with the help of multiplier effects, with each spending dollar creating three others.
Formula One certainly enhances its host country's global profile, as it becomes the focal point of motor sport for three days. Formula One is believed to be contributing to improving Bahrain's ranking in the World Economic Forum's Travel and Tourism Competitiveness Index. The 2009 index ranks Bahrain as No 41, an improvement of seven positions. The UAE tops the rankings of Arab and Middle Eastern countries at No 33.
The Bahraini authorities made the right decision in bidding to host F1, as evidenced by diverse positive spillover effects. Bahrain spent some $150 million on developing the circuit in 2003 and $50 million on essential infrastructure, notably road networks. But the monetary value of all the country's Formula One-related activities amounted to $1.8 billion between 2004 and 2008.
Located in Sakhir, southwest Manama, the Bahrain International Circuit hosts other smaller motor racing activities in addition to serving as a venue for business meetings and concerts throughout the year. Some firms hold their annual staff parties and board meetings at the circuit. Also, sponsorship of the race provides Bahrain-based carrier Gulf Air with good exposure. In 2008, half of visitors flying into Bahrain for Formula One travelled by Gulf Air.
Regionally, Bahrain will soon have to compete with Abu Dhabi for Formula One spectators. The Etihad Airways Abu Dhabi Grand Prix will be held from October 30 to November 1. Much to its credit, the event at the Yas Marina Circuit in Abu Dhabi will be the last in the season, a privilege normally extended to well-established venues such as Sao Paulo in Brazil.
But the newfound riv-alry should be seen as a welcome development that will have positive repercussions for the quality of services in the region. After all, Abu Dhabi is only the second venue for Formula One in the Middle East.
- The writer is a member of parliament in Bahrain.
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