Creeping Fees in Competitive Cycling: An Economics Lesson.

Race fees are rising steadily. One expects race fees to rise over time due to inflation. In some cases the costs associated with putting on a race also rise, requiring promoters to increase race fees to meet basic expenses. These price increases are natural and perfectly acceptable. While we may complain that races no longer cost $15, for the most part, our salaries keep pace with inflationary pressures, allowing us to pay the increased race fees without having to make sacrifices in other areas.

But this season there has been a couple of trends that I would like to note and discuss. First, many race fees have risen significantly this year. Second, there appears to be less people registering for races this season. Third, the overall economy is contracting. My main question is: How do these trends interact? Do the former two trends feed each other or are they merely correlated without causation one way or the other? And how does the overall contraction in the economy affect both of these trends in competitive cycling?

While economic indicators point to our recession ending in the near future, I don't think that anyone would argue that our economy is not faltering. Many of us have accepted wage freezes, no bonuses, reduced hours or pay decreases. Some of us have found ourselves laid off and unemployed. There are people losing their homes. Furthermore, many people are scared of one or more of these things happening.

Curtailing discretionary spending is a logical reaction to the economic downturn. Personally, I am spending less money on non essential items and I have been streamlining my household expenses in an effort to keep precious dollars set aside for the rainy days (if you didn't know, I spent 6 months unemployed last year and am currently looking for a position for the fall).

My 2009 racing budget is less than half of previous years'. I am not traveling as far for races and I am avoiding stage races and expensive one day events. Instead of racing 2 days a weekend, I only race one.

I have made some concessions in equipment as well; I am racing on less expensive rubber, my bartape is changed less frequently, I patch tubes, cleats remain unchanged until really worn out, I buy lower level chains and cassettes and I use generic cables and reuse cable housing.

For 90% of us, race fees are a purely discretionary expense. As such race fees are elastic, meaning that increases in race prices will cause consumers to spend less on them. Of course we can note some examples that defy the law of elasticity, such as The Tour or the Battenkill, which climbed to $45+ a head in 2009 and still had over 1500 registrants. For the most part, as racers find less money in their pockets and as race fees rise, racers will either chose to race less or will seek out races with more reasonable fees.

Many promoters fail to understand this simple law. Instead of lowering fees, or at least holding them steady, in the face of a recession, they have chosen to raise fees to make up for the income that has been lost from lower attendance at races. This will not work. In the case of unique events such as Battenkill, race fees appear to be inelastic; racers will pay ever increasing amounts of money to participate in this unique race. Though I suspect that at some point Battenkill's promoter will raise fees high enough to figure out exactly how elastic or inelastic race fees are.

Promoters of less unique events have also raised fees. Notably, the 2009 Verge races are becoming exorbitant. For cat 4's there it costs $30 for 30 minutes of racing and it pays MEDALS 3 deep. Cat 3's get a payout 0f $250 5 deep, but they will pay $35 for 45 minutes. Cat 2's, who now race with the UCI elites (which requires the purchase of a $90 UCI license that expires on 12/31/09) now will pay $45 for the privilege of getting lapped. Sure there is a $2171 payout that goes 25 deep, but I have seen $17 pay envelopes for people who finished "in the money" at UCI races.

Though it may seem like it, I have not put this post up to merely complain about race fees. I am arguing that increasing race fees will not bring more revenue to promoters. In fact, in many cases, the increased race fees will cause promoters to get less revenue than they would have if the fee was kept lower, as many racers choose to go to a training race or on a group ride instead of spending precious dollars on race fees.

If you increase the race fee by 20% and lose 20% of your racers, you lose 4% of your revenue. For example: if you brought in $100 charging 100 racers a $1 race fee and you increased the fee to $1.2 and only 80 racers came, you'd take in $96. Even worse, you'd probably still have alienated some of the racers who still chose to show up.

A good example of this trend has been the New England Velodrome, which I frequent. In 2007 and 2008, the race fee was $10 and bicycle rental was $2. With transportation from Boston, the whole experience was under $20. In 2008 increased gas prices and the beginnings of the recession decreased attendance at the velodrome.

The management responded by raising the race fee to $15 and bringing bicycle rental to $5 (though they also replaced the grouchy curmudgeon who was running the rental area with a great Goguen kid [maybe Manny?], which is probably worth the price increase). With gas and fees, the NEV now costs almost $30, depending on what kind of vehicle you are driving.

NEV attendance has been sparse in 2009. This morning, I just received an email informing me that race fees will increase to $20 in August in order to cover USAC sanctioning of events. I am going on record to note that USAC sanctioning will not increase track attendance. In fact, I know that my wife and I are unable to pay this race fee on top of our other cycling expenses. From asking around, I know that other riders have largely abandoned track racing at least partially due to price increases. The higher fee will definitely exacerbate this problem.

Bicycle racing is expensive. Even before you pay a race fee, you've dropped $1000's or even $10,000's on equipment and spent countless hours training. Oftentimes transportation costs outstrip race fees. For many years, race fees were an afterthought. But when it starts to cost $75-95 (I include Bikereg.com fees in my accounting) in race fees for a Verge weekend, one starts scratching their head and wondering if its worth it.

Just to put the fees in perspective, my perspective, teachers make about $50,000 a year (my salary is a mandated by contract and is a matter of public record, so I don't feel strange discussing it). After taxes, retirement, health and related expenses I take home about $700 a week. More than 10% of my weekly take home salary is going to cover race fees! Obviously we don't have a race every weekend...wait, actually I race almost every weekend.

Do the math. Now ask me why I am racing less.