Formula 1 Impact on Hotel Performance and What It Says About the Racing Sport's Future

Markets in Europe, US Got a Boost from Events in 2023

Adrenaline. High stakes. Melodrama.

Formula 1, which has been a sports behemoth for years, has these qualities in spades. The European counterpart to NASCAR and IndyCar has a flair and style completely different from any other racing league.

U.S. viewership of nationally broadcast races regularly exceeded 1.1 million viewers on average — NASCAR averaged 2.86 million viewers per broadcast. Most notably, the inaugural Miami race in 2022 scored 2.96 million viewers and generated $350 million in revenue. While this suggests that domestic race fans are warmly embracing this new scene, some hotel performance metrics may not tell the same story.

Before delving into U.S. hotel performance, the whole of the F1 schedule and market to market results must be examined. While it may be viewed as some as a plucky upstart domestically, Formula 1 has long been a fan favorite in a number of European, Middle East and Asia-Pacific markets.

2022 proved, broadly, to be a banner year for the sport, due in large part to much of the world fully emerging from COVID-19 crowd and event restrictions. An enthusiastic returning fan base benefited each host market. On average across the 2022 season, hotel occupancy in host markets was up 73.1% from the previous year. Hotel average daily rate also jumped 71.9% year over year to lift revenue per available room by 228.6%.

From such a peak, performance comparisons to 2022 were tough. Overall, hotels in host markets of F1 races in 2023 still grew occupancy 15.5%, ADR 51.6% and RevPAR 87% year over year. But market by market, the results were inconsistent.

The first thing that stands out are the eye-popping metrics out of Monaco, where hotel average daily rate around the event was $1,802 and revenue per available room was $1,633. As impressive as this performance looks at first blush, it should be taken with a spoonful of salt. The Monaco market consists of 12 operating hotels, nine of which are upper-upscale or luxury, far from the typical supply.

Year-over-year comparisons are complicated by the scheduling format of Formula 1, with most races shifting anywhere from a single to several weeks in each season. Only five host markets — four in North America, and the extreme outlier Monaco — held F1 events on the same week year to year.

These markets show a rather loose correlation if any at all. Occupancy is mostly flat among these four markets — down 0.7% from 2022 — but the commonalities dissipate within the other metrics.

Miami, which hosted its inaugural F1 race in 2022, was the only market with a modest gain in occupancy, up 2.5%. But rates for the week of the race were considerably lower than in 2022. Hotels in Austin, a Formula 1 host since 2012, posted very modest decreases in key performance indexes year over year.

The inaugural Las Vegas Formula 1 Grand Prix also failed to meet lofty expectations.

The Las Vegas market has developed into a sports behemoth in recent years, piling up on relocating and expansion franchises while hosting the Pac-12 football title game earlier this month and Super Bowl 58 next year. Already having a built-in exuberant tourism and sports betting culture, event organizers and city officials had every expectation for an event of this magnitude to be a massive success. However, in the run-up to the race, numerous issues occurred, ranging from snarled traffic to damage to the course, leaving drivers venting their frustrations with the poor planning.

Fans had plenty of gripes, too. Astronomical ticket prices left most race enthusiasts in the wind, prompting the league to slash rates dramatically. Hotels on the Strip did not fare much better with fans looking to book a stay. Many hotels escalated rates to an immense degree, with some charging as much as quadruple the rate for the same week in 2022. As bookings floundered, hotels were forced to slash rates in the weeks leading up to the event, essentially doubling down on lost revenues.

Ultimately, the Las Vegas market crossed the finish line with a total occupancy of 68.4% over race week, falling below the 2023 season average of 78.3%. ADR fared better at $344, compared to the season average of $303, while RevPAR fell a hair below average at $247.

These are lackluster numbers, especially considering occupancy for the same week in 2022 was 77.9% without a marquee event to buoy performance.

Disappointing, certainly, but growing pains for an event with lofty expectations are to be expected. One false start should not derail what could potentially be the gem of American racing.

Nathan Rael is an account manager with STR, CoStar's hospitality analytics division.