The Human and Financial Impact of Canceling a Major Sports Event
This week’s coronavirus-related cancellation of the Detroit Grand Prix has offered a rare look into the financial ramifications of a major sporting event’s loss.
The Detroit Grand Prix, staged each year on the weekend immediately following the Indianapolis 500, serves up the only doubleheader on IndyCar’s schedule as the Chevrolet In Detroit, along with IMSA’s WeatherTech SportsCar Championship, and the reconstituted Trans Am Series play on the streets of Belle Isle park.
Held in the shadow of General Motors’ global headquarters, the Detroit race—promoted by business and racing tycoon Roger Penske—is unlike most of its rivals due to the unique location where the event is erected.
Compared to permanent racing facilities, where owners have minimal dealings with local government, the Detroit Grand Prix exists at the will of state and local municipalities, plus city agencies, who benefit from the sanction fees and annual investments returned by Penske’s team. Add in the benevolent organizations who rely upon the event to enrich the community’s finances, and the three-day GP has become a powerful financial engine for Detroit.
Lost from the 2020 calendar, its cancellation will disappoint more than motor racing fans. With pre-existing commitments in place, the DGP team is still responsible for writing checks despite the lack of income.
“The tentacles of our event go quite far,” DGP chairman Bud Denker tells Road & Track. “I start with Belle Isle, which is the most important piece of why we have our event at Belle Isle Park. Over the last 12 years now, we've invested over $13.5 million dollars into park infrastructure. Having our event there allows us to do that. To give you an example right now, we’re paying for the [Michigan] Department of Natural Resources pumps to be overhauled and maintained.
“Those pump 30,000 gallons of water a minute off the Island, back into the river to keep it above water right now. Those are the kinds of things we partner with, and our event going away now will certainly have an impact on the DNR, because, and this is public knowledge, we provide $450,000 a year to the DNR to rent our little piece of the Island. That money's obviously going to hurt their budget. We support the Belle Isle Conservancy, a woman's group that does a lot of work on the Island. We cover most of their operating budget a year by having our gala every year. We've now given over $5 million to them in the last eight years.
“Things like the aquarium on Belle Isle are kept open free of charge all year because of the money that we raise for them. That's number two, and those things all impact the Island. Number three is the economic benefit to our region. We haven't done a study now for two years, but the last one we did was over $50 million of economic benefit to the market and that's hotels, restaurants, bars, casinos, and all the things that receive income from those who take part in the Detroit Grand Prix. It’s people spending money downtown and staying there the whole weekend. That's a big one.”
The growing list of losses resulting from the DGP being erased from the calendar includes the men and women who would have created and staffed the temporary home for Penske’s street race festival.
“The other one that doesn't get much mention is the fact that we'll employ almost 1000 people that weekend,” Denker adds. “Those are people doing the catering. Those are people doing the floral, those are people doing the staging, all the hands, all the grips, everybody there, the construction people, the safety people, we're paying them all. Those people now don't have that income to supplement what they do, as well as all the people that we take on in construction and trades and union workers that start April 20th, and they go until the end of June, setting up and taking down our facility.
“Our construction costs are over $2 million alone to set up and take down. That's all labor. Those are people that are not going to have that now. The tentacles run deep besides just simply having the race and the postcard to the world that the event provides Detroit in those great overhead shots we have of our Island and the waterfront. Those are all measurable pieces that are tangible in nature that are impacted by having our race canceled.”
Holding the GP in 2021 is where Denker’s group will focus its efforts. Although the ravages of COVID-19 will be felt for years to come, the DGP promoters have received a steady influx of support from its partners at a time where confidence in spending and long-term commitments are wavering.
“Detroit is an amazing sports town, but beyond that, the people in Detroit, the companies in Detroit that support our event–we had 74 sponsors last year and as many of that this year were planned,” Denker says. “Those sponsors are part of what we do and they're the life-sustaining nature of providing the revenue to put on our event. Every single one has said, ‘We understand your decision. Count on us again for next year.’ Not one person has said, ‘We're backing out. We're pulling out because of the economy, because of what we foresee in the future.’ They've doubled down and said ‘we're coming back next year, Bud, and we're with you.’ That's very gratifying and very humbling and frankly, I'm not surprised. It's just the way these businesses operate here in Michigan, and Detroit for that matter.
“I'm not worried about our sponsor support. I'm not worried about the Michigan Department of Natural Resources support. I'm not worried about Belle Isle Conservancy's support. The mayor's office is very disappointed, because they want to have big events. Our next big one, which is the same one as our weekend, is the PGA tournament. The Rocket Mortgage Classic, will that happen or not? Not sure. Then the big one after that is our fireworks at the end of June. I hope that one does happen, because we need to bring people together again, when they're comfortable, and our event does that. I am not the least bit concerned about 2021. Our contract expires at the end of '21 and now I'll be talking to them also about with this means hopefully for '22 and beyond here soon.”
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