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Australian GP in jeopardy as row erupts over Melbourne future

“Fast forward to 2015, the year the franchise ends. Though the documented benefits for the city may include hundreds of millions of dollars of advertising value [and] tens of millions of dollars of local revenue, an event that will draw between 250,000 and 300,000 people over three days will come at a cost that will approach $70 million taxpayer dollars. It is the old argument – pay upfront, but get many times the value of the upfront payment in downstream economic benefits. For most events that formula is persuasive – but $70 million AUD?

“The fourth and final possibility must be faced. I know of no city that has voluntarily walked away from a grand prix, but could Melbourne be the first? The final possibility is that we decide that it has been 20 fantastic years, the benefits to the city and the state have been enormous, but the cycle has run its course. It would mean we would need to replace the grand prix, and major events don't come cheap. Nor, indeed, are there many out there that can be repeated year-after-year and drive the economic returns we get from the grand prix. We should start looking now.

“In the end, it will be a government decision and one of the tough ones that Ted Baillieu faces in his first term. Does he undo the legacy of Jeff Kennett, his mentor, in his very first term? My judgment would be, get ready, time's up.”

Whilst praising the positive impact the Australian Grand Prix has had upon both Melbourne and Victoria, Baillieu was similarly willing to offer no long-term guarantees, agreeing that the $50 million AUD expense of hosting the event in 2010 was too high and must be slashed if the race is to remain on the F1 calendar beyond 2015.

“We look forward to the grand prix performing financially better than it has and we will be looking to make sure that happens,” he mused in non-committal fashion. “I am confident we can reduce costs, and we look forward to that happening.”

However, Grand Prix Corporation chairman Walker – pivotal in luring F1 away from Adelaide in the first place – has defended the race, pointing to the nigh-on $180 million AUD in economic benefits for Victoria and the massive global publicity for Melbourne via extensive television exposure, confessing that he is mystified as to why Mr. Doyle seems hell bent on scrapping the event.

“It's a sad thing for the mayor of a major capital city to come out so publicly against a major event like the grand prix,” he told radio station 3AW, alluding to the mega-bucks currently being shelled out by the likes of Russia and India to attract Ecclestone's attention whilst at the same time acknowledging that jobs may have to go to keep spiralling costs under control.

“On the other side of the ledger, there's an economic benefit of around $160 million AUD. All of Mr. Doyle's hotels, all of his restaurants do a very good trade. Then, of course, there's the tax that's collected of about $18 million AUD a year. It's a huge profit for Melbourne. Its future is a matter for the government, but the Grand Prix Corporation board does its best to keep costs down every year.”

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January 25, 2011 2:24 PM

This highlights the problem with the economic model for hosting a modern GP. Most GP's are ran at a lost by the hosting government of that country. The governments hopes that they make it up in back end money from tourist, taxes from hotels, and the like along with adding some glamour to their country. But how long can this go own? Take independent track ownders like Tony George at Indy who has a track and business to run, could never host a current GP with current hosting fees and all money from track signage and TV going to Bernie. GPs now have to be hosted by governments who will soon grow tired of this money losing relationship. Even the new track in Austin, TX that is suppose to host a GP will be propped up by state funds. How many years will those funds be available?

sebothescot - Unregistered

January 25, 2011 2:13 PM

I havent known a f1 season without a grand prix in melbourne as i started seriously watching the gp in 96 so i wud be extremely sad to see it go. Hope they can work something out or is this thier way of putting pressure on bernie?

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