As inflation tightens its grip, Formula One Group (NASDAQ: FWONA) is feeling the squeeze on the Las Vegas Strip. The organization has allegedly poured a massive $400 million into making the Las Vegas Grand Prix a reality, a spectacle scheduled for a November 18 debut. This expenditure finds the costs connected with F1’s third US race rapidly overreaching double the initial project projections of $210 million.
Regardless of these surging costs, Formula Run remains optimistic about achieving its profit and revenue targets, keeping faith in the comeback of Grand Prix racing to Sin City after four long decades.
Emphasizing this unabated confidence amidst inflationary cost pressures, Liberty Media CEO Greg Maffei stated in a recent interview with Business F1, “Despite inflationary cost pressures, we expect no change in revenue and profitability assumptions. We remain confident of our return profile on this incredible project which will support the incremental capital investment that we are making.”
At the beginning of the year, Formula One Group predicted that the Las Vegas Grand Prix could stimulate revenue of up to $500 million, making it one of the most profitable ventures on its calendar. There is anticipation of a local economic boost comparable to, if not surpassing, the Super Bowl, scheduled to grace Las Vegas in February 2024.
The battle against inflation isn’t Formula One’s alone, as the causes behind the fiscal overrun in Las Vegas remain elusive. However, a lethal amalgamation of sky-high materials costs, scarce labor resources, and record-high interest rates causing escalated financing costs have likely played a major role.
Though led by Sin City, the ounces of inflation being felt in the gaming industry are evident, even as Nevada continues to record impressive gross gaming revenue figures. Several gaming tycoons have already acknowledged the weight of inflation, marking a reduction in casino visits and minimized impulse spending in major markets like Las Vegas, primarily due to rising fuel costs.
Yet, optimism remains high regarding the potential financial impact of the race, as there are expectations for it to make one of the largest contributions to gaming revenue in the city’s history.
When the date for the Las Vegas Grand Prix was officially announced, there was a noticeable hike in hotel room bookings at premium rates. However, the consequent drop in demand has sparked rumors about its potential failure to serve as the boon it initially promised for gaming companies.
Securities analyst Barry Jonas from Truist Securities recently commented on this, noting that while most higher-tier room packages are booked, a decline in room rates has been observed amongst lower-tier/economy hotels in the city.
