Sunday 11 March 2012

Pricing Popular Races



Yesterday I was looking up a few races I thought I could maybe fit into my calendar this year and was looking at the New York City Marathon, which is a great excuse to go back to NYC and re-run that event. I checked on their website to see if entries were still available and was gobsmacked to see the entry price (entries are still available, btw). A non-refundable $11 to enter the lottery (all other race lotteries I'm aware of are free if you lose out) plus the entry cost of $216 (NYRR members), $255 (other US residents) and a whopping $347 for non-residents. That means entry for a 26.2 mile race for someone outside the country is $358!

In comparison, the London Marathon, which is the nearest comparator in terms of size and scale, costs just a fraction (the last time I entered in 2009, I think I paid the equivalent of under $50 as a resident and I understand this hasn't changed significantly). Admittedly, the London marathon charges more for foreigners with the ballot for them costing the equivalent of about $158, but that's still a big difference of $200 with NYC.

In single-stage ultras (multi-days are a different breed with accommodation and other costs coming into the entry fee) there's less discrepancy between race costs bewteen the US and Europe, but the most popular still cost a lot in the US, with Western States 100 costing $370. UTMB is biggest 100-miler in Europe and costs the equivalent of about $203. Both have lotteries that cost you nothing if you lose out.

Every race has specific costs, but I'm an economist and I wondered how much of the price differences were based on cost differences and how much was supply and demand. All of these races mentioned above are hugely oversubscribed and could charge a lot more and still fill their entry spots due to high demand, so I'd argue that the price must come down to costs and potentially milking people for a profit.

Yet the organizers of NYC (NYRR) are a charity, London's profits all go to charity, WS does the same (including towards trail work and maintenance) and I can't find information on whether UTMB is run for private profit or not (anybody know?).

So does this mean that the only difference is costs if they aren't making money for shareholders? Well, even within the scope of a charity, the costs can be subjective (such as wages for the staff) and the profit that goes to charity can still be maximized (especially if the charity is the race itself). For the ultras, most people who know about WS are aware that a significant portion of the costs is for the belt buckles, especially the silver ones. The organizers of virtually every ultra I know aren't grabbing every penny they can and do it largely for the love of the sport, wanting to cover their costs and make a living providing a great product to people.

But marathons are certainly much more corporate, even if they're a charity. Competitor Group organizes the Rock 'n' Roll series of marathons for profit and charges fees that seem excessive to many I've spoken to (including myself) but if you enter for really early bird discounts they are often not much more than $100 - well shy of the NYC costs. The major city marathons have huge prize purses and much of the entry fee goes on that, but sponsors also contribute heavily and TV coverage provides more revenue.

So it comes down to one question that's still not answered for me. Why does NYC cost so much more than London? They both offer a lot of prize money and try to attract the best marathon field in the world, which London arguably manages to do better, possibly due to the course being faster. NYC also had an increase in policing costs for 2012 which resulted in them charging $60 more than the previous year for an entry. But London and NYC should surely be at least a similar price unless there's some bad management of the budgets or a lot more money going to the NYRR charity. Does anyone know if this is their cash cow that then subsidizes their other races and events? I'm not suggesting there's anything sinister, just that there's a significant price differential between US and European marathons which is highlighted most between London and NYC.

I'd appreciate any more information that people can provide as this has caught my interest. Are insurance costs for races a lot higher in the US? Is there something significant I missed? I'm not a race director but I am a certified accountant as well as an economist so I'd like to find out more about the numbers. I couldn't find any financials for any of these races online - let me know if you have any links. [update - here are some numbers on the NYRR. In 2010 they made $8.5m in profit (tax exempt); revenues and costs aren't all split out for just the marathon but it looks like most of the revenue of $50.1m was NYC marathon related but only $22.2m was for marathon costs].

Also, for clarification, I don't mean to imply that organizing races for profit is wrong in any way - people deserve to get a return for creating something others want. It's just the discrepancy in pricing that I'm wondering about. If people want to pay huge entry fees then they can and there are races at all ends of the pricing spectrum. Also, the entry fee is often only a small part of the cost of doing a race, especially if it's far from home.

9 comments:

  1. I believe RW carried an article on this topic a few months ago. The main issue is that NYPD has started charging NYRR for services, whereas most marathons (not sure about London) get free services from their local PD.

    Oh BTW speaking of lottery if you have 1 in 4 chance of getting in, then the real cost for non US residents is not $347 + $11 but $347 + 4 x $11!

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  2. Good point. But even before the $60 increase this year, NYC was still the most expensive marathon I'm aware of by quite a long way.

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  3. I haven't got a clue on any of this, but find it incredibly interesting (particularly wondering how London manages to keep its entry fees SO LOW). If you get some good feedback, I hope you do a follow-up post!

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  4. You forgot to add all the 'silly gear' you have to carry in UTMB that people have to buy.

    You haven't figured in demand either...NYC is also the most popular.

    The big difference is likely insurance and permits in the US. Shutting down major bridges in NYC, etc...

    We have a hard time getting permits to race in the woods on trails that only the race organization 'maintains' through trail days...and no one ever even uses them.

    I'm good friends with a race director on the east coast that puts on trail races and it's unbelievable how the townships swindle him for permits...even just for a weekly 5k cross country they wanted to charge him something like 2k for a permit...a week! (as opposed to a ridiculously low price, the year prior, their justification is, 'we made a mistake last year and should have charged you more')

    I think it just boils down to supply and demand...and capitalism.

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  5. Nobody is cashing in the way the people running the so called rock and roll marathons and half marathons incidentally the same people that do the muddy buddy runs And they are taking them to Europe a pure profit deal I believe Ian.I would rather pay a fiver and go for a run across the fells and a pint at the pub it finishes at that said the US ultra races are great value on the whole and some great people involved with them, nice swag and bling too

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  6. tough mudder (which started as a Harvard business school project) charges for parking and spectators!...and people still LOVE it. I don't get it. I think it's more a 'look at me, I'm muddy and I'm hardcore, I can post this picture on my facebook for attention' thing than anything. Imagine if the Tough Mudder or those 'Color runs' didn't allow any photography what so ever...I bet the registration rate would plummet.

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  7. Rock 'n' Roll charges for a premium toilet near the start. Again, makes sense for maximizing profits on the day but does it provide the kind of experience that gets repeat business from first-timers?

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  8. I'm also an economist (by education anyway) and thought it would be fun to do NYC this year, but decided not to after comparing the cost to other races. Actually as the odds for winning in the lottery are tiny, many runners buy a package from an overseas tour operator. This secured entry costs 498€ in Finland (652 USD!) plus the price of your hotel/flights package, typically 2-3000€ minimum. The same applies for London and other hard-to-get-in marathons as well.

    UTMB and other ultra trails have a much more favorable €/km ratio and they also appear more ethical & ecological. In UTMB Press Kit, you'll find on page 7 that "no financial gain" is one of their values. Now that their success is skyrocketing, they're sponsoring UTMF in May.

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  9. Ian I don't if this is the case with nyrr but a lot of the time similar organisations use their big annual event to subsidise their other smaller events through the rest of the year. So you could argue that the money is still going back into the sport, albeit it is subsidising a smaller group of runners (nyrr members).

    London Mara and others being partly municipally organised and single purpose organisations purely for the event probably do not have this objective, also they aim to promote the city, bring in tourists etc. 

     Is this ethically wrong to overcharge runners in the big race for the benefit of the rest of the club/organisation throughout the year? Probably not, and better than going into corporate pockets like R&R. Having said that, nyrr and members are probably not that hard-up a bunch, and it would be nice to know that they are also putting something back into disadvantaged communities, kids etc - as is the case with comrades for example. So no, probably not ethically wrong, but they could perhaps be a bit more open about where their profits go. 

    Nice blog by the way.

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