SBJ/September 3-9, 2012/Opinion

Team alliances, flexibility for buyers can sell premium inventory

One of the biggest issues I am seeing in my consulting practice is dealing with large blocks of unsold premium inventory. Suites, club seats and, to a certain extent, courtside seats make up this inventory. (Loge boxes, which are a much newer concept, seem to be selling well.)

This problem has two root causes. The first occurs in buildings built in the mid- to late-1990s, which generally were built with too many suites. The second reason is the fallout from the economic downturn several years ago that made “premium” and “luxury” words to be avoided and introduced a level of financial scrutiny and accountability that had not previously existed. Many organizations are reducing their current suite inventory by remodeling them into loge boxes, converting them into inclusive club areas that accommodate 100 to 200 patrons, or eliminating them altogether.

“The challenge is repurposing this space while maintaining the value and integrity of the premium product we are selling,” said Vic Gregovits, senior vice president of sales and marketing for the Cleveland Indians. “With entertainment and hospitality ‘dirty words’ these days we have to focus on business development and how people can use premium for a proven ROI.”

A compounding variable is the emergence of the secondary market that I now argue has become the primary market. The secondary market has excelled at allowing customers to purchase exactly what they want and even allowing purchasers to customize and create ticket plans that might include several teams in the market. While many consumers purchase on the secondary market looking for lower prices, many others patronize the sites looking to buy exactly the games and the number of games they wish to buy in premium locations, often at premium pricing for the right to pick and choose.

To address the excess supply of premium inventory and to stay a step ahead of the secondary market, I offer the following concepts for your consideration.

The strategic alliance

For the purposes of illustration, City X is a city with NBA, NFL and MLB teams, all with unsold suite inventory. I propose that all three teams create a multiteam suite plan with fractional ownership in each venue. A possible plan might include 20 baseball games, 15 basketball games, and four or five football games. Food and parking can be included to make this a turnkey product for business purchasers. The games are sold at market value or at season-ticket prices and not discounted, as the buyer is buying convenience and less than the normal contractual relationship.

The games from each team should be a mix of premium and nonpremium games, weekends as well as weeknights. The inventory targeted for such purposes should not be the least desirable locations, nor should it be the best locations, but something representative of the total inventory. If the team currently has some fractional ownership, this product can be utilized to fill in those suites. Each team has the ability to promote and sell the product as part of its inventory offering to the general public and to potential corporate partners who might be seeking a way to enter the suite market but are unable in invest the resources in three distinct suite leases.

The premium flex

This is designed for teams with excess premium in a variety of areas. The purchaser does not buy a set number of games but instead pays a set amount, say $75,000 or more, into a flexible spending account that can be used to purchase a suite, courtside or home plate club seats, loge seats, or club seats. The purchase of food and other amenities is at the discretion of the buyer, but it can also be packaged along with parking to create a turnkey product for business clients. As with any flex product, the sooner the buyer commits to selecting a game, which would be dynamically priced, the better the selection of seating locations and options available for purchase.

A flex plan would give a customer a variety of premium seating options, depending on his needs.
Photo by: MARK FREERKS
The needs of the business purchaser might vary dramatically throughout the course of the season. There may be times when the potential buyer needs the privacy and intimacy of a suite to host 12 to 15 clients for a dinner and a business meeting. On another occasion, a potential client could be “courted” by sitting courtside. Club seats offer the purchaser an opportunity to reward employees with a special all-inclusive night out. The flexible spending account could also offer the opportunity to purchase a party suite for 100 to 200 employees and their families for a holiday party. Flexible not only describes the amount of the spend, but the location and the rationale for that spend.

A side benefit of this premium flex is the sampling opportunity — exposing the buyer to a number of price and location options and creating a broader understanding of how many options are available to assist the purchaser in terms of business development, client entertainment, and rewards and recognition. It also provides the opportunity for a well-trained sales or service team to connect with the customer after each game purchased to assess interest in possibly purchasing that location as a permanent option.

If the team is having a successful run, or if the buyer purchased a majority of top-of-the-line locations for the highest dynamically priced games, the initial investment might not last the season and there might be a need to purchase additional inventory.

The organization has the opportunity to offer other sporting events, concerts, family shows and miscellaneous entertainment events to the potential buyer to make the purchasing option more attractive. But a team wouldn’t want to make the option too attractive, as there is a risk of cannibalization to the traditional one-product lease/purchase. Perhaps the non-team-related assets could be used to move the purchaser into a more traditional product. But either way, this is a product that, once introduced, will have a following and become a permanent part of the sales inventory.

But don’t wait too long. I’m sure that the new primary market is reading this column as well, and if you don’t create it and control it yourself, I would count on seeing this product offered by a third-party vendor in 2013.
 
Bill Sutton (wsutton1@usf.edu) is the founding director of the sport and entertainment business management MBA at the University of South Florida, and principal of Bill Sutton & Associates. Follow him on Twitter @Sutton_Impact.


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