S E A Tleading the premium seat industry www.alsd.com winter 2013

p u b l i s h e d b y t h e a s s o c i a t i o n o f l u x u r y s u i t e d i r e c t o r s

a sneaK peeK of the 2013 alsd conference and tradeshow page 36

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in the club:a coast-to-coast networkwith year-round benefits

page 78

member highlight:southern hospitality from

chef tina & the practical Jokerpage 28

the premium club:decreasing suitesbut not revenues

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the corporate ticKet marKetplace

Just as dramatic as the sports venue evolution of the past 20-plus years are the dramatic changes in

how the corporate fan handles his ticket assets. So how did we get here? And, more importantly,

where do we go from here? Every team’s approach to how they do business with these most-valued

customers depends on the answers.

By Bill Dorsey, Chairman, ALSD

THE CORPORATE TICKET MARKETPLACE

MetLife Stadium is home to the NFL's New York Jets and Giants and the Commissioners Club, one of the most exclusive

premium seating areas in all of sports hospitality.

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Once upon a time, a sports fan – a per-son who bled for his team – was known by various names. Joe Six Pack was the generic name for all these fans. Some names though were more specific: Cheeseheads braved the frozen tundra of Green Bay and sat on cold, wooden

benches without backs, while the Dog Pounders of Cleveland competed against the Terrible Towelers of Pittsburgh for status as the hardiest and huskiest of fans.

But over the last 20 years, a new fan has emerged: The Cor-porate Fan.

Now, the corporate fan is not someone who paints his face, and he is not someone who sits in the cheap seats, where he can look out over the stadium rafters and see Russia. No, the corporate fan is someone who entertains clients at a game. The corporate fan is someone who is creating a captive market situation for himself and the company he represents. It does not mean the corporate fan is not a fan, but he also has another prime directive.

That directive is to drive business. The corporate fan’s goal is not primarily the game; the corporate fan’s primary function is to create commerce for the company he is representing.

TICKETS BECOME BuSInESS ASSETSIt’s an investment of sorts in human capital; “relationship market-ing” it’s sometimes called. As with any investment, it is expected to pay off down the road. As such, a corporate fan’s tickets are called assets. These assets are tracked, just like any other investment. No one really talks about who wins the game or not; a corporate fan talks about ROI of these assets. How many clients did the cor-poration entertain? What were the results of these interactions? Did the corporation secure any new business or maintain existing business?

The corporate fan that uses these tickets usually needs to file expense reports. He needs to track usage. He needs to file reports on who was at the event and what the business relationship is. He is cognizant of compliance issues, of Dodd-Frank regulations about entertainment expenditures. If he does not use the tickets properly, the corporate fan can, upon occasion, lose his job. Upon occasion, the corporation sends people to the suite to oversee their investments. Sometimes, it’s done clandestinely: a kind of secret shopper program for the corporate world.

THE FIRST GEnERATIOn OF THE MARKETPLACE: COnTRACTuALLy OBLIGATED InCOMEA person, who uses corporate tickets, in most cases, sits in expen-sive premium seats. These seats can be suites, but also club seats, loge boxes, field boxes, or courtside seats. There are many rooms in the corporate fan’s house these days. The food that is ordered is also plentiful and more upscale than the fare offered to Joe Six Pack. Many food options are available, and if the corporate fan orders far enough in advance, almost anything can be brought in: the best wines, the best food, the best of everything.

The best of everything costs money. It is not unusual for cor-porations to own multiple suites in multiple venues that cost millions of dollars. Some of the larger corporations spend up to $100 million for all their sponsorships and premium seats. It’s big business.

Corporate users comprise what is now called the Corporate Ticket Marketplace. It’s been a booming business for more than two decades now. The Contractually Obligated Income (COI) created by long-term suite leases is what fueled the stadium boom in the 1990s. Whereas in 1990 when the corporate VIP market-place was considered only about 3% of the marketplace, a new world-class professional venue now usually has nearly 20% of its seats considered “premium.” Those 20% of seats often equate to somewhere around 40%-50% of the total ticket revenues created. And those ticket revenues often do not include things such as Personal Seat Licenses (PSLs) (see sidebar) that exist in many new venues, primarily in the NFL, where approximately half of the teams now have raised capital for these new sports cathedrals through PSLs.

THE SECOnD GEnERATIOn OF THE MARKETPLACE:TECHnOLOGy AnD FAn EXPERIEnCEThe gentrification of the venue marketplace is alive and well. Besides a few icons (e.g., Wrigley Field, Fenway Park, Lambeau Field, Madison Square Garden, Dodger Stadium), nearly every team in the country now has itself a venue no more than 25 years old, dating back to the Palace of Auburn Hills in Detroit which opened in 1988 when the Corporate Ticket Marketplace really began. And even the iconic venues are receiving facelifts.

After around two decades, the early adopters are going through another round of renovations. Not always new builds (although San Francisco, Minneapolis, Seattle, Las Vegas, and Milwaukee all seem to be planning new venues at the moment), many venues seem to be receiving a facelift of sorts. The shelf life for a new venue is very short these days – less than 20 years.

Much of that is based on the new sports mantra called Fan Experience. As player salaries have gone up over the past two de-cades, the need for buildings to generate revenue has escalated. As prices have gone up though, some fan amenities, including technology in the venues have not kept pace. The result? Fans will NOT come to the venues if their cell phones don’t work. High definition television, games on the Internet, and less costly F&B

THE FOLLOwInG IS nOT A FAIRy TALE…EvEn IF IT ALMOST READS LIKE OnE.

THE CORPORATE TICKET MARKETPLACE:

A corporate fan’s tickets are called assets. These assets are tracked, just like any other investment. no one really talks about who wins the game or not; a corporate fan talks about ROI of these assets.

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PERSOnAL SEAT LICEnSESPersonal Seat Licenses (PSLs), sometimes called Charter Ownership Agreements, are stadium financing tools, primarily existing in NFL venues. Approximately half of NFL venues (15 teams) have raised capital through PSLs to construct these buildings. There are two or three teams currently building new venues which will also offer them: San Francisco 49ers, Minnesota Vikings, and whatever team ends up in Farmers Field in Los Angeles.

PSLs are not only for the corporate fan. They are sold to nearly everyone in the venue. But the corporate fan is the person who is charged the most, especially in markets such as Dallas and New York, where PSLs can reach six figures for the absolute best seats in the house. Because a PSL is needed to obtain a good seat in many NFL venues, they can be purchased as a commodity. Several companies offer them similarly to buying a ticket on the secondary market.

nFL Teams with PSLsDallas CowboysNew York GiantsNew York JetsCarolina PanthersOakland RaidersSt. Louis RamsBaltimore RavensTennessee TitansPhiladelphia EaglesChicago BearsHouston TexansPittsburgh SteelersCleveland BrownsCincinnati BengalsSeattle Seahawks

Average PSL Revenue Per Team: $144.2 million

Average number of PSLs Sold Per Team: 48,221

Teams using or Potentially using PSLs in the Future:San Francisco 49ersMinnesota VikingsLos Angeles franchise (Farmers Field)

Always In Style: Being special is no longer an amenity; it’s a necessity. In the 10,700-square-foot Commissioners Club, members enjoy a destination of luxury with dark rich wood and plush velvet and leather furniture.

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Realistically, there is only a small percentage of the cor-porate market that can afford suite ownership. Consider the following breakdown:

Assume your suites lease for an average of $200,000 per year. How much revenue would a company have to generate to afford such a level of investment? The an-swer depends on the profit margin of their industry, but we will use 1% of gross sales (that would equate to 5% of net sales if profit margin is 20%). So to be considered a legitimate lease candidate, a company should gener-ate at least $20 million in sales.

Eliminating non-prospects such as retail, churches, schools, etc., there are a total of 4.9 million business-to-business (B2B) organizations in the United States. Of the 4.9 million companies, only 2.5% (124,824) have sales of $20 million or more. By changing our param-eters to those companies with minimum sales of $40 million, only 1.2% of companies would qualify.

These figures may seem discouraging, but they confirm that suite sales professionals must become more flexible and creative moving into the future. One way to capitalize on the wants of companies to be suite holders without being limited to the size of the markets listed above is to offer suite sharing opportunities.

Suite sharing allows multiple partners to enjoy all the amenities associated with a suite at a fraction of the cost. For example, four partners share a suite for the season at $60,000 each. Your gross revenue has just increased by 20% with the suite generating $240,000 instead of $200,000.

Using the same formula as above, $6 million or more in annual sales becomes the qualifying threshold for companies to be suite share candidates. The market-place at that level is three times larger than the market-place for single lease clients: 380,906 (7.7%) companies generate at least $6 million in sales.

A lot has changed over the past five years. Compa-nies that were once premium customers could be out of business now; and some industry segments that were booming are suffering now. In addition, counter-cyclical industries have emerged, are now thriving, and are a viable target for suite sales.

Below are business categories occupying premium space in four segments: growing, shrinking, and status quo as well as counter-cyclical.

GROwInG InDuSTRIESAttorneys/Legal Services Insurance Business/Management Consulting Services Accounting, Auditing & Bookkeeping Telecommunications Beer, Ale, Wine & Liquor Distributors Doctors Offices

SHRInKInG InDuSTRIESBanks, Bank Holding Companies & Credit Unions Television, Radio & Newspaper Finance & Investments General Contractors & Home Builders Real Estate Agencies & Managers Car Dealers Mortgage Brokers & Loans Real Estate Developers Title Companies Plumbing, Heating & Air Conditioning Contractors

STATuS QuO InDuSTRIESCasinos Business Services NEC Restaurants & Caterers Holding Companies & Other Investors Manufacturing Categories

COunTER-CyCLICAL InDuSTRIESComputers/High-Tech Collection AgenciesCredit & Debt Counseling ServicesPawnbrokersCheck Cashing ServiceApartment-Related CompaniesEducational/Training CompaniesDiscount ChainsFast Food RestaurantsAuto RepairMedical-RelatedRemodeling Contractors Self-Storage

– Ron Contorno, Full House Entertainment Database Mar-keting and Dr. Heather Lawrence, Ohio University

wHO OCCuPIES PREMIuM InvEnTORy?

whereas in 1990 when the corporate vIP marketplace was considered only about 3% of the marketplace, a new world-class professional venue now usually has nearly 20% of its seats considered “premium.” Those 20% of seats often equate to somewhere around 40%-50% of the total ticket revenues created.

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have all started to keep both the casual fan and now even the corporate fan at home.

Teams are beginning to realize that if you charge more, you have to provide more. Corporate fans especially realize this reality because they are buying the boxes or the club seats in many cases to impress the people they invite. It has to be special. Being special is no longer an amenity; it’s a necessity.

And so the 21st century venue, in order to cater to the com-panies who can afford these high prices, is attempting to provide a truly unique experience. Nowhere is this more evident than for the corporate fan.

The corporate fan coming to a game today often has access to the following:• The best seats in the house• The players and the field• Their suite during non-gamedays• Special clubs or nightclubs at the venue• High-tech innovations such as fantasy game rooms or iPads

in the suite or loge box• Mobile food ordering systems• Added-value amenities such as holiday gifts, food tastings,

golf outings, etc.• Rights of first refusal for non-contracted events: concerts,

major events such as the Super Bowl or the Final Four (in some cases), and other events

• The ability to hold meetings with full Internet access • Wi-Fi installations for full reception on mobile phones

OCCuPAnCy RATES AnD LEASE LEnGTHS DECREASEClearly, the corporate fan is catered to…at a price. There’s the rub. Teams, with the ongoing and seemingly endless task of raising revenue, have continued to raise prices for premium seats. This has not been an easy thing to do during the Great Recession of the

past five years. And some teams –specifically those in the largest markets such as New York City – have apparently gone too far. While the rest of the bowl is nearly full, the most valued tickets in some of these markets are going unsold. Corporations – despite all the amenities they receive – are cutting back in some of these markets.

New York City has had the most difficulty in this area. MetLife Stadium had significant occupancy issues when it opened, espe-cially for the New York Jets. The New York Yankees too have had their premium seat issues; although to be fair, Madison Square Garden was actually able to raise premium prices.

The reason teams/venues no longer can “build it and they will come” is partially money, partially political correctness (the cor-porate fan doesn’t want to appear as Nero while Rome burns), and partially because they have been there and done that. The secondary market has also emerged with a ready supply of tickets available, at least for club seats. Many companies simply cherry pick the games they want. There is probably not one reason just as there is assuredly not one magic bullet to get lost customers back.

Occupancy rates have dropped in many cases, although they have stabilized from a couple years ago. But while occupancy rates have somewhat stabilized, the term length of the lease has gone down. Gone are the days of the 10-year lease, except for new builds in major markets for the biggest of sports such as the San Francisco 49ers in the NFL. Most teams today accept much shorter lease terms. Contracts with corporations also often allow for suite sharing. In some cases, they are now even allowing suite re-selling, especially for those companies who have long-term leases and cannot get out of their lease because of their contrac-tual obligations.

Specific contracts with corporations are also custom written in some cases. The buyers, i.e., the big corporations, often have a great deal more power in negotiations than they once did. The

The Big Event: A Super Bowl suite usually commands upwards of $300,000 for prime locations. The Commissioners Club will certainly qualify as a prime location when MetLife Stadium hosts Super Bowl XLVIII in 2014.

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contracts often favor the buyer. Corporations, who recognize they have newfound leverage, are negotiating better deals for them-selves. And teams tend to acquiesce. It’s not unusual to have many versions of the standard suite contract in the same venue.

What kinds of changes are being made to contracts? The es-calator clauses in the contracts have gone away or are very small; suite owners, in some cases, are given renewal credits or are al-lowed to re-sell their suite; and sometimes, they can negotiate the “big events” coming up years in advance. That is something that would never have happened back in the take-it-or-leave-it glory days from 1990 to around 2007.

RETEnTIOn BECOMES THE wATCHwORD OF THE DAyTimes have changed. The market has changed. The way teams do business needs to change. And in many respects, it has changed.

First off, customer service has evolved tremendously. No longer do teams sign contracts and then virtually ignore the customer until the contract comes up. Now, the teams specifically reach out and “touch” the customer multiple times. The suite directors charged with this task, at least the good ones, get to really know their customers, including birthdays. They are professional con-cierge assistants.

Meanwhile, a new title has emerged over the past couple of

years: the “retention” expert. Because it is much easier to keep an existing customer than to find a new one, retention has become the watchword of the day. And in places such as Oklahoma City, the Thunder in the NBA have hired not one or two retention ex-perts, but 14 of them.

The days when business is taken for granted are long gone. The days when premium staffs were one person are nearly gone. Staff-ing has gone up; customer service has improved; and corporations are the beneficiaries of teams who need to work harder to main-tain their business revenues.

THE CORPORATE TICKET MARKETPLACE BECOMES A $10 BILLIOn InDuSTRyThere are many factors to consider when judging the actual size of the premium seat market. Depending upon your definition of premium seating, it is determined that there are approximately 30,000 suites and 800,000 club seats in the five major sports, plus colleges, minor leagues, racing venues, and portable hospitality. This equates to a $10 billion industry.

Of this $10 billion, about $5 billion is in the professional ranks, $5 billion among the remaining levels. While stadiums, especially in the college ranks, have built out new premium spaces in recent years, many teams have downsized their premium offerings. The

The answer to the question, “Who buys premium seating?”, is further investigated here, listing not only the top 20 business segments, but additional breakdowns, including employee size, annual sales revenue, and business status (headquarters, branch, independent). The top 10 industries alone represent 35% of all the business types that buy premium seating.

These new insights are the result of Full House Entertainment Database Marketing partnering with the Ohio University Center for Sports Administration. Over 13,000 professional sport premium seating customers have been analyzed, and Full House and Ohio University are excited to share the top industries that lease suites and other premium inventory (club seats, VIP clubs, etc.):

Attorneys/Legal ServicesInsuranceGeneral Contractors & Home BuildersOilBusiness & Management Consulting ServicesDoctor’s OfficesBanks, Bank Holding Companies & Credit UnionsReal Estate AgenciesFood and Grocery Manufacturers & DistributorsFinance & InvestmentsManufacturers of Industrial & Commercial MachineryAccounting, Auditing & BookkeepingTelevision, Radio & NewspapersPlumbing, Heating & Air Conditioning ContractorsRestaurants & CaterersEngineering ServicesTruckingCar DealersElectrical Work (Electricians)Dentist Offices

Overall Analysis: ALL Business/Corporate Premium Seating Customers

Employee Size:Less than 5 Employees: 26% 5 - 9 Employees: 11% 10 - 19 Employees: 11%20 - 49 Employees: 16% 50 - 99 Employees: 11% 100+ Employees: 25%

Sales Volume:Less than $1 Million: 28% $1 - 2.5 Million: 13% $2.5 - 5 Million: 10% $5 - 10 Million: 10%$10 - 20 Million: 9%$20 - 50 Million: 9%$50 Million+: 21%

Location Type:Headquarters: 15% Branch: 14% Independent: 71%

– Ron Contorno, Full House Entertainment Database Marketing and Dr. Heather Lawrence, Ohio University

THE TOP 20 BuSInESS CATEGORIES BuyInG PREMIuM SEATS

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two trends tend to offset each other. The professional ranks have 141 teams; the college ranks in-

clude about 500 universities. Minor leagues also contribute heav-ily to the $5 billion. For example: there are more total suites in mi-nor league baseball than there are in MLB because the number of teams is so much higher. But minor league suites tend to cost only about 33% (or even less than that) of suites at a MLB stadium.

Premium seating consists of both club seats (including court-side) and suites, loge boxes, field boxes, and various “clubs” which exist in the venue. Club seating, the most expensive seat in the house on a square footage basis, is about 60% of the total market-place. Too many teams, realizing this, have built out too many club seats in the past. This problem also is being rectified.

Sponsored spaces and naming rights in premium spaces is not included here. Neither are Personal Seat Licenses and season ticket bases which have existed for generations. Also not included here is the concert industry which varies greatly depending upon the touring acts and the price points for those acts.

THE BIG EvEnTSThe concert marketplace is very much like the event market-place for sporting events. What the Super Bowl is to premium, the Rolling Stones are to concert venues. The cost of premium seats, not included in this $10 billion fee, is enormous. A Super Bowl suite usually commands upwards of $300,000 for a decent between-the-20s location.

For major events such as the Super Bowl or Final Four, corpo-rations often are given the option to purchase suites at very high rates. Those who don’t take the option, give up their suites for the events.

Many teams, cognizant of what major events are in their build-ings years in advance, make sure their leases with the corporations take the major event into account in several ways: 1) they use the event as a bonus for signing a long-term lease, and 2) they include the event and justify a much higher cost for the lease than the market would normally bear.

THE nEXT FEw yEARSNegotiating leverage will continue to be on the side of the corpo-rate consumer for the next few years it now appears. But teams are getting smarter. They are beginning to custom build venues spe-cific for their marketplace, with just the right number of premium seats that the market will bear. They are offering more and more value to corporations, especially in the way of unique amenities. And they are beginning, through sophisticated database tech-niques, to distinguish between the business-to-business customer and the more casual business-to-consumer customer.

As a result, occupancy rates seem to be going back up for the teams. And if there is anything the teams do understand, it is the concept of leverage. So corporations need to understand better what is available to them and what is not. It’s a give and take world out there, and corporations need to know if they are the giver or the taker these days. #

How is your team adjusting to the changing Corporate Ticket Marketplace?Write to Bill at bill@alsd.com, and connect with him onLinkedIn at www.linkedin.com/pub/bill-dorsey/6/125/76a.

The $10 Billion Industry: In North America, there are approximately 30,000 suites and 800,000 club seats in the five major sports, plus colleges, minor leagues, racing venues, and portable hospitality. This equates to a $10 billion industry.

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The following information contains highlights and insights gathered from interviews with 15 Fortune 100 company insiders.

why do companies invest in premium seating, i.e., what are your primary objectives? Primary objectives include: 1. Driving business growth and adding new business2. Retaining and providing hospitality to current clients

to nurture an established relationship3. Establishing relationships with teams and properties4. Accessing premium space for business entertain-

ment5. Developing client loyalty

Do companies use premium seating inventory as an employee incentive? For the most part, companies are discouraged and hesitant due to IRS regulations requiring reporting of gifts over $25. Several compliance departments prevent this practice, and they have policies that dictate that this resource is used for business first. Several companies offer employees tickets at the last minute, but these practices are not used as an incentive.

Does your company use return on investment (ROI) when evaluating the value of your premium seating? In some instances, companies track data to show the impact to business, but this evaluation still only provides one data point. An area of agreement among the partici-pants is that there is not an exact science to determine ROI on premium seating; however, each company should find what works best for their senior management.

How important is activation (reinvestment) relative to premium seating? Most of the insiders feel money and time are being

wasted without activation. The goal is to exceed a stan-dard experience and provide a premium experience that attendees will remember for years to come. Premium seating is an important tool to distinguish a business deal from other options a client may have, so company employees need to use premium seating as a tool to do their jobs more effectively.

what have been the best activation examples involv-ing premium seating within your company? Activation can be as simple as staging events or meetings for clients and prospects because the suite environment impacts them more than being in a conference room. Further, it becomes a great touch point to use a player or coach because these appearances make those in the suite feel special. Providing key clients with tickets to entertain their own clients also goes a long way. Another form of activation is to offer prizes in the suite during the game as an added value to those in attendance.

As a leader in luxury suite ownership in multiple facili-ties, what tool/method do you use to manage your ticket inventory? The majority of insiders are using tracking software to monitor attendance, employee usage, and unused, used, and charitable tickets. The most referenced software pro-grams are Spotlight, Ovations, and TicketOS. The biggest reason for using ticketing software is for ease of auditing. There are still some companies that use spreadsheets and a listing of available games to distribute on a first-come, first-served basis. Others indicate they set up a matrix and identify the tickets for each game, splitting them between divisions of the company.

Some companies are donating tickets to charity. If your company has done this, how do you track the value of the tickets? There are differing procedures amongst the participants; some track them and some do not. Some examples of responses include:1. The tickets are not tracked unless they are going to

go unused2. The cost is tracked at either the retail price or the

cost of standing room only3. The 5031C number is entered in the database and

the tickets are released to the charity

An InSIDER’S PERSPECTIvE OF PREMIuM SEATInG uSAGE By FORTunE 100 COMPAnIES

THE CORPORATE TICKET MARKETPLACE:

The majority of insiders are using tracking software to monitor attendance, employee usage, and unused, used, and charitable tickets. The biggest reason for using ticketing software is for ease of auditing.

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4. The value is based on the overall value of the part-nership, not the individual value of a ticket

5. Goodwill cannot be measured; it is a great gesture when the tickets would otherwise go unused

How has being linked to premium seating and corpo-rate sponsorship in sports changed in light of today’s economic challenges? The biggest change is being forced to be more practical and accountable. Since the senior executives are more ac-countable, others in the company have to show value in what they are doing. Overall, premium seating inventory has been decreased due to pressures related to spend-ing and low usage rates. One concern from the insiders is that prices have increased. Also reported is the greater difficulty to fill a suite than three years ago. It is more challenging to find clients willing to attend; either they are not willing, or internal rules and company policies have changed, making it difficult for them to attend.

what do you think the person/company with one suite can learn from Fortune 100 companies that own multiple suites? It is critical that the person/company that has the suite establish objectives before buying and have a tracking mechanism to ensure tickets are being utilized for the in-tended purpose(s). Tickets should not be given to people who are not influencers in the decision-making process of buying the person’s/company’s products/services. Tickets should be annually rotated, allowing one to hit differ-ent targets. The most important thing to keep in mind is that an investment in premium seating is about creating a unique experience and not always about the game or matchup. Leveraging the connection to the team is the critical element.

– Dr. Peter Titlebaum, University of Dayton, Dr. Heather Lawrence, Ohio University, Dr. Christopher Moberg, Ohio University, and Ms. Christina Ramos, Ohio University

The most important thing to keep in mind is that an investment in premium seating is about creating a unique experience and not always about the game or matchup. Leveraging the connection to the team is the critical element.

Branding Bullseye: At Target Field, home of the Minnesota Twins, Cambria uses its suite as a “design studio” to activate its brand for guests 100-125 times a year.