- Hanoi will host a Grand Prix in 2020 after first expressing interest in 2016.
- F1 owner Liberty wants to take series to “iconic” new locations and promises to work closely with hosts to maximise economic returns.
- Focus is on building each Grand Prix into a week-long series of events.
From the moment Liberty Media completed its takeover of Formula One in 2016, speculation began about where the new owners would look to take the sport. This speculation was not dampened by executive chairman Chase Carey, who immediately expressed his intention to put more races in what he called the “key markets” of China and the US. The world’s two biggest economies looked set to be the beneficiaries of Liberty’s efforts to maximise F1’s commercial potential.
It came as some surprise when, in November 2018, the Vietnamese capital Hanoi was announced as the first new city of the Liberty era. In April 2020, Vietnam will become the 33rdcountry to have hosted a Grand Prix; it becomes F1’s fifth street circuit, with the course to run through the historic Mỹ Đình district. As the first new race to be introduced to the series since Baku in 2016, and the first under the new ownership, what can Hanoi tell us about Liberty’s emerging commercial strategy for F1?
“It’s more important now than ever that a new host’s goals align with ours,” says Chloe Targett-Adams, global director of promoter and business relations at F1. “We have looked really closely at our race strategy, at where we’re racing and why. Hanoi presented us with a proposition that perfectly matched our own aims.”
Since the Liberty takeover, F1 has not been shy about its intention to transition F1 from “a sports brand to an entertainment brand”. References now tend to be to “race weeks” rather than “races”, with multiple fan-focused events taking place in the build-up to a Grand Prix. Carey has indicated he wants each race, of which there were 21 in 2018, to be “its own Super Bowl.” Four fan festivals were held in 2018 – in Marseilles, Miami, Milan and Shanghai – in addition to the first in London in 2017, designed to “bring F1 racing closer to the casual fan”. A further six are slated for 2019.
“F1’s primary, overarching strategy over the coming years is to build out its offering at each race”, says Targett-Adams, speaking to SportBusiness at the 2018 Host City conference in Glasgow. “We want a Grand Prix to be a week-long a culmination of events. We see F1 and how we work with our race promoters, our host cities, our host countries as a year-round investment. What we don’t want to be is a rights-holder who just comes in, holds an event and leaves, without thinking about how we continue to engage fans in those territories.”
There has been a move since Liberty’s takeover to be “much more vocal about how a race is really a 365-day-a-year value proposition.” This was a significant part of the appeal to Hanoi, which first showed an interest in hosting a Grand Prix “pretty much as soon as Liberty took over.” The proposal included plans to host several fan events in the run-up to the event, and fan zones in the city where Formula One and its sponsors could engage ordinary Hanoians and visitors to the city.
Vietnam’s economy has grown significantly in recent years, in large part thanks to its emerging status as a tourist destination – the country welcomed over 10 million overseas visitors during 2016, up from 6 million annually at the start of the decade. Expansion of this sector has become a priority for regional governments in the country, with the hosting of major international events seen as the next stage in that development.
F1 claims that, on average, 50 per cent of the audience at any given race are from overseas. Looking at attendance at comparable recent Grands Prix in the region, such as Malaysia (115,000 for its final race in 2017) and Singapore (260,000 the same year), that could amount to an additional 100,000 foreign visitors to Hanoi just for the race itself. With F1’s ambitions to build a full week’s slate of events, hopefully attracting further visitors to the city, the economic impact could be significant.
It will have to be. Since the announcement was made, criticism has been levelled at the Vietnamese government for investing significant sums of money into F1 while 12 per cent of the country’s population still lives below the poverty line. Although most of the backing for the race will come from the race promoter, the privately held Vingroup, the government was still required to green light the project and will also be responsible for the regeneration of some of the areas used for the Grand Prix. The sport’s biggest star, Lewis Hamilton, has compared the race to the ill-fated Indian Grand Prix, which ran for three editions between 2011 and 2013. Hamilton described feeling “very conflicted” about racing in “such a poor place, [where] we had this massive, beautiful track”.
Maximising economic impact
Liberty has promised that it will work closely with hosts on maximising the economic benefits they see from races, both from ticket sales, event tourism, and local sponsorship. Vingroup is rumoured to be paying Liberty about $50m annually, for ten years, for the rights to hold a race, before logistical or marketing costs. In total, a F1 race can cost hosts up to $1bn over the course of the contract, according to Forbes.
The Vietnam Grand Prix is unlikely to cost this much, because only a small section of dedicated, purpose-built track will be built for the pitstop area, with the rest to be assembled in the weeks running up to the race. Targett-Adams points to other relatively new street races, in Baku and Singapore, as a benchmark for the economic impact Hanoi could expect. “A minister’s report in Singapore suggested that the tourism receipts alone had amounted to $1.4bn over the first ten years of them hosting a Grand Prix,” she says. “A PwC report said Baku had seen an economic impact of $277m over the course of its first two years. We can’t predict what the impact in Vietnam will be, but we will be supporting them to achieve their goals.”
That goes beyond the bottom-line figure, Targett-Adams adds. Street and park-based circuits often help to maintain and redevelop the areas they race through. Much of the upkeep for Melbourne’s Albert Park, which has hosted a race since 1996, is provided by F1.
“It doesn’t make sense for us to only come in when we need to race and ignore the place the rest of the time or leave it in a worse state than when we arrived,” she says. “We’re there year-on-year, and that leads to that annual maintenance, which is another positive value proposition in return for hosting F1. Similarly, the city of Hanoi has gained an opportunity to develop an area within it, and we’re looking at a long-term deal so that it creates that return year-on-year for the investment going in, and also leaves them with a facility that they can use for wider event functions.”
Not only is the street circuit format cheaper for hosts, it also magnifies the potential economic impact, providing both a global platform to show off the city, and ensuring fans are in the city centre, spending money with local businesses and occupying local hotels.
Multiple F1 stakeholders, including McLaren chief executive Zak Brown, circuit designer Hermann Tilke (whose company has overseen the design of the Hanoi track) and Chase Carey himself have all declared a preference for street circuits going forward, whether for economic or aesthetic reasons.
Targett-Adams, however, says the strategy will focus on securing “varied, iconic locations” rather than showing a preference for city-centre tracks. “One of the wonderful developments of our calendar is that actually every location is different and unique,” she says. “I don’t think we have one race that is similar to another in terms of location, and that’s one of the reasons why it’s so interesting and so engaging.”
Hanoi undoubtedly fits this bill; it also achieves Liberty’s aim of diversifying the calendar, especially into what Targett-Adams describes as the “core strategic markets” of Asia and the US.
Although Europe is the traditional heartland of F1, it has declined in significance for the sport over recent years. The German and French Grands Prix have both spent time off the schedule, while debates around the futures of the British and Italian races are ongoing, with both promoters determined to pay less to Liberty in rights fees. Taking racing to a wider range of countries, particularly in emerging markets, has been a priority going back to the end of the Ecclestone era, with Grands Prix attempted in South Korea and India in the early 2010s. A lack of coherent strategy and a failure to help support the race promoters, meant those ventures were ill-fated, with both cut short after just three editions. How will Liberty ensure it doesn’t repeat the mistakes of the past?
Targett-Adams points to China as an example, a country where F1 “has placed a lot of strategic focus”. Before Liberty, she says, “we didn’t have any Chinese-language media which, when you think that you’re dealing with the largest and fastest-growing nation on earth, that’s something that needed to be solved very quickly.”
Within months of Liberty’s purchase, F1 had launched Chinese-language platforms on Weibo and WeChat and entered into a partnership with Tencent to create bespoke content for the Chinese market. Earlier this year, a crucial renewal was struck with CCTV, ensuring F1 racing would remain free-to-air on the world’s biggest broadcaster, to a potential audience of well over a billion. Targett-Adams says that the reach of that broadcast grew 25 per cent from 2017 to 2018.
The ‘365-day approach’ is also helping to guide relationships with local race promoters, Targett-Adams says, with F1 continuing to work with them throughout the year.
“We’ve also worked really closely with the race promoter in Shanghai – and will do in Hanoi – not only looking at developing events, but on local and regional sponsorship opportunities,” she adds. The hospitality package has been tailored to better appeal to Chinese businesses, while a fan festival was held in Shanghai this year alongside the Grand Prix to attract and engage casual fans.
“It’s important that we’re flexible and look to adapt for each locality and region. The global strategy is to deliver the greatest possible racing spectacle everywhere we race, but that’s got to be localised for each destination because ultimately I think that’s the way to drive commercial growth and create the best fan experience possible.”