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The 3.2 Million Dollar Question
6/15/06
My phone rang the other day and on the other end of the line was one of those folks who occasionally call just to keep me up to speed on the latest from the hallowed halls of the National Hot Rod Association. This particular person, who has to remain nameless for obvious reasons, was the same one that had let me know months before about the NHRA’s big announcement that there would be new luxury boxes built at three of the tracks the NHRA owns. So, when this person calls, I pay attention. We talked about a lot of things, but the main subject was the luxury boxes at Pomona, where construction material is just beginning to be delivered.
This person told me that the projected cost to build the eight luxury boxes is now about $3.2 million! (Which amazingly is just about the dollar amount NHRA had left in the bank at the end of the 2004 season, according to their 2004 federal tax returns.) My source went on to say that each new box will have 40 seats and will rent for $40,000 per year. At least that is what one Los Angeles businessman/racer has said he was charged for his suite.
I made it clear when I first learned that the NHRA management team had decided on the luxury box project that I believed doing so was a poor business decision and that NHRA could have spent that money in many other ways that possibly could be much more beneficial to NHRA drag racing and its racers. So, when I got the news of the reported cost of the luxury suites, it got me to thinking about this project again, and (of course) I have some questions and observations.
First, I need to understand how installing these suites is anything but a tax write-off for the NHRA. If the average cost of renting one of the eight suites at the fabled Pomona track is $40,000 a year then the rent revenue for all eight is $320,000 per year, which means that even with rate increases it will take around 10 years or so to retire that debt.
I’m still trying to understand how new luxury boxes will really benefit NHRA drag racing, the professional and sportsman racers, or the members.
The boxes can’t possible turn any kind of profit for 8-10 years unless a major sponsor were to sign with the NHRA or a racer based upon the availability of luxury boxes. I’ve never seen a luxury box for Miller Brewing, McDonalds, Brut, Ameriquest, Oakley or UPS so far.
I think Tom Compton has done a great job of cutting costs and making the NHRA profitable. He has reduced travel, manpower, expenses, and salaries -- all of which dramatically increased the company’s cash surplus in 2004 to about $3.5 million at the end of the year. According to Compton himself, they did much better in 2005.
So, just for the sake of argument, let's assume that the amount I was told would be required to build the project at Pomona is correct, and we’ll also assume the cost to install boxes at Gainesville will be close to the same, so the amount they are going to end up spending for the luxury boxes amounts to around $6,000,000. The question I have to ask (and I hope those of you trying to get use the NHRA as a marketing tool have to ask) is, couldn’t that money have been allocated for projects that could do much more to make NHRA drag racing more attractive to its racers, fans, sponsors and potential corporate sponsors?
Here are just a few suggestions of how I think the money that is evidently going to be spent for luxury boxes -- and an additional 320 people per event -- could have been spent better.
1. NHRA could have bought 12 full-page black and white ads in the USA Today newspaper for just $1.2 Million. That would be 12 full pages where they could have promoted their specific races, racers, and the sport in general where Corporate America would be sure to see it. They could have bought a 2/3 page ad for all 23 national events for just $1.84 million.
2. I’m not sure of the exact cost, but you have to believe that for around a million bucks they could paved or black-topped at least the professional pits at the U.S. Nationals so that when racers might want to bring a corporate executive to the pit area at drag racing's biggest race those folks wouldn’t have to walk on rocks, gravel, mud, or wooden planks to get close to the cars.
3. Buy time on CBS or ABC during the Indy 500 or World 600 and run an ad promoting NHRA drag racing and explain why it is an advertising bargain to be associated with.
4. Put money back in the race budget to insure qualified people attend every event to make sure the timing system works as efficiently and accurately as humanly possible. I’ll bet most of this could be done for less than the cost of building 16 new luxury boxes at Pomona and Gainesville.
Look, I have no illusions that Dallas Gardner, Tom Compton, Peter Clifford or any of the other people who are in charge of running the NHRA give any serious consideration or attention to what I write. And they sure don’t give a damn if I agree with their decisions or not. The leaders at the NHRA answer to no one but themselves, unlike the France family and Bruton Smith in NASCAR, or even the management team that runs the IHRA series, all of whom answer to stockholders or higher management. They have absolute power and they exercise it. They don’t have to listen to or report to anyone. I can’t ever remember anyone actually getting fired from a management position at NHRA. They either quit or retire. The attitude of a majority of those in power seems basically, if you don’t like what we are doing then don’t come around; we don’t care either way.
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Of course, I kind of feel the same way about them. I do what I do and I don’t care if they like me or not -- and I don’t think they do.
You’ll never convince me that before deciding to add luxury boxes at Indy, Pomona, and Gainesville Tom Compton, Dallas Gardner, or even Wally Parks called up Don Prudhomme, Kenny Bernstein, Greg Anderson, Don Schumacher, or any of those Pro and Sportsman racers struggling to get or keep a sponsor after the 2004 season was in the books and said, “We’ve got three or four million dollars we have to spend since we are a not for profit organization. How about giving us some ideas on how to spend it to best help our members out?”
No, as the businessmen that they all are, I think they looked at the books and asked themselves something like, “How can we best spend this money to make the books look good and justify our salaries?"
That was the real $3.2 million question. The NHRA may have started out as an organization for and by racers, but it certainly isn't that anymore.
Sadly, I see the current version of NHRA as basically a small business with a 93-year-old absentee owner who has put people in charge with directions to maintain the status quo and do no harm. So, maybe that was why they spent money on adding 320 premium seats, but I’m not sure their decision wasn’t harmful. The NHRA desperately needs something other than more expensive seats. Just ask the folks at Route 66 or Don Prudhomme.
