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Sales of luxury suites slow at most Indianapolis sports venues

October 17, 2009
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Ten years ago, the Indiana Pacers sold out their inventory of 69 Conseco Fieldhouse suites and the Indianapolis Motor Speedway barely touched a phone to sell its 120 luxury boxes.

Nationally, the late 1990s and early 2000s was a time PGA of America officials reported that their corporate hospitality clients were routinely spending $300,000 to host guests at a four-day event.

But times have changed. Entertaining at luxury suites is out of vogue now, thanks to a combination of the recession and companies keeping a closer eye on spending.

Many suites, which were once the backbone of professional sports profitability, now sit empty.

The Pacers sales staff is hustling to sell at least 10 vacant suites for a season that is less than two weeks away. The Speedway on Oct. 16 held an open house to try to sell its 12 empty suites with prime views of the famed Brickyard.

With Conseco Fieldhouse boxes going for $50,000 to $220,000, and Speedway suites costing $110,000 annually, the cost of those vacancies to the Pacers and IMS can easily escalate into the mid-seven-figure range when catering and ancillary spending are considered.

“Traditionally, suite holders are very-high-end clients who spend as much in ancillary dollars as they do on the suite itself,” said Richard Sheehan, University of Notre Dame economist and author of “Keeping Score: The Economics of Big-Time Sports.”

While the Indianapolis Indians and Indianapolis Colts are doing well, they’ve seen struggles elsewhere as a sign they can’t get complacent when it comes to sales.

“We know no one is immune to this,” said Greg Hylton, Colts vice president of premium seating and ticket sales. “It’s kept us on our toes. The selling season is never over.”

Hylton

The Colts have benefited from some extraordinarily good timing. Just as the bottom was falling out of the economy, Hylton and his team were completing sales on 140 suites at the new Lucas Oil Stadium. Those suites were sold on contracts ranging from six to nine years.

With a price tag of roughly $40,000 to $200,000 annually, Hylton admits those sales would have been much more difficult if the stadium had been built a year later.

The Colts reserve five suites that are sold on a game-by-game basis, Hylton said. That allows perspective buyers to sample the product without taking a multiyear plunge. Even the price of $7,000 per preseason game and $12,000 per regular-season game is enough to make most chief financial officers shiver these days.

“A lot of people in business these days don’t want to be seen at a hospitality event having thousands of dollars spent on entertaining them,” said Zak Brown, president of Just Marketing International, a locally based motorsports marketing consultancy. “And companies don’t want to be seen entertaining people when they are letting employees go.”

If the Colts can breathe a sigh of relief at their good fortune, other National Football League franchises weren’t so lucky.

Cleveland and Jacksonville each have 20 vacant suites they are trying to sell on a single-game basis, Hylton said. Denver is trying to sell 15 on a single-game basis and Miami is stuck with 30.

No team is hurting more than the Detroit Lions, with more than 35 vacant suites, said NFL sources. That’s easily a $10 million hit to the bottom line, Sheehan said.

“That market is really hurting with the automotive fallout,” Hylton said.

Though the economy is likely to bounce back before Colts suite deals start to come up for renewal, Just Marketing’s Brown thinks the team still could struggle to sell its inventory.

“In the last 18 months, companies have done so much to increase scrutiny of expenses that everything—rightly or wrongly—is under a microscope,” Brown said. “I don’t see the reins on that ever being let all the way back out. And the hospitality industry across all sports is going to pay for it.”

The struggles of the once-powerful NFL make economists like Sheehan shudder.

“For years, the NFL has been the bellwether,” Sheehan said. “When the NFL is struggling, you know all other sports properties are struggling—and probably a lot more than they are.”

Hospitality spending across all sports is down more than 25 percent, according to Horrow Sports Ventures, a Florida-based sports business consultancy that counts various NFL, National Basketball Association and Major League Baseball constituencies as clients.

Anthony Knopp, vice president of business development for California-based Corporate Events Group, believes the situation is worse than that. Research from his company showed 43 percent of suite tickets bought by corporations went unused in 2008.

“Some companies, though they already had the expense of the suite, didn’t want to incur more expense by entertaining clients there,” Knopp said. “For too long, there’s been no accountability with this line item. No justification. So now, the expense is automatically cut.”

Locally based Sport Graphics, which has suites in Conseco Fieldhouse and Lucas Oil Stadium, isn’t among the companies letting a suite go dark.

Even during difficult economic times, Sport Graphics CEO Frank Hancock has no problem justifying the suite’s cost. Hancock’s company does business with both teams, but he said the suites still come with a considerable cost, including catering.

“It can be very expensive based on how you wine and dine,” Hancock said. “But over the years, we’ve taken a conservative approach with catering.”

Hancock said many clients prefer the laid-back atmosphere of a game or event at a luxury suite.

“It’s a much softer sell taking clients to a suite rather than to dinner, and that’s the way our clients like it,” Hancock said.

Conseco Fieldhouse suites offer the best value, Hancock said, due to the variety of events there.

“If our client doesn’t like basketball, we take them to the circus, rodeo or a concert,” he said.

Speedway spokesman Ron Green said most of the Brickyard’s vacancies are tied to the swooning automotive industry.

He said the recent open house was designed to build awareness.

“For years, our hospitality inventory has been full,” he said. “Now we have availabilities, and we need to let people know.”

Morris

The timing of the economic fallout has been as bad for the Pacers as it has been good for the Colts. Last season marked the team’s 10th year at Conseco Fieldhouse, and team President Jim Morris said a significant number of the facility’s 69 suites were on 10-year contracts.

The Pacers reported losing $30 million last season, and with numerous suite contracts ending, it could get worse.

“These are tougher days than any of us would wish,” Morris said.

But Morris sees light at the end of the tunnel, with group and season-ticket sales up this year, and the team is following numerous leads on suite sales. To maximize potential, he said, the Pacers have begun selling suites for single games and partial season packages.

Schumacher

The Indians, meanwhile, stand remarkably unscathed. The team sold 22 of its 29 suites on multiyear deals, and team Chairman Max Schumacher said the team is already making daily sales for 2010. He expects daily suite occupancy to be at more than 80 percent next year.

The Indians brought in $736,378 in suite revenue in 2008. Not bad for a team with operating revenue of $8.7 million.

While only a fraction of what the city’s major-league teams bring in, it’s tops nationally among minor-league baseball teams, according to Baseball America, a publication covering the sport. The number is up from $691,543 in 2007, and Schumacher expects another increase when revenue is tallied for this year.

“For the money, we think we offer an exceptional value,” Schumacher said. “That’s really helped us in these economic times.”•

 

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