Formula One and Las Vegas appear to be a match made in heaven as the global motorsport series returns to the streets of Sin City for the first time in 41 years.
While the original attempt to bring the glamour of Formula One to the Nevada desert saw the global motorsport series race in a casino car park for just two years, the new and improved Las Vegas Grand Prix has required an effort like no other in the sport’s history just to make the event a reality. Since it was revealed in March 2022 that Vegas would be joining Austin and Miami as the third US race on the calendar, it’s been full steam ahead to ensure everything is ready on time.
On the surface, the logistical challenges of staging a Formula One race in the so-called ‘entertainment capital of the world’ are obvious, but to describe the hosting process for the Las Vegas Grand Prix as ‘complicated’ would be an understatement.
“I don’t think I have a single [obstacle] that stands out, [there have been hundreds so it’s hard to think of one that] was handled correctly or that we’re proud of,” admits Emily Prazer, chief commercial officer of the Las Vegas Grand Prix, speaking to BlackBook Motorsport. “We’ve been trying to survive and get the race ready on time. It’s been really hard.”
Growing pains are to be expected for a debut race, but this is also the first time that Formula One has promoted a Grand Prix itself, rather than relying on a local third party to organise the event. The sport’s business model has long been built on race hosting fees, but promoting the Las Vegas Grand Prix through Liberty Dice and Live Nation – both subsidiaries of Formula One owners Liberty Media – has meant that the series has had to learn on the job while preparing for one of its greatest challenges.
While that brings added responsibility, the decision to depart from the traditional approach has been crucial for making the event a reality.
“I don’t think this would have happened if Liberty hadn’t taken the lead,” Prazer continues. “Ultimately, the casinos had been approached multiple times over a race in Las Vegas, and they didn’t truly believe it could happen until Liberty and F1 walked in the room to say, ‘this is real’.
“There aren’t many companies that could have bought a piece of land the way we did for US$240 million in such a short amount of time and have the capital to build over here. There isn’t a risk, other than the pressure to deliver as a rights holder, which we’re all feeling because there’s an expectation that we should know what we’re doing.”
A financial spiral
That US$240 million deal, which was finalised in the second quarter of 2022, saw Formula One purchase a 39-acre site near the Las Vegas strip to build the pit and paddock facilities for the race. Investment in the construction of the circuit and paddock followed, which Brian Wendling, Liberty Media’s chief financial officer, outlined in an earnings call back in August this year.
“We expect [capital expenditure] related to the Vegas race to be close to US$400 million, of which approximately US$155 million was incurred in the first half of the year,” he said.
That prediction appears to have been on the conservative side. Wendling revealed in Liberty’s recent Q3 earnings call that the company has spent approximately US$280 million so far this year in capital expenditures related to track and pit preparation for the Las Vegas Grand Prix.
Adding that to what was spent on the race site, it means costs have passed US$500 million for capital expenditure alone. That figure doesn’t include significant costs around safety, security and traffic planning. There are of course several one-off investments required for the Vegas event to even exist, but that does not mean that costs haven’t spiralled.
Speaking in September, Prazer revealed that costs “are much more than anticipated”, hinting that costs beyond capital expenditure might have seen the US$500 million figure surpassed months ago.
“It’s a first-year event, you’re in Las Vegas, so everything comes with a little bit of a punch,” she adds. “It’s not specifically about not understanding the event costs; we’re building a racetrack in a living and breathing city, one of the busiest roads in North America. You have to go over and above on certain things.”
Building the necessary infrastructure to host a Formula One race has required a monumental logistical effort from organisers
The show must go on
‘Over and above’ feels like an apt description of Formula One and Las Vegas, which are both associated with pageantry and excess. As the series continues its ‘Americanisation’, the Las Vegas Grand Prix will boast an opening ceremony featuring all 20 drivers and live music performances.
In addition, Netflix will host its first ever live sports event on the Tuesday before the race, when the likes of Lando Norris and Carlos Sainz will be taking on professional golfers in a celebrity golf tournament, which will essentially be a crossover of sorts between the stars of the streaming platform’s ‘Drive to Survive’ and ‘Full Swing’ docuseries.
This all adds to the feeling that the Las Vegas Grand Prix is not just another race, but rather a megaevent of which a motorsport race is simply a part. The emphasis is on the ‘show’, which current world champion Max Verstappen has already called out in the build-up to the race.
Indeed, a series that relies on thermal degradation of its tyres as a key factor for its on-track entertainment racing at night in a desert – where temperatures could drop as low as four degrees – could certainly be called ill-advised. But Las Vegas is here to stay, despite some reports suggesting the circuit will struggle to remain on the calendar.
“We’ve got permission to race for ten years,” explains Prazer. “The deal we currently have with LVCVA [Las Vegas Convention and Visitors Authority] is three years, but we have permits for ten. [An extension] is more of a commercial discussion that needs to happen versus a permitting issue.”
On the bandwagon
Despite concerns surrounding the event, including ticket and hotel prices plummeting in the weeks leading up to the race, brands have jumped at the chance to be involved in a Grand Prix that has a chance of attracting the largest audience of the season.
Heineken Silver will be the title sponsor for the race and local casinos MGM Resorts, Caesars Entertainment and Wynn Resorts are onboard as founding partners, along with the LVCVA. Overall, there are 22 partners signed up for the race weekend, which is by far the most of any Grand Prix this season and has generated “north of US$100 million” in combined sponsorship revenue, according to Prazer. All told, the Financial Times reported at the start of this year that Formula One is targeting US$500 million in total revenue from the event.
The circuit design is making sure to lean into the local casino culture
Plus, even with Las Vegas residents appearing divided over the race itself, especially with traffic congestion issues during 2023, Prazer estimates that the Grand Prix will contribute “over US$1.2 billion in revenue for the state of Nevada”. Indeed, local businesses are looking to cash in on the novelty of the event, with founding partner Caesars, for example, offering an eye-watering hospitality package worth US$5 million.
Despite this, Las Vegas can’t escape the feeling that it has been shoehorned into the calendar. That belief has been exacerbated by its back-to-back scheduling with the season-ending race in Abu Dhabi, which Prazer acknowledges is “a really, really challenging job” to manage, especially when trying to work around Vegas’ portfolio of conferences that are booked “three to five years in advance”.
Profitability is undoubtedly a few years away yet, with a lot riding on Vegas becoming a year-round destination for fans. But Formula One still has a long way to go towards convincing the local authority that an extension beyond three years is beneficial to both sides.