SBJ/February 23 - 29, 2004/Facilities
Once-hot club seats have fewer fans
Published February 23, 2004
When the Phoenix Coyotes visited 14 NHL venues to get ideas for the arena they were building, the verdict on club seats was clear: Teams were having trouble renewing contracts.
"We found out that by the end of the first term, which is typically three to five years, they were reducing their capacity or changing the benefits," said Brian Byrnes, the Coyotes' executive vice president, business operations. "There was a strong enough trend showing itself that we didn't want to make a bad decision."
Glendale Arena, the team's new 17,799-seat home in Phoenix's West Valley, opened in December with 406 club seats, down from plans that Byrnes said had called for up to 1,200. Despite the decrease, he said 100 club seats remain unsold at $100 a game.
Club seats, which typically offer in-seat service and access to exclusive clubs, have with luxury suites brought in millions of dollars of additional ticket revenue in the last decade. They're a tougher sell than they used to be, however, according to team and arena officials interviewed for this story. Those officials saw the slower economy, perceived value of amenity packages, seat locations and poor team performance in some markets, and even a change in federal laws (see "New laws for drug firms cost arena"), affecting the club seat market.
Five years after the Bi-Lo Center opened in Greenville, S.C., the arena has renewed its 30 suites, but the renewal rate is about 70 percent for the 1,100 club seats. Most of the club seat contracts expired in 2003. "That is alarmingly less than satisfactory," said veteran sports executive Carl Scheer, co-owner of the building and of one of its tenants, the ECHL's Greenville Grrrowl.
Annual club seat fees increased by 10 percent, from $1,500 to $1,650, and include the price of hockey and National Indoor Football League tickets. Scheer, who also owns a facility development firm that worked on arena projects in Jacksonville, Fla., and Manchester, N.H., said the "market has changed dramatically with the economy."
On the consulting end, he said, "We have found as we go forward in the 21st century that there is less desire to develop club seats. When we built Bi-Lo Center in 1998, we only budgeted 600 club seats and oversold them, so we added 500 more. It was a hot property. The product had a lot of legs and it was exciting, it offered a different amenity package that wasn't previously offered."
There is no tried-and-true blueprint for the requisite number of club seats, according to consultants and architects. "Every market is different in what they try and do," said Bill Rhoda, a principal with CSL Consulting, who helped NBA and NHL
The American Airlines Center, which has sold 1,800 of 2,125 club seats, offers Platinum Club members who renew early a discount.
At some existing arenas where club seats have been slow movers, marketers are trying to solve the problem by giving themselves fewer club seats to sell.
FleetCenter in Boston plans next season to convert 500 club seats at both ends of the arena to regular seating with reduced prices because those seats have not been sold since the building opened in 1995, said Rich Krezwick, the facility's CEO.
The NBA Seattle SuperSonics "abandoned" their 1,112 club seats last season at KeyArena because of dwindling demand, Rhoda said. Those remain as part of the regular seating, said team spokesman Marc Moquin.
To sell their remaining club seats, teams and venues are trying to pump up the benefits to ticket buyers.
Club seat patrons are re-examining the perks they receive for spending large sums of money, said the Bi-Lo Center's Scheer. "They don't quite feel that they are getting that exclusivity," he said. "The price went up and they don't feel that the amenity packages are worthy of that price. In a bad economy, they carefully pick and choose their entertainment dollars."
FleetCenter's sales staff aggressively promotes the 1,900 seats on the Premium Club level, boosting benefits beyond the building to include Boston Red Sox tickets, private golf club memberships, Caribbean cruises and, starting next season, limousine service.
The plush XO Club, built in 2000 and expanded a year later, has helped Palace Sports & Entertainment sell out its club seats at the St. Pete Times Forum in Tampa.
Palace Sports & Entertainment, after acquiring the Lightning and the leasehold rights to the publicly owned arena in 1999, spent $4.2 million in 2000 to build an exclusive club and restaurant on the suite level that was doubled in size to 40,000 square feet a year later.
The $5,000-a-year memberships for the 1,000 XO Club seats are all-inclusive, providing a leather-bound seat, tickets to the Lightning and AFL Storm, a buffet meal with wine and beer and access to a cigar bar. Henry said the arena incorporated
Fine dining at Tampa’s XO Club
"We took a portion of the suite level and gutted it out to the concourse," Henry said. "There are no walls between the seating section and the hospitality area. It's a club level on steroids."
The arena sold naming rights to XO Communications for $400,000.
Office Depot Center in Sunrise, Fla., took note and may build something similar this off-season with a ticket good for all events in the arena, including the NHL Panthers. Half of the 2,600 club seats are sold, said arena GM Steve Dangerfield.
The XO Club is sold out. Officials have renewed 85 percent of the contracts that expired after last season, and those leases that run out after the 2003-04 campaign. "We've been able to sell the remaining 15 percent to new buyers," Henry said. "I think we have redefined what services are for the club level. I think you will see more of these clubs pop up every season. We have given tours to almost every team in the NHL and NBA, 10 Major League Baseball teams and 15 NFL teams."
The Palace of Auburn Hills, Mich., also owned by Palace Sports & Entertainment, built a club for Detroit Pistons season-ticket holders that opened in 2001. "We borrowed the idea from down south" in Tampa, said Tom Wilson, company president.
Club seats were not originally part of the design for the Palace when it replaced the Pontiac Silverdome as the Pistons' home court in 1988. Wilson said that putting in club seats would have moved season-ticket holders that had prime lower-bowl seats in the Silverdome into the upper deck of the Palace, above two suite levels.
The Palace at Auburn Hills’ newly expanded Cingular Club and new club seats coincided with the Pistons’ return to prominence in Detroit.
Palace Sports & Entertainment happened to strike at the right time, as the Pistons returned to prominence and the playoffs. "It all turned coincidentally that first year," Wilson said, but he said he thinks "people bought into it because they loved the concept, not because they loved the Pistons."
Two hundred club seats were added last season. Last summer, the Cingular Club was expanded to 16,000 square feet. There are 300 names on the waiting list, and Wilson said the club produces an additional $2 million in incremental revenue every year, compared to when those tickets were sold as regular seats.
"Out of that total comes the cost of food, but the redemption on those seats is 90 percent, bigger than anything else we have, including the suites," he said. "People are using those tickets, whether it's for the Lakers or a team that's won four games all year."
The less than desirable location of club seats has also resulted in a lack of renewals throughout the industry, Rhoda said. New facilities are keeping that issue in mind as they position club seats to be the best in the house, in the middle of the arena at or near the event level. The midlevel "wraparound" is no longer the trend, he said.
Toyota Center in Houston, FedEx Forum in Memphis, Jacksonville Veterans Memorial Arena and the Charlotte arena have designed club seats in the area that Charlotte Bobcats Executive Vice President Tom Ward likes to refer to as the building's "beachfront property," centered in the lower bowl.
The facilities that are having difficulties are the ones in which club seats are beyond the baselines, said Rhoda.
"After those lease terms expire, a lot of people are starting to see those are not the best seats," he said. "The arena operators are worried about renewals."
Bill Dorsey, executive director of the Association of Luxury Suite Directors, said: "The trick is to have a separate section with the proper amenities. It needs to be treated as a real club. Too often, teams have put those seats up too high or have extended them too far out in the bowl. Some of that has been adjusted."
Denver-based architect Don Dethlefs said all design firms went through a phase in the 1990s when club seats were designed midlevel and above in three-concourse facilities. "It all depends on where you want them," he said. "Every [team] owner has a different attitude."
The NHL San Jose Sharks were ahead of the curve when they put some of their club seats in prime locations at HP Pavilion, which opened in 1993. Dethlefs designed that venue, then known as San Jose Arena. Project officials designed the 3,400 club seats "from the ice on up, three quarters around the building," he said.
"Those seats are still incredibly hot," Dethlefs said.
John McDonald, senior vice president of Front Row Marketing, noted: "Architects are more savvy than 10 years ago when club seats became a feature. They have improved the sight lines, and club seats are developed to grow or shrink depending on the demand. As you start to sell during preconstruction, you can go ahead and [increase the total] by 300."
The NBA's Memphis Grizzlies, moving from the Pyramid to FedEx Forum this fall, have sold or received commitments on 1,900 of the 2,500 club seats at their new venue. The 900 lower-bowl seats are sold out, said Mike Golub, vice president of business operations. Ticket prices are $165 and $140 a game in the lower bowl and $85 and $68 for the 1,600 midlevel club seats.
The Grizzlies' research of other NBA buildings indicated that "club seats weren't renewing at a very high rate in some cases," Golub said. But the team did not adjust the total.
"It's a soft science," he said. "We could have sold more of the lower clubs."
A successful team certainly helps the cause. In Denver, Pepsi Center's 1,900 club seats are sold out and officials renewed 90 percent of the initial two- and three-year contracts. With two franchises headed for the playoffs, the arena is in a great position to renew 700 more club seats this summer.
Paul Andrews, senior vice president of sales and operations for Kroenke Sports Enterprises, said, "The Nuggets are much better this year, and the Avalanche is on top of the NHL. We're providing good value. The Avalanche is coming off a Stanley Cup win, and there are certainly some advantages to that."
As Brad Mayne, president of Center Operating Co., the manager of American Airlines Center, said, "When they're winning, the hot dogs taste better and the floors are cleaner." Arena tenants the Dallas Stars and Dallas Mavericks both sport winning records, and the Mavs are only a few games from the top of the NBA's competitive Western Conference.
American Airlines Center has half the 1,800 seats it has sold up for renewal this year, said Frank Hubach, vice president of premium seats. Platinum Club members committing by the end of February receive a 5 percent discount that would put the cost of renewal for those seats at or slightly below what club prices were when the arena opened in 2001.
There are 2,125 club seats in the building. "We originally had 1,900 planned, but sold so many, we kept adding club seats," said Hubach. "We would love to have them all on a long-term basis with guaranteed contractual income, but we're comfortable where we are."