SINGAPORE EQUITY

One of Singapore securities has highlighted potential beneficiaries should Singapore secure permission to host a F1 Grand Prix race. This happened last Friday when Singapore announced it has won the sought-after privilege to host the event from 2008 for 5 years. Featured as a night race, the first ever in the F1 circuit, this occasion should give a strong boost to Singapore’s tourism sector and generate $100m in incremental tourist receipts. The cost of holding such an event, estimated up to as much as $150m, can be partially defrayed through revenue ticket sales, sponsorships and merchandising. STB will also co-fund 60% of the cost of the event from the Tourism Development Fund. Apart from putting potentially Singapore on the world map for other such international events, there could likely be broader economic spin-offs to other segments of the economy such as hospitality, entertainment, retailing, transport, construction and logistics services.

1. 5-year right to organize F1 race. Well-known hotelier Mr Ong Beng Seng, through his company Singapore GP Pte Ltd, has won the right to host the annual F1 Grand Prix race in Singapore from Sep 2008 for 5 years. There is an option to extend for a further 5 years. The Singapore F1 Grand Prix is a night race, held on a street circuit. The 60-lap race is conducted on a 5.26km course, circling around Marina Centre and the Marina Bay area. The race is expected to draw 80000 spectators on the home ground and another 500m of TV viewerships worldwide.
    

2. Generate $100m in tourist dollar. The F1 is expected to give a strong boost to the tourism sector and generate $100m in incremental receipts. More importantly, a successful Grand Prix race would mean international branding and potentially opening more doors to other events and opportunities.
    

3. Event to cost up to $150m. The expense of organising this race is hefty, costing as much as up to $150m. STB will foot 60% of cost from the Tourist Development Fund. Apart from revenue from ticket sales, merchandising and sponsorship to defray some of the costs, the government has proposed a F1 hotel cess for a limited of 7 days around the race. The cess will not be more than 30% and will be tiered according to proximity of hotels to the track. It is expected to raise $15-20m a year.
    

4. Broader economic spin-offs. Hosting major events such as F1 would likely to have positive spillover impact on other business sectors. While hotels, entertainment, F&B outlets, retailers and transport companies would enjoy higher critical mass during this period, other service providers such as contractors for construction and logistics should also benefit from increased demand.

SPILLOVER EFFECTS
This section analyses the effects of an F1 Grand Prix for Singapore’s economy. This will be segmented by business sectors, followed by a specific reference to the companies. That the Singapore economy will benefit from an F1 event is a given. However, benefits will, in their view, be skewed towards certain sectors.

Hotel Sector
Room rates are known to double and even triple in host cities during the event. All hotel owners will benefit as occupancy during the race week are likely to surge with the anticipated influx of spectators, participants and tourists. Even their F&B outlets enjoy higher patronage despite mark-up in prices under the guise of event promotion. Hotels on the peripheral of the city will also benefit from higher occupancy and rates as rooms fill up quickly.