Government providing significant $$ for Singapore GP

The new Formula 1 race in Singapore is an interesting business model for the sport with the government admitting that it is going to pay about 60% of the annual cost of $99m. The deal is for five years with a five-year extension planned. The interesting thing is that the promoter, Singapore GP Ltd, a company controlled by hotel tycoon Ong Beng Seng, is not allowed to make big profits from the race, at least not directly. Although no-one will talk about the deal, it has been confirmed by the race's executive director Michael Roche that there is a profit cap in place and if the organization makes more than the limit the additional money will go to the government to reduce the payments it has to make in the later races.

The government accepts that the cost of hosting an F1 race far exceeds the revenue a race promoter can expect to get from ticket sales, merchandising and sponsorship, but is happy to invest because it believes that the race will generate around $100m in additional tourism revenues, and will have intangible benefits such as improving the image of Singapore and getting more people to visit when the racers are not in town.

The most interesting part of the funding will come from a special tax that the government will levy on hotel rooms. With 40,000 people expected to attend from abroad, the hotel prices are expected to be high and the government is pushing them even higher with its special tax, which it is hoped will bring in revenues of between $15m and $20m. This will be fine for the high rollers but may be a little much for race fans and so there will not doubt be a flourishing trade in cheaper accommodation, thus spreading the earnings around. More at Grandprix.com