Less is more

Tuesday, Jan. 15, 2002 | 9:25 a.m.

There is a perception in some circles that the 117,000-seat Las Vegas Motor Speedway is something of a white elephant -- that the 1.5-mile superspeedway opens up for one weekend every spring, attracts in excess of 200,000 people over the course of three days and then collects dust for the remainder of the year.

While the speedway's annual NASCAR Winston Cup Series and Busch Series weekend is enormously popular and equally profitable for parent company Speedway Motorsports Inc., the track's value to the company runs far deeper than its ability to sell out virtually every Winston Cup race it has staged since SMI bought the facility in late 1998.

"It's certainly an unfair perception from a bottom-line standpoint because we're having successful events here every week -- whether it's the Richard Petty Driving Experience, Driving 101, the Derek Daly Academy or the Freddie Spencer riding school," LVMS general manager Chris Powell said. "A lot of these events are far more lucrative than some races."

Powell is not alone in his assessment. A stock analyst for Bear Stearns, the respected Wall Street brokerage firm, said the speedway is successful in maximizing the number of "event days" by hosting driving schools, concerts and car shows.

"It's actually a strong performing track as it relates to its Winston Cup events and that has provided (SMI) with some great growth opportunities," said Bear Stearns' Marc Falcone. "We do look at (track rentals) because it shows that management is working to utilize the 365 days of the track, but it is such a small contribution relative to what a Winston Cup event does."

The publicly traded Speedway Motorsports (TRK, NYSE), Powell said, "is not in the business of staging unprofitable events so what we're trying to do is make sure that any event that we put on is not just profitable but very profitable, and we've been able to do that."

Powell has kept LVMS profitable by resisting the temptation to stage a costly Championship Auto Racing Teams (CART) or Indy Racing League (IRL) open-wheel race in 2001 or 2002, just for the sake of having another race date on the superspeedway's schedule. Powell said he isn't convinced that either series would draw enough fans to make the event profitable.

"I would love to have a profitable open-wheel race here but if (ticket sales) are not tied to the Winston Cup ticket that that facility is selling ... there's no guarantee it will be profitable," Powell said. "(Many tracks) are tying the Winston Cup race to their open-wheel race -- you've got to buy the open-wheel ticket in order to get the Winston Cup tickets."

This practice is what has helped Texas Motor Speedway, also owned by Speedway Motorsports, to attract big crowds to its Indy Racing League events and make them profitable ventures.

LVMS, which does not offer season ticket packages, struggled to draw more than 20,000 spectators to its last four IRL races and no longer hosts the series.

"That's good marketing on their part," Powell said about selling season tickets, "but that was not done here in the beginning and I don't think it's fair to our fans to change the rules in mid-stream and tell them in order to get the same Winston Cup seat next year, they've got to buy a ticket to a CART race or an IRL race here in Las Vegas."

Instead, LVMS rents out its 1.5-mile superspeedway and infield road course about 220 to 230 days a year to the various driving schools based at the speedway. According to industry sources, both the Richard Petty Driving Experience and Driving 101 constantly clamor for more dates.

"If you spend a half-million dollars promoting a certain kind of a race and another million dollars for the purse and sanctioning fee ... and then another half a million dollars to stage the race, you've got two million dollars into it and you've got to sell a lot of tickets in order to satisfy that expense and then to show a profit," Powell said.

"So when you can guarantee a profitable event -- be it a driving school or a (track) rental -- you've done the shareholders in your company some good."

But available dates for track rentals are finite and don't come close to generating Winston Cup race revenue, estimated at between $20 million and $30 million per event. Speedway Motorsports does not release profit statements for its individual tracks.

Unfortunately for LVMS, Winston Cup dates are hard to come by.

SMI chairman and CEO Bruton Smith has been lobbying for a second annual Winston Cup race at LVMS since he bought the track in December 1998. But NASCAR repeatedly has opted for expansion to new markets over awarding second dates to existing tracks.

In a report issued last summer, Bear Stearns reported that the Winston Cup Series is over saturated in the East and needs to stage more races at the new and bigger facilities in the West.

"We believe 22 events in the Southeast represents an oversupply," the study stated. "The most obvious solution, in our view, would be to move races from Southeastern tracks that have two per season to tracks in the less concentrated Western region of the United States.

"We would also argue that tracks like Martinsville (Va.), Pocono (Pa.) and New Hampshire should not have two Winston Cup dates each when tracks like Texas, Las Vegas, California and Kansas have only one each ... "

The report estimated the market value of a Winston Cup date for a track such as Richmond (Va.) International Raceway or Darlington (S.C.) Raceway at $85 million. It said moving one of those races to a track such as Texas Motor Speedway or Las Vegas could increase that amount to $130 million, based on additional seating at the new tracks.

"I would love to have two Winston Cup races," Powell said. "Las Vegas isn't owed anything but I think based on this facility's and this community's merits, we should have a second date."

While the weak economy has begun to impact the motor sports industry in the areas of sponsorship spending and corporate hospitality programs, Powell said ticket sales for the March 3 UAW-DaimlerChrysler 400 Winston Cup are outpacing sales for last year's race -- which was a sellout. But he added that the track is feeling the effects of the recession in terms of corporate sales.

"We are significantly ahead in ticket sales against a year ago today -- significantly," Powell said. "That said, we're actually down on the number of corporate tickets that have been sold.

"Our corporate dollars have edged down slightly but, based on our number of tickets sales to individuals, we're way ahead."

The same can be said for the other SMI tracks. Despite laying off 150 full-time employees as part of a $12 million reduction in expenses, SMI officials say the future is bright.

"Notwithstanding the challenging economic conditions faced all year, we continue to report consecutive year-over-year revenue and operating income growth," SMI president H.A. "Humpy" Wheeler said. "We believe SMI's expense reduction program defensively positions us for the inevitable future upturn in economic conditions and corporate spending."

Although last year's Winston Cup race at LVMS sold out and attracted a crowd estimated at 125,000, attendance actually was down from the year before because LVMS did not erect temporary bleachers outside Turn 3. Powell said if ticket sales continue at their current pace, those additional seats would be added for this year's race.

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