SBJ/Nov. 1, 2010/SBJ In-Depth

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  • A premium on innovation

    Ask anyone who sells premium seating and they’ll tell you about the challenges in determining the best inventory mix. Do you turn vacant suites into club areas? Offer short-term contracts? Tack on additional perks? All of the above?

    As sports facilities mature, those challenges become more pressing, especially for venues that overbuilt in the heyday of the premium market. It’s rare indeed to find a venue where premium seating has gone unchanged. For example:

    TD Garden in Boston broke apart club-seat packages, offering mini-plans and separating them by sport, realizing that few companies and individuals can attend every event.

    Edward Jones Dome in St. Louis sweetened the pot for its top customers by offering field-level seats as an add-on to their purchases.

    Progressive Field in Cleveland offers one-year deals in an attempt to fill an overabundance of suites.

    Staples Center in Los Angles offers gift cards and other perks to land commitments for club seats.

    Miller Park in Milwaukee sees more clients pooling their resources and sharing a suite, as fewer companies are willing to go it alone.

    Madison Square Garden plans to spend $800 million on renovations that, among other things, will put premium seating closer to the action.

    In the pages that follow, those six venues outline the changes they’ve made to their premium-seating inventory since opening, projects still in the works, and other steps they’re taking to stay ahead of the game. Also, executives in the trenches discuss the trends they’re watching, the inventory that’s the most difficult to sell, and how the premium-seating market could look in the future.

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  • Architects design flexibility into projects

    During the stadium binge of the 1990s, the sports architecture firm then known as HOK built three baseball parks that each included more than 100 suites for three teams: the Chicago White Sox, Texas Rangers and Cleveland Indians.

    As the recession has dampened demand for suites, all three of those teams are searching for ways to reconfigure what are now vacant suites into areas that meet today’s consumer appetite.

    “It wasn’t sustainable long term,” said Earl Santee, senior principal at sports architecture firm Populous, formerly known as HOK. “Fortunately we made them big enough in the ’90s that they’re easy enough to adapt. You take private suites out and replace them with a club. That’s easy to do because structurally all the infrastructure is there. And that’s what’s happening for that era of ballparks. Once you hit 10 years, that’s when you see them trying to adapt to a changing marketplace.”


    ADAM JACOBS (2)

    Michigan
    Stadium’s
    renovation
    provides
    for flexibility
    in case demand
    changes for
    indoor and
    outdoor club
    seats.

    With the economy stalled and corporate entertainment flagging, sports architects are finding that one of the more important aspects of their design is flexibility — the potential for a building to be adapted to changing markets and consumer preferences.

    At one time, more was better. Now, less is better. Tomorrow? Who knows.

    “People always assumed that they’d be able to keep the inventory sold and building out new stuff is generally pretty easy,” said Jon Niemuth, principal and design director at Ellerbe Becket. “The thought of going the other way, flexing backwards so something’s at a lower price point, that is still a pretty new attitude.

    “You want to allow lateral flexibility that will allow them to flex their inventory up or down. So what’s the least restrictive footprint you can find?”

    Creating that sort of flexibility within levels generally is a simple and inexpensive proposition. As long as suites are built on the same access level, they can be expanded or contracted to match the market.

    The recession has caused franchises in all sports to alter their suite sizes, splitting some to offer lower prices and combining others to create special event suites that can be rented for individual games. Some teams have combined large swaths of suites to create premium, all-inclusive areas that can be sponsored.

    “You blow out all the walls and create a premium space that meets a different need,” said Chris Lamberth, business development manager at 360 Architecture. “If you can give them a 6,000-square-foot space that used to be 15 suites, you’ve created an opportunity. Maybe they can’t sell the suites right now, but they can find a sponsor for another premium club.”

    The recent renovation of the football stadium at the University of Michigan includes club seats, an amenity that wasn’t available previously. Some are indoors, some outdoors. Indoor club seats require a donation of $4,000 per seat, plus the cost of the ticket. Outdoor club seats can be had by donors who give $1,500 to $3,000. While the university researched the matter, there was no way to know for sure how many fans would want to pay more to sit inside once they’ve compared the experiences.

    Fortunately, architecture firm HNTB designed the stadium with the indoor and outdoor club seats adjacent, so that they can flex based on demand.

    “They’ve never had that product before,” said Tim Cahill, vice president and director of sports design at HNTB. “So the wall between indoor and outdoor can be relocated if in fact their market changes for club seating.”

    HNTB also has designed college stadiums with areas that easily can be converted from suites to indoor club seats if the mix of demand for the two shifts, Cahill said.

    Looking to the future effectively also means consideration beyond seating preferences or economic conditions. Architects say they counsel clients to make sure their structures can accommodate technological advances, which are difficult to predict.

    Lamberth pointed to smaller arenas that save money by constructing roofs that aren’t strong enough to bear the weight required in the riggings for a concert or family show.

    “When they build it, they may say they’re never going to have concerts,” Lamberth said. “Really? Well, what if you try to sell the team? Or if you need to generate more money? If you think about that stuff farther out, maybe for $5 million or $10 million more you’ll build in what’s missing, and that will make the building more viable down the road.”

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  • Arena a model for keeping up with trends

    TD Garden is one big league facility the sports industry points to as a model for adjusting premium-seat inventory to meet demand.

    The Boston arena, now 15 years old, opened in 1995 with more than 100 suites and about 2,400 club seats. Those two products were sold on multiyear terms, and the investment covered tickets to Bruins and Celtics games and first rights to buy concert tickets.

    Now, the venue has pared its suite and club-seat inventory, similar to many other big league arenas. The number of traditional suites has been reduced to 88 and total club seats have been cut more than half to 1,100, with supporting hospitality spaces repositioned into new revenue-producing products.

    Arena owner Delaware North Cos., the Bruins and Sportservice, the facility’s food and retail provider, learned, like others over the years, that few companies and individuals have the ability to attend every event.

    Four years ago, arena executives decided to refresh club spaces and break apart those ticket packages, separating them by sport and into mini-plans offering as few as 10 games. The changes provided the flexibility patrons requested, said John Wentzell, president of Delaware North Cos. Boston.



    TD GARDEN
    The Lofts (above) and the AT&T Sportsdeck
    highlight the arena’s premium inventory.

    “We drive a different business model than most arenas,” Wentzell said. “You pay a license fee, which is your membership in the club. We try not to sell a seat but a membership.”

    The fee, separate from the cost of tickets to events at TD Garden, provides incentives such as opportunities to go to a New England Patriots game or play a round of golf at TPC Boston.

    The revamps have developed new hangouts to adapt to a younger crowd than those who first bought regular club seats 15 years ago. Naming-rights deals with AT&T and Heineken for two premium areas helped offset the investment.

    The AT&T Sportsdeck, the first club renovation done in 2006, offers an active bar scene with 160 reserved seats and standing room for 75. The club fee is $2,000, on the low end of the arena’s premium offerings, plus a $50 cost per ticket.

    For the 150-person Heineken Boardroom, Delaware North consolidated 10 suites over two levels in 2006-07 for a two-story club tied to 75 memberships. The fee per member is $17,000 annually and on average, those patrons pay $95 for a Bruins or Celtics ticket. The big difference with the Boardroom, now in its fourth year, is it operates on a pay-as-you-go model. Members pay only for those tickets they use when attending an event at TD Garden.

    “We oversell the memberships because there is breakage and those people do not actually attend every game,” Wentzell said. “It has allowed us to create a very interesting yield mechanism and made it quite profitable for us.”

    Another project at the arena, The Lofts, opened two seasons ago. The 12 opera-style boxes seat four to six people and are sold in 10-game packages at a cost of about $15,000 a loft, Wentzell said. A tapas menu is included in that cost.

    Some of TD Garden’s 88 suites remain unsold, but Wentzell would not provide specifics. They range in price from $125,000 to $300,000 annually. Tickets average $100 and are a separate cost.

    Wentzell said that TD Garden’s single-game rental business has grown to a point where officials will start holding back more suites because they can generate more revenue per event compared with long-term leases.

    “The market has changed, it’s not going to go back to the way it was, and it’s probably going to change even more rapidly going forward,” Wentzell said. “You have to pay attention.”

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  • ‘Fan cave’ catches on quickly with Tribe fans

    The Cleveland Indians are searching for answers to resolve a tremendous amount of excess suite inventory at Progressive Field, a ballpark that opened in 1994 with 130 skyboxes on three levels.

    Newer MLB facilities opened with less than half that total. Citi Field and Yankee Stadium, combined, have 105 skyboxes tied to long-term leases. Target Field, the Minnesota Twins’ new park and a facility the Indians have toured for new premium seat ideas, has 54 suites.

    “Look at the last four to five buildings that have been built,” said Vic Gregovits, the Indians’ senior vice president of sales and marketing. “In the mid-90s, there was more luxury, more suites and more club seats. That’s what it was all about because we didn’t have premium” to that point.

    Sixteen years later, corporate hospitality has done a 180. The recession didn’t do teams any favors, crushing companies’ marketing budgets. The Indians converted some suites to party areas and reduced the total to 116, although Gregovits declined to say how many remain unsold.

    “We have looked to reinvent the areas down the foul lines,” he said. “Idealistically, in the future, we want the suites to be in more prime locations. In a perfect world, we would like to keep them all between first and third base.”


    DAN MENDLIK / CLEVELAND INDIANS
    The Cleveland Indians took one of their suites off
    the market and made it into a group hangout.

    For the past several years, the Tribe has offered one-year deals to keep suites occupied, compared with the three-, five- and seven-year leases offered when the stadium opened. Team officials see more shared suites, with two to four companies teaming up to pay for those units.

    This past season, the Indians redeveloped a 12-person unit between home plate and first base into a “fan cave” group space featuring a pool table, Nintendo Wii and vintage arcade games. The $3,000 cost per game covered food, soft drinks and beer. The bookings for the 12-person space were strong enough that the Indians plan to build a second, larger one for the 2011 season, Gregovits said.

    “We used the first one for sweepstakes and contest winners and as a seat upgrade at the park,” he said. “We started off thinking it was a knockoff of the ‘man cave,’ but we also found it was very popular with the tweener age segment. With the video games and coolness of the area, kids were all over it.”

    Six years ago, the Indians changed the business model for the park’s 2,000 club seats to include the cost of food and drinks in the ticket price. Those seats cost $65 to $100, based on whether they’re purchased in advance or on the day of the game. The all-inclusive model has helped with retention and new sales, Gregovits said.

    For next season, the Indians have waived the $500 to $900 annual fees for full-season ticket holders to access the Stadium Club, the park’s fine dining facility. The move reflects a big drop in demand for entertaining clients in a “white tablecloth” environment, Gregovits said. Team officials are also developing a separate level of membership with more direct benefits for fans who do not have full-season plans.

    “We want to keep it active and also add value for our customers,” he said. “It’s a beautiful room but enclosed. What you’re hearing from the fans these days is, they want to be outside, they want to be on a patio and they want to have a view to the field to feel like they’re part of the action.”

    The Indians are also thinking of building a hybrid product, a cross between a suite and club seat similar to the Pittsburgh Pirates’ Cambria Club at PNC Park. They have visited seven MLB venues, seen the popular loge boxes at the Edward Jones Dome in St. Louis, and toured the Palace of Auburn Hills.

    “We have gone to several parks to see what is innovative,” Gregovits said. “We are really in the research and gathering information mode right now.”

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  • Field-level seats get patrons close to the action

    The first major premium seat upgrades at the Edward Jones Dome since it opened in 1995 have paid big dividends for the St. Louis Rams.

    The field-level seats, all-inclusive club and loge boxes opened in 2009 and every piece of additional inventory is sold, said Bob Reif, the Rams’ executive vice president and chief marketing officer.

    The 48 field-level seats, 24 behind each end zone, cost $5,000 for the season and are available exclusively to suite holders as an add-on to their skybox purchase, Reif said. The cushioned, swivel chairs, protected by a railing, are just nine feet from the back of the end zone. Field-level patrons walk through the same tunnel the players use to reach the field.

    Reif got the idea for the seats from his days working at Indianapolis Motor Speedway.

    “One product I thought was great was the pit and garage passes, where you leave your suite and go down to the pit,” he said. “This is a similar product; these seats are only eligible to people who own suites. It gives you a different perspective.”


    ST. LOUIS RAMS
    The 48 field-level seats are an add-on to skybox
    purchases.

    The all-inclusive club, sponsored by The Sports Nook, a local ticket broker, was created by tearing down the walls of four suites in the northeast corner. Those skyboxes were previously reserved for community programs and did not typically generate revenue, Reif said.

    The ability to sell two- and four-seat packages in the club provides an option for companies that don’t need a full-scale suite, he said. The Sports Nook seats cost $525 a game for the season. Food and drinks, a pregame field pass for one game, and a chair massage are part of the package.

    The loge boxes, marketed as four-person mini-suites with club chairs and two televisions, cost $18,000 a seat for the season, including food and drinks and private parking. “Park your car, take a private entrance, go up the elevator to the third floor and walk 10 steps into your club,” Reif said.

    The loges are part of the Clarkson Jewelers Club in the south end zone. Loge box holders can hang out and shoot pool, play Xbox games and browse Clarkson’s display case, which contains about $1 million in jewelry, watches and accessories. It’s all brought in by security three hours before kickoff and removed within two hours after the game. Clarkson associates are on hand for those fans interested in making a game-day purchase.

    Other NFL teams visiting St. Louis have seen the appeal of the loge boxes and the affordable prices compared with six-figure suites, Reif said.

    “The irony of all this is … NFL television ratings continue to increase because the experience in-home is so much improved over what it was in the past,” he said. “So many teams are trying to replicate that … all the creature comforts … the ‘man cave,’ if you will.”

    For the Rams, selling naming rights for two premium areas to the ticket broker and jewelry retailer was icing on the cake, he said.

    In another project completed in 2009, the Rams pushed the price of their most expensive regular seats between the 40-yard lines from $100 to $120 a game after replacing hard plastic with cushioned chairs for the best seats in the house.

    “Those are the only tickets we have increased in price in five years,” Reif said. “We did a study with the NFL and found there was great elasticity for those seats.” The 99 percent renewal rate indicates to the Rams that they could charge more money for those seats in the future.

    Fifty-three of the dome’s 121 remaining suites were up for renewal this year after their 15-year leases expired. To date, the number of unsold units is fewer than 20, not bad considering the Rams’ on-field performance of late, Reif said.

    “It’s been a challenge coming off the toughest stretch of any team in NFL history with only six wins in three years,” he said. “On top of that, with everything else happening in the economy … we have sold pretty well.”

    Reif declined to say how much additional revenue the Rams have received from the latest upgrades.

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  • Gift cards, other perks help close the deal

    Staples Center’s premium-seat inventory has remained relatively stable since the arena opened in 1999, but that doesn’t mean the building’s approach to the market has been stuck in neutral.

    The arena’s owner and operator, AEG, has found creative ways to package club-seat inventory and one year ago eliminated eight suites in the upper premium level to build the ultra-exclusive Hyde Lounge.

    Staples Center still has 150 traditional suites plus 18 event rental units. It’s a much larger number than most big league arenas, but one officials consider to be the right number for Los Angeles. The long-term suites are sold out again this season, due in large part to the 160 guaranteed dates tied to the venue’s four sports tenants.

    Having the defending NBA champion Lakers as your ace in the hole certainly helps move the highest-priced real estate. Selling club seats that cover all Lakers, Kings, Clippers and Sparks games is a separate issue.

    AEG, like other sports facilities and teams, has struggled to move that midpriced inventory. The arena has 2,600 Premier Seats, what AEG calls its club seats. As of mid-October, just under 2,000 had been sold, said Lee Zeidman, senior vice president and general manager.



    AEG
    Hyde Lounge opened last year with an invitation-
    only format, but now offers memberships ranging
    from $2,000 to $13,000 annually.

    Premier Seats cost $15,000 to $24,000 per seat for those 160 games depending on location. Despite the large gap in unsold seats, Zeidman says he’s pleased with the results given the state of the economy and the changes in spending for corporate hospitality.

    “It’s all about using the assets we have here,” Zeidman said. “The days of selling club seats based on the teams alone is done. We need to take a look at everything we have on this campus,” including L.A. Live, the entertainment district across the street from the arena.

    For the second year, AEG has packaged Premier Seats with gift cards and coupons to redeem at L.A. Live’s 19 restaurants, two hotels and the Grammys Museum. The value of those in-kind offers is $2,000, according to Zeidman. Suite owners get the same perks at L.A. Live and the value-add increases to $2,500 for them, he said.

    Separately, AEG has booked an exclusive performance for premium-seat clients to see the Radio City Christmas Spectacular starring the Rockettes at L.A. Live’s Nokia Theatre. The Dec. 11 performance — the show runs Dec. 9-12 — includes a free holiday spread provided by Levy Restaurants, Staples Center’s food provider.

    To further spur premium sales, AEG is including a complimentary membership to the Lexus Club restaurant for new Premier Seat patrons and for those renewing their deals. The regular fees are $1,500 to $5,000 per season.

    What’s new for this year is the one-year Premier Seat renewals AEG has granted to about 25 clients that have been loyal customers for the past six to 10 years at Staples Center, Zeidman said, a recognition by AEG of the difficult economic times. Those clients pay a $1,000 upcharge with a commitment to enter into a new deal for three or six years the following season.

    The Hyde Lounge, a joint venture between AEG and Hollywood nightclub operator SBE, opened last year with an invitation-only format. For this season, the operators developed a membership plan with fees ranging from $2,000 to $13,000 annually. The space has room for 175 people and has seats and open views to the game.

    AEG continues to search for additional values for existing and new suite and Premier Seat customers. Arena officials recognize they need to continue to get creative with perks.

    “We hope that by adding various things each year to our premium-seat program, it makes it more affordable and sexy for people looking to buy,” Zeidman said. “We are looking for something above and beyond the norm.”

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  • How to increase revenue as industry evolves

    During the massive North American sports facility building boom of the 1990s and early 2000s, nearly every new sports venue developed incorporated a significant inventory of luxury suites and club seats.

    A healthy economy and seemingly insatiable corporate demand helped to fuel the new building trend and the incorporation of significant premium seating, as businesses were eager to snap up luxury suites and club seats to entertain clients, reward employees and pitch new business.

    Between 1990 and 2010, the total luxury-suite inventory in the four major sports leagues in the U.S. (MLB, NFL, NBA and NHL) grew by 147 percent to more than 10,000 luxury suites (see chart). Meanwhile, club-seat inventory experienced explosive growth during the same time period, increasing by a whopping 624 percent to reach an estimated total of 450,000 club seats.

    But the building boom had a catch. As more new venues opened, the premium seating marketplace began to get crowded, increasing the competition for premium seating revenue in many cities.

    Now the economic downturn has tempered the appetite for premium seating. Many corporations have tightened spending practices, with some bailing on premium seating altogether and others becoming more reluctant to sign long-term deals. Teams have responded by slashing prices, adding amenities, shortening term lengths and offering smaller packages, such as half- and quarter-season packages.

    The future of premium seating will be defined by three key factors: diversification, flexibility and location.

    In order to maximize revenue in an ever-evolving industry, franchises must be prepared to offer a more diverse mix of premium products.


    UNITED CENTER
    United Center converted some of its unsold suites
    into products such as Theater Boxes.

    Many teams are already on their way. Take the Orlando Magic (a CSL client), for example. The new, state-of-the-art Amway Center, which opened this season, features three types of suites — Founders, Presidents and Legends suites — along with loge boxes and terrace tables.

    Teams that are not moving into new buildings must be able to adapt to changing demand, converting less desirable inventory with waning demand into fresh, popular new options.

    In 2009, United Center in Chicago, just 15 years after opening, underwent renovations that reduced its suite inventory from 203 to 169, converting unsold suites into new products such as Theater Boxes and a membership program called the Harris Club. The upscale, four-person Theater Boxes include a reserved table in an adjacent, all-inclusive lounge. The 32 Theater Boxes, which are leased for approximately $90,000 a year, are sold out and have a waiting list. Meanwhile, the Harris Club allows customers to enjoy a suite experience for a fraction of the cost of a suite.

    Another recurring theme in the evolution of premium seating is location, location, location. Once-popular mezzanine club seats have seen a decline in popularity in many facilities, as more and more premium customers prefer to sit closer to the playing surface.

    For instance, Cowboys Stadium (another CSL client) features lower-level club seats, field-level suites and even a private club through which the players walk on their way between the locker room and the field, creating a unique, up-front-and-personal experience for premium customers.

    In addition to diversity, flexibility and location, teams will continually be challenged to offer improved benefits and amenities. One recent trend has seen an increase in teams using all-inclusive packages to entice premium customers, countering the rising costs of food and beverage in premium areas.

    In the end, however, pricing for premium seating products is the most important variable as it relates to the probability for success. It is critical to create a pricing plan that is reflective of the marketplace, accounts for interest in the products and is relative to other comparable products.

    To help our clients develop the appropriate pricing strategies, we spend a considerable amount of time in the local markets talking with existing and potential premium seating clients. We conduct focus groups, one-on-one interviews, and use a variety of other survey methods.

    Along with a review of historical pricing and occupancy levels, we are able to develop a pricing strategy that best maximizes both the short-term and long-term revenue potential.

    Bill Rhoda and Ben Wrigley are principals, and Eric Habermas is an analyst, with CSL International/CSL Marketing Group. The consulting firm, based in Plano, Texas, has done market research for 75 percent of new facilities in the big leagues and college sports.

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  • Multi-owner suites become the new normal

    Miller Park opened in 2001 with 70 suites, the majority of them leased by individual companies.

    Ten seasons later, the Milwaukee Brewers have reduced that number to 64. On the Club Suite level, home to 44 units, the percentage of single owners has plunged from 90 percent to 50 percent, as firms partner up to buy suites priced at $100,000 to $200,000 a year.

    “The first casualty of the Great Recession we experienced at Miller Park was in the hospitality area,” said Rick Schlesinger, the team’s executive vice president of business operations. “In particular, we saw reduction in demand for long-term suites. Companies that used to be considered prime candidates for a full lease are interested in 40 games or 27 games.”

    “It’s obviously more work for us because we have to sell the same suite three or four times to get 81 games filled, and there is more servicing with multiple clients,” Schlesinger said. “No doubt, that is the biggest sea change we have seen.”

    Three years ago, the Brewers eliminated four skyboxes on the Club Suite level and developed the Gehl Club, a 7,900-square-foot upscale lounge tied to all-inclusive tickets covering the cost of food and drinks.



    MILWAUKEE BREWERS
    The ballpark eliminated four skyboxes to develop
    the Gehl Club upscale lounge.

    The Gehl Club, the third of four all-inclusive sections to open at the park since 2001, can accommodate 280 people. All told, there are about 850 all-inclusive seats at Miller Park priced at $50 to $100 a game.

    “We added a range of all-inclusive areas that we have been able to charge relatively higher ticket prices for and they remain extremely popular,” Schlesinger said. “Whether you call them premium areas or all-inclusives, we are still seeing a demand for that experience.”

    In addition, five Club Suites are reserved for single-game rentals, Schlesinger said.

    The 18 Founders Suites on the field level are being renewed after their initial 10-year lease terms expired (two more are reserved for team use). The good news is the Brewers expect all 18 to be sold with extensions and new deals spanning three, five and seven years, Schlesinger said.

    A few original Founders Suite owners declined to renew but the Brewers found other businesses to come in and fill the gap, he said. Location, size and viewing angles are driving renewals. The 2011 prices are $200,000 a unit, with 3 percent to 6 percent annual escalators.

    “Our market looks at those correctly as very high-end real estate, the beachfront property,” Schlesinger said.

    “Based on our tracking data, the usage levels are 96 percent, so there are almost no games when they were not being fully used,” he said. “The key thing our suite holders tell us is if it becomes a burden, the value depreciates tremendously, and that’s why we pay a lot of attention to use rates.”

    The Brewers do not conduct many mass marketing campaigns to sell premium seats. Instead, they have increased staff dedicated to suite sales and rely on existing suite holders to help them find new customers.

    “We’re not shy about asking them if they’re aware of companies or persons interested in suites,” Schlesinger said. The Brewers do not provide incentives for suite holders who help find new business, but “we are working on a few ideas there,” he said.

    The Brewers understand they may have to make further adjustments to premium inventory to catch up with changing consumer habits “that we haven’t even projected yet,” Schlesinger said.

    “We are taking a one- to two-year hiatus in developing new areas. Frankly, we plan to canvass other teams and see what they’re doing, and if somebody’s got an idea that’s working that we can translate here, we’re going to take it.”

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  • Top customers want closer to the action

    Twenty years after the fact, Madison Square Garden is finally putting its best customers down low in the bowl.

    The plans for MSG’s $800 million renovation call for putting most of the project’s 96 suites much closer to the action, compared with the 89 units that were added at the top of the arena in 1991.

    MSG, hamstrung in large part by the constraints of its location over Penn Station in the heart of midtown Manhattan, built its current suites on the ninth and 10th floors to avoid having to gut the seating bowl.

    Spending the most money to sit up top did not prevent MSG from selling those suites. They were hot property when both the New York Knicks and New York Rangers made the NBA and Stanley Cup finals in the mid-1990s, said Mike Ondrejko, MSG’s senior vice president of suites, premium seating and service.

    “Those were healthy times both from a financial industry standpoint and team performance standpoint,” Ondrejko said. “But just like the rest of the premium seating world, we have gone through a number of changes since that point in time.”

    Moving forward, 20 new bunker suites will open next October as part of the first phase of a three-year project. The event-level lounges will have no view of the floor but will be tied to 200 seats in rows 1 through 5 for Rangers games and rows 7 through 12 for Knicks games. MSG is selling that prime real estate for $1 million annually per season for each suite, according to multiple sources.


    MADISON SQUARE GARDEN
    Twenty new event-level suites will open next October.

    Ondrejko declined to discuss suite prices, but said that MSG is “essentially sold out” of event-level suites, working out the details on the few remaining contracts. That’s no surprise, considering premium seat patrons’ preferences.

    “These were born out of feedback from our current suite holders,” he said. “Two things they told us were they loved having gorgeous hospitality space and the best seats in the building. It’s almost like having an ownership of a franchise-type experience without the P&L of owning the team.”

    Two floors above the event-level suites, a traditional ring of 58 suites will put those units 23 rows from the ice and 30 rows from the court. That phase will open in October 2012. The 18 existing suites on the ninth floor will stay intact and will be refurbished and reopened in October 2013.

    The 71 suites on the top floor will be eliminated in the renovation, and the same is true for the four VIP boxes and eight loft boxes now in the lower bowl, Ondrejko said. The VIP boxes are near event level where the 20 new suites will be and the loft boxes are roughly 23 rows from the ice.

    “We like the loft box product a lot and I would be surprised if over the course of time we don’t find some other spaces we can do it in,” he said. “As we sit today, those products go away after the first summer shutdown.”

    An area to be situated on the same level as the traditional 58 suites will serve as the Garden’s club-seat product, something the arena has not previously had in the purest sense of the term, according to Ondrejko.

    The space was initially designed as 10 separate suites until officials decided to develop an all-inclusive area where customers can buy four to eight seats and get access to a large lounge behind those seats. It will open up a new market for firms without the deep pockets to spend up to seven figures on a suite.

    The club’s location at stage end means it will be operational only for sports events. MSG marketers are still developing a plan for where to relocate club-seat holders for concerts, a decision that will come late in the process, Ondrejko said.

    “Our intent is to make sure we are sold out from a suite standpoint before we begin selling that club,” he said.

    MSG, similar to TD Garden in Boston and Staples Center in Los Angeles, is packaging exclusive perks such as playing hoops on the MSG floor and skating on the Rangers’ rink as incentives to buy into the arena’s new premium seats.

    “We are able to provide a number of assets across all of our properties to provide solutions for what businesses are looking for,” Ondrejko said.

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  • Trends and challenges

    Jennifer Ark
    Director of premium sales and guest services Green Bay Packers
    Chad Estis
    Senior vice president of sales and booking Cowboys Stadium
    Frank Hubach
    Vice president of premium sales
    American Airlines Center
    Peter Luukko
    President and chief operating officer,
    Comcast-Spectacor
    Dennis Moore
    Vice president of sales and marketing
    Denver Broncos
    Steve Schanwald
    Senior vice president of marketing
    United Center
    John Weber
    Vice president of sales and ticketing operations
    Philadelphia Phillies

    What trends are you watching in premium seating?

    DENNIS MOORE: 1. Less corporate buyers and more personal buyers. Corporations are just starting to come back to the table, but the decisions involve a lot more research, justification, and understanding of the value proposition.

    2. Consumers are laser focused on value. Entry-level price points for both suites and club seats are selling very well. The buyer is not concerned with sitting at the 50-yard line; they would rather pay less to sit in a seat that is off the yard lines.

    3. One size does NOT fit all. The demand for premium products is still strong, but buyers are only willing to purchase exactly what they want or what fits their budget. That puts the pressure on teams to develop additional premium seating concepts that speak to specific client needs and budgets. Three years ago, we had three premium products to sell. Today, we actively market and sell over eight premium products. This trend will only continue.

    CHAD ESTIS: Consolidation of inventory. We’re still seeing venues that aren’t that old take suites and turn them into clubs and also find ways to reduce club seat inventory. We are still all trying to find the right mix and percentage of total inventory that should be premium. How does technology continue to play a role? What new amenities can we create to continue to
    drive value?

    FRANK HUBACH: Now more than ever we have to offer something other than a traditional club seat or luxury suite. It seems businesses want the exclusive way to entertain clients but in a setting that is less than a suite for 12-18 people. Dallas/Fort Worth companies are trying to be the most cost-effective/conservative with their hospitality spend, and we have to offer them more variety to keep their entertainment dollars coming to sports and entertainment facilities.

    PETER LUUKKO: We continue to see larger publicly held companies continuing to renew their leases on premium seating. There has been some hesitation by some of the corporations that have been severely hit by the economic conditions. Smaller privately owned companies still see the value of sports hospitality and entertainment and continue to be very interested in leasing premium seating. The length of term needs to be customized to the company’s internal philosophy. We have been able to do some price adjustments in our single-event suites and club box seating based on the popularity of a show/concert/event.

    JOHN WEBER: The overall amount of available inventory. Premium seating is a fantastic seat, as long as you have a correct number. Also, clearly pricing and location play into premium seating. We are fortunate — we designed our ballpark with 3,700 premium seats. Clearly our success has helped, but I believe 3,700 seats for our market is the correct number for the up-and-down nature of our business.

    JENNIFER ARK: Flexibility is the key word in premium seating. I believe the trends will focus on loge boxes as well as spaces that have flexibility to accommodate groups of many sizes. Teams will need to be flexible in terms of contract lengths as well. Shorter terms seem to be key in many situations. We have hired two salespeople this season to help create the awareness about the suite inventory we have now.



    What’s been the most difficult inventory to sell and how are you meeting that challenge?


    ESTIS: It’s always the middle pricing tier of suites and the last 10 percent of any club program. We are meeting the challenge by casting a wider net and utilizing data from CRM to better target new prospects.

    MOORE: The most difficult inventory to sell continues to be suites on a multiyear commitment. To counter these challenges, we have rebranded specific locations and redefined what it means to own a suite. Example: Prior to the 2010 season, we rebranded 13 executive suite locations to Legends Rooms. Previously, these executive suites held 15-17 people and sold for approximately $100,000 annually. Legends Rooms hold eight people, include a base food and beverage package, and sell for $48,000 annually. All 13 Legends Rooms are now sold on multiyear commitments. Legends Rooms are also stripped of the standard suite amenities, i.e. no trips, VIP parties, etc. Simply a great game-day experience.

    HUBACH: Securing new/fresh long-term suite leases. [American Airlines Center/Center Operating Co.] has been more flexible with terms and had to cater to smaller packages while offering many of the same amenities we do for full-lease sales. Companies seem to be doing fewer events with a greater emphasis on ROI.

    WEBER: Our challenge is to continue with excellent customer service — with our premium clients and with all of our clients. We want all of our clients to understand they are a key reason why we have been successful on the field.



    What will premium spaces look like in 20 years?

    LUUKKO: Club box seating and private luxury suites still have an appeal. We eventually see potential in renovating suites in the balcony levels to become a combination of a great view and a great experience for up to 100 persons, or possibly converting that space to become a nightclub or a specially themed, sponsorable destination.

    MOORE:
    It would be tough to answer where I see premium seating in five years, let alone 20 years. But, in 20 years I see the convergence of “the team” and “the fan.” As teams continue to push the envelope with new ideas and ways to provide value, “inside access” will further become the norm. Premium fans will interact on a more intimate level with the teams they pay to watch.

    ESTIS: Continue to provide customers with closer access to team activities, incredible use of technology and create spaces that are utilized well outside of event day.

    STEVE SCHANWALD:
    Over the years, we have changed from full suites to offering daily rental suites to fractional [shared] suites to smaller all-inclusive premium products. In my opinion, the future premium seating will revolve around more all-inclusive, especially in the full and fractional executive suites.


    Turnkey Sports Poll

    The following are results of the Turnkey Sports Poll taken in October. The survey covered more than 1,100 senior-level sports industry executives spanning professional and college sports.

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