Liberty admits that Las Vegas F1 race costs are rising
Liberty Media admits that the costs associated with Formula 1's Las Vegas Grand Prix have risen – but the company insists that the event is set to be a financial success.
The race is the first to be promoted and organised by Liberty and the F1 organisation, with the support of the city authorities and the main casino organisations.
As a starting point, Liberty purchased a site on which to build a permanent pit and paddock infrastructure, with the construction having to move quickly in order to be ready for November’s race.
In addition to costs associated with the construction, Liberty has come extra challenges as it resurfaces the roads associated with the track and other issues have emerged.
“I am pleased to say preparations are running on schedule,” Liberty CEO Greg Maffei said in a call with Wall Street analysts.
“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.”
Liberty chief financial officer Brian Wilding confirmed that costs have gone beyond the original estimates.
“Our paddock building is now 85% complete,” said Wilding. “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.
Las Vegas GP pit complex
Photo by: Las Vegas GP
"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.”
Renee Wilm, the Liberty legal expert who is also now CEO of the Las Vegas event, gave more detail on the issues that have emerged.
"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,” she explained.
“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.”
Las Vegas track action
Photo by: Liberty Media
On a more positive note, Liberty is exploring ways of generating income from the pit and paddock facilities outside the race weekend.
“We've also been already receiving inbounds with attractive economics for use of the paddock building within the next year,” said Maffei. “And we look forward to sharing those commercial plans once they're finalised.”
Wilm revealed that there has been lots of interest for possible usage of the permanent facilities.
“We are just beginning to really scratch the surface on what is available for us on a go-forward basis with the building,” she said. “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.”
Maffei also stressed that, given more time to prepare, there will be more going on around the race weekend in its second year in 2024.
“There will be opportunities, both around the GP and outside the GP as we go into year two,” he said. “We moved with lightning speed, the F1 team, Renee's team, to put this in place, and that's probably led to increased costs.
“And it's also meant that there are opportunities we [could] not capitalise on, whether it be fan festivals, whether it be sporting events, whether it be music events. All of those are things that potentially can grow around the second and beyond GP.”
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