When the Las Vegas Convention and Visitors Authority’s board of directors voted unanimously Tuesday to spend $19.5 million over three years to sponsor Formula One races in the resort corridor, board members didn’t view the decision as a handout to a rich sport looking to make its mark in the city.
They saw it as an investment designed to drive revenue to all corners of the city, the LVCVA’s top officials say. It’s also viewed as an investment to help ensure it becomes a permanent event on Las Vegas’ calendar.
The authority has no recent history of putting on a race the caliber of F1’s Las Vegas Grand Prix, but researchers have determined that the payback to the city would be big — even Super Bowl big.
The board approved spending $6.5 million a year to partner with Liberty Dice Inc., a media company, to put on the event expected to attract tens of thousands of people to Las Vegas — many of them international arrivals.
LVCVA researchers have always noted that international guests tend to spend more because they’re coming such a long way to visit and they normally spend more than a few days in town.
Payment on sponsorships of this kind is appropriated from the LVCVA general fund, which is generated mostly from room taxes of up to 13.35 percent, depending on a contributing property’s location.
Another aspect of the F1 sponsorship is that Liberty Dice will have skin in the game.
Steve Hill, president and CEO of the LVCVA, said the deal with Liberty is different from most sponsorship arrangements the organization makes.
“They see this opportunity as one they want to fully capitalize on,” Hill explained after last week’s meeting. “In most markets, the race promoter cuts a check to Formula One and Formula One comes and has the race and the race promoter (the LVCVA) takes the risk and gets a lot of the upside. Here in Las Vegas, Liberty Media Formula One sees the opportunity that this city represents for them, and they decided to take that risk, but also see the benefit internally.”
That means much of the promotional costs will fall to Liberty.
“We’re excited by that. It’s a commitment they’re making to this city that they’re not making any place else,” Hill said. “We think that’s the right decision on their part, we think it’s going to pay off for them and we’re excited about what it will mean for Las Vegas.”
More than three years
What it signals to Hill is that a November 2023 F1 race might be the start of something even bigger than the current three-year commitment.
“Formula One is such a phenomenon at this point that we think it’s going to be in Las Vegas permanently,” Hill said. “Matching the brand of Formula One with Las Vegas is unbeatable. I think those first three years will show that, and I’m sure the races are going to be here after that.”
The appeal of Las Vegas for F1 is the same for crowds that come for all kinds of other sponsored events. The city has more hotel rooms — around 150,000 — than any other destination. The resort corridor is bunched together in a relatively small space. The city is home to three of the nation’s 10 largest convention centers and has arenas that can potentially house other large events. And the airport, Harry Reid International, is minutes away from the hotels, convention venues and arenas.
Plus, Las Vegas offers the kind of pizzazz and sex appeal that can draw the casual race fan.
Hill said the recently completed NFL draft in Las Vegas was a great example of how a sponsored event can generate economic impact for the community.
“It’s like what we saw during the draft, having all of those hotel rooms right there, next to the venue, and that will be the case for Formula One with 100,000 hotel rooms within walking distance of the course itself,” Hill said.
“Our visitors are going to come, stay in their room, have meals, go down and watch the race and walk back to their hotel,” he said. “They’ll be able to do that between qualifying sessions. No place offers that kind of opportunity and that kind of convenience, and it’s one of the reasons it’s such a great platform for the event in Las Vegas.”
Unanimous votes, few debates
The F1 sponsorship is not unlike many more the LVCVA board has approved over the past year.
Rarely do board members debate a sponsorship’s merit. Each event is thoroughly explained in materials provided to board members in advance of meetings. The LVCVA staff generally explains the event, the dates it runs and how many people are expected to attend, based on past history or event trends. Just about every vote is unanimously in favor of approving a sponsorship.
“Sponsorships are a key component to our integrated marketing efforts, especially as we’ve evolved into the World’s Greatest Arena hosting premier sports events,” Lori Kraft, senior vice president of communications for the LVCVA, said in an email.
“They give us an opportunity to emotionally connect with a dedicated fan base, drive visitation and provide us with valuable media and branding promotional exposure,” she said.
In many cases, events provide a national or international stage to show off Las Vegas in broadcasts. That occurred with the draft, as Las Vegas received millions of dollars worth of promotional plugs before millions of viewers.
When broadcasters reported on a player selection, his highlights and statistics were overlaid on images of a Las Vegas landmark.
During Tuesday’s board meeting, a video showed NFL commentator Rich Eisen gushing about Las Vegas’ attributes, a monologue that perhaps convinced some prospective visitors who might have been riding the fence about a trip to the city to visit.
In past months, the LVCVA board has agreed to spend millions of dollars to sponsor upcoming events. A sampling:
— In April, the board agreed to spend an additional $525,000 on top of $2.4 million it appropriated in February 2020 for the NFL draft because costs had risen and extra safety precautions were ordered. Tourism officials were anticipating 600,000 people to be in Las Vegas over the three-day event. LVCVA researchers are expected to report how many came and how much they spent in the weeks ahead.
— In February, the board approved a $275,000 expenditure for the 2024 Girls Junior National Volleyball Championships at Mandalay Bay. USA Volleyball estimates 23,000 participants and 44,000 spectators will be in the city for the event that will generate an estimated $90 million in economic impact.
— In January, the board agreed to spend $40 million — the largest amount ever dedicated to a single event — for Super Bowl LVIII at Allegiant Stadium on Feb. 11, 2024. A nonprofit host committee also is raising $20 million to help pay for direct operations and event-related costs.
Ballpark naming rights
Not every sponsorship in the convention authority’s history has been directed to a specific event, and the organization weathered public criticism over a naming rights deal for Las Vegas Ballpark.
In 2017, the LVCVA agreed to spend $80 million over 20 years to ensure that the Las Vegas name would stay on the stadium in Summerlin and for the team, now known as the Las Vegas Aviators.
Since that naming rights deal, most of the board and all of the top administrators have changed.
Gaming industry analyst Brendan Bussmann, founder of Las Vegas-based B Global, said the role of the LVCVA is to promote the entire destination and work with the tourism industry to maximize opportunities. Large or small, those partnerships over the years have built the destination to what it is today, the capital for entertainment, sports and meetings, conferences and exhibitions, he said.
“Everyone has seen the larger commitments that have been made in upcoming events, including the Super Bowl and F1,” Bussmann said. “Those will translate into hundreds of millions of dollars in direct, indirect and induced economic impact to the Las Vegas Valley, not just once but recurring.”
Bussmann said even sponsorships and investments in youth sports have benefited the community.
“Any time you can get a solid multiplier on an investment is one that should be considered to draft tens to hundreds of thousands of people to the destination to stay in our hotels, shop, dine and entertain as well as the taxes associated with those activities,” he said. “It increases our ability to host bigger and bolder events now and into the future.”