SBJ/February 18-24, 2013/Facilities

Daytona downshifting on chalet size

When sports executives scan the exterior of Daytona International Speedway this week, they will see a different landscape.

Gone are the enormous hospitality tents paid for by corporate sponsors who entertained 500-plus guests each. In their place will be a handful of smaller tents that can hold no more than 100 people.

Speedway officials have seen individual interest in hospitality increase as corporate interest has faded.
Photo: DAYTONA INTERNATIONAL SPEEDWAY
The shift from large tents to smaller tents illustrates a change in hospitality demand across racetracks. The race chalet, as the tents are known, is becoming a thing of the past, and tracks are working to develop smaller premium experiences that fit corporations’ new demands for more intimate, affordable and effective hospitality.

“You’re seeing a shift from these big, big companies entertaining hundreds of people,” said Joie Chitwood III, president of Daytona International Speedway. “We’re chasing consumer demand and finding out there’s a nice uptick as it relates to smaller, individual hospitality.”

Corporate demand for large chalets began to fade after the recent recession. Prior to it, sponsors such as DuPont and Lowe’s had a track record of hosting huge hospitality events and parties during race weekends. DuPont’s program was the sport’s largest. It held hospitality at every Sprint Cup race, hosting 20,000 people a year. Their guests ranged from local body shop owners who bought DuPont paint to contractors who used the company’s Tyvek house wrap. DuPont regularly brought as many as 1,000 people to a race and entertained them with meals and question-and-answer sessions with driver Jeff Gordon.

But the company reduced the number of events it hosted from 36 to six in 2009, and it cut the number of guests it entertained to 300 a race.

The company’s move reflected decisions other companies made around the same time. As budgets tightened after the recession, many cut back, and as the economy recovered, many opted to keep their programs smaller. They did so to contain costs — a 500-person chalet cost $50,000 six years ago, while a 50-person chalet today costs $10,000 — but also because they found it easier to track their return on investment when they entertained fewer guests. They also had reached a point where the large chalet experience had become repetitive and boring for guests, officials said.

“We kept hearing, ‘We want a different option,’” said Jimmy Bruns, vice president of business development at GMR Marketing, which works with clients Lowe’s and MillerCoors. “They’d done the chalets. A general trend we’ve seen is our customers want smaller, more genuine, better hospitality opportunities than hosting that many people in a tent.”

Tracks across the country are trying to respond to that by offering new premium packages. Charlotte Motor Speedway last year created a series of pit-road suites that overlook the start-finish line. Bristol Motor Speedway is converting several of its 16-person suites into eight-person “man caves.” Michigan International Speedway is looking to create a shared hospitality experience where a group of chalets would function like a club with access to a food court that offers fajitas, hamburgers and prime rib. Daytona is looking at renovating its entire facility to build hospitality experiences more in line with the new demand. And Indianapolis Motor Speedway, which has 128 suites for 80 people each, is looking for areas where it can develop suite or temporary hospitality experiences for 20 to 30 people.

“Companies have tighter budgets,” said Mike Redlick, chief sales and marketing officer at Indianapolis Motor Speedway. “They still want to come to the race, but they don’t want 80 tickets to every date that we’re open in May [for the Indianapolis 500].”

The shift presents a challenge for tracks. Most have limited capital expenditure budgets. International Speedway Corp. spent $82.9 million on capital improvements last year, and its 12 tracks had to share that. Speedway Motorsports Inc. spent $42 million in 2011, split among its eight tracks.

Because of budget limitations and the need for project approval, tracks must look for inexpensive ways to improve hospitality offerings. That was part of the reason Charlotte Motor Speedway created The Hub, where companies and guests can buy paved 2,500-square-foot spaces to entertain guests in their own motor coach or one provided by the track. It’s also why Michigan created a food court chalet and a hospitality area surrounded by a white picket fence.

“We’re not going to get the kind of capital to build new suite buildings, but we can do the things we need to do to improve hospitality,” said Josh Burgett, Michigan’s senior director of corporate partnerships, who added that each ISC track gets about $100,000 it can devote to hospitality enhancements annually. “We have to find creative ways that are sometimes inexpensive and sometimes are expensive to improve the guest experience. We want people to walk by and say, ‘How do you get in there?’ They’re going to hear, see and smell things. There will be live cooks. You will see show cars. You will hear entertainment.”

Though the shift in corporate demand is forcing tracks to make changes and sell more hospitality packages than they did in the past, there’s an upside in the transition. Individual hospitality packages can be sold at a higher price point, which makes the margin on food and hospitality better, and there are more packages sold. Those packages are just to entertain smaller groups of people.

“The sweet spot seems to be 50 people, and they’re looking for something unique that they can’t get on their own,” said Dan Farrell, Charlotte Motor Speedway’s senior vice president of corporate sales. “Traditional hospitality is still doing well, but we’re enhancing it and adding value.”

Farrell said that there’s still some demand for large chalets. Charlotte sold three chalets for its May races last year to Coca-Cola, Time Warner Cable and United Rentals, which all hosted parties for more than 1,000 people. But Coca-Cola is the only one of those that has been in the sport for multiple years. Everyone else is new, and long-standing sponsors in the sport like DuPont and Lowe’s increasingly look for other ways to entertain.

“For the right customer, they’re doing a big tent,” Farrell said. “But every company is looking for something new that they haven’t experienced.”

Staff writer Michael Smith contributed to this report.

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