Grand prix still relies on its hoary old myths
Save Albert Park Inc 24 February 2012
Today, it was reported that the Baillieu Government will bid to retain the F1 grand prix in
Melbourne beyond 2015. While commenting on this, Grand Prix Corporation CEO Andrew
Westacott said that the expected $55 million operating loss on the 2012 race, and the
cumulative losses of $300 million on previous races, were made worthwhile by the event’s
“economic, tourism and branding benefits.”
These benefits do not exist! In defending the event Mr Westacott is just repeating hoary old
myths!
Myth number one: Grand Prix visitors (fans, teams and officials) spend up big when they come
here, and that this means a huge economic benefit to the state.
FACT: Visitor spending means extra revenue for city hotels, restaurants and the casino, but this
revenue is not a measure of economic benefit.
Mainstream economists say that after deducting the cost of providing services to visitors, and
allowing for crowding out (displacing) non-grand prix visitors, the net profit for the big city hotels
and the casino would be 5-6% of the ‘new money’ the grand prix brings in.
A government-commissioned ‘economic impact’ assessment of last year’s grand prix put visitor
spending at about $35 million. If you accept this as accurate (and there are good reasons for
believing it to be overstated) then the real net benefit of the 2011 grand prix to Melbourne’s
businesses was only about $2 million.
This would do little to offset the 2011 operating loss of $52 million.
Myth number two: The TV broadcasts of the grand prix ‘induce’ tourists to come to Melbourne.
FACT: No evidence has ever been produced by the Grand Prix Corporation, or Tourism Victoria,
or by any arm of the Victorian Government that significant numbers of tourists have ever been
induced to come here by the TV or other media coverage of the Melbourne grand prix. Even the
Victorian Auditor-General has been unable to find any such evidence.
Myth number three: The TV broadcasts of the grand prix, showing the ‘MELBOURNE’ banner
on pit straight, have a highly valuable ’branding’ (publicity) effect, possibly worth $100 million.
FACT: The most authoritative publication on Formula One finances, Formula Money, in its 2011
edition, estimated the publicity value of the ‘MELBOURNE’ banner (in terms of TV exposure
time) to be worth $262, 552, not $100 million.
For further information: Peter Logan, Save Albert Park media spokesman, 0412 697 074