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Study: Finding the perfect franchise home

Las Vegas, other possibilities for expansion, relocation

Franchise owner Bill Foley (left) reacts to the new name and logo of Las Vegas’ NHL team.
Photo by: GETTY IMAGES

Like many people, Kerry Bubolz visited Las Vegas about a dozen times without ever getting off its famed Strip.

It wasn’t until he went there to interview for the job as president of an NHL expansion franchise earlier this year that he saw firsthand the side that Vegas proponents have pitched to all the major sports leagues — a rapidly growing metro of more than 2 million who remain, even as 40 million visitors a year come and go.

“When I came in for the interviews, I started to see that this is a significant market with a significant economic base,” said Bubolz, who joined the recently named Vegas Golden Knights in October after 13 seasons with the Cleveland Cavaliers. “And, from a ticket sales perspective, there’s a foundation in place that, regardless of any of the other market metrics, made this an attractive opportunity.”

That foundation Bubolz referred to was the product of a season-ticket drive that helped Las Vegas land the franchise, an 18-month push during which prospective owner Bill Foley lined up deposits for 16,000 seats. Bubolz said he is confident the franchise will start its first season in the top 10 in the NHL in full-season sales, at an average price that also ranks in the top 10.

A deeper look shows a season base that isn’t what you might expect in Vegas, where the massive resort casino chains and deep-pocketed brokers have a history of locking up large swaths of tickets to big events. Almost 95 percent of accounts are for eight seats or fewer, Bubolz said, which makes him hopeful that the buyers will make consistent use of the seats.

All of this is comfort — and perhaps a necessary one — in a market that is unlike any in sports.

A SportsBusiness Journal study of the 41 U.S. sports markets and another 13 vacant markets of 900,000 people or larger showed that Vegas looks much like the seven cities that already host one pro team when it comes to population, TV market size, corporate base and metro GDP, four measures that sports economists typically use to assess the readiness of a city to host a pro team.

And yet, because of stark differences from those other existing pro markets in areas like discretionary income, an overwhelming economic reliance on tourism, limited potential for an extended regional TV market, a lower concentration of professional jobs and a far higher concentration of service jobs, Vegas looks like something short of an open-net shot.

Even Bubolz, who is convinced that the market will be a winner, concedes that those question marks merit consideration, although in his mind most were largely answered when season-ticket buyers plunked down their deposits.

“If I went back 1 1/2 years ago and was looking at this same opportunity [before the ticket drive],” Bubolz said, “I would have faced a vastly different due diligence process than what I did.”

Expansion and relocation are risky by nature.

That risk, coupled with the emerging discussion of expansion and inevitability of relocation, motivated us to take a closer look at the metrics of some oft-mentioned markets, such as Vegas. In the process, we found others that might bear watching.

It’s not intended as an end-game analysis, or even a prediction. Many factors that we didn’t, or couldn’t, measure will determine what cities teams call home. Consider this as one take on the U.S. sports map, as it enters yet another period of evolution.

The NBA has said clearly of late that neither expansion nor relocation are on its radar, but it is alone in that position.

Less than a year after allowing the relocation of the Rams from St. Louis to Los Angeles, the NFL is considering doing the same for the Oakland Raiders, who in October struck a deal to move to a proposed $1.6 billion stadium in Vegas. Now that the NHL has expanded into Las Vegas, it seems only a matter of time before that league adds a second expansion team.

With a burgeoning fan base that appears finally to be coming of age, Major League Soccer is fully in the throes of expansion, having gone from 12 to 20 teams in the last decade, with plans to get to 28 before long.

While Major League Baseball hasn’t moved a club since 2005 or expanded since 1998, Commissioner Rob Manfred is on record saying that he views expansion from 30 to 32 teams as inevitable, although he hasn’t been more specific about a timeline. It stands to reason that Manfred also would consider any expansion candidate to be a relocation candidate, considering the inability of clubs in Oakland and Tampa to right stadium woes that have plagued them for years.

During his time as commissioner of baseball, Bud Selig presided over expansion into Miami and Denver in 1993 and Phoenix and St. Petersburg, Fla., in 1998, as well as relocation from Montreal to Washington in 2005. He also came into the league as a result of relocation and, tangentially, expansion in 1970, when he purchased and moved the Seattle Pilots one year after their birth.

Selig, now commissioner emeritus, would not discuss baseball’s next round of expansion, if there is to be one, referring questions on that topic to the current MLB administration. But he acknowledged that the staking out of new territories is part of every league’s evolution, never to be put to bed. Not only does it allow a league to react to demographic shifts, like the move west and then to the Sun Belt, it also gives franchises options, and leverage, as they work through ballpark and lease negotiations.

“Going way back, Branch Rickey talked about undigested expansion and how bad that was for the game, and certainly you have to avoid that,” Selig said. “But there has always been talk of clubs moving and there probably always will be.

“Even if it’s nothing more than talk.”

■    ■

When management of the Florida Panthers hastily assembled a marketing plan around the launch of their expansion NHL team in Miami, they lacked the time to dive beyond the surface of the market’s demographic profile.

They knew South Florida was home to seasonal snowbirds who came from the Northeast and upper Midwest. And they sensed that many — not any specific number or percentage, but there certainly seemed to be a lot — came from Canada, the acknowledged ancestral home of ice hockey.

“We fell into the trap of what most people would have done at that time,” said Dean Jordan, a Raleigh, N.C.-based media consultant for sports marketing agency Wasserman, who earlier in his career was vice president of marketing for the Panthers and then president of the relocated Carolina Hurricanes. “We said, ‘There are a lot of snowbirds here. And a lot of French Canadians. We’ll focus on that market.’

“Well,” Jordan said, chuckling, “that market turned out to be a dud.”

Fortunately for the Panthers, they came up with a solution in year two, which led to a string of 115 consecutive sellouts and a season-ticket roll capped at 12,000.

“It really didn’t take off until we completely scrapped our initial thought process and went with selling hockey as something new and cool in South Florida, where everybody wants to be part of something hip and cool,” Jordan said. “People in South Florida couldn’t name you one NHL player other than Wayne Gretzky at that time. It did us no good to say come see Mario Lemieux or Eric Lindros. But when [we] came up with cool and hip commercials and tag lines like ‘Good hockey but great air conditioning,’ that’s when we took off.”

Though most of his time was spent with the Panthers, Jordan came to the franchise from another of owner Wayne Huizenga’s properties, the Florida Marlins, who played their first game that same year.

Because MLB’s expansion process was far more competitive and exhaustive than the NHL’s at the time, the Marlins’ marketing department had far more data with which to work, Jordan said. And yet, even with all that data, the team failed to connect on a couple of assumptions, at least through its first decade.

The mass of Latinos who lived to the south of the stadium did not attend as many games as anticipated, even though they came from a rabid baseball culture. And the Northern transplants who remained avid baseball fans were slow to transfer their loyalty, coming only to see the clubs from their old hometowns.

Early on, the Marlins found it difficult to connect with Latinos and transplants in South Florida.
Photo by: GETTY IMAGES

While the metrics are valuable, the history of expansion and relocation tells us that they can be deceiving. The “right” demo doesn’t always convert into a reliable fan base. Think about the struggles of soccer to woo international communities in Washington and Houston, of baseball to attract fans in both of its Florida markets, of hockey to connect in burgeoning Sun Belt communities hungry for entertainment options.

MLS President Mark Abbott has been with the league from its beginnings, crafting its original business plan in 1993, three years before it began play.

While market size and demographics always have been considerations as the league has grown, MLS has learned over the years that three other factors are at least equally important and often codependent: A well-funded and committed ownership group; a soccer-specific facility, preferably close to mass transit in an urban core; and logical placement.

Last, MLS considers the way a new location will fit into its league footprint. Checking off the larger TV markets is a consideration, Abbott said, conceding a connection to national media and sponsorship rights values. But the league has learned that developing regional rivalries can prove to be equally, or even more, valuable than adding a larger market.

Consider, for example, the league’s 2016 regular-season attendance table, where the nation’s third-, fourth- and sixth-largest markets — Chicago, Dallas and Washington — occupy three of the bottom four slots. In contrast, the Seattle Sounders have been the top draw in MLS since their debut in 2009, averaging 40,000-plus fans through each of the last five seasons. In 2011, the league doubled down on the Pacific Northwest, bracketing the Sounders with franchises in Vancouver and Portland, who last year ranked sixth and seventh in attendance, respectively.

“While we’re trying to raise the national profile of our league, we also want to create rivalries, which have become a core part of our league,” Abbott said. “Expansion has been a great story for us in the Pacific Northwest. That great rivalry between Portland, Seattle and Vancouver — it’s astonishing what’s happening there. It really has helped focus everybody [in the league] on the importance of rivalries.”

While Abbott said MLS will study the numbers extensively when making each market decision, it won’t be without considering the overlying factors.

“There is a data answer to what fan support would be in a market,” he said, pointing to indicators such as strong TV ratings for U.S. national team and World Cup games, which was a strong predictor of success in Seattle. “You can answer that question through appropriate research. But absent the other factors — a strong ownership group, the right facility, and other components such as corporate support and media support — you’re not going to take advantage of what that fan interest is.

“It all has to work together.”

■    ■

If you’re looking for the market that is most like Vegas, the closest you’ll find is Orlando. Though it has twice as many TV households as Vegas, Orlando has a similarly sized MSA population and GDP. Orlando has a far broader employment profile than Las Vegas, but it does count tourism as its No. 1 industry.

When the Magic launched in 1989, the team attempted to tap into the tourist market by building relationships with concierges at area hotels and resorts, envisioning spur-of-the-moment purchases by families looking for something different to do while at Disney. Those proved difficult to convert. In recent years, it has had far more success working with tour group vendors, selling tickets far in advance as part of packages. Rather than relying on a concierge sale, the Magic sends reps to meet with tour operators from Europe and South America, hoping to get in on the front end of their planning.

“We found just targeting the American tourist that’s coming with the family to Disney was not successful in and of itself,” said Magic CEO Alex Martins, who credited tour packages for the franchise’s position atop the NBA’s group sales rankings. “Where we’ve been able to be successful is targeting this international visitor and this huge convention market, utilizing as well those groups who aren’t necessarily here to go to a tourist attraction. They may go to Disney Springs, but they’re looking for other things to do as well.”

Bubolz said that while the Golden Knights hope to capitalize on tourists when they can, the Las Vegas franchise won’t build its pro forma around them.

“We’re looking at this primarily as being a locally driven marketplace,” Bubolz said. “People who live here are our vision, and our goal is to build the business on the local market. Where we capture additional revenue from the tourism market, that will be incremental to what we’re doing. There will be a mix. But tourism will be more in the 20 percent bucket than the 80 percent bucket.”

There also may be a first-mover benefit that plays in Las Vegas’ favor, though the possibility of an NFL franchise announcing a move to the city in the same year that a hockey franchise launches could put a damper on that.

The NBA is the league best known for being first into a market and succeeding there at least in part because of it. Today, the NBA is in four U.S. markets where it has the only team: Oklahoma City, Memphis, San Antonio and Sacramento. The NHL is in only one, Raleigh. MLB and the MLS aren’t in any. In six other current NBA markets — Utah, Indianapolis, Orlando, Portland, Charlotte and Phoenix — the league was the first in. The NHL was first in four cities in which it still has teams.

While San Antonio and Indianapolis were inherited from the ABA, the rest were chosen strategically — four of them for relocation and four for expansion. As commissioner from 1984 until 2014, David Stern presided over three of those relocations and two of the expansions.

“There’s no question you get a bonus in a market as the only team in town,” Stern said, recalling the civic pride that flowed across front pages and sports pages each time the league went into virgin territory. “It’s been very much a point of ours to be able to succeed in markets that are small markets. That approach led us to Oklahoma City and kept us in Sacramento and brought us to Memphis. It has been a point of differentiation. We thought that where we were the only game in town or close to it we had a decided advantage and would be well-supported by the city. And most of the time it turned out that way.”

The success of a few of those teams in markets that would not have been any more closely associated with basketball than Las Vegas is with ice hockey — San Antonio and Oklahoma City, for example — makes you wonder whether those cultures are more often developed rather than inherited.

“Boston, no matter what teams are there, is first thought of as a baseball town,” Stern said. “And there are cities in Canada that are hockey towns. But usually it develops. A one-team town is more likely to become a town that you can describe as a hockey town or a basketball town.

“San Antonio is a basketball town. I think the absence of other franchises to have to compete with is probably an important consideration when you think about how it got that way.”

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