Driving ahead: Golf brings in 10% of income and an F1 event is on track

In the past 15-20 years, Thailand has built up its international-standard golf facilities to the extent that 10% of its entire tourism income from foreigners is derived from that sport. Were it not for a ban on alcohol firms sponsoring public events, it might be growing even faster. Ironically, another drink, non-alcoholic, is partially behind a drive to put the country on the world map of motor racing by bidding to stage an F1 event. The costs for staging such a high-profile event are high and the return much less guaranteed.

GOLF: Of around 250 courses in the country, approximately 60 are of international standard, and around 15 have the facilities and the quality to hold top notch world events. Many were built in the late 1990s and are spread out in five main locations – Bangkok, Pattaya, Hua Hin, Phuket and Chiang Mai. An original idea to establish residential areas bordering some of them was buried in the bunker of the 1997-98 Asian financial crisis. The courses survived and prospered. For the most part, accompanying luxury housing was forgotten. Mark Siegel, the managing director of GolfAsian, a company that organises golf tourism in the region, told OBG, “There are around five or six really major international events a year. There have been in past years as many as 15, but in last three to four years these events have declined. The biggest snag is a law that now bans alcoholic beverage companies from sponsoring these events.”

Companies like Singha, one of the top beer brewers in Thailand, now backs events outside of the country. “The alcohol sponsorship ban is a big limitation for many events, not just golf occasions,” said Siegel. “Most major golfing tournaments have one of the alcohol companies as a major sponsor.”

Even so, the sport has become a big earner for the tourism industry as a whole. Some 650,000 foreign golfers visit Thailand each year, contributing $2bn in revenue. According to Siegel, while the average tourist spends BT20,000 ($638), golfers hand over six times as much each – BT120,000 ($3828) on average. Although they account for only approximately 3% of the numbers, their expenditure accounts for 10% of the total tourist spend.

ECONOMICS: Of the four cost elements that comprise a golf holiday, air transport, accommodation, green fees, and food and beverage, prices for the last three are so far below global averages that the segment survives and prospers. “Green fees are half of those in Spain and a third of the prices charged in Hawaii, while Bangkok is the cheapest city in the world for five-star hotels,” said Siegel. “You cannot get a motel in the US for the price of a five-star hotel here.”

Since eating out is also a fraction of what it costs in most of the world’s other golf centres, cheaper living more than offsets flight charges. Green fees for the top courses are around $150, which Siegel says would be comparable with other parts of the world. The difference is that in Thailand, it is possible for amateurs to play these top tier courses. Elsewhere they are often inaccessible. Aside from these 15, the charges drop dramatically to around $40-50 for the 60 other international-standard courses.

Nor does the other side of golf tourism economics, maintaining the courses, present problems. Labour costs are low and course occupancy is high. From December to February the main courses are “really busy”, according to Siegel, and the average throughout the year is about 50% usage.

The vast majority of golf tourists come from north Asia, former British colonies and Europe. There are very few from North America because of the distance and the existence of many golf tours in the US. Two other areas that are missing from the mix are Russia and Arab countries, where overall there is no golfing tradition, save among the expatriates.

The opening up of Myanmar, which has two or three international-standard courses – although none of the quality of Thailand’s top 15 – will boost the region’s attraction. But Thailand alone has so many courses that it would take a golfer years to tour them all.

FORMULA 1: The possibility of staging an F1 event in Thailand may be more spectacular than golf as an annual one-off event, but the profitability to the tourism industry or to the economy generally is less assured. According to Tourism and Sports Minister Chumpol Silpa-archa, the country is aiming to become a venue possibly as early as 2014. “Private companies such as Red Bull, PTT and automobile manufacturers, along with the Thailand Convention and Exhibition Bureau (TCEB), and the Sports Authority of Thailand, have shown interest in co-hosting the event,” the minister is quoted as saying.

While the ministry is now taking the lead in pressing for acceptance, the initial idea was floated by the TCEB. Akapol Sorasuchart, the former president of the TCEB, told OBG, “Actually, the project’s framework was completed by the bureau and is currently at the discussion stage with Red Bull owner Chalerm Yoovidhya, who is negotiating with the copyright holders.” Thailand has already landed the bid to host the December 2012 end-of-season Race of Champions, which is a precursor to obtaining rights to stage an F1 but not an automatic guarantee.

CIRCUITS: The main obstacle is the lack of a circuit where an F1 could be run, though there is no shortage of ideas. One suggestion is to use Rajdamnoen Avenue in Bangkok, where Red Bull driver Mark Alan Webber drove a much modified F1 car on a demonstration circuit in December 2010 as part of the celebrations for the king of Thailand’s birthday.

Chumpol’s view is that “it will save costs to use a road circuit and we can improve the roads, which will have a spin-off benefit for motorists after the event.” While that view is logical, it glosses over the major disruption to traffic in a capital already under threat of grinding to a halt through congestion.

One alternative would be to build an F1 standard circuit at Pattaya, although that would take a surface of 350 rai (6.25 rai is 1 ha) and be expensive. There is, as far as is known, no estimate of costs, save that they would be high. Indeed, while the benefits of staging an F1 race bring a sparkle to the eye, the estimated costs of any of the alternatives are still no more than a shot in the dark. A Tourism and Sports Ministry spokesman said the initial budget estimate had been BT10m ($319,000), although he added that the final figure could be three times that amount.

Since the probable cost of a ticket for the event itself will be out of the range of most Thai pockets, and given the brief time span occupied by an F1 race and practice sessions, a return on the investment needed may well require some lateral thinking in staging simultaneous allied attractions. The rights fee for hosting the Grand Prix in Singapore was reported as costing $35m initially, rising to $42m in 2011. Associated tourism receipts for the first three of the five-year contract were put at $317m.

If the Bangkok street bid wins out, Rajdamnoen Avenue would be the third F1 street circuit alongside the Monaco Grand Prix and the Singapore Night Race. The true cost of closing roads every year to set up the race, building and dismantling stadia for spectators and installing noise limiting barriers has yet to be worked out. “Our discussions with Bernie Ecclestone have gone smoothly. We expect to get rights to host a grand prix from 2014 onwards,” Kanokphand Chulakasem, the governor of the Sports Authority of Thailand, has been quoted as saying.

Part of the planning includes a possibility to stage the F1 event at night to make live television coverage more convenient to viewers in Europe and thus increase the potential sponsorship revenue. F1’s only artificially lit races are in Singapore and Abu Dhabi.

Yet another possibility is to host the event in the north of Thailand, in Chiang Mai. Chumpol said the ministry would conduct a feasibility study to build an F1 circuit on land close to the site used for the Royal Flora Ratchaphruek 2011. The Austrian Dietrich Mateschitz, which controls 49% of Red Bull, said Formula 1 chief Bernie Ecclestone supports the idea of a Thai F1, adding, “We are in talks and Thailand could host a Formula 1 race in the next two to three years.”

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The Report: Thailand 2012

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