Premium seating continues to transition from suites to all-inclusive mid-level inventory. But sometimes loge and theatre boxes curb long-term revenue maximization. Are you considering all the variables associated with your owner’s bottom line?
In recent years, premium seating has accelerated its shift from suites to smaller, all-inclusive areas at lower price points. Many venues have had success with reconfiguring their product mixes in this way for many reasons: The pool of potential businesses able to afford a premium experience grows. Diversity of offerings is vital in a world increasingly required to offer custom experiences. Including amenities, namely food and beverage, provides a frictionless environment for patrons and avoids the dreaded bill at the end of the night for a premium seat owner already paying a hefty lease or the seat owner’s guest who shouldn’t be required to pull out his or her wallet.
There is a lot to like about these mid-tier premium seat options, such as loge seating or theatre boxes. To be clear, this article isn’t meant to dissuade you from considering building loge boxes in your venue. They are viable and proven products. But the venue marketplace is potentially approaching the point of too many loge boxes because of a shoot first, ask questions later mentality. Other variables besides the ease of the sale should be considered when evaluating the optimal product mix for your owner's bottom line.
While easier to sell, loge seating and theatre boxes do not equate to greater revenues for your organization. Inherently, these premium products have fewer seats, cost less, but come with more amenities. More amenities for the customer means higher expenses for your organization. Less revenue and higher expenses are never good in large doses.
If your building is considering transforming a general ticketed area into an in-demand premium area with higher revenue generating potential, by all means, hack away. But if you are considering a retrofit of a significant portion of your suites because of the existing business landscape or your business strategy, explore these five questions before commencing demolition:
1) Did you account for the full scope of your revenue?
Some teams count the entire cost of an all-inclusive premium area, including ticket value, food, beverage, and alcohol, into one lump sum on their P&L's. However, in all-inclusive areas, teams typically do not receive commissions back from the concessionaire as they do for suites, rentals, and individual premium spends. That expense of unrealized F&B commissions should be subtracted out, recorded as such, and compared against all premium concession commissions, which will vary between sports and concerts/events.
Without doing so, a false sense of revenue in the all-inclusive areas is recorded.
Smaller areas also limit the number of bodies who will buy concessions while on your premium levels. Individual suite ticket sales, comps, or non-catered suite per caps must also be taken into consideration, as does the full (pregame, game, post-game) premium club or concession spend.
Non-revenue-shared sales and percentages become monster revenue generators for ownership groups, aid in operating costs, and must be considered when providing financial models.
2) Did you consider your league’s revenue sharing policy?
One lesser known aspect of sports business is that non-sports-related and possible playoff revenue beyond league fees is not shared nor part of the salary cap calculations. Also, a percentage of lease revenue is counted as non-sports-related and protected from revenue sharing. In that case, these non-revenue-shared sales and percentages become monster revenue generators for ownership groups, aid in operating costs, and must be considered when providing financial models.
By limiting the number of suites and actual customers while replacing them with non-commissioned concessions, venues not only lose that revenue from the start, they completely chop off all non-revenue-shared catering commissions from those suites during non-sports events and some league’s playoffs.
By including non-commissioned concessions into the price of the all-inclusive areas plus limiting the number of individuals on the suite level, teams cannot run financials as apples to apples (revenue sharing vs. non-revenue sharing). By doing so, comparisons are inaccurate in actual cash flow.
3) Are you hurting suite lease sales and renewals?
Loge seating creates an unfair advantage over a venue’s top sports and non-sports-related revenue generator. Why should a B2B customer buy or renew a lease with additional food and beverage expenses when they can get a similar experience for half the price?
Yes, the product itself might provide less seats and less privacy. But by having too much mid-level inventory, the sports and entertainment industry forces the hand of its best customers, who now need to convince themselves and six counterparts that a few seats and a little more privacy is worth increasing the ticket cost while paying for catering nightly.
4) Are your marketing efforts B2B-focused?
If teams run premium marketing through transactional outreach models, then eventually premium inventory will reflect that methodology.
Too many premium departments do not follow B2B marketing best practices. They focus on amenities instead of ROI. They also fail to utilize modern practices, such as account-based marketing, educational sales and content, or qualified digital lead generation.
Multiple studies have proven the effectiveness of these approaches for B2B sales. Without doing so, any organization risks going after the wrong customers and trains existing customers to be transactional.
It should come as no surprise when customers see sports as an amenity driven value proposition instead of a ROI driven business decision.
5) Is your staffing up to B2B standards?
Competition for business dollars is not only between local teams and venues. It includes any company that accepts entertainment or marketing dollars in exchange for ROI. And many of those competing companies do not have the same principles and staffing models for their B2B clients as they do for B2C.
The competition does not send an AE with three years of inside sales experience to the COO of a multi-million-dollar corporation to negotiate a lengthy six-figure legal contract. That same AE does not report to a superior with only five years of experience in mostly consumer sales. And most importantly, the competition does not pass the sale onto an even less experienced service rep for annual renewals and upselling.
By training a staff to be transactional, promoting them as such, and passing clients off instantly, teams show customers what they think the sale is: merely a transaction. A CEO or COO does not need an autograph session or event hosted by a general manager. They need results, ROI, education on how premium seating provides it, and to be treated in this way for the long term.
Mike Guiffre is currently the VP of Sales at TicketCity. In the first 17 years of his career, he served stints as the Director of Premium Seating for the Pittsburgh Penguins and at American Airlines Center in Dallas, Texas. He can be reached at firstname.lastname@example.org.
Continue reading Part Two of this article to review hypothetical financial comparisons of suite and loge box revenues.