How does COVID-19 affect Track Day Organisers?

INTRODUCTION

The beginning of March marked the escalation of the COVID-19 pandemic in Europe. Several EU member states started to implement drastic measures in order to curb the spread of the virus, including unprecedented social distancing rules as well as the social and economic shutdown of entire countries, thereby severely impacting our way of living.

By doing so, our societies and governments have entered truly unchartered waters defined by uncertainty, the fear of failure, and trying to balance the economic prosperity of entire continents while ensuring its population stays healthy and safe. All without losing sight of our fundamental rights and freedoms - it's going to be a tough challenge!

From an overall economic perspective, the Track Day sector is incredibly small. We are a niche, catering to a small minority of enthusiasts who enjoy driving their cars on the most beautiful race tracks around Europe. We are not the people who keep the show running such as doctors, nurses, shop assistants in grocery stores, rubbish men and women, and many, many others.

Nevertheless, as this is what we do and love, we’d like to offer you an insight into what many Track Day organisers (“TDOs”) may go through at the moment, how we can handle this situation, as well as a glimpse at the future of our passion.

In order for you to better understand the inner workings of a TDO and give you a basic structure of the necessary activities, we have to imagine the following, extremely simplified scenario:

"You as a TDO want to organise a Track Day in June / July 2020"

From here on, we'll run you through the timeline of the organisation, the expenses accumulating over time, and an overview of all other steps involved in the process.

Assumptions

Organising a Track Day in June / July this year means, that first discussions with the circuit operators will probably have started around the end of 2019 or the beginning of 2020. Once a date has been set, the process starts:

1. Payment (Installments) for the track
2. Marketing activities
3. Merchandise and equipment
4. Insurance and legal coverage
5. Photographers
6. Support
7. etc.

Let's take a closer look at the three most important factors that we identified for regarding the business side of things:

1. Track rental and payment terms

The track rent is by far the biggest chunk of expenses a TDO faces. The total amount varies widely and is depending on the size and location of the track, whether it's used for official races such as Formula 1 and the necessary extra services required such as ambulance, tow trucks, marshalls, catering and administrative staff.

As the overall rental cost can easily exceed several 10 thousands of euros, the TDO usually pays the rent in installments spread over several months.

You'll find a simplified payment schedule below for a Track Day circuit rental (Rental Cost € 20,000) for a date in the middle of the year:

COST POSITION	TIMING
1st Installment	Approx. a 4 - 6 weeks after confirming the date (€ 4,000 - 20%)
2nd installment	Approx. 3 month after confirming the date of the installment (€ 6,000 - 30%)
3rd installment	Approx. 4 weeks before the event (€ 10,000 - 50%)

The schedule shows how cash-intensive our business is, especially at the beginning of the season when all the initial installments have to be paid. That's why it's important for TDO to have a constant flow of early bookings in order to cover the expenses right from the beginning.

The COVID-19 crisis and the corresponding social distancing measures hit TDOs early in the season. The uncertainty about the further trajectory of the measures taken by the local authorities (incl. the ban of public events and gatherings), the spread of the virus, as well as the economic downturn, virtually halted all track day bookings taking away the majority of early booking revenues.

2. The booking dynamics

While we mostly speak from our experience, this will likely apply to the majority of TDOs around.

In normal times, there will be a good amount of inscriptions long before the actual Track Day. Especially "blockbuster"-tracks such as the Nordschleife, Spa Francorchamps, or Bilster Berg will show a significant share of early bookings.

The COVID-19 crisis has completely and understandably changed those dynamics. We (and probably most other TDOs) have experienced a massive drop in bookings from around the middle of March to the middle of April. That's also right around the time, when installments for many of the summer Track Days are due. Thankfully, with more and more talks by governments about easing the virus lockdown, the number of bookings gradually picked up again from the mid of April.

3. Refund policy

Normally, TDOs follow a defined cancellation schedule which means that participants can cancel for free early in the year and will not be refunded if they end up cancelling a couple of weeks before the actual event.

However, what happens if an event has to be cancelled due to the current governmental restrictions?

At the moment, there seems to be no universal approach by the organisers. We observed that some offer a credit/voucher for any of their upcoming events in 2021, while others offer a full refund of the Track Day fees if desired.

We at GP Days decided to make things as simple and transparent as possible for you: In case a Trackday is cancelled by the local authorities, you'll receive a refund of your Trackday-Fee!

However, large waves of refund requests can potentially hurt a TDO, if the track operators take several weeks or months to reimburse the rental fees.

In addition, many TDOs are receiving bookings of drivers from various European countries. While this usually is a great addition to any event, the virus lockdown created a major problem. How will Track Day organisers handle potential travel bans from participants not being allowed to leave their country?

The complexity of the situation requires that TDOs as well as track organisers find a way to limit the damages on all sides. In the end, we are all dependent on each other

To visualise the effect of the COVID-19 restrictions on just one Track Day, please take a look at the graph below: 

You can see that by now (around week 15 - 17), that events may run on a deficit now. In our opinion, many TDOs can recover from this if the restrictions are being lifted soon as many participants are most probably just holding back their bookings until there is a bit more certainty and clearity on if the Track Days in question are going forward.

However, if the Track Day gets cancelled completely, many will face a massive impact on their liquidity at least until the track operators refund the fees for the track rental. This effect is of course being amplified for TDOs with many dates on their books.

The implications

Are we going to see a lot of TDOs getting into financial trouble in the coming weeks and months? We don't think so, at least not for organisers with a low overhead. As with any business the more fixed cost there are, the more difficult a potential shortfall of revenues is to handle. So organisers with a larger permanent employee base, maybe a pool of rental cars, office spaces, etc. face more severe problems than lean, more digitally-oriented businesses.

In a good scenario, most TDOs will be able to cover the first wave of down payments with pre-bookings which happened in December 2019 and the beginning of 2020. However, due to the lack of new bookings, all other payments may cause a significant cash drain. In case an event is cancelled, it all depends on how quickly and to what extend the track operators refund the rental fees.

Further, even if an event takes place, the current uncertainty will most likely still impact the overall level of bookings. We noticed that dates right on the edge of the current governmental restriction (May, June and July) experience significantly lower numbers of booking as people are understandably unsure about whether those Track Days are going forward. For example, looking at our Bilster Berg Trackday on the 12th June, we can clearly see that the number of bookings has declined and not reached the frequency of pre-COVID bookings. However, we are of course still obliged to cover the rental expenses.

All of the above shows, that the industry is heading towards some very difficult weeks and months. The outcome will all depend on how long governments will keep social distancing measures and event bans in place as well as potential agreements between TDOs and track operators.

Our 2020/21 outlook

In our opinion, there are several scenarios and in the end, all will depend on when the social distancing measures and other restrictions will be lifted.

Currently, many governments are releasing their plans on how to ease the virus lockdown. If it becomes clear, that Track Days will be permitted over the course of the next weeks, TDOs will recover from it relatively quickly. If we can get back on track by the end of May, that means we still have several months for pure Track Day action!

If however, the restrictions (especially on public gatherings) are being held in place for longer, the effects might drag into the season 2021. If TDOs are facing a complete shutdown of their business for a prolonged period, they might have to use their reserves in order to cover the fixed cost until the next season begins. Consequently, this could mean that they couldn't take on as many dates as they did in 2020.

What is GP Days doing to handle the challenges ahead?

First of all, we were in the beneficial position of our calender not being packed with events once we saw the COVID-19 crisis unfolding. At this stage we had just confirmed 3 events - Mettet, Bilster Berg and Dijon. By the beginning to mid of February, we had stopped all other plans in light of intensifying situation and global news changing their rhetoric and painting grim pictures of the coming months. In addition, having started our business just last year, we have not and are not aiming to build up any significant overhead or fixed cost so in the end, we see ourselves extremely well prepared for whatever this situation will develop into.

As we anticipated the situation relatively early on, we managed to quickly reschedule our Track Day in Mettet from the 3rd April to the 23rd June. So at this stage, we are just hoping this day can now go through as planned.

Regarding our Track Days at Bilster Berg (12th June) and in Dijon Prenois (31st July) we have an increasingly optimistic view as the French and German governments are easing the lockdown restrictions more and more.

However, our main focus is your safety and well-being. That's why we are regularly in touch with all involved to discuss our options and ways to run our Track Days in June.

So in terms of planning the actual process of running the Track Day, we are focussing our efforts on finding solutions on how to minimise the close contact between all the participants. The cornerstone of this strategy is, of course, our online check-in as well as the E-Briefing. A system that has proven itself already in 2019. The difficult bit is neither the track operators nor the local authorities can give an indication about what exactly will be necessary in terms of precautions to run a Track Day in June. We are in constant exchange all involved parties and hopefully find out soon, what it is exactly we need to do, in order to move forward with our Track Days as planned.

Further, we're trying to be as transparent and communicative as possible and engage with all our drivers and followers who booked or are thinking about booking an event with us. That's why we recently started to publish weekly updates covering current developments surrounding COVID-19 and our Track Days so you stay informed at all times. You'll find our news update here: NEWS.

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Summary

Well, as you can see the situation is extremely difficult with the uncertainty being the dominating factor. The situation changes by the day and so do the calendars of the TDOs.

While we still stay positive and see a good chance for us to get on track by June, the COVID-19 pandemic has already ruined a good start to the season. For us as a relatively new organiser, it's more than unfortunate. Our first Track Day of the season in Mettet on the 3rd April was fully booked by the end of Februrary / beginning of March. We were on a very good track of achieving this for our Track Days at Bilster Berg and Dijon as well. Yet, we are very confident that we'll come stronger out of this than before. We are consistently optimising our processes, using the time to engage with potential partners for our upcoming events and are already thinking about how we can accelerate our growth in the future.

In the end, all of us need to stick together in these difficult times and ultimately find a solution that works for everyone. We are eager to get on track with you and are trying our best in order to find solutions on how we can safely organise our Track Days in the coming months.

Thank you for all your trust and stay healthy!