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Hospitality suites becoming big business in Formula One - Autoweek Racing F1 news - Autoweek
Feeding the Formula One beast -- the business of F1
Money drives F1, but many teams wouldn't be in the sport without access to corporate hospitality
By: Christian Sylt on August 2, 2013
Big hospitality suites are just part of the Formula One show.
Hospitality suites are big business in Formula One, and Red Bull offers one of the swankiest experiences.
Regular Formula One television broadcast viewers have probably wondered what is inside the conspicuous long building with a white roof and “Paddock Club” written in large red letters. You can't miss it thanks to its position parallel to each track's main straightaway; it is shown often via sweeping footage of the circuits broadcast from helicopter cameras.
The building contains F1's most prized corporate hospitality suites, and its prominence reflects its importance.
Don't confuse the Paddock Club with the paddock itself, F1's nerve center. The paddock is where teams set up their mobile headquarters, and where drivers prepare themselves. In contrast visitors to the Paddock Club are encouraged to relax and enjoy themselves. However its purpose is far from frivolous; the guests fuel F1's multi-million dollar budgets.
F1 and corporate hospitality go hand in hand. More than 300 brands sponsor the series and each has at least one representative who looks after the partnership. They need somewhere suitably impressive to entertain their clients. The Paddock Club provides an experience found nowhere else in motorsport, and for good reason.
Spend just a few moments in the Paddock Club and it's easy to forget you're anywhere near a racetrack. The smell of an open grill almost covers up the scent of burning rubber, and an open champagne bar is at the ready. It sounds like a party but serious business is underway.
Each year the F1 Group (it runs the series), supplies the teams with Paddock Club passes; they distribute them sparingly to their sponsors. Blue-chip brands such as Blackberry, Dell and Hilton fuel the teams' budgets with tens of millions of dollars, and in return receive logos on the cars and as many as 50 Paddock Club passes per race. Passes are available to the general public; they cost about $4,000 each.
Sponsors use the opportunity to indulge their own clients in opulent surroundings. Keeping sponsors engaged and happy increases the chance they will renew their deals. Teams also give passes to brands not yet involved with F1 in order to tempt them to sign up. In short the Paddock Club keeps F1's wheels turning. Not surprisingly, it was the brainchild of the series' billionaire boss, Bernie Ecclestone.
Allsport Management runs the Paddock Club. Allsport is a Swiss company. Paddy McNally founded it in 1983. McNally is an entrepreneur who was previously a trackside advertising salesman. He was led by Ecclestone's vision of big-spending blue-chip corporations sponsoring F1 due to its extraordinary exposure. The sport would need an entertainment venue in a business-to-business environment. The more luxurious, the better.
Ecclestone granted Allsport exclusive rights to hospitality at F1 circuits. This might sound like an instant license to print money, but not until the 1990s did the Paddock Club take off as F1's popularity accelerated.
The Paddock Club is adorned with fresh flowers; turf is flown in from England and rolled out onsite. It attracts a suitably high-level clientele including film stars, politicians, pop groups, models and sports stars. In turn, this makes the environment seem even more exclusive to sponsors, encouraging them to sign up or stay in F1.
The Paddock Club is split into three distinct areas and each has luxury akin to a premium hotel. The Village is a several marquees surrounding a central open garden, each with its own patio seating area and buffet tent. Separate marquees house the champagne bar and various entertainment options are found within the garden area.
Inside the swanky Red Bull Paddock Club.
Every Paddock Club pass includes access to a gourmet banquet with fine wines as well as a massage therapist, beautician and hairdresser. A caricaturist and card-trick artist provide light relief. Paddock Clubbers may take a guided pit tour before the Grand Prix and have access to the support-race paddock. Team personnel are also on hand to talk the guests through the weekend's developments.
The second area, the Pit Building Lounges, offers a unique chance for clubbers to see the drivers. These are a collection of individual lounges usually located directly above the pit lane with a privileged view of the main straightaway and the pit lane.
Third is the Pit Building Terrace, a collection of suites above the pits. They are often one story higher than the Pit Building Lounges and afford panoramic views of the pits and circuit.
The sport, luxury and entertainment combination is intoxicating, and consistency is crucial: The Paddock Club's standards must remain almost identical in each location. There is a trick to pulling this off. (See "Taking Inventory" at end of story.)
Red Bull offers guests quite an experience.
Hundreds of workers are involved, including chefs, catering staff, electricians, security, entertainers, florists, therapists and cleaners. However, only around 10 percent are local. The same contractors tend to handle security, logistics, construction and catering throughout the season, meaning teams and sponsors know who and what they will get no matter where in the world the Grand Prix is held.
Setting up the Paddock Club requires transporting by road, air or ship 10 miles of cables, 77,000 pieces of cutlery, 40,000 glasses, 30,000 plates, 22 tons of ice, 90,000 liters of water, 5,500 magnums of champagne, 10,000 cut flowers, 3,000 flowering plants and 220 tons of tent material. This all comes at a high cost.
F1's latest financial statements are for the year ending Dec. 31, 2011, and they reveal the hospitality costs came to $51.5 million, with $78.7 million in revenue. This might sound like a lot but it is only 5.2 percent of F1's total income—7.6 percent of its profit.
This demonstrates just how much importance F1 places on hospitality and the deals it fosters: In the exceptional case of the Paddock Club, the sport certainly isn't in it for the money.
Setting up the Paddock Club requires transporting by road, air or ship:
10 miles of cables
77,000 pieces of cutlery
22 tons of ice
25,000 gallons of water
5,500 magnums of champagne
10,000 cut flowers
220 tons of tent material
Editor's note: All season long, Autoweek will detail the ins and outs of the F1 business. Formula Money editor Christian Sylt is an expert on the finances and politics behind the richest, most glamorous and expensive form of all motorsports.
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