Formula 1 Grand Prix fuels $160m Victorian taxpayer blowout

Melbourne’s corporates are the big winner from an extensive refurbishment of ageing facilities at the Albert Park track. But all the revenue will go to Formula One’s global owner.

McLaren’s Australian driver Oscar Piastri, centre, walks down pit lane ahead of the Formula One Australian Grand Prix at the Albert Park Circuit in Melbourne. Picture: AFP

Taxpayers will spend $160m to overhaul the opulent Formula One Paddock Club, the pits and the track in Melbourne in a move that will benefit the global owners of the motor racing circuit and high rollers who attend the race.

A confidential deal to extensively refurbish the corporate hospitality area, where tickets sell for almost $6000 per person, is part of an agreement that helped seal the race staying in Melbourne.

The Victorian government last year clinched two extensions to its existing Grand Prix contract, considered one of the centrepieces of the state’s major events calendar, the first through to 2035 signed in June and then a further two-year contract clinched in December.

The Australian has learnt that Formula One’s global owners Liberty Media used competition from NSW to drive a hard bargain for the extension, insisting on almost doubling the Paddock Club facilities to a capacity of 5000 and the pits area being extended to host up to 40 cars in case of future expansion to the racing circuit.

The cost to taxpayers of the Australian Formula One Grand Prix, which takes place on Sunday after practice sessions and qualifying beginning on Friday, has now risen to close to $1bn over almost 30 years, including the covering of a record $78m shortfall last year.

It comes as the Andrews government is considering cutting thousands of jobs in the May budget to help control debt, which is forecast to hit $165bn in 2025-26.

Assistant Treasurer Danny Pearson said on Wednesday no final decisions had been made on the budget, but he conceded there were pressures on state finances.

Premier Dan Andrews also has raised the spectre of a tough budget due to Covid spending.

Sources familiar with discussions said there had been pressure on the Victorian GP to improve its assets because of newer races at glamorous locales like Las Vegas and Miami and cashed-up centres such as Bahrain and Saudi Arabia.

However, a key feature of Melbourne is that every year virtually all of the track facilities are removed to appease hostile residents in nearby Albert Park and South Melbourne. This has caused a significant financial penalty compared with other cities.

Global F1 officials had expressed a desire for more standardised – and larger – paddock and racing car facilities to bolster revenue and match offerings elsewhere in the world.

“The organisers prefer big and fresh and new,” said a source familiar with the push to extract new facilities in Melbourne.

Sources said any construction in the Albert Park race precinct would have to be contained because of the anger in the community about the location of the event.

The timing of the looming big bill for reform of the Melbourne track, set for completion by the 2024 or 2025 race, will embarrass the government as it eyes some significant public service job cuts.

“The contract for the Australian Grand Prix has been extended to 2037 – facilities at Albert Park will need to be upgraded to ensure Melbourne is home to one of the premier races on the F1 calendar for years into the future,” a Victorian government spokesperson told The Australian.

“These upgrades would likely include improvements to the pits and paddock facilities to maintain the high standards needed for elite F1 teams.”

The sold-out Paddock Club costs $5995 per person for three days’ access, plus additional requests and experiences that cashed-up customers also pay for.

While the Paddock Club is the most premium corporate hospitality product at Albert Park, all the revenue it makes goes directly to Formula One’s global owner Liberty Media which runs the precinct at most Grand Prix events around the world each year.

It has proven to be a lucrative business for Liberty, which made $US466m ($696m) from “other Formula 1 revenue” in 2022, most of which was the Paddock Club that it operated for 19 races.

Meanwhile, the state-owned Australian Grand Prix Corporation makes its revenue from ticket sales to the general public, some sponsorship deals and other corporate hospitality at the track.

But the increasing costs associated with putting on the event and big payments for the right to hold the race means it’s the Victorian taxpayers who are forced to cover the financial shortfall each year.

The Victorian government shelled out a record $78.12m for the 2022 race to cover the event’s financial loss, up from $60.1m in 2019, the last held before the pandemic, and $56.5m in 2018.

Ticket buyers for the Paddock Club get access to a premium rooftop vantage point along pit straight, fine-dining experiences matched with premium wine, exclusive tours of the pits and the track and meetings with Formula One drivers.

This year’s Paddock Club is sponsored by Patron tequila, which has made a specially curated Checo Perez Mango Margarita to mark the occasion – named after Mexican Red Bull driver ­Sergio “Checo” Perez.

Australian Grand Prix Corporation general manager of sales and commercial Darian Misko said the event organisers were “expecting a record (number of hospitality guests) across the Friday, Saturday and Sunday”.