[NOTE: The purse size -- a factor which I incorporate into the attendance model to gauge the "prestige" of an event -- is excluded from this particular analysis on the economy. Although it relates well to the marketing budget for many tracks, I choose to focus on the economic realities for consumers. Obviously, the amount of money a facility dedicates to "woo" folks to an event has an effect on attendance. I'll study that influence in a future entry.]
Undeniably, several factors (predominantly outside of NASCAR’s jurisdiction) affect the well-being of race facilities across the country. A desirable on-track product increases the number of people in the grandstands in theory, but the economy certainly clouds that contribution. The objectives of today’s entry are to analyze that economic impact on attendance and to determine what ticket-demand would have looked like in a consistently average economy from 2002 through 2012. Here are the conclusions that I draw throughout the article:
- Gas prices, hotel rates, and disposable income growth all affect attendance to Cup events substantially.
- Primarily, the unemployment rate in areas around race facilities explains most of the decline in attendance that the series experienced in the late 2000s.
- If it weren’t for a bummed economy, Cup Series attendance likely would have increased through 2008.
- By the end of 2012, the ticket-demand for races had stabilized after taking into account the economy.
In my previous entry on NASCARnomics.com, I created a model that explains the contribution of various factors on attendance. I split those factors into four categories — economy, location, scheduling, and on-track product. After accounting for those variables, I can examine how the economy affects attendance, all other factors being held equal. This exercise, although hypothetical, allows me to understand the demand to see a race in-person if one’s economic well-being neither improves nor declines. This is a major contribution to NASCAR research because it shows a historical demand curve that is influenced solely by the sanctioning body’s choices for competition and tracks.
The following table lists the four economic variables I use to explain Cup Series attendance. Joined with the other categories, my model explains almost ninety-percent of the number of race-day attendees in a given week (you can view the entire model’s results here). The factors which carry a statistically significant impact on race attendance are marked with an asterisk in the final column. I explain what each line means below the chart:
Average price of gas per gallon from previous three months. Although this variable is statistically insignificant (the confidence interval shows that its real impact on attendance is between -0.26 and +0.03), its p-value of 0.19 suggests that there is a weak relationship with attendance (a “definite” effect on attendance would register a p-value below 0.10). This impact on the grandstands might be a bit weaker than several anecdotes recall; the cost of gas may be overshadowed by ridiculous hotel prices and job losses. The coefficient for this term is -0.114; that is, one can theorize that a race-day’s attendance figure drops by 1.14% if the price of gas increases by 10%. For example, the country’s average gas price per gallon during the 2007 regular season finale at Richmond was $2.79. One year later, however, that price increases 36.2% to $3.80. Such an increase theoretically decreases the attendance for the race by over 4% [ (36.2 / 10.0 ) * 1.14 ]. This translates to a drop of almost 4,700 folks from the 2007 estimated attendance of 112,029 at Richmond.
Annual hotel prices. Although the average annual hotel price isn’t the best method to determine how lodging rates affect one’s decision to go to a race (as price gouging on NASCAR weekends is common), the statistic still provides a nice glimpse. In general, as the price of a hotel room increases, one expects attendance to a Cup Series race to decline. The reported coefficient in the table is -0.982. This means that attendance theoretically decreases by almost 10% as hotel rates increase by 10% — a one-to-one ratio.
Area unemployment rate from previous year. I also include the unemployment rate for the surrounding area for each NASCAR event. To account for a changing economy, I average the previous twelve months’ rates and apply that value to each event for the proper location. The coefficient is -0.187 and has a definite negative impact on NASCAR’s attendance estimates. In English, as the number of unemployed folks (within the labor force) jumps by 1%, one expects attendance to decline by 0.19%. Over a two-year stretch (2007-2009), the unemployment rate around Bristol, TN, skyrocketed to 10.2% from 4.6%. That translates to a 121.7% increase in the unemployment rate. That increase in jobless claims hypothetically led to a decrease in Thunder Valley’s attendance by almost 23% [ 121.7 * 0.187 ]. That explains most — if not all — of Bristol’s recent attendance woes in which consistent sell-outs turned into estimates of under 140,000 in the grandstands.
Disposable income. The money that households earn (after taxes and other “mandatory donations”), indeed, has a positive influence on attendance. A one percentage-point increase in that income positively influences attendance by roughly 2.8%. Once again, this economic indicator certainly plays a role in NASCAR’s ticket-demand issue — the variable is statistically significant.
For those who want to see how these economic factors affect facilities from year-to-year, I present the following table for this weekend’s race at Texas Motor Speedway. I explain this table further below:
The actual attendance for each event is in the first column highlighted in pink. The following eight columns show how attendance would change with a normal economy in-place. I list the average value for each statistic below the name of the economic indicator. Within each variable column, I list the value of that statistic from that event and what attendance would have been if that value were “normal.”
For example, last year’s event at Forth Worth coincides with a gasoline price of $3.16 per gallon — well above the $2.64 average. So the hypothetical attendance number of 149,752 shows what the reported attendance could have been if gas were just $2.64. I repeat this exercise for all economic variables. After I theorize each category, I list the “economy-independent” attendance in yellow. This number shows what attendance could have been if the economy were consistent and average from 2002 through 2012. As you’d suspect, the estimated attendance value during times of fast-paced economic growth are adjusted downward, while values from the recession receive an increase.
After I complete this set of adjustments for every race from the time period, I investigate how NASCAR’s average attendance would have been under this “economically consistent” scenario. I plot these hypothetical values in solid green line in the graph below. The dotted line plots the average reported attendance estimates from NASCAR:
[EDIT: This graph is the corrected version from a chart that I had shown in my previous entry. In that graph, I had an error in my code which adjusted disposable income changes incorrectly. That process is now fixed and I am happy to share that code with you at your request.]
When I account for the economic rise and fall from the previous decade, the remaining current combination of on-track product and scheduling produces a ticket-demand that rivals NASCAR’s reported attendance figures from its “peak years” of 2003 through 2005. The green line shows that attendance would have increased through 2008, declined substantially in 2009 and 2010, and leveled-off for 2011 and 2012.
Visualizing attendance as if the economy never tanked is important because it shows two things — the demand for the Cup Series’ product regardless of economic conditions and the impact the economy has on NASCAR fans’ attendance to races. As you can see, that effect is huge. It changes the entire narrative of historical attendance. It’s very apparent now that the demand for tickets actually would have grown through 2008 if it weren’t for a recession. Conversely, exceedingly good economic conditions played a large role in the “boom” years for NASCAR. If it weren’t for a fast-moving economy, the Cup Series’ appeal in the mid-2000s might never have been realized.
The good news is that the scheduling and product at races in 2012 created a demand that was reminiscent of economy-independent demand from 2003 through 2005. In other words, the product is relatively strong. While it suffered a bit as the Car of Tomorrow struggled to gain acceptance, NASCAR’s constant tweaking seems to have stopped the decline from 2009 and 2010. And the bad news? Although the economy explains most of the downward slide in attendance, NASCAR and many tracks need to work together to create a structure that can be more economy-friendly. As the green line clearly shows, the demand for the product remains healthy, but race-viewing needs to be more affordable for when another recession hits. Thus, it is imperative that the sanctioning body create a system that can “weather the storm” and reduce the risk of another massive decline in real attendance during the next economic meltdown.
That’s it for this week. I certainly appreciate your reading this rather lengthy essay. I hope you have some thoughts over NASCAR and the economy. After all, the point of this website is to supplement a lot of qualitative evidence I’ve seen floating around within motorsports circles. If you have any opinions, disputes, or ramblings on the topic — please send them my way! You may contact me on Twitter at or via electronic mail at . Thanks!