There is more to racetracks than vroom

The amazing circus that is Formula 1 arrives in the Middle East this week to prove once again that you don’t have to produce anything useful for it to be big business. F1 cars are small, noisy and very expensive but their economic impact goes far beyond simple sport.

This is a $3 billion (Dh11bn) a year business that generates even greater returns for the cities that host events – as Bahrain, the location of this weekend’s Grand Prix – has discovered.

It cost Bahrain $150 million five years ago to build a track suitable for F1 and I’m sure many people shook their heads in bewilderment at such extravagant expenditure just so spectators can go deaf while watching cars whizz around and around. But there have been no complaints from Bahrain’s government about the investment and race weekends are now generating more than $370m in revenue. Last year 90,000 people turned up to watch the event and 500 million more got to check out Bahrain from the comfort of their living rooms.

F1 and other related events are thought to be worth nearly $1bn a year in tourism revenue for the small Gulf state and the spin-off benefits are numerous: Bahrain’s airport reports that the Grand Prix contributed to a 9.3 per cent increase in passenger numbers and a 7.7 per cent increase in duty free sales last year. No wonder then that cities such as Kuala Lumpur in Malaysia and Shanghai have pushed to be included on the F1 circuit.

Singapore will be added later this season and I sensed a real excitement about hosting the event, which will be F1’s first night race, when I visited the city recently. My taxi driver from Changi Airport took me on a tour of the street circuit and I expect there will be similar pride in the UAE when Abu Dhabi joins the circus next year. Abu Dhabi is positioning itself as a cultural tourism centre in counterpoint to the bright-lights, big-city feel of Dubai and F1 will add a coat of high-speed glamour to the planned museums and art galleries.

But before the UAE’s motorsport fans get to sniff the petrol fumes, Abu Dhabi has had to do a lot of work to get a seat at the F1 table. It started with Mubadala, the investment fund, buying a five per cent stake in Ferrari four years ago. Many people dismissed this as Arabs buying more bling because it was hard to see what benefit a sovereign wealth fund could get from having its name on an F1 car.

 

What we now see is that Abu Dhabi used the stake to get a foot in the door and it has since utilised its connections within F1 to win the right to host a race. The stake has also enabled Abu Dhabi to negotiate the establishment of a Ferrari driving school, which will further enhance the city’s tourism credentials.

Bahrain, conscious that its position on the F1 schedule is threatened by competition from countries with larger populations, has copied this idea and the government’s Mumtalakat investment fund bought a 30 per cent stake in the McLaren team last year.

I imagine that Qatar must be considering something similar having just announced its intention to build an F1-standard racetrack.

But Abu Dhabi seems to be planning a far grander future in the motorsport world than simply attracting tourism. Abu Dhabi, through Mubadala, is building itself an aerospace industry, which is exactly the sort of high-tech and cutting-edge sector that will be vital for a post-oil economy. F1’s links to aerospace are nearly as important as its links to the auto industry. For example, Martin Whitmash, the head of McLaren Racing, was initially seconded into F1 from BAE Systems, Europe’s largest defence company and the builder of Eurofighter Typhoons. BAE has retained a close partnership with McLaren providing the sort of aerodynamic, advanced materials and telemetric technology that are beyond the team’s auto sponsor, Mercedes.

Abu Dhabi has a growing aerospace industry and a close working relationship with Ferrari – these investments are not an accidental but, rather, part of a wider strategy to position the emirate at the heart of future industrial technologies. It is the sort of long-term thinking that the West fails to grasp when we see sovereign funds making acquisitions such as the Ferrari stake. F1 is just a sport but Abu Dhabi has a plan to turn it into something much more useful, no matter who takes the chequered flag this weekend.