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July Monthly

July Monthly

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Many major and emerging central banks took action in June, but outside of possible technical adjustments will continue with the current supportive stance in July.  The policy focus will shift back to fiscal initiatives.  The highlights will be the EU Summit on July 12, which is considering the EC's 750 bln euro package of grants and loans, and the US decision regarding the $600 a week extra unemployment insurance (expiring at the end of July) and another large budget bill ostensibly for state and local governments and infrastructure.

In the second half of June, more monetary support was provided, though it took different forms and was not coordinated.  The Federal Reserve's Main Street facility was launched after being announced in late March.  The Fed's corporate bond purchase program began including individual issues rather than just ETFs, which had been the case previously, and it will also buy bonds in the primary market. 

The Bank of Japan expanded interest-free loans to corporations to JPY110 trillion from JPY75 trillion.  The ECB made net new three-year loans of nearly 550 bln euro (at minus 100 bp), or a 10% increase in its balance sheet (~5.63 trillion euros as of June 12).  The Bank of England boosted its bond-buying program by GBP100 bln. 

The People's Bank of China cut its reverse repo rate by 20 bp and officials signaled further easing of monetary policy would be delivered.  It also announced a 25 bp cut in the re-discount rate to 2%, which is seen helping small and medium businesses.  Other central banks, including Brazil (-75 bp to 2.25%), Russia (-100 bp to 4.50%), Indonesia (-25 bp to 4.25%), the Philippines (-50 bp to 2.25%) Mexico (-50 bp to 5.0%), and Colombia (-25 bp to 2.50%).   

It appears that most of the major economies are past the worst of the direct of economic impact.  Going forward, nation-wide lockdowns may not be necessary, though localized action could have broader knock-effects.  As the second quarter wound down, several countries in Europe and Asia have seen an increase in new cases.  The US is seeing a record number of cases, and a few re-opening exercises have been reversed, and others halted, while Mexico may be seeing early signs that the curve is bending, Brazil is still in the throes of the worst of the epidemic.

The world's two largest economies will report Q2 GDP in July. China's report is due in the middle of the month.  Outside of February, China's composite PMI has been above the boom/bust 50-level. China's economy contracted by nearly 10% in the first quarter, and small but positive growth cannot be ruled out in Q2, though some economists are more pessimistic. The US economy contracted by 5% at an annualized pace in Q1, and output may have fallen by 35%-45% in Q2.  It reports the first estimate at the end of the month.   

The third quarter is widely expected to show strong improvement over Q2 and there is good reason to suspect it was a historically short but deep contraction.  The critical issue going forward is about the pace of the recovery, which itself depends on no small extent on the evolution of the virus.  If new flare-ups cannot be totally avoided, as was seen in Beijing that had a surge in cases after reporting no new cases for more than fifty days, then the challenge is the speed and effectiveness of containment. 

However, after the third quarter, visibility is limited. Without a vaccine or specific treatment, the recovery will likely be gradual and uneven.  The signs of green shoots may also temper the will to maintain the extent of the stimulus. There may be two last hurrahs in July.  A consensus may be reached for the EU Recovery Fund at the summit. 

The protracted negotiations underscore that these are not emergency funds that will be disbursed and spent immediately.  It is a small part of the fiscal support many countries will need.  The subscript may be where the real political importance lies.  A common bond that is not an intergovernmental agreement, but something larger, some have suggested is the "Hamiltonian moment" for Europe.  It could be scaffolding for a greater fiscal union, but we are reluctant to project emergency measures into the future.  Those fights still lie ahead.

In fact, in the current circumstances, a common bond itself is not so controversial.  By focusing on the potential significance of a common bond, the advocates not confronted the main objection of the "frugal four" (Sweden, Denmark, Netherlands, and Austria).  Their complaint is how the proceeds of the bond will be used.  The German and French proposal is heavily weighed toward grants.  This does not sit well with taxpayers in the North.  

The US may approve another stimulus package in July  Previously, the Congressional Budget Office projected a budget deficit of around 18% of GDP.   If it weren't for the elections in November, this package might not have been considered. At the same time, most countries have neither the political will nor financial capacity to provide as much stimulus.  After the Great Financial Crisis, the divergence helped underpin the dollar.   This time a different dynamic appears to be at work. The liquidity the central banks are providing, and the spending of governments are encouraging the pursuit of risk-assets. And the dollar is the opposite. 

At the same time, between loan guarantees and the fiscal stimulus, German efforts are unlikely to be matched elsewhere in Europe.  Even with a generous package of loans and grants, the EU's Recovery Fund is not going to dampen that new divergence in Europe could very well shape the next European crisis. 

EC President von der Leyen and UK Prime Minister Johnson appear to have reinvigorated the trade talks, which will be accelerated in the coming weeks. The UK indicated that regardless of the outcome, it will relax the control that applies to trade with the EU for the first half of next year, seemingly making a virtue out of necessity.   If the Irish border was the critical element in the withdrawal bill, the crux of trade dispute might be over the future alignment of environmental and labor protections, and state aid.  Checks of plants and products of animal origins will also be particularly challenging for the UK.  Its ports lack the facilities and often the space to carry out such checks.  Some estimates suggest the UK may need to hire as many as 50k more customs agents. 

Meanwhile, Japan has indicated that a trade agreement needs to also be completed by the end of July to give it time to be debated and approved by the Diet.  To achieve this, the EU-Japan trade agreement that took effect in 2019 will likely simply be duplicated to include the UK. The UK was pushing for a further reduction (or elimination) of Japanese tariffs on goods and agriculture, like beef and cheese.   


Dollar:  The dollar fell against all the major currencies in May but sterling and the yen  It fell further in June, though sterling was the exception, slipping about 0.2%  The JP Morgan Emerging Market Currency Index fell 1% in June after rising 3.4% in May, which was the only month in H1 20 that it did not decline.  With the funding markets functioning normally, the use of the Fed's swap facility diminished, and the dollar was used again to fund the purchase of other higher-risk assets. Speculators, judging from the positioning in the futures market, have amassed a significant long euro position. Outside of the yen, the non-commercials in the futures market were net short most of the other currency futures.  In the weeks ahead, negative surprises will likely be more dollar supportive than unexpected positive news. 

Euro:  The ECB has aggressively moved to ensure that its ultra-accommodative monetary stance transmitted through the region.  In June, it increased the size of its Pandemic Emergency Purchase Plan by 600 bln euros and extended the program until at least mid-2021. It also made net new loans of about 550 bln euros for three-years at minus 100 bp.  The ECB's balance sheet increased by roughly 11.5% in June, more than the previous two months put together.  What market participants call carry trades is the implementation of the ECB's transmission mechanism.  The ECB buys bonds and provides incentives for investors to buy peripheral bonds, thus narrowing spreads. The next step is the European Recovery Plan, and there is cautious optimism that a compromise can be struck.  Europe appears to be doing a better job than the US in containing the virus.  Trade tensions with the US over digital tax, the Nord Stream II pipeline, and the threat of US auto tariffs, are simmering just below the surface.  Merkel assumes the rotating presidency of the EU in H2 20 and certainly has her work cut out. 

(end of March indicative prices, previous in parentheses)

Spot: $1.1235   ($1.1100) 
Median Bloomberg One-month Forecast $1.1225 ($1.1075) 
One-month forward  $1.1245 ($1.1110)    One-month implied vol  7.1%  (6.4%)    


Yen:   The dollar rose to almost JPY110 in early June, its highest level since late March, but quick retreated and tested the lower end of the range near JPY106 as the month drew to a close. The exchange rate's co-movement with the risk appetites has weakened from the first part of the year.  The rolling 60-day correlation is around 0.15, after peaking above 0.80 in February and holding above  0.55 throughout Q1.  It was just below 0.50 at the start of June.  Other forces moved to the fore in June, and some observers emphasized the large corporate divesture (Softbank sales of T-Mobile, ~$20 bln).  The government and the central bank are cautiously optimistic that a recovery may be at hand.   The Bank of Japan forecasts a 4% contraction this year, which appears to be on the optimistic side of forecasts.  Soft (surveys) and hard data (industrial production) has disappointed.  Judging from the BOJ's bond purchase plans in July, it will not object to further steepening of the yield curve.  The nearly five basis point increase in the 10-year benchmark yield was the most within the G7 in the second quarter. Japan's 30-year yield a little below 60 bp. By comparison, the UK's 30-year Gilt is a few basis points higher, while the German Bund yield is minus two basis points.  

Spot: JPY107.95 (JPY107.85)      
Median Bloomberg One-month Forecast JPY107.65  (JPY107.60)     
One-month forward JPY107.90  (JPY107.80)    One-month implied vol  5.8% (5.4%)  


Sterling: Sterling's flat performance in June after the poor showing in May (-~2.0%) reflects the poor news stream from the UK.   Even when some data, like the preliminary June PMI was stronger than expected, sterling struggled to sustain even modest upticks.  The low for June (~$1.2250) was set late in the month.  The euro set a three-month high against sterling (~GBP0.9175) at the end of June, as well.  We look for a better showing from sterling in July, which is a critical month for the UK.  The country will be re-opening more quickly, and the risk of new flare-ups, as seen elsewhere, is a concern.  Trade talks with the EU are to accelerate, and the next several weeks will reveal if progress has been made.  The UK's own customs facilities and personnel need to be expanded.  Japan is insisting that its trade agreement with the UK needs to be completed by the end of July to give the Diet sufficient time to debate and vote on it.  It may be little more than extending the agreement between the EU and Japan that took effect last year.  

Spot: $1.2400  ($1.2345)   
Median Bloomberg One-month Forecast $1.2415 ($1.2355) 
One-month forward $1.2400 ($1.2345)   One-month implied vol 9.0% (8.9%)
  

Canadian Dollar:  The US dollar fell out of the CAD1.3850-CAD1.4200 trading range of April and the first half of May and continued to fall in the first part of June, ultimately reaching nearly CAD1.33.   The greenback entered a consolidative phase in the second half of June, but there may be scope back into the previous range.  June will be remembered for the beginning of Macklem's seven-year term as Governor of the Bank of Canada.  It will also be remembered for when Fitch became the first major rating agency to take away its AAA standing, citing rising deficit and debt levels in response to the pandemic (now, AA+ with stable outlook).  The housing sector appears to be leading the Canadian recovery. In Q2, Canada's 10-year yield fell about 25 bp to lead the G7. The Bank of Canada meets on July 15. There is scope for technical adjustments as the markets have normalized.  

Spot: CAD1.3580  (CAD 1.3780) 
Median Bloomberg One-month Forecast  CAD1.3585 (CAD1.3810)
One-month forward  CAD1.3575  (CAD1.3800)    One-month implied vol  7.0%  (6.9%) 


Australian Dollar:  The Australian dollar dropped 12.7% in Q1 and bounced 12.5% in Q2 (including a 3.5% gain in June).  The currency appreciation did not reflect the domestic economy, which has been hard hit by the virus.  The preliminary June composite PMI surged from 28.1 in May to 52.6.  In 2019, it averaged 50.5, and last June stood at 52.5.  The Aussie is one of the currency proxies for risk.  The rolling 60-day correlation between (percent change) in the Aussie and S&P 500 is near 0.7 and the highest eight years.  On a purely directional basis, the correlation is about 0.95.  The Reserve Bank of Australia meets on July 7.  No change in policy is expected, but it could raise the level of concern about the strength of the Aussie.  When exchange rates move in the opposite direction of monetary policy, it can dilute official effects.

Spot:  $0.6900($0.6665)       
Median Bloomberg One-Month Forecast $.0.6870  ($0.6575)     
One-month forward  $0.6905  ($0.6665)     One-month implied vol 10.9%  (10.8%)   


Mexican Peso:  The dollar peaked around MXN25.7850 in early April, and two months later, it looks like it has bottomed near MXN21.45, a little above an important technical level. The peso is also treated as a currency proxy for risk, and it also serves as a proxy for emerging market currencies broadly.  The dollar recorded the highs for the month (~MXN23.23) on the last session.  The government's response to the pandemic continues to appear relatively light. The central bank delivered its fifth rate cut of the year in June to bring the cash target to 5.0% from 7.25% at the end of 2019.  Banxico does not meet again until August when it could deliver a 25 or 50 bp rate cut depending on circumstances. While worker remittances have been stronger than expected, the trade position has deteriorated markedly.  In May, what was supposed to be a trade surplus was the second consecutive deficit over $3.5 bln.  Exports had fallen by almost 57% year-over-year, while imports were off 47%. 

Spot: MXN22.99 (MXN22.18)  
Median Bloomberg One-Month Forecast  MXN22.77 (MXN22.38)  
One-month forward  MXN23.09 (MXN22.28)     One-month implied vol 18.8% (18.5%)


Chinese Yuan:   The dollar peaked in late May near CNY7.1780 and returned to CNY7.05, the lower end of its two-month trading range, before the middle of June.  It was confined to CNY7.05-CNY7.10 trading range second half of the last month.  The 200-day moving average is around CNY7.0460, and the dollar has not been below CNY7.03 since mid-March.  Chinese officials have done a reasonably good job if their goal is for a stable yuan against the dollar.  It appreciated by about 0.25% in Q2 after falling almost 1.7% in Q1.  The stability of the yuan, while offering substantially higher rates than the US, may attract investment flows. Relations with the US continue to deteriorate.  China has boosted imports from the US recently, including meat, aircraft, and integrated circuits.  China has by-and-large, kept trade issues separate from other political issues. But, Beijing has warned on at least two occasions that if the US continues to challenge it on so many fronts, including on issues it regards as redlines, it will not be able to fulfill Phase One trade agreement.  China has only met about a fifth of the overall quantitative target through May.  

Spot: CNY7.0655(CNY7.1365)
Median Bloomberg One-month Forecast  CNY7.0670 (CNY7.1150) 
One-month forward CNY7.0795  (CNY7.1350)    One-month implied vol  4.2% (4.7%)





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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

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The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Another beloved brewery files Chapter 11 bankruptcy

The beer industry has been devastated by covid, changing tastes, and maybe fallout from the Bud Light scandal.

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Before the covid pandemic, craft beer was having a moment. Most cities had multiple breweries and taprooms with some having so many that people put together the brewery version of a pub crawl.

It was a period where beer snobbery ruled the day and it was not uncommon to hear bar patrons discuss the makeup of the beer the beer they were drinking. This boom period always seemed destined for failure, or at least a retraction as many markets seemed to have more craft breweries than they could support.

Related: Fast-food chain closes more stores after Chapter 11 bankruptcy

The pandemic, however, hastened that downfall. Many of these local and regional craft breweries counted on in-person sales to drive their business. 

And while many had local and regional distribution, selling through a third party comes with much lower margins. Direct sales drove their business and the pandemic forced many breweries to shut down their taprooms during the period where social distancing rules were in effect.

During those months the breweries still had rent and employees to pay while little money was coming in. That led to a number of popular beermakers including San Francisco's nationally-known Anchor Brewing as well as many regional favorites including Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks, and Cleveland’s Terrestrial Brewing filing bankruptcy.

Some of these brands hope to survive, but others, including Anchor Brewing, fell into Chapter 7 liquidation. Now, another domino has fallen as a popular regional brewery has filed for Chapter 11 bankruptcy protection.

Overall beer sales have fallen.

Image source: Shutterstock

Covid is not the only reason for brewery bankruptcies

While covid deserves some of the blame for brewery failures, it's not the only reason why so many have filed for bankruptcy protection. Overall beer sales have fallen driven by younger people embracing non-alcoholic cocktails, and the rise in popularity of non-beer alcoholic offerings,

Beer sales have fallen to their lowest levels since 1999 and some industry analysts

"Sales declined by more than 5% in the first nine months of the year, dragged down not only by the backlash and boycotts against Anheuser-Busch-owned Bud Light but the changing habits of younger drinkers," according to data from Beer Marketer’s Insights published by the New York Post.

Bud Light parent Anheuser Busch InBev (BUD) faced massive boycotts after it partnered with transgender social media influencer Dylan Mulvaney. It was a very small partnership but it led to a right-wing backlash spurred on by Kid Rock, who posted a video on social media where he chastised the company before shooting up cases of Bud Light with an automatic weapon.

Another brewery files Chapter 11 bankruptcy

Gizmo Brew Works, which does business under the name Roth Brewing Company LLC, filed for Chapter 11 bankruptcy protection on March 8. In its filing, the company checked the box that indicates that its debts are less than $7.5 million and it chooses to proceed under Subchapter V of Chapter 11. 

"Both small business and subchapter V cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed," USCourts.gov explained. 

Roth Brewing/Gizmo Brew Works shared that it has 50-99 creditors and assets $100,000 and $500,000. The filing noted that the company does expect to have funds available for unsecured creditors. 

The popular brewery operates three taprooms and sells its beer to go at those locations.

"Join us at Gizmo Brew Works Craft Brewery and Taprooms located in Raleigh, Durham, and Chapel Hill, North Carolina. Find us for entertainment, live music, food trucks, beer specials, and most importantly, great-tasting craft beer by Gizmo Brew Works," the company shared on its website.

The company estimates that it has between $1 and $10 million in liabilities (a broad range as the bankruptcy form does not provide a space to be more specific).

Gizmo Brew Works/Roth Brewing did not share a reorganization or funding plan in its bankruptcy filing. An email request for comment sent through the company's contact page was not immediately returned.

 

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Revving up tourism: Formula One and other big events look set to drive growth in the hospitality industry

With big events drawing a growing share of of tourism dollars, F1 offers a potential glimpse of the travel industry’s future.

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Sergio Perez of Oracle Red Bull Racing, right, and Charles Leclerc of the Scuderia Ferrari team compete in the Las Vegas Grand Prix on Nov. 19, 2023. Tayfun Coskun/Anadolu via Getty Images

In late 2023, I embarked on my first Formula One race experience, attending the first-ever Las Vegas Grand Prix. I had never been to an F1 race; my interest was sparked during the pandemic, largely through the Netflix series “Formula 1: Drive to Survive.”

But I wasn’t just attending as a fan. As the inaugural chair of the University of Florida’s department of tourism, hospitality and event management, I saw this as an opportunity. Big events and festivals represent a growing share of the tourism market – as an educator, I want to prepare future leaders to manage them.

And what better place to learn how to do that than in the stands of the Las Vegas Grand Prix?

A smiling professor is illuminated by bright lights in a nighttime photo taken at a Formula 1 event in Nevada.
The author at the Las Vegas Grand Prix. Katherine Fu

The future of tourism is in events and experiences

Tourism is fun, but it’s also big business: In the U.S. alone, it’s a US$2.6 trillion industry employing 15 million people. And with travelers increasingly planning their trips around events rather than places, both industry leaders and academics are paying attention.

Event tourism is also key to many cities’ economic development strategies – think Chicago and its annual Lollapalooza music festival, which has been hosted in Grant Park since 2005. In 2023, Lollapalooza generated an estimated $422 million for the local economy and drew record-breaking crowds to the city’s hotels.

That’s why when Formula One announced it would be making a 10-year commitment to host races in Las Vegas, the region’s tourism agency was eager to spread the news. The 2023 grand prix eventually generated $100 million in tax revenue, the head of that agency later announced.

Why Formula One?

Formula One offers a prime example of the economic importance of event tourism. In 2022, Formula One generated about $2.6 billion in total revenues, according to the latest full-year data from its parent company. That’s up 20% from 2021 and 27% from 2019, the last pre-COVID year. A record 5.7 million fans attended Formula One races in 2022, up 36% from 2019.

This surge in interest can be attributed to expanded broadcasting rights, sponsorship deals and a growing global fan base. And, of course, the in-person events make a lot of money – the cheapest tickets to the Las Vegas Grand Prix were $500.

Two brightly colored race cars are seen speeding down a track in a blur.
Turn 1 at the first Las Vegas Grand Prix. Rachel Fu, CC BY

That’s why I think of Formula One as more than just a pastime: It’s emblematic of a major shift in the tourism industry that offers substantial job opportunities. And it takes more than drivers and pit crews to make Formula One run – it takes a diverse range of professionals in fields such as event management, marketing, engineering and beyond.

This rapid industry growth indicates an opportune moment for universities to adapt their hospitality and business curricula and prepare students for careers in this profitable field.

How hospitality and business programs should prepare students

To align with the evolving landscape of mega-events like Formula One races, hospitality schools should, I believe, integrate specialized training in event management, luxury hospitality and international business. Courses focusing on large-scale event planning, VIP client management and cross-cultural communication are essential.

Another area for curriculum enhancement is sustainability and innovation in hospitality. Formula One, like many other companies, has increased its emphasis on environmental responsibility in recent years. While some critics have been skeptical of this push, I think it makes sense. After all, the event tourism industry both contributes to climate change and is threatened by it. So, programs may consider incorporating courses in sustainable event management, eco-friendly hospitality practices and innovations in sustainable event and tourism.

Additionally, business programs may consider emphasizing strategic marketing, brand management and digital media strategies for F1 and for the larger event-tourism space. As both continue to evolve, understanding how to leverage digital platforms, engage global audiences and create compelling brand narratives becomes increasingly important.

Beyond hospitality and business, other disciplines such as material sciences, engineering and data analytics can also integrate F1 into their curricula. Given the younger generation’s growing interest in motor sports, embedding F1 case studies and projects in these programs can enhance student engagement and provide practical applications of theoretical concepts.

Racing into the future: Formula One today and tomorrow

F1 has boosted its outreach to younger audiences in recent years and has also acted to strengthen its presence in the U.S., a market with major potential for the sport. The 2023 Las Vegas race was a strategic move in this direction. These decisions, along with the continued growth of the sport’s fan base and sponsorship deals, underscore F1’s economic significance and future potential.

Looking ahead in 2024, Formula One seems ripe for further expansion. New races, continued advancements in broadcasting technology and evolving sponsorship models are expected to drive revenue growth. And Season 6 of “Drive to Survive” will be released on Feb. 23, 2024. We already know that was effective marketing – after all, it inspired me to check out the Las Vegas Grand Prix.

I’m more sure than ever that big events like this will play a major role in the future of tourism – a message I’ll be imparting to my students. And in my free time, I’m planning to enhance my quality of life in 2024 by synchronizing my vacations with the F1 calendar. After all, nothing says “relaxing getaway” quite like the roar of engines and excitement of the racetrack.

Rachel J.C. Fu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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