Report: Love of the Game Trumps Economy of the Lame

So, here is some inside scoop from the premium seat industry, my story on the status of premium seating and the recession. Enjoy.

While many industries and markets are down due to the recession, premium-seating options in college and professional sports venues still largely boast ‘no vacancy’.

In universities across the country, longtime fans supporting their alma maters are retaining their luxury suites despite economic troubles. At new venues across the country, like the new Yankee Stadium or the new Cowboys Stadium, an increasing number of luxury seating options are now available, increasing the value of those franchises, keeping existing suite leases, and attracting new ones.

At Kinnick Stadium in Iowa City, Iowa, Director of Premium Seating Jess Rickertsen said that of the 46 luxury suites available, only one suite is empty at the time of press, and likely to be filled. Furthermore, Rickertsen added that there is a still a short waiting list for seating in the outdoor club section.

“Our waiting list could be longer,” Rickertsen said. “But a couple people’s leases were up, and they simply decided to just not renew their contract.”

Customer loyalty of wealthy fans is important to schools and to the people and businesses that purchase premium seating. At Kinnick for instance, an 18-person suite requires an annual pledge of $53,000 per suite to the Kinnick Stadium Renovation campaign, plus the season tickets and an amenities charges.

This year, according to Rickertsen, the University of Iowa expects to pull in about $5 to $6 million from their premium seat sales. All proceeds from premium seat sales go towards the debt incurred in the Kinnick Stadium renovation completed in 2006.

While premium seating is lucrative for universities, suite renters also have a big incentive to hold onto suites through the recession. With college suites, 80 percent of the money given to the school for the suite is tax deductible. This kind of savings makes suites doubly attractive when coupled with the new space to rewarding clients.

At Kinnick Stadium, many larger businesses have suites. Coca-Cola, Hy-Vee, Heartland Express, and Jacobson Companies, among other firms.

However, when contacted, executives for Coca-Cola, Hy-Vee, Jacobson Companies, and Heartland Trucking were unavailable to comment on how they utilize their suites in Kinnick Stadium.

Of the companies who rent suites at Kinnick, Heartland Express is the only company contacted that was doing worse because of the recession. Due to weak demand, the company’s shares are down 7.6 percent for the year, according to the Wall Street Journal.

Rickertsen could not say what each of the companies uses their suite for. However, Rickertsen speculates that at Kinnick most suites rented by businesses are used by families or to entertain clients.

Nowadays, business leaders are becoming more meticulous in ensuring that the suites their companies rent are used for gaining new clients. Thus, with the tighter corporate budgets, venues looking to sell premium seating have had to change their own marketing, according to Bill Dorsey, the executive director of the Association of Luxury Suite Directors (ALSD).

“When professional sports venues sell premium seating, they don’t use the word ‘luxury’ anymore,” Dorsey said. “Suites are a way that corporations make an investment and can use their suites as a marketing tool, as well as better track their investment.”

Dorsey confirmed Rickertsen’s speculation on corporations who lease luxury suites: it is all about keeping the businesses in the black now.

“Return on investment has been the big pitch now, and it really has been the last two or three years.”

Dorsey said he has been tracking these trends ever since the concept of premium seating began in the 1990s. After years as a sports business journalist, Dorsey founded the ALSD in 1991, which now has 1,000 members who are responsible for marketing and selling premium seating options at professional and college venues across the country. Additionally, the ALSD keeps track of the health of the industry as well as the latest trends in premium seating.

Dorsey added that in terms of premium seating, about 90 percent of those who rent suites at college venues are families, wealthy individuals, or CEOs. In professional sports, about 90 percent of suite renters are corporations, Dorsey said.

Despite the any backlash against extravagant expenditures for marketing, the premium seating market is growing across the country, Dorsey said.

“In the four professional sports there are 12 thousand suites,” Dorsey said. “In a few years there will be 13 to 14 thousand suites, but even so teams are ripping out suites and building other kinds of products, most of the new suites are from the new venues being built.”

When clubs do decided to reduce the number of luxury suites, more and more venues are developing club seating. As a result, club seating has been gaining in popularity in recent years, both because of its flexibility and profit margin to teams, according to Dorsey.

“Smart teams are reducing their supply [of premium seats] to increase demand,” Dorsey said.

Even though the economy has soured, do not expect any deals on any of the new stadiums offering premium seating, despite some openings.

Suites in the new Cowboys stadium will run from $100,000 to $500,000 a year, according to the Dallas Morning News. Furthermore, Cowboys owner Jerry Jones told reporters that 273 of 300 suites available in the new stadium had been sold is spite of the economy.

Additionally, at college stadiums with devoted fanbases, luxury seating will not be available to new buyers anytime soon. At the University of Nebraska, their premium seating website states that they have had a 100 percent renewal for suites for some time, despite a poor record in recent seasons.

Likewise for the University of Texas. The Longhorns added a 2,000-seat club to Darrell K. Royal-Texas Memorial Stadium, and the foundation announced that the section has sold out for the 2009 season.

As the economy slows, premium seat sales revenues have not. College and professional sports venues have gotten around sagging volume by increasing the value of their premium seating options. Overall, more value to sports venues means those saddled with capital improvement debts will not be posting ‘vacancy’ signs of their own.