A lot of talk in Thailand…

Bernie Ecclestone likes race promoters who do not talk a lot and deliver deals – before they go public. Thus he cannot be overly impressed with the Thailand’s government’s sports authority, which has been putting out stories for some weeks that it will be hosting a Formula 1 race in Bangkok in 2014. If a contract has been signed, numbers agreed and guaranteed by the government then it is a good moment to make a noise, but Kanokphand Chulakasem, the man in charge of the Sports Authority, admits that the negotiations are not yet completed and the project has not been signed off by the Thai government.

He says that he will sign a deal when he gets the nod from the government, but adds that the government will be paying only 60 percent of the costs; the rest being paid by private enterprise (read Red Bull and friends). He says that the deal will not cost more than $39.2 million per year. It would be a surprise if the Formula One group would be willingt to accept such a deal. One can understand that the total may have dropped from the high-spending days in the early 2000s, when deals up to $50 million a year were agreed. All the F1 contracts are believed to include a 10 percent increase per year, which means that a $40 million a year race fee with a normal 10 percent annual hike means that over a seven-year contract a promoter must find around $380 million, without including the money needed to either build a track or assemble and disassemble a street circuit each year. This will add around $200 million to the bill.

Thus the government must be willing to guarantee funds of around $600 million if a deal is to go ahead. If private partners are going to kick in 40 percent that is fine, but the guarantee is likely to be at government level only. While this is a great deal of money, an event does make sense for Thailand where the country is trying to build on recent growth in the tourism sector. Thailand underwent a messy coup d’état in 2006 and political disruption followed on and off until the election in 2011 when the Pheu Thai Party won a landslide victory over the Democrat Party. There have since been disastrous floods with widespread damage that has hurt the economy.

Despite all the troubles, the country’s tourism figures have moved upwards, rising from 10 million in 2003, to 14.6 million in 2006. They then stabilised after the coup, but in 2010 the number leapt to 16 million, jumping to 19 million last year. This year the Tourism Authority of Thailand has set a target of 22.22 million for 2013, hoping to latch on to the developing middle classes in Asia, at a time when European demand has weakened because of the Euro Crisis.

The Thais are also talking about a race in November, which makes little sense given that the World Championship showdowns attract the biggest TV audiences when they take place in the Americas, the time difference meaning that the races are beamed into Europe – the biggest F1 TV market – at prime time.

25 thoughts on “A lot of talk in Thailand…

  1. I met with Mr BCE’s lap dog this week for the first time – Sylt – and it was a rather dull meeting other than to say that, Sylt now seems to be putting it about that New Jersey is definately off for 2013.

    Now as we know, he is the puppet and if he is saying that, it makes me wonder what the real message is? Joe?

    1. Maybe I’m wrong, but Bernie’s approach to NJ just seems to say that he still doesn’t get it as far as the US is concerned. It looks like he’s playing his usual hardball, negotiating through the press game – but I’m worried that the US public, whom F1 needs to woo, not play hard-to-get with, will start to have more of a “who the hell do they think they are? see ya!” attitude.

      Hope my fears are misplaced here.

      1. I don’t think the average American has any idea what F1 is let alone caring about these kinds of details. If it (hopefully!) happens and F1’s popularity begins to grow that could change of course but for now fans of F1 in the US are few and far between. Though I will say US fans are very passionate and knowledgable!

      2. I think it’s more the other way around. The U.S. doesn’t get how BE operates. Leo Hindery, Jr. (who won the 24 hrs of Le Mans in GT2 class in 2005) probably thought that things could get by for now with just a handshake, the way things happen in the U.S. among the moneyed set, whereas I get the feeling that nothing is certain with BE until the check clears the bank. Of course, we attend different churches, so I could be wrong. What do you think, Joe?

    2. I have to say, I’m morbidly curious. Does he commentate upon himself in the false third person, you know, as he _revealed how he _revealed_ how he obviously _revealed just what he _revealed whatever it was that still is not quite _revealed, until some further stunning elucidation?

      My question uninformed by a recent piece that had me questioning the power of comprehension over language and common precis. Oh, okay, oops, a bit of a gloat, it was. One part tip off, 99 parts, I really don’t comprehend. Disjointed spray gun hit and run random numbers purporting to be business logic, admixed with self referential adhominem. .

      You may thank him for one thing, though: since I last sneaked a look at the pit, I have been minded to curtail my own ramblings.

      What gets to me, is there’s two ways to look at what goes on underneath F1: either it would be better none of us had to care, which is just sadly not the case, or one takes a random walk amongst the accounting flack and waffle, and creates a distended simulacrum, a aborted genetic mishap, of the impression a hoped for paymaster might want to promulgate. The first is a bit sad, but it does take money to go racing. The second is something out of a Dustin Hoffman movie involving the ebola virus.

  2. Just a small addition to your usual erudite editorial – I live in a small resort town in Thailand and the tourist numbers have been dropping since I arrived here, year on year. As a rough estimate there are less than half the numbers now than eight years ago. My Thai friends in the shops, cafes, taxis, markets (and the bars) have been bemoaning their fate for five years

    The local press last year accused the TAT of falsifying figures claimed they count every full aircraft seat, in AND OUT… which if true means the 2011 figure should be lower than in 2003, which bears out my observations.

    Additionally the TAT has recently been luring new markets (Russia, India & China) with cheap holiday deals – these people eat in the hotels, walk everywhere, and rarely buy souvenirs. They do nothing for the Thai people directly…

    I would be very surprised to see a GP here, especially as the present government is supposed to be for the people (sic), more than half of whom exist on an average of less than $5/day. But who knows…?

    1. I look forward to finding out which Penelope has a party trick useful to going undercover in Thai nightspots…

      1. The Mole had a laugh at that suggestion. He’s not working for F1 Racing, so you must be wrong in your assumptions.

  3. OT, what about NBC in the USA picking up F1 coverage for the next 4 or 5 years? We had a reasonable coverage with a Speed TV crew here, I can’t imagine what a botch job NBC will do.

  4. Joe – in the past Bernard did deals on the basis of a low buy in, but where he took all the revenues. Could this be a similar prospect?

  5. Hi Joe, I hate to be a pedant, or am I missing something?
    $40m at 10per cent compounding for seven years would come to $77.9 million in the last year, according to my calculator. Of course, as in most aspects of life, I suspect my calculator runs slower than Mr E’s.
    I shan’t go into the morality of adding a 10 per cent surcharge to the fee every year. Only idiots and egotists would go for that (I have been an F1 reporter and fan since the 70s, but I am afraid it’s time for Melbourne to pull the pin. we should do what Adelaide did and have a V8 Supercar race instead. Lower cost, higher attendance.)

    1. …and the $77.9m is for year eight. Yes, 40 * 1.1^7 = 77.94, but remember the first year is $40m (40 * 1.1^0), year zero in terms of growth, so the seventh year is year six in terms of growth.

  6. If Thailand do get a race, hopefully they go and have a look at how they handle the traffic at Sepang and put aside some of the $600 milllion to work out how to do a better job. Having just been at the MotoGP this weekend at Sepang, the traffic jams around the circuit, and the hassle of getting to and from the circuit on public transport is a massive downer on an overwise great weekend, and is a massive turn off to tourists coming back. Thailand like Malaysia are going to need to rely on tourists to make any race successful.

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