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NASCAR Becomes Too Big To Ignore

Source: Charlotte Business Journal  

April 21, 2006

When Charlotte was announced as the winner of the NASCAR Hall of Fame derby, business and civic leaders praised what they called a team effort to land the prized tourist attraction.

The commitment to the facility totals $154.5 million, with much of the cost to be covered by a hike in lodging taxes.

That commitment would have been unthinkable in the early days of the sport, when the relationship between the city, business leaders and motorsports wasn't so cozy.

When the track now known as Lowe's Motor Speedway opened in 1960, auto racing was barely a blip on the radar of local officials. Charlotte Motor Speedway, in fact, fell into bankruptcy in 1961, and attendance at the track waned.

For the first two decades of the track's existence, it held a "very distant relationship" with local business and public officials, says veteran motorsports marketing executive Max Muhleman.

"It was not accepted nearly as widely as a sport, particularly not accepted as a big-league sport," recalls Muhleman.

But in the last 20 years, a variety of factors have changed the attitude of local leaders toward the sport.

Foremost is the growth of racing itself. Where NASCAR once was considered a Southern pursuit shown sparingly on television, it has become well-established on the national sports scene, with every race carried on national broadcasts.

"A similar thing happened in Nashville when country music was called mountain music or hillbilly music," says Humpy Wheeler, Lowe's Motor Speedway president and general manager. "When money started flowing in and NASCAR's popularity grew, more and more people in leadership started embracing it."

Muhleman says a key point in the city's acceptance of motorsports occurred when attendance at Lowe's reached 100,000, which occurred in the early 1990s.

"A hundred thousand is kind of a magic number, and it clearly jolted a lot of the community into the recognition that, 'Hey, this is something special, this NASCAR thing,'" he says.

In 2001, NASCAR inked a television contract worth an estimated $2.8 billion over six years. Almost immediately, TV ratings rose. Ratings for the 2001 Daytona 500 increased by 20% over the prior year's race. NASCAR soon became the No. 2 sport on television, trailing only the National Football League.

The acceptance of the sport faced a critical test when Nextel succeeded R.J. Reynolds as sponsor of NASCAR's top series in 2004. The change in sponsor was announced the previous year, and rumors surfaced that NASCAR's all-star race would move from Lowe's Motor Speedway to another track.

But the public sector responded with more than $500,000 in subsidies for the race.

"The corporate community started to get involved more heavily with the efforts around the Nextel All-Star Challenge," says Tim Newman, chief executive at the Charlotte Regional Visitors Authority. "Over the last three or four years, those efforts have grown. That really set the stage, in my mind, for our ability to pull together a successful team to go after the NASCAR Hall of Fame bid."

The threat of losing the race became real. Lowe's hosted two NASCAR Nextel Cup races, and the all-star race was a third major event.

The city had already lost a major sports franchise when the NBA's Hornets left for New Orleans in 2002, and replacing them with another franchise was an expensive proposition.

"Any time you are trying to grow your destination appeal, you want to keep the things you have and grow them in addition to trying to bring new things in," Newman says. "If you lose something, it's awfully hard to get it back. I was interested in keeping the All-Star Challenge because of the great event that it is. And in that very same vein, with the schedule of Nextel Cup racing, for the Hall of Fame to be in another location, that would be easy for some of the race teams to look at the center of gravity moving away from Charlotte. We would not want to see that happen."

Fortunately for Charlotte, the all-star race has remained, and the hall of fame landed here, too. The hall of fame effort was won by a coalition of bankers, public officials and the hospitality industry, which supported an increase in the local room occupancy tax to 8% from 6%. The tax is projected to provide $120 million in funding for the complex.

Wachovia Corp. and Bank of America Corp. helped win the hall by offering to lend $41.5 million for land, construction and other expenses at 4%, well below the 7.5% prime rate. Representatives from the rival banks joined forces to craft the financing plan.

It's readily apparent why motorsports would attract such support. Local economic impact estimates for having the hall of fame here range from $60 million to $100 million annually.

With its numerous race teams and ancillary businesses, motorsports had grown to a $5.9 billion industry in North Carolina in 2005, according to an economic-impact study conducted by UNC Charlotte economics professors John Connaughton and Ronald Madsen.

"We'd lost a lot of our traditional industry -- textiles, tobacco, furniture," Wheeler says. "We need to help everybody that's left to expand and take up the slack here. They've really, really come forth in a strong way."

The recognition of motorsports converged with Charlotte's successful bid for the hall of fame. Will it continue? Newman expects the hall to anchor efforts to attract tourists. Plus, city leaders will need to work to keep the Nextel All-Star Challenge.

"The long and short of it, now with Nextel and Sprint coming together and Sprint having a lot of new people who will be seeing the All-Star Challenge for the first time, we want to continue to tell them how important it is to us and continue to tell NASCAR how important it is to us," Newman says. "We want that event to stay here in Charlotte, where we think it makes the most sense for NASCAR and for the industry."

Muhleman says the city has done "an outstanding job" promoting motorsports.

"There's no other sizeable city in the country you could compare what Charlotte's doing, other than Indianapolis," Muhleman says. "It's time to recognize that we're doing a lot. The Charlotte community is doing well and is very much at the high end of the ladder in terms of appreciating its NASCAR and its racing.

"Can they do more? I'm sure Humpy can give you a better answer to that than anyone. From the point of view of where I am -- doing business in sports all over the country -- I'm pretty impressed with what we're doing."

Wheeler has been impressed, too, even though he believes the area can do more.

"They need to continue to stay behind the all-star race," Wheeler says. "That should be another reason to push for the completion of Interstate 485. There are a lot of things like that that not only affect us but affect the citizens of Mecklenburg County. But right now, I'm satisfied with the way they've reached out."

Lee Montgomery is a staff writer and associate editor at NASCAR Scene who can be reached at (704) 973-1311 or lmontgomery@bizjournals.com.