Not all luxury suite holders share the same measurements. To ensure a good fit for each buyer, two competing approaches are used to track premium seating investments: Return on Objective and Return on Investment. But which one is right for you?
The competition between Return on Objective (ROO) and Return on Investment (ROI) has become more important than ever with the rise of premium seating inventories for professional sports teams. This article looks at the best approaches for tracking these measurements, defines who should be doing so, and shares other variables to be taken into consideration to get the full picture of success.
ROO is a “pre-event” approach to setting goals, where organizations set initial objectives for the purchase. Instead of focusing solely on quantitative analysis, this approach deals with pinpointing eventual targets to be achieved by the end of the agreement. There should be a joint effort of the brand and seller to determine objectives before the agreement and then compare financial and non-financial results. The ROO method is less fiscally focused than its relative, ROI, and is considered beneficial because goals have been agreed upon prior to implementation.
The more traditional quantitative approach is ROI, where usually it is the seller’s responsibility to measure numbers after the event had ended. In this approach, a dollar value is related back to the investment cost, providing an analysis more focused on the bottom line. The suite owner should take responsibility for maximizing ROI; otherwise, the purchase could have been an irresponsible one not fiscally benefitting the company. Clearly, this approach differs from ROO.
Most of us expect a manual when we purchase a product of substantial value. This is not typically the case with luxury suites. There is a prevailing feeling in the suite industry if you can afford a suite, you already know why and how best to leverage the purchase. There are some obvious shortcomings in this logic. Currently, seat inventory is not fully utilized. In fact, according to Tony Knopp, CEO of Spotlight Ticket Management, 40% of luxury suite tickets are never utilized, so this valuable asset is languishing, locked away in file cabinets, desk drawers, and who knows where else. Indeed, the fact is tickets are not being used effectively if they are used at all. It is clear without maximizing potential rewards from ownership, full return on the investment cannot be achieved.
Better information regarding inventory management can be used to empower suite holders to bring key clients. It can also be used by sales staff to ensure top salespeople get access to the best games first or only top clients get first chance at the top inventory. While a suite is not always part of sponsorship, it can be helpful if a purchase is considered from a sponsor perspective.
Regardless, the purpose of the suite purchase should be determined, the responsibility for selecting the evaluation approach assigned, and the person accountable identified before the deal is secured. These decisions will be in place throughout the contract; therefore, so should the measurement approach for either ROI or ROO. But how should buyers and sellers approach this important decision? Several research projects involving sport team’s luxury suite directors were completed to best answer this question. Upon completion, it is clear more time must be spent on the topic in order to better understand the reasons behind each approach.
Inherently, suite owners carry the greatest responsibility for developing the needed success metrics as well as gathering and measuring data. Research suggests several tools are available for managing ticket inventory. Some luxury suite purchasers rely solely on Microsoft Excel spreadsheets to monitor, track, record, document their utilization of tickets, and determine their ROO and ROI (to the best of their abilities). The next method cited includes the use of an independent third-party researcher to provide metrics for ticket management. These unbiased companies also provide assistance in tracking ticketing and take responsibility for controlling the process; however, teams and facilities are also able to contribute to the data throughout the process. The data and results will be viewed as more objective and neutral if an independent researcher is used.
It is common practice at year-end meetings and in reports to highlight past programs and sponsorships. Even so, it is necessary to follow up throughout the year for the suite owner to ensure both firms are recognizing the returns they expected throughout the length of the contract which means the team and the facility should be involved whenever the client needs support in gathering and measuring data. If both the team and the client participate in establishing initial objectives, it makes sense for both to be involved in providing information throughout. When the property is providing data, it might be considered skewed in favor of the team because of the perceived self-interests for a beneficial measuring system. Any data from one side must be merged with information from the suite owner or the independent researcher to tell a more accurate story. A comprehensive report should fully disclose both sides in order to fairly evaluate ROI or ROO.
Industry experts have struggled to make ROI an entirely quantitative approach. Therefore, when it comes to suites, ROO more often will be placed into a final report, because ROI is difficult to measure. An approach to help solve this debate would be for firms to actually consider luxury suites as a type of inventory and then follow established best practices from the business world for inventory management. From there, firms should adapt to available new technologies to more accurately evaluate both returns.
The final determination whether to employ ROI or ROO ultimately depends on why the purchase was made in the first place. The purchaser must have an idea why a suite was bought and how the value of that purchase is going to be measured and by whom. It may not be realistic to determine an accurate ROI after purchasing a suite because the purchase is just one of the many activities the brand is doing to support its marketing efforts. In reality, this investment is just one data point in the process. Thus, ROO tells a broader story about whether or not the purchase has the desired effect in promoting the business. Firms on both sides should be looking toward ROO and more management-based approaches to realizing success.