Research Note
Total Page:16
File Type:pdf, Size:1020Kb
Event Management, Vol. 22, pp. 671–674 1525-9951/18 $60.00 + .00 Printed in the USA. All rights reserved. DOI: https://doi.org/10.3727/152599518X15300559276985 Copyright © 2018 Cognizant, LLC. E-ISSN 1943-4308 www.cognizantcommunication.com RESEARCH NOTE THE IMPACT OF THE HUNGARORING GRAND PRIX ON THE HUNGARIAN TOURISM INDUSTRY LÓRÁNT DÉNES DÁVID,*† BULCSÚ REMENYIK,‡ CSILLA MOLNÁR,§ RUSLAN BAIBURIEV,† AND KATALIN CSOBÁN¶ *Savaria Department of Business Economics, Eötvös Loránd University, Budapest-Szombathely, Hungary †Department of Recreational Geography and Tourism, Al-Farabi Kazakh National University, Almaty, Kazakhstan ‡Department of Tourism, Budapest Business University, Budapest, Hungary §Department of Tourism and Hospitality, Szent István University, Gödöllő, Hungary ¶Department of Tourism and Hospitality Management, University of Debrecen, Debrecen, Hungary The Formula One race circuit is one of the most popular spectator sports events worldwide. The “speeding circus” was introduced in Hungary in 1986 and regime changes and governmental fluc- tuations notwithstanding, the event enjoys almost undisputed support among the respective political decision makers. Relying on the latest scholarly results and data provided by Hungaroring Sport Ltd. and the Hotel Association of Hungary, this study aims to explore the reasons why the Hungarian Grand Prix is worth holding on an annual basis. Key words: Formula 1; Hungaroring; Sports tourism; Tourism development; Hotel industry Introduction of Formula 1 in 2005, emphasizing the multipli- cator effect of these sports events, while Foo, Lim, The present treatise utilizes several scholarly and Yip (2014) investigated the same issue. The achievements from the field of tourism and espe- authors also relied on texts discussing the historical cially sports tourism including that of Weed and development of the Formula 1 and its most famous Bull’s (2004) seminal work highlighting the drivers—among them, The Official History of the fast increase in the receipts of the Formula 1 car World’s Greatest Motor Race by Quentin Spurring races. Furthermore, Gibson, McIntyre, Mackay, (2013) and The History of the Hungarian Grand and Riddington analyzed the economic impact Prix written by András Boda. Tamás Bethlen and Address correspondence to Dr. Lóránt Dénes Dávid, Associate Professor, Savaria Department of Business Economics, Eötvös Loránd University, HU-9700 Szombathely, Berzsenyi Sq. 2, Hungary 3300. Tel: +36209722833; E-mail: [email protected] 671 672 DÁVID ET AL. István Hegedűs compiled a chronicle of the For- of the country. During the race, the hotels and the mula 1 in 2008, while the Formula 1 All the Races: restaurants are believed to be full, and the approxi- The World Championship Story Race-by-Race mately 150,000 nights spent in various accommo- 1950–2015 by Roger Smith was published in 2016. dation facilities exert a clearly positive aggregate The marketing activities of the Formula 1 were impact on the Hungarian economy (Boda, 2013). analyzed by Judd, Booth, and Brooks (2014) in Although tourism impact analyses tend to the article “Second Place Is First of the Losers: An single out the hotel industry of Budapest as the Analysis of Competitive Balance in Formula One.” main beneficiary of the Hungarian Grand Prix, the The process of pricing was explored by Zsuzsanna race itself does not automatically guarantee room Thür (2013) in the study “Official Ticket Prices of sell outs in the capital city and its surrounding areas. Formula 1 Hungarian Grand Prix.” Although the bookings of Budapest hotels show an improvement tendency on the Formula 1 week- end, travel agents and tourism-related firms tend Discussion to complain about the lack of demand for higher The Hungaroring as the venue of the race and priced accommodations as compared to a decade naturally the Hungarian Grand Prix have enjoyed earlier. Sell outs could not have been guaranteed in unprecedented support provided by the Hungarian the past few years either. Five or 6 years ago, room state (Verebélyi & Bagdi, 2013). Furthermore, the prices were double the current rates and the impact racing circuit is favored by the Formula 1 commu- of the Hungarian Grand Prix tends to decline year nity and the popularity of the race itself is relatively by year. The negative trends in demand and supply high, and despite fluctuating viewership figures a can be illustrated by the fact that in the beginning, significant number of foreign spectators attend hotel rooms could only be sold for the whole 3-day the Formula 1 Hungarian Grand Prix every year. weekend, but now daily rates are available. Although the general profitability of the Hungar- The hotel industry experienced its lowest point ian Grand Prix is difficult to assess without precise in 2009 when the number of visitors showed a steep calculations, the forthcoming analysis of data pro- decline due to the economic crisis. The price sensi- vided by KPMG Consulting Ltd. can lead to realis- tivity of ticket sales was manifested in hotel book- tic estimations. ings as well. Accordingly, the 1/10th price increase Although at first glance it may seem that the in ticket sales meant only a 4–5% growth in price Formula 1 race produces only financial losses for receipts indicating a higher demand for cheaper Hungary, but after analyzing its advantages in tickets. terms of the increase of generated output and the According to data provided by the Federation of attendant creation of new workplaces, and enhanc- Hungarian Hotels and Restaurants, the Hungarian ing of the country image, different conclusions can Hotel Monitor reported increased demand during be drawn. Obviously, there are certain advantages the 2015 Formula 1 race. The 96% booking rate that cannot be quantified financially. Governments was 4% higher than previously reported. Further- who subsidize Formula 1 Grand Prix auto races all more, the net average room price was favorable as around the world rely on their perceptions that this well with 24,934 HUF for the 3-day weekend. This million-Euro financial investment is profitable for booking price was 10.5% higher than the previ- their country overall. This expectation is applicable ous one. As far as the Hungarian hotel industry is to Hungary as well. Basically, the area where For- concerned, the REVPAR rates show a steady annual mula 1 exerts one of its most significant impacts is increase, especially in the category of four-star hotels. the hotel industry. In the present study, these effects Yet, Budapest hotel prices are still ranked among the are closely examined regarding the room occupa- lowest ones charged in capital cities of the European tion and the average net price per room. Union, indicating there is room for growth. It is a widely held view in Hungary that the All in all, it can be concluded that the REVPAR significant tourism-boosting effect generated by indicator showed a 50% increase in the hotels sur- the Hungaroring and the Formula One Hungarian veyed, while 41.6% experienced a decrease and Grand Prix play a special role in the development 3.4% remained the same. The EUR/HUF exchange IMPACT OF THE HUNGARIAN GRAND PRIX 673 rate (320) was 10% lower than that of 2014, rep- a great success by the Hungaroring Sport Co. so resenting the exact amount it contributed to the further measures were implemented including the increase of the net average room price and the “Straight to the Hungaroring” program. Fans could REVPAR. Our calculations can be further impacted reach the Hungaroring with free public transport on by the fact that while the Hungaroring Sports Co.’s the day of the respective race, while reduced entry campaign of attracting more domestic visitors passes enabled ticket holders from even the most resulted in higher attendance numbers, Hungarian remote parts of the country to travel to the race with fans were not likely to have made accommodation the Hungarian National Railway, the Volán Coach bookings. Companies, the Budapest subway system, and the According to government reports, the amount Árpád Bridge Station-Mogyoród bus line free of the Hungarian Grand Prix annually contributes charge. The “Straight to the Hungaroring Program” to the GDP is 17.4 billion HUF, implying tax and the reduced fares led to skyrocketing ticket and other contribution-related receipts of 7.5 bil- sales in the past 2 years (Érsek & Simon, 2005). lion HUF. Live broadcast of the race is viewed by 69 million people worldwide providing a media Conclusion value of 5.3 billion HUF (Healey, 2009). The coverage of the Hungarian Grand Prix resulted in It can be concluded that the Hungarian Grand 10,854 mentions of Hungary in the written and Prix becomes less and less profitable due to the high electronic press internationally (http://www.hah. license fees, but it is indispensable for the further hu/files/3714/7620/0245/A_Forma1_autverseny_ development of the tourism industry of the country. hatsa_a_szllodk_teljestmnyre_2015-16.pdf). Although funds provided from the central budget Due to the financial and economic crisis and the increase, the maintenance of compatibility requires devaluation of the Hungarian Forint, governmental further development. One of the most important support greatly increased. In both 2009 and 2010, tasks is increasing the quality of services and the subsidies grew by 1 billion HUF each year reach- comfort level of the visitors along with improving ing the aggregate figure of 4.77 billion HUF. In the enjoyment value of the race itself (Kelemen, 2015, the Hungaroring Sports Co. was not financed 1993). Thus, the recommended improvements from the National Budget Tourism Section, but include better parking facilities, more comfortable by 9.5 billion HUF allocated to the Ministry for bleachers, enhanced bathroom services, state of the National Development. According to the Hungarian art display facilities, along with structural changes Gazette, the license fee for 2026 is expected to reach to accommodate higher speeds to generate more US$57 million (17 billion HUF), a figure appearing excitement during the race.