Tuesday, July 21, 2009

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.





17 comments:

Colin R said...

I only have one bone to pick (and you're no -- a UCI license expiring at the end of cross season is not a big deal, because the only thing you would use it for is cross. If it expired 7/1/2010 that wouldn't change its value to you in any way, so don't act like the expiration date is an issue.

All in all a reasonable assessment of the situation.

Yash Katsumi said...

I recall the days when a $75 dollar saddle was considered super high end. Then fricking Fizik introduced the Aliante for $140. A year or two later, the whole price range had increased by 20-50%. I fear this will happen with race fees.

With the increase in Verge race fees, I assume many of the smaller races will adjust their fees this year and start to charge $30-$35 since the mindset of most of us Giambronis is that if the fee isn't high, the race probably isn't that great.

Too bad.

Like you said, the budget is tight this year for me as well.

Something to consider is having more events like "Superprestiege" to get our competitive efforts in for free. We can buy flood lights, make barriers, and other obstacles.

RMM said...

Colin:

There are UCI races after 12/31/09, which you could, theoretically be eligible to participate in if you accumulate some UCI points in the Verge series. Isn't that why they are charging $45 a race, for the opportunity to accrue UCI points?

Colin R said...

RMM: Yes, and you can buy your 2010 UCI license to race in them, which is good for the entire 2010 season. And realistically, the UCI license matches up with the UCI CX season anyway. It's not like you have to repurchase in November. How many of us are racing UCI in January?

RMM and Yash: We ran Ice Weasels last year at $20/racer and covered our expenses, but we also made a conscious effort to keep our overhead as low as possible. The real problem is that putting on a UCI C2 event costs more about 10x what Ice Weasels did, but only draws 2x the racers at 1.5x the price. Seriously -- I'm pretty sure Myerson said he barely broke even on Noho, and that was 900 racers in 2 days at ~$30/head, to give you an idea of the budget those things take. Gloucester is even bigger.

Not say that justifies the cost either way, just pointing out that the numbers involved are surprisingly large.

Frankly if you run a grassroots cx race near Boston without any UCI overhead it's a slam dunk to make money, even at $20/head. Look at how many people go to Canton, MRC, even Quad Cross. Location is everything. No matter what promoters charge, it's possible to balance the budget for a lot less. You just need someone to do it... like yourselves.

Speaking of which, got any leads on a location for Ice Weasels? They built a greenhouse in the middle of my course :/

RMM said...

In my accounting, it does not matter whether the promoter makes money, breaks even or loses their shirt. What matters is whether I feel like I am getting a good value out of my race fee. At $35 a 45 minute race, I don't feel like I am.

Last year, I did every Verge race, this year I will only do a few. I have effectively been priced out of racing cyclocross.

Yash Katsumi said...

I have to say Ice Weasel, although I did not race it, was the pinnacle of racing/fun/atmosphere for me.

Great job Reuter!

I hate to sound cheap, but I think a $20 entry fee is PERFECT.

velocb said...

We so need a SF, DFL style series...$5 entries, big keg party at the final...free entry if you cross dress...maybe without the dresses don't know if that would fly on the east coast...It was so much fun granted at a few venues you needed a tetnus shot and maybe a hep b just in case....

Colin R said...

"I have effectively been priced out of racing cyclocross"

As much as I appreciate your melodrama, sir, we are only talking about a $70 increase over the duration of the season. If you were "priced out" at $35 then you're "priced out" at $30 -- unless you'd like to tell me you're not going to make a single discretionary purchase of $70 or more in the next four months.

Otherwise, you're not "priced out." You've just got better ways to spend your money. Nothing wrong with that.

kevin said...

Finally, I don't know you, and I don't know if you already promote a race, but I am going to assume that you do not. Instead of shitting on someone else's attempt to put on a decent race, why don't you organize one? Show us how it is done. Go out, find a venue, book it, mark a course, gather some sponsors and sacrifice some of your season so that we can learn from you. Maybe your enlightened approach to *ENTRY FEES* will educate everyone and improve all races in New England.

In all disciplines of bike racing there seems to be those who make races happen and those that complain about races. These people are seldom one and the same.

RMM said...

Kevin:

Do your homework.

I don't promote a USAC sanctioned event, but I have been helping to put on a regular weeknight cyclocross training series in Lower Allston: Wednesday Night SuperPrestige.

While it was not a huge event, I was there rain, shine, ice, snow, mud, freezing temperatures and in the dark marking a course, organizing riders and making sure that everyone was safe on the darkened course. It ran every Wednesday, October through December. I was there every week, even when I wasn't racing. And when I was racing, I made sure that we had a volunteer to hold lap cards and heckle (most nights the volunteer was given free beer as an incentive).

When the weather was crappy, we had about 20 racers. On pleasant nights...I never counted. What I do know is that our little training series was the mainstay of many Boston area cyclocross racers' mid week training schedule

We didn't charge anyone a dime. Many weeks we even had sponsors and gave out prizes, primes, free beers...

I am working on getting a venue and USAC sanctioning (actually, Diane already gave me the informal nod) for the event this fall.

I will be sure to invite you to the races either way, whether it is an alley cat style, free event or if it gets a venue and sanctioning and we charge a few dollars to cover expenses.

Well Kevin, you could say that this is not enough.

I also am one of the managers of my racing team, which for our level and our goals is quite successful. I won't bore you with all the minutia and tasks that I take on, but ask around, I know that people will tell you that my initiative and drive is major part of the reason that our team is successful. I am not saying that I do everything, but I do enough to claim some credit for what we have built.

So if your argument with me is about my bitching while not adding anything to the scene, it is unfounded and dead wrong.

If you want to continue this flame war: What have you added to the competitive cycling scene lately? Other than a decent blog (yeah, though I don't always agree with you, I enjoy your blog) and entering some races?

kevin said...

some day i'm going to figure out how to turn off your shitspout.

holding up a mirror doesn't seem to be the answer.

(For those that missed the joke: My original comment was written by RMM in response to a negative race experience I recently wrote about, I don't have the arrogance to be able to write like that.)

RMM said...

Um Kevin:

While we all appreciate the wit of your throwing my own comment back at me (yes, I appreciate being roasted), what you seem to be missing is that I posted an appropriate response.

If you object to the validity of my response, say so in a well reasoned counter comment. Reducing yourself to mere name calling just makes readers think that you are frustrated since you were proven wrong.

Is it arrogance you lack or a decent argument?

zack said...

Hey RMM, if you really want to complain about something, how about the rising cost of graduate education. I have to do a lot of 25$ races to offset the 61000$ loan I just took out, ouch.

RMM said...

Zach:

I am still quietly paying for my masters degree, though on a teacher's salary. As I remember you are studying for a fancy pants type career. Complain now, but later you will be hiring a coach, racing a Colnago and driving to and from the races in your BMW.

kevin said...

McKittrick, You are literally arguing with yourself. I copied and pasted your comment, and now you want me to defend it?

I'm kind of getting tired of pointing out how dull you are.

RMM said...

Kevin:

No, I am not arguing with myself, I am pointing out why your turning my comment back on me doesn't accomplish the job.

Can you really be as dense as you appear to be here? I don't believe that you are; I just think that you are pissed that someone has out maneuvered you and it kills you to admit it or remain quiet.

Also if you are tired of my dullness and pointing it out, you can choose not to read my blog and/or not post comments on said blog. I doubt that you live in a penal colony that forces you to read and then comment on cycling blogs.

But to be clear, I am suggesting that you abandon neither pastime as I am rather beginning to enjoy our exchanges.

dfadf said...

Microsoft Office 2010
Office 2010
Microsoft Office 2007
Office 2007
Microsoft Office
Office 2007 key
Office 2007 download
Office 2007 Professional
Microsoft outlook
Microsoft outlook 2010