Why sports stadiums are seen as income generators for investors
English football clubs are moving to bigger stadiums. But can they match the returns generated by US counterparts? Hi-tech innovation may help them
Euro 2016, which starts on Friday, will showcase more than just the skills of the continent’s leading footballers.
The tournament in France will also highlight the dramatic recent transformation of Europe’s sports stadiums. Of the 10 grounds that will be used, four new ones have been built – in Bordeaux, Lille, Lyon and Nice – and five more have undergone major renovation at a total cost of €1.6bn (£1.2bn). Previously, only three stadiums holding more than 30,000 fans had been built in France since 1945.
In England, Chelsea and Tottenham Hotspur are among the leading football clubs planning to move to bigger homes, while West Ham United have sold 52,000 season tickets for their first season in the 60,000-seat Olympic Stadium.
However, the new stadium debate is about investment returns rather than purely increasing capacity.
The world’s most profitable sports stadium, The Staples Center in Los Angeles, has only 19,067 seats. That is a quarter of the capacity of Manchester United’s Old Trafford and just under a third that of Arsenal’s Emirates Stadium.
But the Staples Center is home to four teams: the Lakers, Clippers, Sparks (basketball) and the Kings (ice hockey), which ensures 140 match days a year, not including play-offs.
The venue also stages major concerts – Barbra Streisand and Adele are among the big stars soon to play there. Its revenue growth has been driven through differential pricing strategies that, in 2015, took premium seating revenue through the $100m barrier.
Catering that British sports fans can only dream of adds to an annual revenue figure that, in July 2014, totalled $345m. Manchester United, in contrast, had match-day takings of £90.6m ($132m) in 2014-15.
Investment in technology may drive spectator numbers higher. Cisco Systems has installed a £2.7m video-over-IP and digital content delivery platform at the Millennium Stadium in Cardiff in an effort to boost food and drink sales and advertising revenues.
The Football League has also announced a seven-year deal to provide free Wi-Fi and club mobile apps featuring news and real-time content at 72 grounds in England and Wales via a partnership with intechnologyWiFi that both parties believe will produce long-term sustainable revenues.
In the US, the AT&T Stadium, home of Dallas Cowboys, has apps that flash lights on fans’ mobile phones when the team score a touchdown and lets them post photos from games on an electronic billboard.
An app at the Levi’s Stadium, home to the San Francisco 49ers, enables greeters at the gates to welcome fans by name and also provides on-demand video replays plus details of the most convenient rest room.
Such initiatives are providing lucrative revenues for corporate backers and clubs. The US technology networks company Avaya ran the communications for the 2006 World Cup in Germany and the 2000, 2004 and 2008 Olympic Games in Sydney, Athens and Beijing. It also has its name on the Avaya Stadium, which opened in California last year to host the MLS side San Jose Earthquakes.
“Without our networks at these stadiums, nobody would see any TV sports,” says Peter Thompson, Avaya’s managing director. “We use stadiums to showcase what we do. Our brand awareness in Silicon Valley has gone up 450pc because of the San Jose deal. We can demonstrate that getting involved with sports stadiums is making our business better.”
That could be a mantra for sports clubs. Once, building new grounds brought English football clubs to their knees. Now, they are seen as income generators that can deliver returns for investors.
Why vertical may be the future
“The future of stadiums must be linked to their ability to generate maximum revenue for the investment needed to build or upgrade them.
Stadiums must be used more than twice a week and for more than the sport of the host organisation. It can be as simple as providing parking, market stalls and general community value or through concerts, other sporting events, conferences and hotels.
Building laterally with huge car parks as in the US might not be the answer in the UK, unless the stadium is built in the outskirts of urban areas and loses the community links.
But building vertically, with underground car parks and shopping malls with playing surfaces three floors up, could provide huge commercial opportunities.”
– Prof Chris Brady, Centre for Sports Business, University of Salford