Doha: In 2009, Sharmila Nadarajah was brought in to turn the fortunes of the Sepang Circuit around. From just 40 per cent utilisation of the circuit to almost 100 per cent currently, Nadarajah is the lady credited with the turnaround.
Motor sport is an expensive business. And, although, Formula One and MotoGP are trying to reach out to different countries, building a circuit and sustaining it is not the same thing. In this fiercely competitive environment, Malaysia’s Sepang International Circuit (SIC) is thriving.
Formula One came to the SIC 17 years ago. But after the initial success, the circuit started turning into a white elephant. In 2009, Nadarajah was brought in as the Chief Strategy Officer and managed to revive the track’s fortunes.
Currently, the Chief Commercial Officer of the SIC, Nadarajah was in Doha for the Qatar Motor Show 2015 where she spoke about the achievements and future plans for the SIC.
Excerpts:
Q: How viable is it to run a motor sport circuit? Or, how does one make it viable?
A: The Formula One race at the SIC is a government-initiated event. So the rights fee is taken care of by the government of Malaysia. The circuit only pays the operating costs, which it generates from ticket sales. International events are held at the SIC only three times a year. The rest of the year we run private track days — bookings for manufacturers, weddings and concerts — that’s what sustains the circuit throughout the year.
So the three international events are awesome but if we had to cover the Formula One rights fee then things wouldn’t be so viable. The returns are based on the fact that Formula One is meant to get tourists into Malaysia.
We did an economic impact study last year to determine whether we should continue with Formula One and the returns are still there in terms of tourists spending within Malaysia. The ratio between international and local tourists descending for the race is 50:50. And the international tourists spend enough money for the rest of the year. Plus you can’t beat the fact that Formula One has 63m viewers worldwide and that, sort of, puts Malaysia on the map. This return is calculated in terms of media value. And if you add all that up, the ratio of investment and returns is still about 1:4.
Q: How difficult or easy has it been to keep getting government support?
A: It was tough to get the support of the government. SIC has been hosting Formula One for 17 years now. During this time, Singapore came into play, then it was South Korea and then it was India…In the first year when Singapore came around, we had a 10-15 percent decrease in terms of ticket sales. And then when Korea came around and India came around, we saw a decrease of 5-10 per cent. It wasn’t a lot. 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 are marketed as a tourist destination, where you go to the islands after the race, it didn’t impact us that much. Thankfully, 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 go for both. Singapore is a street circuit and it’s at night, so it is a different experience altogether. We’re like a hot, fast, loud kind of an experience…The only thing that affected us quite badly last year was the MH17 aircraft going missing.
Q: How much of an attraction is motor sport in Malaysia?
A: The motorcycles seem to have garnered more interest than Formula One. The reason for this, I think is connectivity. If you go to the World SuperBike or MotoGP, you can buy a similar kind of a bike...But Formula One is different because you wouldn’t want to own a F1 car. You can’t take it out and show it your friends. Also, entry into Formula One is very difficult and there are not many drivers and teams from the Asia Pacific region running around. So there’s not much in terms of pushing people into F1. Whereas for MotoGP and WSBK, we ourselves have been able to put a local talent, Zulfahmi Khairuddin, into the races and he’s doing quite well. And now we have our own racing team as well. So it has been a good transition. Formula One is 150 times more expensive.
Q: Formula One or MotoGP — which one is more lucrative?
A: The money comes in from Formula One but it has its own operating costs.
Q: Future plans for the circuit?
A: We had a facility development plan put in place about six years ago. The reason we did that was because we had only one track and we are running at full capacity every year…We had 300 hectares of land and we capitalised on that. Over the last five years, in terms of sustainability of the circuit itself, we have put together a complete facility, not just a motor sport venue. So we have done product launches, weddings, corporate events, concerts, cycling and marathon events. And these don’t take place on the track. And then we also have boot camps. That’s very popular. We have taken all that and developed a facility development plan that focuses on building the facility into an ‘edutainment’ centre. Put in place plans to revamp our go-kart track. Put in place a 4x4 world experience track. In February, we complete the business park. It is a warehouse kind of concept.
All of these things feed into the business of the circuit and generates income for us through lease or investment. We have a motorsport academy that we plan to put in place. And that’s what we see as the future of the circuit.
Q: Qatar is now in talks to hold a Formula One race. They already have MotoGP and WSBK. What are your thoughts on motor sport in this region?
A: There’s a lot of competition in motor sport in this region. India has a beautiful circuit. Korea has two circuits. China is coming up with 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 realise is that there is a market for motor sport in this region. And that’s because of what motor sport is associated with — healthy living and lots of sponsors. It’s a worldwide experience. It’s considered the second most expensive sport in the world, the first being equestrian events. The tagline of being the second-most expensive sport attracts people. People’s ability to spend has increased quite a bit. The first thing they do is buy a house and then the next thing they do is have ten different cars in their garage. That’s growing in popularity in Malaysia. We have got very different tiers of how you can enter into the industry. We have got GT car racing, high-end racing, endurance racing. Since we have all of these races, manufacturers like Ferrari and Lamborghini are coming up with one-make races which are becoming more and more accessible. The market is there and it is growing. But I have to admit, for us in Malaysia, a lot of our growth has been from the investments through the people in China who are now taking motor sport very, very seriously. In that sense I don’t see it waning or becoming a struggle like it was six-seven years ago.
Q: So motor sport is a viable business?
A: I wouldn’t say it is profit-making for the rider or the driver. But it is profit-making for us at the circuit. The circuit has been there for 16 years. The team that we have running the circuit has been there only for seven years and prior to that it was a white elephant. When I was first came in it was quite tough. It came to a point where the government said that the land value was more as a commercial property or a residential property because they weren’t getting the returns they were expecting. And then we were tasked to come up with a turnaround plan. And within a month we went to our shareholder, which was the Ministry of Finance, and I remember the looks on their faces when we put forward our business plan. Almost like, ‘who are these people? Are they nuts! Who the hell did we hire?’ But we just said that it’s much more than a motor sport circuit. There’s 300 hectares of land here, it’s an amazing sight for us at work...We also talked a lot to various circuits around the world. But with the advent of competition it shows that it is a viable business.
THE PENINSULA
