The Formula One race came to Singapore in 2008. It was a tremendous success and gained wide international coverage. In a first for the F1, the event was held at night. State-of-the-art technology was used to ensure that the race operated in near daylight conditions.
Holding the race at night had a great advantage as European audiences could watch it at a convenient time. Over the years, Singapore’s tourism industry has gained significant benefits from the media attention that the race has generated.
But in the recent past, Formula One has been attracting a declining level of interest in the country. Last year’s race saw the poorest level of attendance ever since the launch in 2008. On an average, attendance was down 15%. The race weekend that extends over three days attracted a total of 219,000 visitors or about 73,000 per day.
Despite its declining popularity, the F1 has helped to boost Singapore’s economy. According to Singapore Tourism Board statistics, the race drew 350,000 international visitors over an eight-year period. Consequently, the country’s tourism industry generated an additional S$150 of revenues every year.
S$2 billion in benefits over a decade
The Formula One contract has a validity of five years. The initial tie-up between F1 and Singapore was for the races to be held in the years from 2008 to 2012. At the time when the contract was renewed in 2013, questions had been raised about the benefits that the race provided to the country. Although it is indisputable that there are increased tourism revenues, do the costs justify the expenditure involved?
It has also to be kept in mind that the event disrupts the business of many establishments that are not connected with it. In an effort to understand the true economic impact of the race on Singapore, the government commissioned the Boston Consulting Group (BCG), to carry out a study.
The 2012 study projected that over a 10-year period from 2008 to 2017, the country would gain a net economic benefit of S$2 billion. How was this figure arrived at?
- BCG’s projections said that about S$1 billion would be from direct tourism spending over the 10-year period. That’s an additional S$100 million every year from spending by visitors to the F1 races.
- There would also be a “multiplier effect.” The international media exposure would result in attracting more tourists to Singapore and lead to making it a centre for business conferences.
- The study took into account the fact that many of the tourists that the F1 would attract would be from affluent countries. Visitors from Europe, the US, and Australia generally spend more than those from other countries.
Formula One is probably the single biggest event on Singapore’s tourism calendar. Hotels can charge their guest higher rates and restaurants and other establishments catering to tourists see a spike in business.
Derek Tan, an analyst at DBS Vickers, a brokerage based in Singapore, points out that, “Formula One is still the peak period for the hospitality sector in Singapore. But the benefits are mixed. Other hotels which aren’t at the trackside lose travellers…. And generally, travel budgets (and) corporate budgets are down.”
Importance of Formula One to Singapore’s tourism industry
At the time of the first F1 in Singapore in 2008, the country’s tourism sector was much smaller than it is now. The total number of visitors to the country was about 10.3 million. Eight years later, this figure has climbed to 16.4 million. Receipts from the tourism industry have grown by 141% in this period.
Source: Singapore Tourism Board
The F1 has played an important role in bringing the world’s attention to Singapore as a tourist destination. But in the last 10 years, the country has developed a number of other attractions. Large numbers of tourists from China, India, Indonesia, and Malaysia now visit Singapore. While the F1 is still a major draw, its importance to the tourism industry is greatly reduced.
In fact, Formula One needs Singapore more than Singapore needs the motor racing company. In the last decade, the positions have been reversed.
Malaysia pulls out
Formula One has already suffered a setback in the region. Malaysia has hosted the grand prix since 1998. It has now decided to pull out. The reason? Many within the country question the exorbitant cost of holding the event. They hold the view that the benefits that the country derives are far less than the amount that needs to be paid to the organisers.
Some Singaporeans are of the same mind. Song Seng Wun, an economist with CIMB Bank who is based in Singapore, says, “… why do we need to pay so much to host the race? Or why do we have to pay at all, when Monaco doesn’t pay?”
Last year, former Formula One chief, Bernie Ecclestone had raised a controversy when he said that the F1 had helped Singapore become “… more than just an airport to fly to or from somewhere.” He later said that his comments had been misinterpreted.
Is this the last year of the F1 in Singapore?
This is the tenth year of the Singapore Grand Prix. The Formula One race has put the country on the world racing map and also given it a great deal of international exposure. According to the Singapore Tourism Board’s director of sports, Jean Ng, over 640 million international viewers watch the broadcast of the race.
But this publicity comes at a price. The race costs S$150 million, with the Singapore government paying 60% of this amount. There are other downsides as well. Road closures and decreased footfalls at establishments that do not benefit from the F1 add to the negative impact of the Grand Prix.
The current 10-year contract for holding the race in Singapore expires in 2017. F1 chief Chase Carey is very keen to renew the contract. But will Singapore bite? Ong Beng Seng, the owner of Singapore GP, the private company that is behind the event, will probably make the final decision.
(By Ravinder Kapur)