Revenue rolls in as F1 ups its hospitality game
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The 2022 Formula One season may have lacked the drama and emotional edge of last year’s showdown between Max Verstappen and Lewis Hamilton, but the sport is still riding a wave of fan interest.
Races are sold out well in advance, which means the biggest headache for organisers is often the strain put on local infrastructure by such huge crowds. And this demand has not been restricted to the fans who pack the grandstands. Up in the corporate hospitality area, in what is known as F1’s Paddock Club, activity has been just as busy.
Tickets may cost upwards of $5,000 for a three-day weekend package but, across the 19 races where F1 manages the Paddock Club, the forecast is for a total of 47,100 guests this year. That represents a 64 per cent increase in utilisation compared with the last full season in 2019 — despite hospitality being suspended during the Covid pandemic in 2020 and only restarted midway through the 2021 season, at the Austrian Grand Prix.
“In some ways, it has outpaced [general admission] sales,” says Brandon Snow, F1’s commercial managing director. “This year, we’ve been sold out way in advance and, for next year already, the demand we have is demonstrating that we will probably be sold out pretty quick there, too.”
The Paddock Club offering has evolved with the reinvigoration of the F1 spectacle under current owner Liberty Media, helped by the success of Netflix’s Drive to Survive series. Hospitality has moved on from being targeted mostly at a business-to-business clientele seeking lobster and champagne.
Events for Paddock Club guests now include track tours on open-top trucks, photo opportunities on the grid, and pit lane walkabouts. At selected venues, there is even a special Paddock Club garage where guests are wined and dined right next to the pit lane.
What has not changed, though, is the organisers’ desire to offer good quality food and entertainment — including appearances from drivers in the Paddock Club area, which is typically above the pits.
To ensure a consistent experience throughout the year, F1 uses the same central supplier, Austrian catering company Do & Co, at almost every venue.
“We still do champagne and we still do lobster, but there are now also those money-can’t-buy premium opportunities,” says Snow. “Putting the CEO of a big company in a car on a hot lap, or going on a garage tour — from a B2B standpoint, it really helps sell what F1 is all about. There are many sports out there that have high-end hospitality products. But adding on the experiences really separates us.”
Success for the Paddock Club has also brought challenges. Whereas increased demand for general admission tickets can be addressed by building extra stands, Snow accepts it is a balancing act to ensure higher Paddock Club sales do not dilute the experience for guests.
“You don’t want to lose the exclusiveness of it by packing in more people,” he says. “We’ve had a couple of races where it got pretty tight in there just because of outsized demand.”
The uplift in interest, as well as the desire to not make things too crowded, is even pushing teams to consider their own hospitality offerings.
Bradley Lord, the Mercedes F1 team’s strategic communications director, says that, while the Paddock Club is flourishing at the moment — with over 60 per cent increase in demand compared to pre-pandemic — “this is also driving us towards broader secondary hospitality experiences, which are opening up new hosting opportunities for our guests, especially at marquee races like Miami and Las Vegas”.
These secondary experiences are typically additional hospitality venues at the tracks, separate from the official Paddock Club, and operating as part of an arrangement with F1.
The sport is also having internal discussions about how to balance the benefits that come from a consistent product offering over the season with opening the door to more local suppliers.
This year’s race in Miami highlighted the pros and cons of a more open approach. While offerings such as the Hard Rock Beach Club and the MSC Cruises Yacht Club’s simulated marina brought some unique elements to the event, allowing Miami’s promoter to run the food and beverage services did not go too well. Problems with getting staff to the circuit early enough led to delays in food preparation, and the quality was not up to the usual standard. Miami race chiefs and F1 say the lessons have been learnt and matters will be addressed for next year.
Looking towards 2023, F1 is well aware that Grand Prix racing will not be immune to the economic downturn, as cash-strapped fans opt to watch races at home and companies cut back on hospitality budgets.
Snow says F1 will react if the level of interest drops substantially. “We’re very mindful and we’ll be very nimble,” he says, adding that the sport will make sure it can “manage the volume” of interest and “address the pricing at that time if we need to”.
“There may also be a world soon where there are sort of tiered opportunities. The Monacos of the world will still always have a need for the premium, premium piece, but there may be a need to have a descaled version in other places if the economics require it.”
Whatever the economic climate, the Paddock Club remains a core element of F1, making a contribution far beyond the revenue from expensive hospitality packages. “It’s a critical component to sponsorship deals, partnership opportunities, licensee opportunities and promoter opportunities,” says Snow. “It provides this underpinning and underlining of opportunity — beyond just being its own vertical of the business.”