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Corporate hospitality at sporting events started out as a way to entertain clients with a ticket and a hot dog. It has developed into an industry with sophisticated methods to determine return on investment and a focus on providing a first-class experience.
“It’s actually a robust, growing portion of the sponsorship world over the last four to five years,” said SportsMark CMO Keith Bruce, who works with clients such as Visa and Xerox. “The industry is in a pretty healthy place compared to some others.”
The exact size of the corporate sports hospitality industry is unknown, but industry executives estimate the size between $1 billion and $2 billion annually, depending on the timing of high-value, quadrennial events such as the Summer Olympics and FIFA World Cup.
Brands and agency executives point to two areas that have shaped changes to corporate hospitality in recent years: more of a focus on ROI and providing high-quality, unique client experiences.
Proving ROI was a natural outgrowth from existing legal guidelines that limit what companies in various industries, banking for example, can spend on individual clients.
“Prior to developing our experiential marketing programs, it’s imperative that we have a clear understanding of legislation, legal and internal guidelines, so that once we develop those plans they are absolutely in keeping with those rules,” said Dan Fleishman, senior vice president and director of sponsorship alliances at Wachovia.
Like all banks, Wachovia tracks and limits the amount spent on clients hosted at sporting events, concerts, dinners, etc. It also assigns dollar values to spending on guests attending the PGA Tour event it title sponsors in Charlotte.
That focus on ROI has extended into other industries. Many companies now emphasize ROI by tracking which guests attended an event and whether business objectives were reached.
“It’s now about setting and meeting objectives to establish ROI,” said Octagon North America President Jeff Shifrin. “It’s no longer ‘Come to the event, have fun and maybe we’ll get the sale in a couple weeks.’”
One benefit of hospitality over other forms of marketing is the ability to directly tie new revenue to an event, as opposed to trying to associate sales with advertising impressions. “It’s so much easier to understand the ROI in hospitality than when you’re putting an ad out on TV or a billboard,” said Robert Tuchman, president of Premiere Corporate Events, formerly TSE Sports & Entertainment.
SportsMark was one of the first agencies to track hospitality ROI. The agency uses a proprietary system called Strategic Event Evaluation Platform that helps clients identify the types of guests they should invite to an event and create objectives to be measured at the conclusion of the event.
The manner in which returns are measured also has changed. Many companies that used to be satisfied simply with anecdotal returns about client experiences are now empirically measuring attitudes toward the host and how that translates into revenue.
That means integrating more business meetings and product showcasing to make the most out of the time between companies and their clients. Business meetings are an increasingly important part of creating something larger for each client and event.
“It used to be about big shrimp,” Shifrin said. “It was about getting people tickets and then getting them back to the hospitality so they could dip the shrimp in the cocktail sauce. But everybody started realizing that a suite just wasn’t enough anymore.”
At the Super Bowl and Masters, the two most popular annual events in corporate hospitality, the ancillary activities have become an integral part of the overall experience. That means arranging for flight, airport transportation and lodging, and extends to first-class dinners, celebrity appearances and other activities to supplement the actual sporting event.
“The event is such a minimal part of the program,” Tuchman said. “It’s really about the overall experience because when you go to the Super Bowl or Daytona 500, you might be there for four or five days.”
At the U.S. Open this month, Lexus, a USGA partner, sponsored a new sports hospitality concept called Style Villa Sports, run by Miami Marketing Group and Peter Jacobsen Sports. The event brought together approximately 800 celebrities, athletes, models, sports industry executives, Lexus clients and select local residents for a one-night party at the Hard Rock Hotel in San Diego.
As a whole, most buyers and sellers of hospitality say professional golf still provides one of the best opportunities for them to entertain and interact with clients.
AT&T, which sponsors the Masters and two PGA Tour events, as well as numerous other properties, sees its best ROI in golf. “Golf tracks very, very high at all levels, from (PGA Tour) tournaments to one-day tournaments and clinics,” said Lora Watts, senior vice president of global customer events for AT&T. “Golf is a high producer.”
Brands and their consultants say golf provides long periods of time to entertain clients in a high-class venue with no assigned seats. It also is one of the few sports that people watch on television and play on weekends.
Another advantage to golf is the pro-ams that allow buyers of sponsorship and hospitality to play with some of the top-ranked players in the world each week on the LPGA and PGA tours.
“It gives you a chance to get out there with your favorite player, whether it’s Phil Mickelson, Tiger Woods or Trevor Immelman, and play 18 holes of golf,” said Peter Jacobsen, a longtime PGA Tour player whose agency stages events and consults brands in the golf space. “If you’re a baseball or basketball fan you can’t hit a pitch off Roger Clemens or go one-on-one with Kobe Bryant.”
NASCAR also has become popular due to its willingness to allow access to garages and pit areas, and its drivers and team owners are arguably the most accessible in sports. During this year’s Coca-Cola 600 in Charlotte, driver Robby Gordon hit the Jim Beam party deck shortly after his Beam-sponsored car was knocked out of the race.
“I don’t think anyone’s ever going to touch the access that NASCAR gives,” Shifrin said. “NASCAR is about having meetings with drivers before the races and getting into the pits and seeing the cars close up. They are providing access that other people can’t get. When you’re sitting there talking to Dale Jr. a couple hours before the Daytona 500, that’s a once-in-a-lifetime experience.”
Similar to other sports, corporations are looking for first-class experiences in NASCAR, which has led track owners SMI and ISC to install more high-end clubs such as Octane at Phoenix International Raceway. The 100-person club mixes NASCAR races with views of the mountains and a menu of sushi and various wine labels.
SMI opened a similar club at Lowe’s Motor Speedway in the late 1980s, providing credence to the complaint that despite the growth of corporate hospitality, some sports are providing the same hospitality formula week after week, year after year. As a result, some brands are supplementing existing offerings with programs that fit their own needs.
Bank of America has operated its Hogan’s Alley traveling hospitality venue at golf tournaments for the last few years, and recently created a similar version to leverage its NASCAR relationships.
CitiFinancial, Vitaminwater and Toyota are among the many companies that have leased SkyDeck mobile transports, which are parked on the infield and feature meeting space, private bathrooms, TVs, dining areas and full bars, and offer the ability for a company to wrap the entire vehicle in its marks.
The desire to create unique experiences will continue to drive the industry in the coming years, leaving some to wonder, what’s next?
“We went from serving good food, then great food and drinks in a tent, to having current and former players and celebrities in the tent making speeches,” Shifrin said. “I want to see what the next level is. Is it some sort of participation?”
Agency executives toss around ideas such as walking alongside a Kentucky Derby entrant to the starting gate or working as a ball boy or ball girl at a U.S. Open, but they admit such participation will likely never approach involvement in an actual competition.
“We haven’t had anyone ask to play Augusta with Tiger Woods,” joked Shifrin.
Most brand consultants see professional golf, and specifically the Masters, as the sport that will continue to see the most growth in hospitality. Gains are also expected in NASCAR, the men’s Final Four and college bowl games.
One trend that bears monitoring is properties like the NFL and NCAA taking more control over the hospitality inventory of their signature events. Many would like to see other leagues and governing bodies follow suit in order to curb the ubiquity of secondary ticket and travel brokers.
“I think properties would be well-served to take over a little more control of their hospitality assets so there is a more centralized process,” Bruce said. “The financial impact on the market can swing wildly based on how much control the properties have on the access.”
As the clock ticks toward the Beijing Summer Olympics, planning is under way for the 2010 Vancouver Winter Olympics and the 2010 FIFA World Cup. But conversations with leaders of corporate hospitality agencies sound as if they are heading for a day at the beach.
“Waves,” said Wayne Eldevik, who heads Maritz Inc.’s SME Olympic services unit. “We operate in waves.”
A wave is a unit of Olympic guests for a specific set of days. The length of waves — and who will be included in each during the 17 days of the Games — rests at the logistical core of staging and managing the movement of, sometimes, thousands of people from dozens of countries flying in and out of a distant nation for fewer than 100 hours. Five-day, four-night waves. Four-day, three-night waves. Even two-day waves.
In Eldevik’s case, for instance, SME is managing 3,000 guests for Bank of China, an official Beijing Organizing Committee partner. He can install two-day waves for customers commuting from Shanghai.
But Carlson Marketing’s Pete Moore, who manages TOP-sponsor Kodak, is bringing about 500 guests from more than 20 nations. Jet lag and all, four- and five-day waves are his typical stays. Same with SportsMark and its gaggle of Visa, Adidas China, Hilton and Bank of America guests.
Leaders of four U.S.-based agencies emphasized their tasks involve more than getting their arms around all the moving parts of transporting and feeding guests, shuffling hotel rooms, procuring and assigning tickets — far in advance of knowing who will actually use them — and getting folks to the Great Wall.
Key words for their clients — firms that hire them to run their Olympic and World Cup programs — must be “Why?” and “Who?” Which guests will bring them the greatest return on their global sports marketing investment and objective? (By the way, increasingly, guests are being asked to pay their own airfare.) Is there a product launch that certain customers must attend? Which employees should be on site?
“And you thought this was easy,” said SportsMark President and COO Steve Skubic. “The Olympics are 16 back-to-back Super Bowls.”
As part of its TOP sponsorship, a global Olympic partner is allotted 200 hotel rooms — double occupancy expected — and four tickets per day per room. Sponsors of local organizing committees typically receive a smaller hotel and ticket inventory.
There is no typical day for a corporate client’s guest, but it is certain to include one sporting event, one cultural trip and, probably, some focused business-to-business contact, perhaps by going behind the Olympic scenes to see how their host’s products are used at the Games.
Jet Set Sports’ business is different from the more boutique approaches. Jet Set is a sponsor of various national Olympic committees, including the U.S. Olympic Committee, and also the ticket sales agent in six nations. Jet Set expects to handle about 30,000 corporate-linked guests, said founder and CEO Sead Dizdarevic. With consumer packages — ticket and accommodation plans for average citizens — Jet Set is moving another 60,000 people into Beijing.
Another global property on the horizon is the 2010 FIFA World Cup. SportsMark is beginning to manage Visa’s program. It’s early in the process, but unlike Beijing — where there is a surplus of hotel rooms — South Africa’s cities are short on accommodations.
But Beijing is filled with its own challenges. The most pressing — besides scrambling for travel visas and official letters of invitations from hotels — is BOCOG’s requirement that specific names be assigned to those using tickets to the opening and closing ceremonies.
Despite protests from hospitality agencies, BOCOG has said it needs every ticket holder’s name 20 days in advance of Aug. 8. And no changes.
“Someone gets sick, what do you do with that ticket?” Moore asked. “What is actually going to happen on that day we don’t know.”
Language skills are critical. Moore went to Xian, 500 miles from Beijing, to recruit more than 100 university students who are majoring in English to work for him during the Games. Jet Set established its own English-language hospitality academy and trained 1,200 people.
Despite political issues and earthquakes, agency leaders have seen no retreat among customers. And the five rings are forever turning. SportsMark has already placed its Vancouver ticket orders. Carlson’s Moore has moved to the 2010 Winter Olympics city to whip up business.
The waves are already forming for the next Olympics.
Jay Weiner is a writer in Minnesota.
There was a time 10 years ago when sports hospitality was considered by many as the least attractive part of our industry. Few sports executives considered it a potential revenue source for their organizations.
It didn’t take long to realize that the ad buyers and corporate types I had been selling to from my sales job with a startup sports magazine were interested more in the added-value aspect of our advertising packages than in the ads.
I’ll never forget the media buyer who told me that if I could include two Knicks playoff tickets as part of a $300,000 deal, then it was all mine. He said the tickets were much more important for him than the actual placement of the ad campaign.
His client was an avid Knicks fan. If he could score tickets for him, he knew he was going to assure himself of more business. That was my light-bulb moment.
Even back then, before the Internet and wireless boom, media spending was starting to change. Corporate advertising budgets were becoming more fractionalized and there were significant resources being focused on the promotion and hospitality areas. Corporations soon realized that to make an impact they needed to activate the sponsorships they were spending marketing dollars securing. Hospitality soon became an integral element of the overall sponsorship offering.
As corporate spending habits evolved, venue managers began to realize there was a huge opportunity to capture additional dollars by creating premium experiences at the events they hosted. With this in mind, ownership groups started to construct new stadiums and arenas with hospitality as the determining design factor. Jerry Jones’ new stadium for his Dallas Cowboys will feature 300 premium luxury suites.
All of this has occurred because hospitality has become a major driver in revenue generation for sports franchises. The margin a team can make in wrapping a ticket around an experience dwarfs what it can bring in on selling that ticket alone.
What has made this work for teams and leagues is that corporations (their most lucrative clients) have consistently expanded their entertainment budgets over the years. Corporations understand that they need to create incentives for their sales personnel, distributors and employees to stay competitive in meeting Wall Street expectations. They also know that they must entertain their clients for fear of losing them to a competitor. This causes the ante to keep rising as companies vie for the time of busy executives.
What has been even more remarkable is what has happened in the ticket industry with the growth and acceptance of the secondary ticket market. There was no StubHub 10 years ago. At that time, the ticket was the key component of any hospitality program. Today, ticketing is becoming more of a commodity as the secondary and primary markets start to blend.
Ticketmaster just recently purchased TicketsNow for $265 million. Ticket companies have captured these markets, but they continue to seek out hospitality companies to help fatten their margins.
No longer will a ticket and a beer suffice. In today’s world, with a continued increase in travel costs, custom tours to sporting events are more and more popular. Tour companies continue to improve the experience and make these events into first-class operations. Universities, teams and leagues have all jumped into the hospitality and travel game head first.
They are realizing that the fan experience is what is driving the popularity of their events. As people continue to seek out these lifetime experiences, the demand becomes only greater.
Executives understand that there is no rate card for experiences. How can you value watching a game with a childhood legend in a luxury suite while you down some shrimp cocktail and beer?
With its high-margin item and a feel-good product, the hospitality industry is proving to be the darling of the sports business industry these days.
Robert Tuchman (email@example.com) is president of Premiere Corporate Events, formerly TSE Sports & Entertainment, a division of Premiere Global Sports.