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SBJ/July 19 - 25, 2004/SBJ In Depth
New looks for sports venues
Published July 19, 2004
Most of the business for sports venue renovation is on college campuses, including this $107 million project at the University of Wisconsin.
Sean Henry celebrated the fifth anniversary last month of Palace Sports & Entertainment operating the St. Pete Times Forum. He remembers vividly the arena’s condition when the Detroit-based firm took over in Tampa in 1999.
“The concourses looked like a ‘Sanford & Son’ junkyard, with furnishings all second-hand and mismatched,” said Henry, the facility’s chief operating officer. “Pipes were sticking out of walls in the rest rooms where there should’ve been urinals and hand sinks.”
Palace Sports, acquiring the NHL Lightning and the leasehold rights to the arena, was faced with a building that wasn’t fully completed when it opened in 1996. The team struggled on and off the ice, going through two owners and as many venues in its first seven years of existence.
“They didn’t want to put any more money into the arena and do the preventative maintenance and general upkeep,” Henry said. “It was more due to financial constraints. We had to clean it up. It was starved on capital. We gave it a big facelift.”
Palace Sports also owns the NBA Pistons and the Palace of Auburn Hills, an arena that has reinvented itself several times since it opened in 1988. The company invested $20 million over three offseasons to renovate the Florida arena.
Some changes were as simple as installing a dehumidification system that allowed officials to increase the building temperature to a comfortable level for hockey fans without melting the ice floor.
Others were more dramatic, such as knocking down walls and spending a few million to build a pair of 40,000-square-foot bars and lounges, one of which, Shots Bar, extends to a plaza outside the facility and was a gathering place for thousands of fans who couldn’t get tickets for the 2004 Stanley Cup playoffs.
The physical turnaround transformed the venue into a facility that was attractive enough to sell naming rights for $30 million to the St. Petersburg Times in 2002.
“I wish I could honestly say we had X, Y and Z for a blueprint,” Henry said. “Half of that $20 million went for back-of-house improvements, things the public never sees.”
No scientific formula or rigid template exists for renovating a professional or collegiate sports facility that leads to increased revenue, Henry said, but upgrading food service, adding premium seating and destination areas, and creating more sponsorship opportunities are good places to start.
The reasons for renovating are varied, as well, starting with the Times Forum, which wanted to do things the right way. Alltel Stadium in Jacksonville is completing its second major renovation in 10 years, a $60 million project to upgrade the facility for the 2005 Super Bowl.
Some venues, such as America West Arena in Phoenix and Target Center in Minneapolis, both more than 10 years old, are going through major makeovers to remain competitive in the marketplace with, respectively, Glendale (Ariz.) Arena and Xcel Energy Center in St. Paul, two newer buildings.
SportsBusiness Journal research shows that active renovations of sports venues total $720 million, with $606 million occurring on the collegiate level, where architects and builders are getting most of their business and will continue to in the next several years.
“We’ve done some research, and of the 117 Division I football teams out there, only 40 to 50 schools have done major upgrades,” said Dale Koger, vice president and general manager of Turner Construction’s sports facility division.
“You do the math,” Koger said. “There are two-thirds of those programs that haven’t done renovations. If you haven’t upgraded your facility and captured that increased revenue, you’re playing catch-up. Those that haven’t are in some stage of having to do so.”
In the college market, the focus is primarily on major universities incorporating suites and club seats into football stadiums that are 50 to 75 years old. The universities want to use the projects to generate the revenue necessary to fund their non-revenue sports and facilities.
“A university will look at its football stadium to fund softball, soccer and men’s baseball,” said Jim Pieper, an architect who recently started his own practice after working for HNTB, Ellerbe Becket and HOK Sport. “The donations, or PSLs, depending on the terminology, help generate additional cash flow for the stadium renovation and other projects.
“On many campuses, men’s basketball isn’t profitable, and women’s basketball doesn’t break even. You have to make sure the stadium is constantly trying to improve itself and generating as much revenue as it can, but also that it doesn’t go to the extreme when you’re catering to the rich and forgetting about Joe Fan.”
The University of Tennessee in Knoxville plans to use the revenue gained from selling 2,000 new club seats at Neyland Stadium to pay for improving the building’s concessions, rest rooms and concourses. The school’s Thompson-Boling Arena is one of the few college arenas that sustains itself with strong men’s and women’s basketball programs, Pieper said.
The University of Michigan is interviewing alumni to determine the demand for suites, part of another seating expansion to Michigan Stadium, which already has the most seats in college football with 107,501. “They want to remain the Big House,” Pieper said.
The Tennessee and Michigan renovations are key elements of 20-year master plans that extend to other facilities on campus, Pieper said.
“Neyland is an older stadium that has been renovated piecemeal with end-zone seating and upper decks,” Pieper said. “They didn’t [previously] have a master plan. It’s money well spent. Georgia did the same thing in implementing a master plan [at Sanford Stadium]. There are 13 phases potentially to be done.”
The lack of state funding to finance multimillion-dollar renovations of college football stadiums has forced schools to rely heavily on their primary donors to fund the projects.
A $90 million overhaul of the University of Iowa’s football stadium will add 40 suites.
“The bottom line for all of these projects is that there are restrictions on public funding and tightening of belts,” said Pieper, who worked on the Kinnick project when he was with HNTB.
“Colleges are struggling to implement these renovations because every athletic director is struggling with their budgets,” said Scott Radecic, senior principal with HOK Sport and the firm’s point man for collegiate projects. “They need to manage their costs, and at the same time they want to be more competitive than the other schools in their conference. They’re balancing the need to generate more revenue versus the quality of their programs.”
Colleges tend to request more improvements than they can afford, when it’s the opposite end of the spectrum they should consider, Radecic said.
“You always want one less suite so you can create demand,” he said. For example, Iowa received 43 commitments for the 40 suites and can build more units if necessary.
Professional teams, although they have capital expenditure money built into their budgets, also struggle with keeping renovation expenses at a manageable level at their facilities.
“The dilemma is finding a modest construction cost with significant revenue gains for a three-year return on investment,” said Earl Santee, senior principal with HOK Sport, specializing in Major League Baseball.
Santee counted eight MLB stadiums in various stages of renovation. They’re all tweaking their seating bowls in search of additional revenue. All but two of those ballparks are less than 15 years old.
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“You can get a lot more value with a club seat than a suite,” Santee said. “The construction costs less, there are three times as many seats and you can charge almost the same price for a ticket.”
The key is pinpointing the patron for that “tweener” market. “They’re looking for the new baseball fan that has never owned season tickets and has wealth, people with disposable income that can come to the game and have a unique experience,” Santee said.
The other issue is deciding where to put that new inventory, other than the established trend of putting seats near the dugouts. “They’re all adding premium seats, but they’re in the hundreds, not thousands,” he said. “Some are low-hanging fruit with a quicker return. The question is whether to add 200 seats on the field and charge $50 a game or add 400 seats at $200 a game. Even though there are more capital costs, you’re adding more revenue in the end.”
The Chicago White Sox went against the trend by eliminating 6,600 seats in the much-maligned upper deck at U.S. Cellular Field and could lose an estimated $792,000 in revenue this season, said Scott Reifort, the team’s vice president of communications.
The team’s fan base and the local media, however, supported the move to get rid of the top eight rows of an upper bowl that often sat empty due to the extreme height and angle of the structure. Home attendance has increased 20 percent over last year, which made the change worthwhile, Reifort said.
Renovations often hinge on upgrading food concessions because of the quick return on investment; adding points of sale can increase revenue 15 to 40 percent, depending on the extent of the existing food operation, said Chris Bigelow, a food service consultant.
“The older arenas and stadiums don’t have enough premium, so they want clubs and restaurants,” he said. “Now, everybody wants multiple clubs.”
Comcast-Spectacor and Aramark will be knocking down walls soon on the east side of Wachovia Center to build a food court at the Philadelphia arena. It will open to the outdoors in warm weather to lend a formal environment to the popular pregame “block parties” the arena has outside the building during the NHL and NBA playoffs.
Comcast owns the arena and is sharing the cost of the $5 million project with its concessions firm. Together, they expect to generate an additional $3.5 million to $5 million annually in food sales. This is Wachovia Center’s fifth renovation since it opened in 1996.
"You’ve got to keep the building fresh and innovative."
Peter Luukko, Global Spectrum
The Peoria (Ill.) Civic Center anticipates increasing revenue by making it easier for basketball, hockey and indoor football fans to navigate the 12,150-seat arena. The facility is converting what have traditionally been crowded concession stands to a food court as part of a $55 million renovation of the 20-year-old complex.
“The food court will eliminate congestion in the concourse and the rest rooms,” said Debbie Ritschel, general manager of the SMG-operated facility. “We’re doing the same thing with novelties. Our old format was putting eight-foot tables in the hallway, which made it tough to get around.”
Sports facilities and their tenants also realize that storage closets and administrative offices are taking up valuable concession space. Shots Bar, the indoor-outdoor tavern at the St. Pete Times Forum, was built in a location that was previously a storeroom. “Now, it’s a destination point that opens early, at 3 p.m.,” Henry said.
“In an arena, it’s amazing how many non-revenue items are on the concourse, such as offices and break rooms,” Bigelow said. “Now, they’re moving those areas to the back of the house, downstairs or off site.”
Aramark moved its 5,000-square-foot office behind home plate at Fenway Park last year to a converted warehouse in the outfield. The relocation provided relief for fans walking the main concourse and allowed the concessionaire to concentrate efforts on a new outfield food court.
The area was themed as the “Big Concourse,” with candy-striped awnings and a sit-down dining area, a first for concessions at the 92-year-old ballpark as the Boston Red Sox continue to find ways to generate more revenue at the venerable facility.
“We found some win-wins by using our other real estate more wisely,” said Janet Marie Smith, vice president of planning and development for the Red Sox.
“Years ago, the real estate was not as valuable,” Bigelow said. “People didn’t think in those terms. The [Kansas City] Royals have moved their offices into a separate building in the parking lot to expand the club level and the concourse.”
Sports facilities are also taking advantage of the land immediately outside arenas and stadiums, discovering the moneymaking opportunities for food, beverage, retail and live entertainment.
The Phoenix Suns added a Starbucks coffee shop, a new team store and a high-end Italian restaurant operated by Levy Restaurants surrounding America West Arena. The team “turned the facility inside out,” said Paige Peterson, the arena’s general manager.
A pavilion area is part of $70 million in renovations at America West Arena in Phoenix.
Michael Hallmark, who originally designed AWA, worked with other designers to plan those improvements in addition to upgrading the interior with two exclusive clubs, new courtside seating and four sponsorship zones.
“We looked at this as an urban development opportunity, a revenue opportunity,” Hallmark said. “The suite market hasn’t surpassed our ability to deliver on that. But there were so many other good things that this building can do for us.”
Suns owner Jerry Colangelo took one look at Staples Center in Los Angeles shortly after it opened in 1999 and knew it was time to start planning what would result in a $70 million renovation, said Rick Welts, team president and chief operating officer. AWA aged rapidly from a technological and amenities standpoint, going from the NBA’s latest and greatest arena in 1992 to the league’s 17th-oldest facility seven years later.
“The amenities that it didn’t have started to be more visible sometimes than those that it did have,” Welts said. “Our challenge was how do we take that facility without the benefit of $200 million to $300 million of taxpayer money and return the arena to not only state of the art but right back in a leadership position.”
The Suns’ $40 million contribution will be repaid through ticket surcharges. The city provided the balance of funding that included a $5 million low-interest loan to the team. The Suns and AWA expect to increase revenue from $7 million to $10 million a year.
The redevelopment of Lambeau Field in Green Bay has been well documented and applauded, with the 366,000-square-foot, five-story atrium attached to the stadium a primary factor in the Packers’ announcing a record profit of $23 million from fiscal year 2004.
The publicly owned team was desperate to boost its financial standing after plummeting from ninth in NFL revenue in 1997 to 20th in 2001 after the 1990s building boom. “Once you get past the TV contract, the next best revenue source is your stadium,” said Bob Harlan, the Packers’ president and CEO.
What’s interesting, however, is that there was no concrete vision to create a year-round destination within Lambeau despite the fact that Harlan for years would receive numerous requests to book special events at the stadium.
“We originally focused on game-day revenues only, playing 10 Sunday afternoons, but we weren’t quite hitting our target,” said Bob Dunn, president of Hammes Co., the Madison, Wis., developer that worked with Ellerbe Becket on the master plan. “The more we studied and analyzed it, we realized there was more opportunity there. It was more financial driven than by design.”
The Jacksonville Jaguars are perfecting the tailgating concept in extending their game-day business into the parking lots at Alltel Stadium to help offset their $33.1 million portion of updating the facility.
The Jags spent $4 million to develop the Pepsi Plaza, a 50,000-square-foot interactive area outside the north end zone that includes 33 cabanas, permanent metal structures with roofs, TVs, ceiling fans, tables and chairs and grills.
The team rents the cabanas for $2,500 a game or $2,000 a game for the entire season. The package provides 20 game tickets, food and beverage from Levy and parking for six vehicles.
“It’s the suite concept for the tailgate experience,” said Bill Prescott, the team’s chief financial officer. “We think there’s a market for corporations and individuals coming to the stadium and entertaining. We have enough land to develop another 30.”