SBJ/20080623/SBJ In-Depth

Industry has come a long way in a decade

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 (rtuchman@premieresports.com) is president of Premiere Corporate Events, formerly TSE Sports & Entertainment, a division of Premiere Global Sports.

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