Motor sport

“We just said it’s much more than a motorsport circuit”

Doha: In 2009, Sharmila Nadarajah was brought in to rectify the situation at the Sepang circuit. From just 40% home run to nearly 100% currently, Nadarajah is the lady credited with the turnaround.
Motorsport is an expensive business. And, although Formula 1 and MotoGP try to reach different countries, building a circuit and maintaining it are not the same thing. In this fiercely competitive environment, Malaysia’s Sepang International Circuit (SIC) is thriving.
Formula 1 arrived at the SIC 17 years ago. But after the initial success, the circuit began to turn into a white elephant. In 2009, Nadarajah was appointed chief strategy officer and successfully revived the track’s fortunes.
Currently, SIC’s Commercial Director, Nadarajah was in Doha for the Qatar Motor Show 2015 where she spoke about SIC’s achievements and future plans.
Excerpts:
Q: How viable is it to operate a motorsport circuit? Or how to make it viable?
A: The Formula 1 race at SIC is a government initiated event. Thus, the duty costs are borne by the Malaysian government. The circuit only pays the operating costs it generates from ticket sales. International events only take place at the SIC three times a year. The rest of the year we run private track days – bookings for manufacturers, weddings and concerts – this is what sustains the circuit throughout the year.
So the three international events are great, but if we had to cover the Formula 1 rights fee, things wouldn’t be so viable. The returns are based on the fact that Formula 1 is meant to attract tourists to Malaysia.
We did an economic impact study last year to determine if we should continue with Formula 1 and the returns are still there in terms of tourist spending in Malaysia. The ratio of international to local tourists descending for the race is 50:50. And international tourists spend enough money for the rest of the year. Plus, you can’t beat the fact that Formula 1 has 63 million viewers worldwide and somehow puts Malaysia on the map. This return is calculated in terms of media value. And if you add it all up, the ratio of investment to returns is still around 1:4.
Q: How difficult or easy was it to continue to get support from the government?
A: It was difficult to get support from the government. SIC has hosted Formula 1 for 17 years now. During that time Singapore came in, then it was South Korea and then it was India… The first year Singapore came in, we had a 10-15% drop in sales of tickets. And then when Korea came in and India came in, we saw a 5-10% drop. It wasn’t much. Not a big impact. Our main sources of tourists were India, Singapore, Indonesia, Thailand and Australia. Australia is a very big market for us. And because we’re marketed as a tourist destination, where you go to the islands after the race, that didn’t impact us that much. Luckily the Singapore GP is in September and we are in March. So you don’t really have to choose which one to go to. You can opt for both. Singapore is a street circuit and it’s at night, so it’s a completely different experience. We’re like a hot, fast, noisy experiment… The only thing that hit us hard enough last year was the disappearance of the MH17 plane.
Q: How much of an attraction is motorsport in Malaysia?
A: Motorcycles seem to have attracted more interest than Formula 1. I think the reason is connectivity. If you go to World SuperBike or MotoGP you can buy a similar type of bike… But Formula 1 is different because you wouldn’t want to own an F1 car. You cannot take it out and show it to your friends. Also, getting into Formula 1 is very difficult and there aren’t many drivers and teams from the Asia-Pacific region racing. So there is not much to push people towards F1. Whereas for MotoGP and WSBK, we ourselves were able to put a local talent, Zulfahmi Khairuddin, in the races and he is doing quite well. And now we also have our own racing team. So it’s a good transition. Formula 1 is 150 times more expensive.
Q: Formula 1 or MotoGP – which is more lucrative?
A: The money comes from Formula 1 but it has its own operating costs.
Q: Any future plans for the circuit?
A: We put in place a facility development plan about six years ago. The reason we did this is because we only had one runway and we were running at full capacity every year… We had 300 hectares of land and we capitalized on that. Over the last five years, in terms of the sustainability of the circuit itself, we have put in place a full facility, not just a motorsport venue. So we did product launches, weddings, corporate events, concerts, cycling events and marathons. And these do not take place on the track. And then we also have training camps. It is very popular. We’ve taken all of this and developed a facility development plan that focuses on transforming the facility into an ‘edutainment’ center. Put plans in place to revamp our go-kart track. Set up a 4×4 world experience track. In February we finish the business park. It’s kind of a warehouse concept.
All of these things fuel tour business and generate income for us through rental or investment. We have a motorsport academy which we are planning to set up. And that’s what we see as the future of the circuit.
Q: Qatar is currently in talks to host a Formula 1 race. They already have MotoGP and WSBK. What do you think of motorsport in this region?
A: There is a lot of motorsport competition in this region. India has a beautiful circuit. Korea has two circuits. China offers a multitude of circuits. Last time I checked, there were nine. In Malaysia, we are consulting for two other circuits to be built. What we realize is that there is a market for motorsport in this region. And it’s because of what motorsport is associated with: healthy living and lots of sponsors. It is a global experience. It is considered the second most expensive sport in the world, the first being equestrian events. The slogan of being the second most expensive sport attracts people. People’s ability to spend has increased a bit. The first thing they do is buy a house, then the next thing they do is have ten different cars in their garage. It is increasingly popular in Malaysia. We have very different levels of how you can enter the industry. We have GT car racing, high end racing, endurance racing. Since we have all these races, manufacturers like Ferrari and Lamborghini have been offering one-make races that are becoming more and more accessible. The market is there and it is growing. But I have to admit that for us in Malaysia, a lot of our growth has come from investments through people in China who now take motorsport very, very seriously. In that sense, I don’t see it diminishing or becoming a struggle like it was six or seven years ago.
Q: So is motorsport a viable business?
A: I wouldn’t say it’s a profit for the pilot or driver. But it’s profitable for us on the circuit. The circuit has existed for 16 years. The team that runs the circuit has only been around for seven years and before that it was a white elephant. When I first arrived it was quite difficult. It got to a point where the government said the value of the land was more of a commercial property or a residential property because it wasn’t getting the expected returns. And then we were tasked with coming up with a recovery plan. And less than a month later, we went to see our shareholder, which was the Ministry of Finance, and I remember the look on their faces when we presented our business plan. Almost, ‘who are these people? Are they crazy! Who the hell did we hire? But we have just said that it is much more than a motorsport circuit. There are 300 hectares of land here, it’s an incredible sight for us at work… We also talked a lot with different circuits around the world. But with the advent of competition, it shows that it is a viable business.
THE PENINSULA