Stadiums and Facilities as Profit Centers

Every stadium—indeed, every sporting facility—needs to be seen as a multi-use, multi-revenue generating facility. The days of building a stadium for a specific purpose without a plan for continued viability over an additional 5, 10, or 20 years after the event, should never be accepted. Furthermore, the days of relying on government or other similar sources for primary support are numbered if not gone all together. Existing facilities who struggle daily to make ends meet, need to take action or be forever relegated to external, and therefore unpredictable, dependencies.

Many of the new stadiums being built today understand these realities. However most stadiums (probably upwards of 90%) lead a hand-to-mouth existence. There are very few stadiums in the world today who can say with confidence—and with proof of their financial statements—that they are able to sustain themselves.

Myself and likeminded others have been writing and teaching about these conditions for some time. We appreciate the many who have approached and asked, “what can I do about it?” Of course admitting that there is a problem is an excellent first step. Only from there can a clear understanding of the severity of the situation or the fragility of the existing foundation take place. And only when these two steps have occurred can we start the process of researching options. Of course, no one wants to leave or disrupt a “good” situation if indeed, for example, a government entity is supporting the facility. But can we honestly say that this is a healthy and sustainable situation?

Before proceeding any further, let us first state that people and groups are looking for stadiums and facilities. There are people and groups who want to use your spaces. There are people and groups who value what you have. You, therefore, can and should approach this initiative from a position of strength. Of course, it will not hurt to look around and take stock of the condition of your venue. Will a new paint job help? Are the restrooms working properly? How about the elevators/escalators? Is your Wi-Fi offering strong enough? These are just some of the questions that have to be answered honestly and directly. In most cases, it will not take much to get to a certain level of acceptance. Target for a certain quality range, and then improve from there.

Working from a position of strength (i.e., confidence in value) is critical because that is the only (effective) way to attract and then ultimately engage. “Attract” is just another word for marketing, and “engaging” is just another word for selling. But what exactly are we marketing and selling? Quite simply, it is what most venues have an abundance of—space and time. Therefore our next step is to define what spaces (exactly) we can market and sell, and when. In short, we have to create our inventory of sellable opportunities.

Spaces can include everything from the pitch to the dressing rooms, to the meeting rooms, to the dining/concession areas, to the open concourse areas, all the way to the parking lots. Every space, literally, has to be considered. And every considered space needs to be measured, given a name/code, and included in the inventory register together with all its attributes as appropriate (i.e., square footage, physical orientation, amenities, and the like). One benefit that we can guarantee with the above process is that it will not only bring new light into spaces previously taken for granted, but it will also bring new ways of thinking about how spaces are used even for traditional events.

For example, why can’t an end zone concourse be converted into a “party deck” of some kind for a normal league match? No additional seats will necessarily be needed. Add a few large TVs, and now there are social and entertainment opportunities in addition to the match, thereby creating more value for the fans.

But let’s get back to the inventory. It does not have to be perfect the first time. As mentioned, target for a quality range and then improve from there. With experience will come confidence, and more opportunities to attract and engage. Once we get several events under our belts and a better feel for what is possible, the guesswork will lead to more data-based informed decisions. The central questions will revolve around the following, in no particular order:

·        Sporting vs non-sporting events? Aside from the league match every two weeks, do we add more sporting events or less? We know that football (soccer) and rugby can complement each other. But how about archery? How about the Special Olympics? How about school based sports vs professional sports? Remember that school based sports are usually during the day and remember that we are selling time as well as space. It is imperative that you get out of the box and out of your comfort zone!

If not sports, then what other types of events might be worth exploring? The most common example is concerts. But how about parties? Wedding parties, birthday parties, anniversary parties? How about business conferences, exhibitions, and shows? Parties and conferences, if done correctly, can be extremely profitable, can be scheduled at the same time in different spaces of the venue, and in most cases, you get paid up front. What more do you need?

Here’s something to think about: imagine if aside from the regular league matches you are able to achieve an income ratio of 50/50 from sporting and non-sporting events? Think about what that will do to your bottom line. You should already have the numbers for the league matches. Now we have to build “the other half.”

·        Owning vs renting events? In most cases it is easier to simply rent a space. Certainly it is easier to get started with these initiatives by simply renting to people or groups who bring and often manage, their own events. They require relatively simpler contracts, and bring good revenues for rent and/or revenue sharing, including possibly concessions, and the like. But what if, in addition to renting, you are also able to create your own events? Your own branding and image building? Imagine if you did not have to share revenues.

Here’s something to think about: as mentioned, as we get started down these new avenues of opportunities, it might be easier to rent vs owning events. Perhaps the target for the initial period is 30/70 in which of all events, 30% are owned and 70% are rented. Imagine if with time, the percentages were to change to 70/30. Now, 70% of the time you are not sharing revenues with anyone. Imagine what that will do not just to your bottom line, but also to your brand and image.

·        Utilization rates? In its most basic sense, utilization simply means how much usage is gained from a resource. Utilization usually works hand in hand with efficiency and maximization. In our inventory register of available spaces within the venue, each space will have a designated size (square feet) and a designated amount of time when it can be used (all subject to change based on results).

For example, a room (which based on size represents 10% of the total identified space inventory in the venue) may be used from 4pm to 9pm from Mondays to Fridays, and from 9am to 10 pm on Saturdays and Sundays. That is a total of 51 hours per week. If the room is available (for whatever reason) for 40 weeks per year, then the total availability would be 2040 hours per year. Using the room for 2040 hours per year therefore would be a 100% utilization rate. So as we start our journey towards maximizing opportunities, we may start with a utilization rate of 30% for this room (just as an example, 612 hours per year or 15 hours per week), and then work on improving from there. Thus 10% of our inventory was used 30% of the time.

Utilization rates are not the only metrics we will need, but it is a simple and handy one to use to measure our space and time productivity.

We covered quite a bit in this article. Hopefully the information is helpful. Though we covered many important points, there is much more to consider once we start to get into the business of revenue generation and profitability. For example, we have not yet talked about revenues that can be generated from TV and sponsorship partnerships. Or from parking, one of the easiest and best opportunities. We also have to consider social media, waivers, contracts, insurance, costs per hour, food costs, labor costs, overhead costs, profit margins, cash flows, the competitive landscape, the leadership, etc.

Sorry about listing those items so quickly towards the end. Clearly there is much more to learn and discuss. Each venue will have its own unique characteristics. Each venue will have its own strengths, weaknesses, and threats, in addition to its opportunities, all of which have to be analyzed and understood. But what we are really saying is that each venue has to be seen as a business. We as professionals, have a responsibility to create and deliver incremental value. One dimensional and/or linear business planning is no longer acceptable. The stakes are too high. We are now merging event and facility management. The future is in projects.