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Old 01-04-10, 11:24 PM   #1
57rebike
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The Economics of Professional Racing Tours

Does anyone have any idea what the sources and uses of funds are for a professional tour? Tour of Georgia just chose to sit out for a second year. Some internet threads show Missouri on the bubble and California growing.

Georgia was a cause tour, with sponsor money going to a charity. Amgen sponsors CA and some of the CA tour money goes to cancer research. I don't know what the story is with MO.

It would seem that GA should have held back some money to carry through without a sponsor, but I don't know the scale of things.

More specifically, where does most of the money come from and where does most of it go in running a tour. Anyone out there with some insight? I don't know WHY the tours cannot sustain themselves.

By comparison, non-racing rides seem to work reasonably well with RAGBRAI leading the way. I'm guessing that is net positive for the Register. Totally different events to be sure. Racing Tours must have huge fixed costs or near zero revenue stream. . .
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Old 01-05-10, 12:08 PM   #2
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They are mostly promotional events. The state governments spend their tourism $ to showcase the state, which is why they are hurting right now.
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Old 01-05-10, 06:14 PM   #3
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Here is a good article from the Atlanta Journal Constitution:
http://www.ajc.com/news/can-tour-de-georgia-265759.html

"... said Tom Saddlemire, "the race needs to attract a “core sponsor” willing to pony up $500,000 to $1 million. That, he said, would almost certainly attract a long line of secondary sponsors who would contribute about $150,000 each. It costs about $3.5 million to put on the six-day, 600-mile race."

" the race... is estimated to pump $30 million-plus annually into the state economy"

I hope the US tours can re emerge after the downturn. I really thought American Road Racing had turned a corner (smile) in the last few years and was ready to emerge with a new strength and the international credibility it deserves.
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Old 01-05-10, 07:19 PM   #4
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Here is a good article from the Atlanta Journal Constitution:
http://www.ajc.com/news/can-tour-de-georgia-265759.html

"... said Tom Saddlemire, "the race needs to attract a “core sponsor” willing to pony up $500,000 to $1 million. That, he said, would almost certainly attract a long line of secondary sponsors who would contribute about $150,000 each. It costs about $3.5 million to put on the six-day, 600-mile race."

" the race... is estimated to pump $30 million-plus annually into the state economy"

I hope the US tours can re emerge after the downturn. I really thought American Road Racing had turned a corner (smile) in the last few years and was ready to emerge with a new strength and the international credibility it deserves.
If those numbers are true, the State should foot the bill for the race and recover the money through sales and salary taxes. It would be free advertising for the State and they would even turn a profit on their investment. Something tells me those numbers (30 million) are a bit high.
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Old 01-05-10, 09:11 PM   #5
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If those numbers are true, the State should foot the bill for the race and recover the money through sales and salary taxes. It would be free advertising for the State and they would even turn a profit on their investment. Something tells me those numbers (30 million) are a bit high.
While that suggestion makes perfect sense (taking for the sake of argument that the 30 million number is somewhere near correct), politics doesn't. In an era where money is tight, government's are being forced to cut back, or try to raise taxes, or both; it'd be political suicide for the governor of (say) Georgia to announce that the state is going to finance the tour.

While I don't know which party currently controls the state government, I can guarantee you that in making the announcement, the governor has just given the opposition party a wonderful stick to beat him with next election. "Gee Mabel, we're getting our taxes raised, the roads have potholes, the library is losing funding, and that idiot governor wants to fund a bicycle race."

I can already see the attack ads. Footage of a sprint finish with a multi bike pileup in the last 500 meters. "And this is what the governor spent your tax dollars on."

Even if there is a real profit in such an event, the voter never notices. All he will see is the government spending. More pork.
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Old 01-06-10, 07:09 AM   #6
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Thanks! The Atlanta Constitution article was great. Some of the other research I did showed that the TdG was run by a not for profit foundation not dedicated to bike racing, but to raising funds for a cause. I also read that the Foundation paid out to the cause in 2007, perhaps 2008. That would seem odd if it is true in that they did not, it would appear ("pocket change in the account right now") manage to maintain sufficient reserves for ongoing operations.

Some of the remarks re politics are interesting as well. Even if it were a not positive for the State of Georgia, political haymakers would likely spin it as pork. In a rational world, the net would carry the day, but the world of politics is not rational.

The article also suggests the TdG is a $3.5M endeavor. Does anyone know where all that money goes? Surely not much goes into purse?
Is all of the revenue from sponsors? Are there meaningful entry fees? (Likely not as I puzzle this through, a few hundred riders at $1000/rider would total just a few hundred thousand dollars, and I don't know that pro bicycle racers/teams pony up any money at all)

Is the CA race an economic success? Why?
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Old 01-06-10, 09:53 AM   #7
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I'm always a bit sceptical when someone says "It will pump x million dollars into the economy!" when they are trying to get taxpayer dollars to help fund his/her for-profit project. You do the arithmetic and wonder if every single person attending the event is going to eat and drink to excess, get a new hairdo, buy two changes of clothes, buy his tickets from a scalper, party hardy after the game, park illegally and get his car towed, review the state of modern dance technique at a gentleman's club, buy an ounce of dope, get arrested and post bail; because that is what is going to have to happen for that x million dollar figure to pump it up.
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Old 01-06-10, 03:10 PM   #8
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People are impulse consumers. Stores run sales to get people in the door so they buy other stuff. Why can't a city or state do the same thing. It is automatically assumed that government are wasteful and stores are efficient even though they are doing the exact same thing.
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Old 01-07-10, 07:06 AM   #9
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I agree that the spend studies are suspect. I'll look at a few of the claims out there and see what happens when the claim is divided by the number of riders. I'm guessing if the number works out to several hundred dollars it is likely true. If several thousand, it might stretch things. I don't know what the volunteer spend is, and I have no idea how likely it is for a rider to return later for a vacation or something after seeing an area.

Something else I don't know. . .what is the entourage factor? In a professional race, how many support people come to the race to support each rider on the team, or each individual? I suppose the star factor is a factor as well. If Lance shows up, is his entourage 10 or 20 people? His fan base has to be huge, and that drives spectator spend. If a spectator goes to a free race, they still spend for a day or two travel and living if out of town.

Most of that spend is taxable, often at a higher tax rate as some "destinations" impose higher sales and other taxes targeted for travelers.

I live near Greenville, SC and last year's races drew a huge crowd. I don't know what fraction was local, but downtown was packed. It was great. Last summer's Bike Week in Milwaukee drew lots of spectators as well. No idea how many were local and how many were from out of town, but there were plenty of busy street vendors.

Still wondering how TdG spends $3.5M.
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Old 01-07-10, 07:34 PM   #10
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The Tour of Georgia's last title sponsor was GE, but with them laying off 15K in the last year, me being one, I think some shareholder's, me being one, would have been highly ticked that they would have continued this sponsorship until they returned to profitability. I believe they sidelined close to 6K of those 15K in Atlanta alone, so it might not played well.
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Old 01-09-10, 03:45 PM   #11
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The Tour of Missouri is also in trouble this year - the state has pulled its funding...hopefully someone will step up (in both cases)!
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Old 01-09-10, 11:21 PM   #12
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Here's a great article about the logistics of setting up a major stage race in the US, with info that applies to all the Grand Tours and other European stage races. http://www.pezcyclingnews.com/?pg=fu...=Latest%20News
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Old 01-10-10, 10:01 PM   #13
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Thank you RB! That was a great article. I still don't have the economics, but you have helped me understand the complexity involved. It would seem the whole of the revenue stream is balanced on sponsorships and convincing sponsors that there will be some sort of return on their investment. I'm still looking for where all the money goes, but you moved things quite a bit. Thanks again!
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Old 01-10-10, 11:32 PM   #14
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People are impulse consumers. Stores run sales to get people in the door so they buy other stuff. Why can't a city or state do the same thing. It is automatically assumed that government are wasteful and stores are efficient even though they are doing the exact same thing.
My guess is you either haven't worked for the government or still do. In the military I wasn't allowed to buy an ISA* video card (same part #; exactly the same card) for $4 from an NOS dealer I found to fix a piece of equipment. I was forced instead to wait 2.5 years and spend $687k (no exaggeration) on one from the manufacturer. I have other examples of how the government throws away money too if needed. Diodes that cost 4$ at rat shack cost us 350$ to order and were nothing different. The state had people guarding the fountain at work (I work near the state controller) because it was cold and they were worried about people slipping. I suggested they just reduce the flow so it didn't splash on the walk way but they thought hiring 2 extra hands was a better solution. If the government ran a bicycle race I have no doubts the overhead would kill any chance at profit, even an inflated number like $30 million.

For you non-80s computer types ISA is a bus type common to motherboards until the late 90s. The video cards can still be had new and cost only a few bucks. http://en.wikipedia.org/wiki/Industr...d_Architecture

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