Transforming sports venue hospitality suites into dynamic “business suites” can be a win-win for arena owners and businesses
Sports arenas and stadiums: High cost, low usage
The United States has more than 130 sports stadiums and arenas across its five major professional sports leagues— NFL, NBA, MLB, NHL, and MLS. Most sit in major cities or nearby. On game days, they can be filled with tens of thousands of spectators. But on days when no home game or other ancillary event is scheduled, these vast facilities remain empty. Minimal revenue is generated, and the owner still must pay for basic upkeep, such as electricity, heating, cooling, and security.
That adds up to a low dollar return per square foot.
But there is a way for stadiums to increase their usage and become more of a destination during nongame times.
All professional stadiums offer hospitality suites, where businesses can entertain their prospective and existing clients on game day to build relationships and close deals. In today’s work environment, with the increase of hybrid and remote workforces, businesses are searching for multi-function spaces for employees and customers to convene. What if those hospitality suites were converted to allow more than just entertainment during a game? What if they were redesigned to be unique business meeting spaces that would allow a company to not only meet its clients but also give them an immersive experience with its products and services? And after the meeting, what if the suite still functioned as an exclusive space to enjoy the game?
Such a plan would benefit both businesses and stadium owners: Businesses get a unique “destination” venue to conduct their business and meet with clients that has a lot more cachet than a typical office or hotel meeting room, while owners get increased use for their facilities and additional revenue for the enhanced suites.
“There’s just so much down time.”
Today, sports stadiums and arenas cost billions of dollars to construct and millions of dollars more to operate—a price tag so large that most new facilities have corporate sponsorships tagged to their names. SoFi Stadium in Inglewood, Calif., home to the NFL’s Los Angeles Rams and Los Angeles Chargers, opened in 2020 and cost an estimated $5.5 billion to develop. The Chase Center in San Francisco, home to the NBA’s Golden State Warriors, opened in 2019 and cost an estimated $1.4 billion.
What’s more, these stadiums and arenas boast some of the latest engineering and technology. From self-serve concessions and cashless transactions to increased Wi-Fi coverage and location-based optimizations, these stadiums are doing everything possible to provide a convenient and memorable experience for their fans.
Yet for all the dollars needed to build these modern coliseums for today’s professional sport gladiators, most of them are dormant for much of the year (hourly speaking) and are losing money when not in use. When the home team is away, during the day, and in off-seasons, their arena is dormant while the operational costs remain steady.
“We do more than 230 events per year, but we open an hour before each event and close almost immediately after,” said Jim Van Stone, President of Business Operations and Chief Commercial Officer at Monumental Sports and Entertainment, the owner of Capital One Arena in Washington, DC, home to the NBA’s Washington Wizards and NHL’s Washington Capitals. “There’s just so much down time.”
The bottom line is that the cost-value benefit for these properties is low, and some stadium owners are beginning to realize that they are missing an opportunity to not only add to revenues but also gain good will and enhance their brand by making their facility more of a destination for fans, the community, and businesses.
We’ve already seen examples of owners offering their stadiums for other uses, such locations for COVID-19 testing and vaccinations, which strengthens the sports organization’s relationship with the community and businesses. So, the big question stadium and arena owners should be asking is: How can we use this facility more?
A better ROI on hospitality suites
For decades, businesses of all sizes have used professional sporting events to build relationships with clients or customers. In the past, this might have meant purchasing season tickets in prime seating locations like the 50-yard line, behind home plate, or center ice.
Today, stadium and arena owners have taken the idea even further by building into sports-facility designs seating levels with hospitality suites that can be sponsored on an annual basis or on a game-day basis for their exclusive use. These luxury suites offer air conditioned or heated rooms, prime viewing locations, full catering, and other amenities.
Stadiums and arenas built within the last decade on average have a hundred or so of these hospitality suites or boxes. Capital One Arena in Washington, DC, for example, has 110. But the current business model for hospitality suites isn’t designed for people to use them when games aren’t being played. Suite owners pay to use the suite during games and events such as concerts, but don’t typically see additional value from the suite during off-hours. That leaves a lot of time— nonevent days and off-hours on day games— when the suites are unused and empty. Not exactly the best return for investment.
Courtesy KMPG. Click here for full report / PDF