The month of May, once an Indianapolis institution culminating with The Race on Memorial Day weekends, has come to this:
empty hotel rooms and corporate hospitality suites.
Unfathomable just a decade ago, the Indianapolis Motor Speedway is trimming demands on hospitality packages in a scramble to fill vacancies and preserve what IMS officials call “a major profit center.”
Carburetion Day, May 28, is sold out, but hospitality vacancies are available every other day despite the fact that track activities have been compressed from a full month to two weeks.
Speedway officials for the first time are selling smaller, one-day hospitality packages, said George Hobbs, IMS’ hospitality client services manager.
Gasoline Alley Club has been launched to allow individual, one-day suite sales. Brickyard Club is designed for parties as small as six people, including a table in the hospitality area, catering services and grandstand tickets.
“Traditionally, suites have only been rented by the month, and we haven’t offered anything specifically for smaller parties,” said Bob Guptill, Speedway sales account executive. “We’re reacting to the market.”
Corporate hospitality at IMS is up 30 percent this year. But that isn’t saying much, motorsports business experts caution, considering that 2009 was dismally eroded by the recession on top of the ongoing decline in open-wheel racing.
This year’s increase is on par with what Los Angeles-based RazorGator, one of the nation’s largest corporate hospitality providers, has seen at other events.
RazorGator’s corporate hospitality business at this year’s Final Four in Indianapolis was up 60 percent over last year, according to John Wallace, RazorGator general manager and vice president. Hospitality was up 40 percent at the Super Bowl and 20 percent at The Master’s, Wallace said.
“Even with those increases, it’s going to be another 24 months before we get back to 2008 levels,” Wallace said. “And I suspect the same is true for the Indianapolis Motor Speedway.”
Much at stake
Given the track’s overall impact on local tourism, much rides on the Speedway’s attempt to overhaul its corporate hospitality arm.
“Historically, the events at the track have been a huge driver for the entire region’s hospitality and tourism business,” said Don Welsh, Indianapolis Convention & Visitors Association CEO.
Welsh added that hotel room nights have declined more than 20 percent in the past five years for the Indianapolis 500 and other events at the fabled Brickyard.
Speedway officials are optimistic the new offerings will increase hospitality business at the track long term.
One-day packages falling on non-race days are available for as little as $1,750 and a race-day table for six is available for $2,400. One-day packages go up to $60,000 for parties of 600.
The IMS has launched some traditional advertising to publicize the offerings, but is relying primarily on word-of-mouth and referrals.
The sunny outlook assumes the economy, not the fading popularity of open-wheel racing, is hurting hospitality, said Richard Sheehan, a University of Notre Dame economist and author of several books on professional sports operations.
Despite the open-wheel split fathered by former IMS Chairman Tony George in 1996, corporate hospitality remained a vital part of the Speedway’s overall revenue. Sports business experts credit hospitality with about 15 percent of the track’s overall revenue in May—$5 million to $10 million.
In 2000, Speedway officials smartly used infrastructure built to host the Formula One race later in the year to increase the facility’s hospitality inventory during May.
“You can’t overemphasize the impact that one event, the Indianapolis 500, has had,” said Mark Rosentraub, a former IUPUI dean and sports economist who studied the Speedway’s economic impact in 2000.
That impact spread well beyond the gates at 16th Street and Georgetown Road.
“The entire region—from hotels to restaurants and more—became fat off the activities at the track,” said Tim Frost, president of Frost Motorsports, a Chicago-based motorsports business consultancy. “There are very few venues like that anywhere in the nation that can rival the Speedway’s economic impact in the region where it resides.”
The tens of millions of dollars that flowed from 300,000 race fans filling IMS each May obscured the impact of corporate entertainment.
“Corporate hospitality is what brings in many of the high rollers,” Frost said. “It’s what fills up the most expensive hotels and restaurants. When you can get that much money coming from a concentrated area, it’s definitely a revenue stream you want to hang on to.”
In his 2000 study, Rosentraub concluded the Indianapolis 500 generated $336.6 million for the region; the Brickyard 400, $219.5 million; and the U.S. Grand Prix Formula One race, $170.8 million.
For comparison’s sake, this year’s Final Four at Lucas Oil Stadium had a $50 million impact.
Corporate hospitality at IMS remained relatively strong through the early years of the Indy Racing League’s split with Champ Car.
But sponsors began slipping away due to the split and the rise of NASCAR.
The Speedway has taken two other big hits. After 2007, the F1 race departed and was replaced by the MotoGP motorcycle race, which has a much smaller corporate fan base. A year later, the bottom fell out of the economy.
Although Speedway officials would not detail the decline in their business, sports business experts said overall corporate hospitality at sporting events nationwide fell 30 percent to 45 percent between 2006 and 2009.
Glenn Brooks, vice president of General Hotels Corp., which owns and operates Crown Plaza locations downtown and at the airport as well as five other hotels in the area, said his firm has seen a dip in hotel demand from the Indianapolis 500 and Brickyard 400.
“Those events are still major, major business generators, but at the same time, we’ve seen continual year-over-year declines for the last five or 10 years,” Brooks said.
Nights before the Indianapolis 500 and Brickyard 400 are always booked, Brooks said. However, he added, gone are the days when local hotels could command three nights or more. And the impact from the MotoGP race on hotels is lagging far behind what the F1 race generated.
When it comes to the Indianapolis 500 and Brickyard 400, Brooks said downtown hotels fill first, followed by those at the airport. As a result, suburban hotels have taken the biggest hit.
“Our downtown hotels are the only ones we’re able to get three-night minimums for the Indianapolis 500 and Brickyard 400,” Brooks said. “And there just isn’t the demand for corporate entertaining that there used to be. We feel it on a number of different levels, from meetings and parties hosted to rooms booked and our hotel restaurants and catering business.”
In the 1990s and early 2000s, he said, the Indianapolis 500 was unrivaled in its impact to area hotels and restaurants.
“Now we see a similar economic impact from an event like the Final Four or even some city-wide multi-day conventions,” Brooks said.
Speedway still a driver
Despite the swoon, Indianapolis remains a relatively vital hotel market.
Nationally, hotel occupancy rates have dropped below 58 percent, according to Smith Travel Research. While hotels in Marion and the surrounding counties have had occupancy rates in the 55 percent range the last two years, according to Smith Travel Research, downtown hotels have been near 70-percent occupancy in 2008 and 2009.
“A lot of that has to do with the events at the Speedway,” said ICVA’s Welsh.
John Livengood, president of the Indiana Restaurant & Hospitality Association, thinks central Indiana’s hotel occupancy and restaurant business has “stood up a lot better” than other similar-size cities during the recession due to activities at the track.
And, he added, there’s another intangible.
“Without the year-in, year-out activities at the Speedway, we wouldn’t have all these hotel rooms and restaurants that this city boasts,” Livengood said. “We wouldn’t be in a position to bid for events like the FFA Convention, the [NCAA] Final Four and Super Bowl.
“Without the Indianapolis Motor Speedway, we simply wouldn’t have a hospitality industry that is big enough or strong enough to compete for these other events.”•