Analytics is not a new concept within the sports industry. Teams have been using data to make strategic business, player-personnel, and gameplay decisions for many years. Banks have complex models to value physical and intangible assets along with what owners can borrow. Sophisticated sponsors have ways to read fan engagement and assign values for their investments.
Similarly, sophisticated construction companies rely heavily upon historical cost, schedule, and material databases to estimate project expenses while providing certainty of outcomes. The intersection of these empirical approaches advances a new perspective that could impact sports venues for years to come.
Access to a robust collection of venue-specific program data, especially early on, provides a powerful advantage to forward-thinking customers. Validating capital expenditures using this data can deliver on strategic business KPIs (think: team valuation growth, initial personal seat licenses) and immediate revenue drivers. The latter is especially impactful to ownership and venue operators. This increased focus on KPIs from the planning stages also puts the onus on the entire project team to deliver on opening day.
The Status Quo
In a traditional sports project setting, once the owners recognize the need for a new facility, they hire an expert to perform a feasibility study to understand market demand and, many times, what they as an organization can afford. Then they hire an architect to start designing for both demand and aesthetics.
After several months (in some instances, years) of design, a general contractor is hired to estimate what the above design would cost to build. With so much time invested in focusing on the vision of a venue along with its aesthetics, the building ends up significantly over their budget.
Now comes the value engineering cycle – between the owner, designer, and contractor – to trim budget overruns. These overruns don’t include just the finishes but also get into the program elements that could have significant long-term business implications for the customer. Beyond what’s cut, this back-and-forth exercise intrinsically results in:
- The painful process of unseeing a vision that can no longer be afforded
- Cost and stress of the time and effort to get the program back to budget
- Projects put on hold due to sticker shock beyond what the owner can afford
Bringing Data-Based Program Analysis Early
Reimagining the sequence of these steps, once the feasibility study is complete, could we consider doing a detailed program analysis of what ownership, front office, long-term operator(s), and financiers desire? The analysis itself would be specifically designed to include:
- Critical fan experience criteria
- In-venue revenue generation drivers, including food and beverage, ticketing, sponsorship and advertising, premium suite products, and personal seat licenses
- Making the facility multi-purpose
- Setting up the facility congruent with adjacent development
The navigation of highly complex and unique circumstances is inherent within these types of projects – ones that require equally complex and unique data. What this methodology does is define a program that ownership cares most about while removing the repetitive (and morale-busting) process of value engineering and paving a path to create payback equations that fit what an owner can realistically afford and dream about.
Inspiring What’s Possible
A contractor like Mortenson is typically responsible for the success of the project, aligning on scope and budget, delivering on promises of scope for a budget, and eventually a solid customer experience throughout the course of the project. And the variability of the program – made primarily due to reacting to budget overruns – can significantly impact revenues the team has earmarked.
Our program analysis approach, used across multiple projects, will optimize a sports venue at the earliest stages of the planning journey. Whether it’s providing breakdowns with league comparative benchmarks, or detailed construction cost options that utilize net present value cash flow estimates, we’ll help you make better decisions to maximize the return recognized on your capital investment.
In closing, we ask the ALSD community: What kind of an owner or project do you think this methodology can work? Has the pandemic changed your viewpoint at all with regards to this process? Let’s connect to discuss in depth and learn from each other.
About Shankar Muthukumar
As Director of Business Development, Shankar Muthukumar is committed to supporting customer success by making connections to revenue-generating resources. He excels in gathering insights and strategically positioning financing, design, and construction solutions to maximize the return on sports venue investments. Shankar has expertise in creative design, analysis, and implementation of strategy for Fortune 500 businesses, lending a unique perspective to the Mortenson Sports business. Shankar is an alumnus of both Texas A&M and University of Virginia.