5K Fans at Talladega is a Losing Financial Proposition, But a Necessary Step Towards Larger Crowds

JohnWallStreet

NASCAR became the first U.S. pro sports league/sanctioning body (save PBR) to welcome spectators back to venues since the sports hiatus began in mid-March. 1,000 South Florida first responders and military service members attended last weekend’s Dixie Vodka 400 at Homestead-Miami Speedway (Talladega Speedway will host 5,000 fans for the Geico 500 on Father's Day). 

As with countless other businesses, Coronavirus has forced track operators to implement a series of new protocols and procedures at their venues to ensure the health and welfare of fans in attendance. Mike Burch (Chief Strategy Officer, Speedway Motorsports Inc.) suggested the new safety measures would increase operational costs by 25% to 40%. Considering the increase in costs needed to stage an event this summer, it’s reasonable to wonder if NASCAR's track owners would be better off with no fans in attendance than a race with less than 10% of the seats filled.

Our Take: As noted, the incremental costs associated with ensuring fan health/safety at races this summer is “not going to be insignificant.” Burch explained “there is signage that needs to be posted and markings that need to be laid down. Concession stands need to be retrofitted. Our cleaning and decontamination expenses are going to rise significantly and we'll need to add ushers and ticket takers as more gates and sections will need to be open.” Darryl Wolfe (Chief Operations and Sales Officer, NASCAR) added that “there is also a new screening procedure for fans entering the venue that requires an investment in both additional personnel and infrastructure.” While each measure in of itself may seem a nominal expenditure, “when you layer them on top of each other they begin to add up.”

Burch and Wolfe both acknowledged that from a financial perspective, hosting races where attendance was limited to less than 10% of venue's capacity is a losing proposition. In fact, Burch said “it would be a challenge [for an operator] to sustain the current business model [with that few fans in attendance] long-term simply because there is such a baseline of fixed costs associated with staging an event.” But the decision to have fans in a significantly reduced capacity is not solely a P&L driven decision. The SMI executive said “there’s value - from both a marketing and habit forming perspective - to have fans at the track.” Wolfe also noted that “you can’t take steps 2 and 3 without first taking step 1. If [NASCAR and the tracks] want to eventually get back to having a large number of fans in the stands - which we clearly do - we have to take a methodical approach.”

Burch explained that NASCAR wanted to "test its newly implemented systems with a small group at Homestead, take what was learned there and apply it to Talladega as opposed to jumping right in with 25,000 or 30,000 fans." The plan is to gradually increase the number of fans in attendance as processes are refined and perfected.

Even if every state was allowing spectators at sporting events, it would be impossible for NASCAR to grow attendance in “a perfect linear line” week over week; the physical configuration of the various tracks simply varies too widely. For example, Bristol - which seats more than 162,000 fans - can easily accommodate 30,000 socially distanced fans (as it will do for the All-Star race). By contrast, Homestead-Miami has an unencumbered capacity of ’just’ 46,000.

While NASCAR has been sure to include all of its stakeholders (think: tracks, owners, drivers, broadcast partners and sponsors) in the decision making process related fan attendance, Burch said “it’s really the Governors and the virus” that are dictating if - and how many - guests can be present a given race. That explains why the July 15th All-Star race at Bristol (recently moved from Charlotte to ensure fans could attend) will be the next race after Talladega with spectators in the building (despite stops at Pocono Raceway, IMS and Kentucky Speedway in between). Fortunately for SMI “unless there is a second wave of Coronavirus” they shouldn’t have to worry much about politicians banning fans from attending races at their venues. “If you look at the states [the company] operates in - Texas, Tennessee, Nevada; the've all been very open. North Carolina is the lone exception.”

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