Why construction cost of F1’s Las Vegas Grand Prix has risen to $400m
By Neil Gerrard10 August 2023
The cost of construction work ahead of the Las Vegas Grand Prix, scheduled for November this year, has risen to $400 million.
That’s according to the client Liberty Media Corporation, whose F1 Group holds exclusive commercial rights to the FIA Formula One World Championship, an annual nine-month-long motor racing competition.
Liberty Media plans to bring F1 to Las Vegas for the first time since the early 1980s. The project involves the rapid construction of a 300,000 sq ft (27,900 sq m) paddock building in time for the race in November.
It is also undertaking resurfacing works in multiple locations along the Las Vegas Strip, Koval Lane, Harmon Avenue and Sands Avenue to bring the surface up to standard for the 3.8-mile, 14-turn race circuit.
Causes of the rise in construction costs
Miller Project Management is overseeing construction works on the paddock building and resurfacing for the track, while Las Vegas Paving Corp is reported to be the main contractor for the track works. Work on the paddock building, which only started late last year, is now 85% complete.
But the race to complete the project against a tight deadline, plus unexpected challenges involved in the resurfacing works, and infrastructure changes to improve the spectator experience and allay concerns from local businesses have all contributed to the rising capital cost of the project, Liberty Media told investors earlier this week.
The company’s chief accounting officer and principal financial officer Brian J. Wendling, said, “We expect capex related to the paddock building and track-related capex to be close to $400 million of which $155 million incurred during first half of the year.
“Our team has managed this project on a compressed timeline and in an inflationary environment.
“Much of our cost increase is attributed to track-related expenses incurred to be responsive to concerns of the local community such as minimising disruption to businesses along the Strip.
“We have also invested in security enhancements and expenses incurred to ensure the quality of the fan experience, with infrastructure changes to improve sight lines.”
Elaborating further on some of the challenges that the project faces to be ready in time for open practice on 16 and 17 November, ahead of the Grand Prix itself on 18 November, Renee Wilm, chief executive officer of Las Vegas Grand Prix said, “We entered into a couple of challenges as we have uncovered asphalt [during resurfacing of the track]”.
She said these challenges included the discovery of underground cables under the road surface, as well as wires overhead that needed to be moved.
A lot of the extra work has come at the requirement of local stakeholders, she added.
“We have also encountered some additional requests from the local stakeholders, such as the casino properties, around enhanced security around opening and closing the track.
“So this has led to additional equipment that was needed as well as additional roadworks.”
Other elevated costs related to the “lightning speed” at which the paddock building is being constructed, at a time when inflation is driving costs higher, she said.
The four-level paddock building includes a pit row and adjoining garages, as well as luxury suites on the upper levels and a rooftop area for race viewing.
Reports have suggested that contractors have been engaged to work on the project for 20 hours a day and that could rise to 24 hours today as the deadline completing the project ahead of the Grand Prix nears.
Original cost estimates
While Liberty Media last week indicated that capital expenditure for the project would reach $400 million, it has never previously revealed precisely how much it planned to spend on construction works.
Instead, it indicated only that it would be about the same or slightly higher than what it cost to buy up land at Koval and Harmon as the site for the pit and paddock building. The cost of buying that land has previously been reported as $240 million, which suggests that capital costs have risen by around 60% against what was originally forecast.
Nonetheless, Liberty Media said that despite inflation and cost pressures, it still expected no change in the revenue and profitability assumptions that it has previously laid out for the event, which it described as being of “unprecedented complexity and scale”.
It added that it plans to hold a Grand Prix in Las Vegas every year “for years to come”.
F1 racing has grown in popularity in the US over recent years, helped by the Netflix documentary ‘Drive to Survive’. The 2023 F1 season so three of the four largest live audiences for the sport in the history of US TV, while races pulled in one million viewers on average.