A tiny 91-year-old looms large over Singapore’s Formula 1 Grand Prix, but he is not one of the drivers. He won’t even be here this month. But, he is the unseen force that will power the race.
Bernie Ecclestone is the F1’s godfather. He controlled the sport for four decades until his fall from grace in 2017. Ecclestone stands at 160cm but towers over the F1 like a floodlight.
Almost 300,000 tickets have been sold for the F1 this month. Over 100 million people will watch it on TV. Singapore expects five million visitors. Hotel rates are skyrocketing. Bookings have now reached record heights for the F1 weekend. The Fullerton Hotel suite provides a ringside view of the race. It is going for $2,500 a night, which is twice the rate in 2008. It is nine times the rate for a typical weekend.
The grand event is in sharp contrast to Ecclestone’s origins. He was born in 1930 in an English fisherman’s family. His early ambition was to be a racing car driver. His slight frame and nimble reflexes were ideal. However, his plans were derailed by a horrific car crash in the last 1960s.
The failure as a driver led him to seek success elsewhere. Ecclestone realised that there were more ways to prosper than behind the wheel. He made his first fortune as a trader. He bought and sold sports cars in London. In 1972, Ecclestone bought a racing team. This gave him membership in the Formula One Constructors Association (FOCA), which then arranged F1 races.
F1 racing then was different to today’s gilded event: It was not professional. The racing tracks were treacherous with frequent crashes. The events attracted travelling businessmen, minor royalty and hangers-on. Many drivers perished. The F1 was dubbed a blood sport like bullfighting in Spain.
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TV coverage was also infrequent, as national TV networks sporadically broadcast it. The race was not set up for TV viewing, and the tracks were muddy and skiddy. But Ecclestone saw a chance to professionalise the sport. The other team owners had no commercial sense and were just retired repairmen and drivers. He asked FOCA to hand over the event to him. By 1975, he took charge as president of FOCA.
This was a masterstroke. With Ecclestone behind the wheel, the event was transformed. He forced the TV stations to pay royalties on commercial terms. The organisation of the race was handled entirely by him. Today, live TV coverage of sports is standard. We take it for granted. But, in 1975, it was a radical step.
In 2000, Ecclestone was granted exclusive commercial rights to the F1 till 2110. The payment for the 110-year deal was US$360 million, the bulk of which would be deferred for decades. Ecclestone had the sole rights to negotiate and collect fees from hosts. Singapore had to contract with Ecclestone’s entity to hold the races. Ecclestone’s exclusivity extends to the TV rights to the 21 races with a six billion TV audience.
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Ecclestone no longer controls the sport as controversies, including tax evasion charges, have driven him out. F1 is also not listed. But there are other ways to play it.
Singapore is on the cusp of a massive resurgence of travel and tourism. The surging hotel rates this month are a sign of brighter times. Singapore is a beacon of light in a region grappling with Covid-19. The island is open to quarantine-free travel. Hong Kong, Asia’s other hub, still requires a week’s isolation. In 2019, tourist arrivals in Singapore were 19 million. There is pent-up demand for travel. Tourist arrivals in 2023 could exceed pre-pandemic levels.
Hospitality stocks on the Singapore Exchange (SGX) have not risen as much as hotel rates. Far East Hospitality Trust — which holds nine hotels and three service residences — is still 18% below its February 2020 levels. The market is expecting its revenue to match 2019 levels in 2024. OUE Commercial Trust is languishing below 20% of its pre-pandemic high. Its assets include the Hilton Singapore Orchard and Crowne Plaza Changi Airport. These marquee names could benefit from thronging visitors.
The firing shot in this year’s F1 will be held on Oct 2. It may not just mark the start of a race but also a travel boom. Investing in hospitality stocks could be like winning the race built by an old man.
Nirgunan Tiruchelvam is head of consumer sector equity at Tellimer and author of Investing in the Covid Era. He does not hold any position in the stocks mentioned in these columns
