Breakdown of Formula One, a fascinating business

Patrick O’Shaughnessy released a wonderful podcast episode on Formula One as a business. If you are not familiar with the sport, Formula One is the pinnacle of motorsports. It features more than 20 races in a calendar year around the world with 10 teams, some of which are iconic brands such as Ferrari, Mercedes, Aston Martin, McClaren or Renault, and, arguably, 20 best drivers that we have to offer. Teams compete for driver and constructor championships. The higher a constructor finishes in the standing at the end of the season, the more money it receives. The more successful a driver is, the higher salary he can demand. The likes of Alonso, Vettel, Verstappen and Hamilton earn between 10 – 40 million dollars a year. These cars can easily hit 180mph on the straights and take corners at a speed that normal cars have on a highway. This is a sport that uniquely combines entertainment, legacy, world-class engineering, science, data analysis, drama and strategy.

I have been a fan of Formula One half of my life. While I am pretty familiar with the sport, I still get to learn about the business from this podcast episode. If you want to know about the sport itself or if you are looking to learn about the business, have a listen. It’s definitely worth the time. Here are some of my notes:

Even though Formula One has a big global fanbase, it is still somewhat under-monetized, compared to other sports

There are 400 million or so unique fans globally. And just to give you a comparison point there, the NFL might have more like a hundred million. And even the Premier League is probably closer to 300 million. And the Premier League is truly a global sport in some ways, even though the avid fans are more regional and local. And so there’s just a huge fan base here. And the fans are really, almost all of them, tend to be avid because it’s such a technical sport. Now the Drive to Survive series on Netflix has changed that a little bit with a little bit more of the casual fan coming in, which is why there’s probably an opportunity to grow that 400 million number even further. But it is one of the largest, if not the largest league in the world by the fan base, depending on what metric you use.

Just to step back and stay at the macro level, for a second, we talked about $2 billion of revenue, more or less, and 400 million fans. So if you want to think about it, that’s about $5 of monetization per unique fan. In the NFL, we talked about 16 billion with about a hundred million fans. So that’s over $150 per unique fan. The premier league does 6 billion in revenues with 300 million, that’s $20 per unique fan. So without getting into the specifics for a second, if you just step back and say, what’s the opportunity to monetize, it’s there. It’s just, it’s there. Right? So now the question is, how do you go execute that?

Breakdown of revenue: 33% from promoter fees, 33% from broadcast, 15% from sponsorship & advertising and the rest from paddock club

Absolutely. There are three main primary drivers of revenue. The first is race or promoter fees. Those are essentially the fees that a local partner pays Formula One to host a race. Formula One isn’t actually putting on the race itself. It charges a fee to a local partner, who then hosts the race, sets up the race track, sets up all the entertainment around the race. And that’s just under a third of revenues today.

The second bucket is broadcast revenues, obviously just transmission of the broadcast, rights at the sport, across the world to different broadcast partners. That’s just a touch over a third of revenues. And then finally there’s sponsorship and advertising today. That’s about 15% of revenues. Though, I would say that’s probably where there’s the most opportunity for growth versus the other two.

There’s a final bucket, let’s call it, which is, other. That’s about 15% of revenues as well. The primary driver there is paddock club revenues. So paddock club is essentially the VIP section at a race and the league, Formula One has the right to sell tickets to that and to host the VIP section in a handful of races. And so that’s kind of the biggest driver. There are other drivers. Formula One’s involved with Formula Two and Formula Three racing, kind of the minor leagues, if you will, and generate some revenue from there. There is some revenue tied to transporting the team’s cars around. There’s a fleet of 747s that basically help this circus go from one spot to the other around the world. But those are all lower margins if you will than the primary three. So even though it might be 15% in that final bucket of revenue, it’s a smaller portion of profits. And so I would really think of the big three that we just talked about as the primary drivers of the business.

Promoters can pay more than $30 million for a race, but those who pay the highest fees tend to generate the most revenue and profits. Vietnam GP was cancelled twice because of Covid. I wonder how much we paid the sport to host the race

If you want to think about the way that revenue works, is, as you said, the promoter will usually agree to pay a fee to Formula One. That fee can be anywhere from near zero, which is what a Monaco is given the historic importance and historic relationship that city, it’s not even a race track, has had with the sport. Typically, you’ll have a group of what they call core races in Western Europe that might pay more like a 10 to 20 million fee depending on the race. And again, these are individually negotiated. They are not publicized, so they’re not readily available. Nobody likes to talk about them. And then finally, you have flyaway races. These are races and kind of the emerging world where usually the promoter or the government has an interest in trying to use the F1 name to bring tourism or to bring some of that VIP pizazz, if you will, to the local market where you’ll see 30 million-plus race fees.

And there’s been a big debate about whether or not fees that are paid are sustainable. In other words, do the promoters get to generate a return on that. It’s very expensive to put on a race like this. The FIA requirements for a Formula One race track are very high. You can imagine if you have a car going at the speeds these things are going at, potholes are not okay. And so things just have to be exacting standards. That said, I think there is good evidence that it’s funny, the relationship to the profitability of a race versus the fee to a race is not direct. So some of the more profitable races also happened to be the highest fee races. It’s really increasingly become evident that it’s how well someone does at monetizing the race itself. How good a job do you do, creating demand for the sport? How much of a show do you put on? Do you have concerts? Tier one musical acts? Do you bring in different famous people to kind of try to draw more attention to it? Do you start tiering your offering so that there’s something even beyond the paddock club, VIP club that you can charge even more for? And the best promoters are very good at doing that and can pay high fees and yet also generate a profit. And some of the promoters have a harder time doing it.

Formula One has a few costs it bears, mainly around creating the broadcast, which then it resells to its broadcast sponsors. But in terms of actually putting on the race, all of the costs associated with that are with the promoter. And then the primary revenue is ticketing. As you said, sometimes it doesn’t include VIP because the squeak has kept it, in some agreements, it does. And then like you said, Austin does a very good job. For example, they’ll have a, usually a headline musical act associated with it. If you buy a higher-tier ticket, you can get access to that act. And so they can create some monetization that way.

Formula One from the perspective of an OEM

…There are two OEMs and an FMCG consumer business, they really view this in a holistic way with their core businesses, in terms of brand building and advertising. Mercedes has come out and said, they think there’s $1 billion of advertising equivalent value to being a part of Formula One. Ferrari talks about it in their public filings, about how Formula One is a key competitive advantage for the brand and strategic folks for the brand. For Ferrari, I mean their primary marketing budget is F1. That’s how they market the business. If you go to a race, they have their own club. All the Ferrari owners in the local market come to those races and are hosted there. It’s a huge part of that brand, its history, and its success.

And Mercedes similarly, and Red Bull, a little bit different, not so much an OEM, but essentially that whole idea of an extreme sport and 200 miles per hour plus cars are pulling multiple Gs, it certainly fits that bucket. McLaren is a little bit different. McLaren is essentially a racing team. They’ve now created an OEM out of that. McLaren started as a racing team and that was kind of their singular focus, and they and Renault, which obviously is another OEM, certainly see value in terms of the brand. Now they’re both OEMs where the racing team, in McLaren’s case, was the primary driver. And in Renault’s case, they, like Ferrari and like Mercedes, see value for the brand in being part of the sport. And they’ve been able to spend more as a result and kind of, not quite as much as the largest teams historically, but enough to be competitive year in and year out.

My thoughts

Formula One is in a unique position because there is nothing else like it in the world and Liberty Media has a complete monopoly over the commercial side. Yes, there are many sports that, like Formula One, love to attract eyeballs and money from viewers, but it is not a zero sum game in this case. People can pay and spend time to watch Premier League and Formula One at the same time. In some situations, you pay for a TV subscription and can watch multiple sports, including Formula One. Even with that unique advantage, the monetization of the sport, in comparison with that of others, shows that there is a lot of value to unlock. There are countries where Formula One presence and popularity leave much to be desired. Take America, for example. It’s arguably the biggest media market in the world. Haas team is owned by an American and the country is going to host two races soon. Yet, not a lot of people in this country understand Formula One, let alone coughing up some money to watch it.

The question now is how Liberty Media can make the sport more understandable and accessible. On the surface, Formula One looks to be simple and even boring. 20 cars complete the same track layout multiple times in 2 hours to determine the standing. Mercedes has won the last 7 driver and constructor championships in a row. What else is there to watch for, right? But the beauty of the sport lies in the intricacy and complexity that are not often understood. How does a shift of a couple of degrees on the track surface change the competitiveness of the cars drastically? Why does a team opt for a two-stop strategy while its rival goes for one stop only? Why are some cars fast on soft tires and others on harder tires? How can drivers find more lap time?

Unfortunately, these details are often glossed over and not explained well on TV to average viewers, myself included. If viewers don’t fully grasp the beautiful complexity of the sport, they won’t fully get the appeal of Formula One. When they don’t get the appeal of Formula One, that effect will cascade down into the commercial side, particularly the promoters, broadcasters & teams. But if Liberty Media can bring the sport closer to viewers, fans will engage and pay more. Then, promoters are more willing to pay to host races as there is always a limit on how many races can take place every year. Broadcasters will also put up more money to earn the rights to broadcast races. This influx of money will directly benefit teams which, in turn, will be more committed to making the spectacle more spectacular.

On this note, I have been very pleased with what Chase and Liberty Media have done so far. The series Drive To Survive on Netflix has been a hit and a great user acquisition tool. There has been a lot of interest on Twitter in Formula One out of the series. According to Sportpromedia, “a recent study published by Nielsen even cited the docuseries as a key reason for the sport’s increasing popularity among those aged between 16 and 35, who accounted for 77 per cent of Formula One’s audience growth in 2020.” It really is a nice place to start if you want to learn about Formula One.

In addition, Liberty Media has created some great content on YouTube that helps average viewers understand more the technicality embedded in the sport. Take this one as an example. This is how drivers and their engineers can use data to identify where on a track they lose time and what correction actions they can take. It’s hard enough to correct how you approach a corner with a normal vehicle. These guys have to do it at an insane speed. Or this video which helps explain in layman’s terms some of the common phrases used in Formula One such as oversteer, understeer, apex…Understanding these terms will enable viewers to get why some teams and drivers struggle with their pace than others.

In short, I am really glad that the sport I love is getting more recognition and interest that I think it deserves. Liberty Media has done a great job so far with the marketing and some important behind-the-scenes issues such as Concorde Agreement that can ensure the sustainability of Formula One. I really look forward to two things: a Grand Prix in my homeland and discussing Formula One with more people here in the U.S.

Drive To Survive Season 2 is a surprisingly good series

I am an F1 fanatic. I have been following the sport for more than 10 years. I also wrote about it multiple times on this blog. Personally, Formula 1 appeals to me with its unpredictability and its “nerdiness”. A lot of elements go into a race weekend, including top class engineering, data analytics that powers strategy and a split-second decision to deal with the changing elements in a race. Despite having races in 21 countries in the world, I feel that somehow it’s still a foreign sport to many. Not a whole lot of folks that I know follow the sport. Those who do developed a strong love for it like I do.

That’s why I was pretty excited about Drive To Survive Series – Season 2 by Netflix. To be honest, I didn’t watch the first season because my favorite team, Ferrari, and its rival- Mercedes, weren’t featured. The 2nd season showed that the streamer was given an unprecedented access to the paddock and teams. Cameramen followed drivers and team principals to their personal homes. Behind the scene footage where access was normally restricted was available. Folks who were interviewed gave answers that would have made significant headlines had they been published at the time. Watching it made me miss F1 even more than I do now. Like all other sports, F1 has been put on hold because of COVID-19

I do think that the series will bolster the popularity of F1 globally. I have seen positive reviews on Twitter regarding the 2nd season. If you run out of favorite shows to watch, I highly recommend it.

Do host countries really benefit from F1 races?

Vietnam is going to hose our first ever F1 race in April 2020. It will be a historic moment for my home country since as far as I can remember, we never have an international sporting event. As an F1 fanatic, I am excited about my fellow Vietnamese getting to know the sport I love. However, do host countries usually benefit from hosting an F1 event? Let’s take a look at a few cases

The bull case

In 2017, Singapore Tourism Board announced its plan to retain the race through 2021. STB outlined its rational below:

The announcement comes against the background of a year-to-date 19% increase in ticket sales, with the weekend sales still to be included. In its first decade, the race has yielded significant economic benefits, attracting over 450,000 international visitors to Singapore and about S$1.4 billion in tourism receipts[1]. With more than 90% of the race organisation sub-contracted annually to Singapore-based companies, the race also contributes to the local economy, over and above the tourism outcomes. This event has also showcased Singapore as a beautiful, vibrant and attractive destination to over 780 million international broadcast viewers.

Source: Singapore Tourism Board

If you watch F1 often enough like I do, drivers love to come to Singapore and it’s one of the most anticipated races on the calendar. In 2018, the race attracted the second biggest crowd, only behind the inaugural race in 2008. Hence, it is safe to say that Singapore benefits from having an F1 race.

Bahrain became the first country in the Middle East to host an F1 race in 2004. Since then, it has become one of the favorite tracks of drivers and fans. According to an E&Y audit report in 2015, the race generated a net gain of $95 million for the country and added multiple jobs directly. It was also reported that the race ignited some aspects of the country’s economy. As a result, Bahrain is a beneficiary of F1’s draw.

I didn’t know much about Azerbaijan or its capital Baku until 2016 when it first joined the F1 calendar. Since then, Baku has been responsible for some of the most exciting races. In 2018, a PwC report claimed that “more than $270 million has been added to the local economy as a result of the race, $164 million of which is “direct spend” or money spent by visitors and participants”. the 2018 race attracted 94,000 attendees and was watched by millions of viewers around the world.

The bear case

  • Indian GP ran only for three years and was discontinued after 2013 due to the lack of attendance
  • Korean GP was cancelled after three years as well after failing to generate interest and money
  • Malaysian GP was stopped after almost 20 years of hosting a race since the “numbers don’t add up any more”

It is telling that two new Asian races were discontinued after 3 years due to financial infeasibility. Whether Vietnam will follow the footsteps of Singapore or become another example of the bear case category above remains to be seen. A lot will depend on the execution and whether the races will be good. For the sake of my country, I hope that we will strive to emulate the success that Singapore has had.

Future looks bleak for Sebastian Vettel

Sebastian Vettel is a 4-time Formula 1 champion. He is the first ballot hall of fame in the future with his trophy cabinet and the record of the youngest pole sitter ever. He has been the lead driver in Ferrari since 2015, and up to, possibly, today. In the Italian Grand Prix today, Vettel started fourth behind the Mercedes drivers and his much younger and less experienced teammate Charles Leclerc. Instead of fighting in the top, he spun, came back to the track dangerously, hit Lance Stroll and received a 10-second stop and go penalty, the most severe punishment behind only disqualification. His race was over at the point. Luckily for Ferrari and all the Tifosis, Charles Leclerc withstood the assaults from the Silver Arrows to win the race, first for Ferrari since 2010. As a result, Leclerc has now beaten Vettel in qualifying 7 races in a row, leapfrogged the German in the driver standing and been responsible for Ferrari’s two wins this season. The changing of the guards seems completed.

What went wrong for the 4-time champion? Every problem and mistake he has made for the past months looks to stem from his disastrous race in Germany last year. He was cruising to the win, but crashed out of the race on his own. Since then, he hasn’t been himself. Mistake after mistake and after each one, the pressure kept piling on. There is an argument that Vettel can’t cope with hungrier and younger teammates. At Red Bull, he was thoroughly beaten y Ricciardo. Now, Charles Leclerc has gotten the better of him. The pressure to win at Ferrari is incredible. His failure to win a world title with the Reds isn’t completely his fault. The team failed to give him a competitive car all year long. But his mistakes recently have been nobody’s but his and his alone.

Ferrari repeatedly said he would still race for the Red team next year and I am confident that is the case. Nonetheless, what if next year will be even worse since Leclerc will likely be more settled at Ferrari. He won’t secure a drive at Mercedes. Nor will he at Red Bull now that Max is the team leader and Red Bull is known for promoting drivers internally. Where would he go? Rumors of retirement have been circulating around the paddock and I would hate to see him retire at 33. He has still much to offer. But I think Ferrari should take him off the grid for the remainder of 2019 and install a young driver next to Charles. Doing so will give Vettel time to collect himself and get ready for next year as well as test a potential option in case the German walks after 2020. If a break can’t get him back to his formidable old self, I doubt leaving him on track for the rest of the season will do him any better.

Nonetheless, I wish for his sake and the team’s (I have been a Ferrari fan since 2005 and the last 10 years has been rough) that Vettel would find his way back to the top of the echelon of F1 soon.

If you are intellectually curious, these facts about Formula 1 will intrigue you

I am a Formula 1 fanatic. The sport is unpredictable, exciting and intellectually intriguing. Everything about the drivers and the cars is about maximizing every last drop of performance and gaining even one hundredth or one tenth of a second. The level of attention to details and state-of-the-art technologies that go to every aspect of the sport is astonishing. Here are a few clips that I found very helpful in understanding the sport. Even if you are not interested in the racing, I think it’s interesting when you are just curious about how stuff works

Car setup

A car setup is instrumental to the performance of the car. It’s more of an art and trial-error than science and there are a lot that go into the setup such as the nature of the tracks, driver preference, strengths & weaknesses of the cars, weather, tyre…The video below explains how one millimeter can mean the world in a car setup!

Braking System

Brakes are crucial in racing, even in commuter cars. As F1 cars travel at such a high speed and brake multiple times in one lap, brakes can get hot and fail, causing drivers to crash and fall out of races. The video below from Mercedes explains how brakes work and how setting up brake systems in certain races can be an engineering nightmare. For instance, Monaco Grand Prix is a twisty street track where speed is low and brakes are applied almost constantly. After every corner, brakes get increasingly hot. Cooling down brakes is a challenge as they are usually cooled when drivers accelerate in straights; which is, as mentioned, not what happens in Monaco.

In Baku Grand Prix, the challenge is different. Half of the track is made of long straights and the other half is a street circuit. At the end of long straights, brakes are cold and drivers run the risk of not having the best performance from brakes for the twisty part. Then, during the twisty part, there is not enough cooling for the brakes.

Logistics

A F1 calendar consists of around 21 races a year, spanning across the globe over a period of 9 months. Teams have to manage car parts, communication equipment, hospitality settings, fuel, kitchen, etc… Managing the logistics of a race, especially back-to-back races in different countries miles away from each other is a daunting challenge. This video explains very well this aspect of Formula 1

Steering wheel

Do you think you can remember how all the buttons work and make them work while driving at 180mph?

British GP – Some of The Best of F1

I have a love-hate relationship with F1. Normally, I am a crazy fan of the sport that is unpredictable, exciting, glamorous and sophisticated. To win a race, let alone a long season, a team/driver needs a perfect weekend, starting from preparation, practice to qualifying and the real race. Factors that play a significant role in a race include tires, strategy, luck, weather, drivers, pit crews and circuits. Nonetheless, F1 tends to be dominated by one or two teams before regulation changes. In the past, it was Ferrari with Schumacher, followed by McClaren, Red Bull and Mercedes. Some races are incredibly boring as there is no overtaking (I am talking about you street circuits and Australian GP)

The very last Grand Prix in UK featured some of the best F1 has to offer. The fastest pit stop ever is 1.91 seconds. In that insanely short amount of time, the pit crew lifted the car up, removed the old wheels, fitted in the new ones, lowered the car down, signaled to the driver and got out of the way. The muscle memory and the collaboration are unreal. Pit crew work can play a tremendous factor in a team’s success as you will see later on, but first enjoy the world’s record pit stop

The next highlight is the battle between two great young stars Charles LeClerc and Max Verstappen. Both of them are 21 years old or younger. The battle was enthralling and showed the talent two young men possessed. It’s incredible they fought at 180mph with the masterful control and techniques

Weekly Readings – 16th March 2019

How the epic ‘Lord of the Rings’ deal explains Amazon’s slow-burning media strategy. Interesting insights into angles Amazon may be pursuing in their media strategy. I am curious to know the activities to which Amazon prefers users watching videos.

How Equifax neglected cybersecurity and suffered a devastating data breach. I encourage you to read or at least skim it. The data breach affected more than 140 million accounts. So, there is a high chance that you are one of the affected. As one of the three main Consumer Reporting Agencies, Equifax is important in our lives, yet it displayed a shocking lack of care about our sensitive data. According to the report, Equifax didn’t have proper documentation or policy in place. It had 8,000 vulnerabilities that were past the due dates for patching. It didn’t even track the expiration date of SSL certificates, something that is definitely not rocket-science. Upton notice of an Apache vulnerability, Equifax failed to respond in a timely manner. The other two CRAs did and as a result, avoided a similar fate.

Writing is thinking. I don’t think I need to elaborate more on this. I love writing and it’s one of the reasons why I have this blog.

The Clear Case for Capitalism. I am a fan of true capitalism. With emphasis on the word “true”. There I said it. The article lays out the benefits that we can gain and have gained from capitalism. I urge you to read the article before listening to politicians or anyone talk about capitalism.

Lyft IPO: Cautiously Optimistic Unit Economics Despite Significant Losses. I have a pessimistic view on the outlook of Lyft after reading their S-1. However, this is an interesting and positive take on the ride-sharing company’s unit economics.

Where Warren’s Wrong. A 4,900-word masterpiece by Ben on Senator Warren’s proposal to break up big techs.

Microsoft, Facebook, trust and privacy. I find it great for us to have folks like Ben Evans, who has a lot of years of experience in tech and business. His experience, reflection, connecting the past and the present, the writing and multi-dimensional view are always helpful and informative. I agree with him that even though the new change in vision may render it irrelevant the strategic issues Facebook is facing, the new vision asks as many questions as it answers.

Formula 1: The secret aerodynamicist reveals design concepts. Formula 1 isn’t a popular sport in America even though the country features one of the best tracks in the world and has one world champion back in 1980. Formula 1, as people usually say, is the pinnacle of motorsports. It has arguably the fastest cars, at least in corners, and the most advanced technologies. The post will reveal great information on the aerodynamics of the cars.

Don’t Read This If You’re Bullish About Lyft. The title is quite self-explanatory.

Fernando Alonso

The final race of the 2018 Formula 1 season will be this Sunday at Abu Dhabi. It’s also the final race, possibly ever, of one of the greatest drivers who ever drove a Formula 1 car: Fernando Alonso. Tributes of the man by news outlets have already begun. Though there are still a few days away, I already have goosebumps and feel a bit sad. 

Alonso is a two-time world champion from Spain. Even though his race wins or pole laps never fully reflect the talent of the man, he is well-regarded on the paddock and more than 10 years of watching the sport, I have never heard or read even once that his talent is ever doubted. All I have read is one of the greatest drivers in the history whose career is littered with driving the wheels off his cars, taking a car’s capacity beyond its limits, ill-informed decisions and utterly bad luck. 

I was super elated when he decided to drive for Ferrari, my favorite team. He won in the first ever race with the team! The first 3 years, especially 2010 and 2012, were remarkable and bittersweet. He and the team lost two championships on the final race twice and through bad luck despite having an uncompetitive car. Per BBC in their 5-part story on the man

In the fourth-fastest car, Alonso led the championship for much of the season, taking three outstanding victories along the way in Malaysia, Valencia and Germany. He was overtaken by Vettel in a burst of four consecutive wins by the German in a run of races in Asia in the closing stages of the season. But Alonso lost the title only because of two instances of bad luck.


He was taken out at the start of both the Belgian and Japanese Grands Prix: in Spa by Romain Grosjean’s flying Lotus after the Frenchman tangled with Lewis Hamilton’s McLaren; at Suzuka when the front wing of Kimi Raikkonen’s Lotus punctured his left rear tyre.


Had only one of those incidents not happened, Alonso would have been champion.

The two championships lost in 2010 and 2012 sadden me to this day. I cannot re-watch the final races of those two years again ever. It’s just too difficult to take. 

Though in the middle of two Capstones, I cannot wait to watch, for one last time, one of the greats. Hopefully his McClaren will give him and all the fans, myself included, two hours of Fernando Alonso. 

This is his favorite race win and mine. A spectacular win from 11th position

Vietnam GP in 2020

Well, it’s finally and officially here! Formula 1 Vietnam Grand Prix is officially the latest addition to the calendar in 2020. As a long-time F1 fanatic, I am thrilled by this news. Our country will have an international sport event that will attract tourists and increase our country’s brand awareness. It’s not surprising to me any more that many people don’t know much about Vietnam. Hopefully, this event and all the publicity that comes with it will help make Vietnam more known on the world stage.

Formula 1 put together a cool video that shows the streets in Hanoi, where the race will take place. Check it out:

This is the track circuit. I am not a fan of street circuits, except Baku with its magical long straight and turn 1. I hope this track will be just as exciting

 

Initiatives in the Tourism Industry in Vietnam

First of all, if you are looking for a website to learn more about Vietnam and particularly Saigon, I highly recommend this website – Saigoneer. Its section on street food is a great start. It’s in English and has lots of details.

There are a few upcoming initiatives announced recently in the industry:

  • There will be bi-weekly direct flights form Zurich to Saigon
  • Vietnam Airlines will soon operate direct flights from Danang to Japan
  • Vietnam Airlines is exploring the possibility of direct flights from Vietnam to America
  • Vietnam Tourism Association will soon carry out exams to classify tour guides in the country. Tour guides will be given 3 to 5 stars based on the results of the exams which will be free of charge and voluntary. Also, freelance tour guides are now mandated to be under contracts with authorized tour companies in order to do business
  • BBC Sport reported that a 2020 race in Hanoi, Vietnam was now secured barring an official announcement

Three points here. First, the tourism industry brought in $13 billion in the first half of 2018, an increase of 22% compared to last year. It is huge for a country like Vietnam. We have a lot to offer. A long coast throughout the country. An authentic and exotic cuisine. We have beaches, mountains and Mekong Delta, everything that a tourist can hope to experience. But our tourism has been plagued by the lack of standards in services leading to the poor return rate of guests. Our country is pretty much a myth that is worth exploring once and no more. In business, it costs 6 times more to acquire a new customer than to retain one. This is the same case. Even though the tour guide exam’s effectiveness remains to be seen (we Vietnamese are not known for world class execution), it is a small step towards the right direction. If we want to compete and have more guests return, maintaining high service standards is instrumental.

Secondly, having more direct flights is huge. Thailand and Singapore have two airport hubs in the region and look what the airports have done to their tourism. Direct flights will reduce the hesitation from guests when they have to make a decision on where to visit. Vietnam’s two biggest airports sorely need major upgrade. It’s a pity that some bureaucracy red tape has prevented the expansion of the airport in Ho Chi Minh City. We have the land to do so and the airport is ridiculously right next to the city center. I have been to quite some airports and I haven’t seen one that close to a city center. Nonetheless, having more direct flights will increase our appeal as a destination.

Lastly, I have been hoping for annual international event in Vietnam for years. Singapore’s F1 Grand Prix has been a remarkable success since its debut in 2008. Otherwise, Singapore wouldn’t keep hosting it. A race is usually a combination of music concerts, press conference, other activities and of course the racing itself. With the reach of Formula 1, Vietnam’s brand awareness which has been under-marketed due to lackluster branding and marketing efforts will hopefully be boosted.