New digs for Vegas fight scene?
On the eve of the most lucrative fight in history, with receipts from $20 million in tickets counted and projections of pay-per-view sales edging toward $150 million, the promoter behind the record-setting event tackled yet another calculation.
Floyd Mayweather’s record-smashing victory against Mexican sensation Saul “Canelo” Alvarez last month came at an MGM Grand Garden Arena that, for all its ability to generate electricity for a big event, is woefully lacking in the amenities expected from a modern-day venue.
|Floyd Mayweather fights Saul “Canelo” Alvarez at MGM Garden Arena, a no-thrills venue that lacks suites, club seats and other amenities.
And yet, on one extraordinary night in September, a prize fight that was by no means the reincarnation of the Thrilla in Manila generated about nine times as much in ticket revenue as the Los Angeles Lakers do at the sold-out Staples Center.
Every ticket in the arena’s lower bowl, from the row of chairs aligned at ringside to the top row of each section, sold for $2,000. There were 4,718 of those tickets, together accounting for $9.4 million, or nearly half of the $20 million gate.
Another 1,498 tickets sold for $1,750 each. There were 1,627 seats at $1,500 and 2,429 at $1,000. At $600, 4,081 seats were available. There were 1,793 seats that sold at the lowest price point, $350.
Not counted in the gate was another $2.6 million from 26,163 tickets sold for closed-circuit viewing at seven properties along the Las Vegas strip.
Late in the afternoon a day before the fight, Golden Boy Promotions CEO Richard Schaefer contemplated how much more money they could have generated if the Grand Garden were more like some of the other buildings at which he puts on fights: the Staples Center in Los Angeles or the Barclays Center in Brooklyn.
For the first time, the question was based on an expectation rather than distant hope.
In June, MGM Resorts International announced a partnership with arena developer and operator AEG to build a 20,000-seat arena on property between the two casino resorts across from the MGM Grand — New York-New York and the Monte Carlo — with work scheduled to begin next year and an opening set for the spring of 2016.
While Vegas has seen enough fits and starts on this front to react with a degree of skepticism, Schaefer has reviewed plans by architect Populous and says he has no question it is happening.
UFC co-owner Lorenzo Fertitta, himself a Las Vegas casino operator, believes the project will be built. “Jim Murren [CEO of MGM Resorts] says it’s going to open, and everything he has ever said was going to happen has happened,” Fertitta said.
Todd DuBoef, president of Las Vegas-based promoter Top Rank, also sees the arena becoming a reality.
Not only has MGM announced the project and discussed it during earnings calls, but representatives from MGM and AEG held a board meeting of the joint venture the day before the fight.
Still, the two sides refused multiple requests to discuss anything about the project — or even how the partnership came about — for the purposes of this story. So there are dots left to connect.
What is certain is that the building they’re talking about, replete with suites and clubs, on a glitzy scale for which Vegas is renowned, will take the financial potential for a big fight to unprecedented levels.
Schaefer answered the revenue question quickly and simply, without much calculation. The new building would have about 25 percent more capacity, so he expects the September fight would have made at least $5 million more from tickets if it were in the new building.
It could be even more, he said, because a state-of-the-art venue would be better equipped for television and in-arena production. The promoters took out large swaths of seating to accommodate in-arena sets for crews from Showtime and ESPN, and to put in large video screens to bring the experience more in line with what fans expect.
The 199 seats they took out in the lower bowl cost about $400,000 in revenue. The 374 they killed upstairs amounted to another $212,000.
When it was suggested that more supply might require him to come off the $2,000 price for part of the lower bowl, Schaefer shook his head.
“If I would go to the MGM today and say, ‘By the way, I just found another 2,000 seats at $2,000 a ticket,’ they would say — ‘We want them. We want them all,’” Schaefer said. “My son showed me this morning on StubHub, prices for the $2,000 tickets are $10,000 and higher. So if there would be more $2,000 seats, they’d go like that,” he said, raising a hand and snapping his fingers.
“It’s Las Vegas,” he said, leaning on the three words that those who do business in the world’s fight capital frequently intone.
“It’s Las Vegas.”
Shifting revenue streams
There was a time when the insiders’ take on why neither of the two large arenas on the Las Vegas strip had been retrofitted to include suites or a club was that fight fans were worth more to casinos at the blackjack tables than they were in the arena.
A big fight is a great way to attract gamblers for a weekend. But once casinos got them to Vegas through the lure of a fight, they wanted them pushing chips out onto the tables, not lounging in an arena club for two hours leading up to the main event.
|Sean Combs was among the celebrities on hand for Mayweather-Alvarez, showing that a big fight still pulls in the VIPs, despite an old-school arena setting.
“When you look at the mix of revenues in Las Vegas, the growth part of that is entertainment, dining and night clubs,” said Fertitta, who was president of his family’s casino business before leaving to oversee the UFC full time five years ago. “Gaming has been fairly flat. But when you look at whether I’m buying bottle service for $2,000 or putting down $2,000 on the table games, the bottle service is actually more profitable than the casino. So now the thinking is just generate revenue wherever you can.”
Since 1989, the year that the opening of the Mirage reinvigorated Vegas tourism, gaming revenue has gone from delivering 59 percent of revenue at Las Vegas strip properties to making up only 38 percent of it, according to figures compiled by the UNLV Center for Gaming Research.
In that same span, rooms have gone from providing 16 percent of revenue to 25 percent, food has gone from 11 percent to almost 16 percent, and entertainment and retail have gone from 6 percent to 15 percent.
“Fifteen years ago the revenue you generated at a pool was selling some burgers, chips, cocktails and maybe some sunscreen,” Fertitta said. “Now they build these palaces. You want to stay in that cabana, which is where the rich guy is? That’s 20 grand. And on top of that I’m going to charge you for bottle service and this and that. They’ve taken an entity that was generating $15,000 on a good Sunday to $1.2 million on a good Sunday. That’s what new facilities can do here.
“This is the entertainment capital of the world. There should be a party on four different levels of suites at our events. In Las Vegas, we’re No. 1 in night clubs. Restaurants. Retail. The one thing we don’t have is an arena where we can cater to people. There’s a lot more revenue to be had there.”
Yet even as the model has shifted, the two larger arenas on the Strip have remained locked in the past. MGM, which paid for its own facilities, publicly opposed any arena project that required municipal funding. The logical assumption is that the company didn’t put much money into updates for the Grand Garden or its sibling, the slightly smaller Mandalay Bay Events Center, because it owned both of them.
“They’ve got both buildings,” observed UFC President Dana White, who typically books five or six events a year at either the MGM Grand Garden or Mandalay Bay Events Center. “Where else are you gonna go?”
That changed in 2007, when AEG struck a deal with MGM competitor Harrah’s to build a 20,000-seat arena behind two of its properties. That project stumbled over funding hurdles, the most recent of which came when a proposed 1 percent sales tax failed to come to a vote last November.
In June, AEG announced it would instead develop the building with MGM.
The connection to one casino operator worries some who do business in Vegas. MGM typically buys many of the better seats to events at its arenas itself, using them to compete for travelers. Other properties must turn to brokers to acquire good seats. With suites and other premium amenities in play, MGM may continue to hold tightly to the best the building has to offer.
“To have anything new with updated amenities that modernizes our city is absolutely fantastic,” said DuBoef, whose company typically booked at least two big fights a year at the Grand Garden or Mandalay, but in the last year has worked instead with the Thomas & Mack Center and casino operator Wynn Resorts. “But if it’s not managed on an agnostic basis that welcomes all the properties, it gets mismanaged. It doesn’t work.”
In the meantime, making do
A couple of hours before Mayweather and Alvarez entered the ring, guests of Showtime, Golden Boy and MGM stood elbow to elbow in a room that earlier in the week served as the fight promoter’s office.
Thanks to the right lighting, a heavy hand on the thermostat and a glitzy guest list, the event went off surprisingly well.
CBS Chief Executive Les Moonves chatted with producer Jerry Bruckheimer. Showtime head Matt Blank held court at a nearby table. Behind a velvet rope set up at the entrance, photographers snapped photos of a parade of familiar faces from sports and entertainment.
“We work hard at it and so maybe we pull it off and people are entertained,” Schaefer said. “But when you consider that everything else about the event is first-class, and you think about what people expect when they come to Las Vegas — really, you want to do more.”
By the time the main event started, Jack Nicholson was in his seat at ringside. Denzel Washington was nearby. So were Magic Johnson, Wayne Gretzky and Michael Phelps. It was electric the way that Vegas so often is for Mayweather, leaving one to wonder what it might be if the venue were as polished as the property’s most bankable fighting star.
“I spent $2,000 a seat, and you’ve got to walk up the stairs and through this crazy atmosphere to go to the bathroom,” said UFC Chief Operating Officer Lawrence Epstein, who in recent years has made a habit of traveling to major sporting events to see how his company’s arena experience compares. “That’s not what happens when you go to a Miami Heat game.”