Chapter 12 Facility Management

Introduction

• • Public assembly facilities must be large enough to accommodate large numbers of people.

• Facilities include arenas, stadiums, convention (or exposition) centers, theaters (or performing arts facilities), racetracks, and amphitheaters.

International Association of Auditorium Managers (IAAM)

is the professional trade association for the facility management field.

History: Stadiums

• Gain in the popularity of professional baseball and intercollegiate football launched construction of stadiums.

• Constraints of urban space limitations dictated the irregular sizes and shapes of the older ballparks (e.g., Fenway Park).

• Early NFL teams played in baseball stadiums until new stadiums were built.

History: Arenas

• 1927: Hockey owners followed the lead of baseball owners and built arenas to host their teams • Needed to fill empty seats in arenas on nonhockey nights: Hosted boxing matches on some nights • Ice Capades put together to fill nights • Basketball enters arena picture, and arena owners earn revenue from two tenants

History: Modern Era

• Baseball-only stadiums were becoming obsolete during the 1960s.

• Team owners could make a great deal of money by having their host city build their stadium rather than building it themselves. • Cities built shiny new facilities to keep their teams enthusiastic about their hometowns (e.g., Veterans Stadium, Three Rivers Stadium, Riverfront Stadium). • City leaders believed that publicly built stadiums were good investments and added to quality of life.

• Trend toward one purpose stadiums again – Ex. Soccer specific stadiums

Types of Public Facilities: Arenas

• Built to accommodate one (or more) prime sports tenant(s) or to lure a prime tenant to the facility • Intercollegiate facilities are financed by private donations, endowments, student fees, fund-raising campaigns, and, in the case of public institutions, public grants • Public owner may manage its own facility or contract out for private management • Recent trends in facility construction include adjacent practice facilities for the primary tenants to increase event bookings

Types of Public Facilities: Stadiums

• Outdoor or domed facilities for baseball, football, and outdoor soccer teams • Stadium managers try to maximize bookings, but it is more difficult with a stadium than an arena • Far fewer nonsport events can play in stadiums, primarily because stadiums are significantly larger than other venues and most other events cannot attract stadium-sized crowds • Stadium managers have become increasingly effective in creating events for their venues that take advantage of all available spaces (e.g., parking lots for carnivals)

Types of Public Facilities: Convention Centers

• Almost always built and owned by a public entity • Built to lure conventions and business meetings to a particular municipality • Publicly financed because the rents and fees they charge do not always cover costs • However, the economic impact the convention or business meeting has on the municipality can be large

Types of Public Facilities: Theaters

• Public assembly facilities that are primarily utilized for the presentation of live artistic entertainment • House prime tenants such as symphony orchestras, opera and dance companies, and resident theater groups • Profits are rare, but the spinoff business from theater attractions justifies public subsidies • Provide culture and entertainment for a community, enhancing its quality of life

Types of Public Facilities: Other Types of Venues

• University Venues – stadiums, arena, theaters focused on students • Metropolitan facilities – large city venues seen as must play (ex. Madison Square, Staples Center) • Local/Civic venue – smaller capacity, focus on smaller events, minor league sports

Types of Events

• Sport – specific seasons, dates determined by league • Family – Disney, Nickelodeon, and Sesame Street shows; also Ice shows • Concerts – typically booked months in advance • Trade Shows – multiple day events • Religious Events – mass worships • Convocations – graduations, speaking events • Seasonal – summer tours, holiday shows

Facility Financing

• Federal government allows state and local governments to issue tax-exempt bonds • Tax exemption lowers interest on debt and thus reduces the amount that cities and teams must pay for a stadium • Public vs. private financing • Team owners have had to look for additional revenue to compete for, and pay, their players while maintaining profitability • Building public assembly facilities meant other services had to be neglected

Facility Financing (cont.)

• Joe Robbie (Miami Dolphins) privately financed new stadium using stadium revenues as collateral • Team owners then looked for city or state willing to build a new facility but let the

team

control the stadium revenue streams, thereby allowing the owner to maximize revenue without heavy debt service expenses • Examples: Baltimore and Cleveland

Facility Financing Mechanisms: Bonds

• Money to build facilities is usually obtained by issuing

bonds

• Promise by the borrower to pay back the lender a specified amount of money, with interest, within a specified period of time • General obligation bonds: Backed by the local government’s ability to raise taxes to pay off the debt (safe) • Revenue bonds: Backed specifically by the facility’s ability to generate revenues (risky)

Facility Financing Mechanisms: Taxes

• Property taxes: Paid by homeowners, who are often long-term residents of a city • Occupational tax: Anyone who works in the community. More likely to pass in vote • Hospitality tax: Forces visitors to pay directly for the facility • General sales tax: Affects both local residents and out-of-town visitors

Facility Financing Mechanisms: Corporate Investment

• Sale of naming rights for stadiums and arenas is a current trend • Facility pouring rights: Being the facility’s exclusive soft drink or beer distributor • Outright corporate donations: Defray costs in exchange for the publicity and public relations benefits that may result from such a donation

Facility Financing Mechanisms: Facility Revenues

• Personal seat licenses (PSLs) – down payments on luxury suites and club seating – Used to pay up front costs • Ticket tax • Revenue from other sources – parking, rent, concessions

Why Cities Subsidize Sports

• Sports facilities are thought to improve the local economy in four ways: – Building a facility creates construction jobs.

– People who attend games or work for the team generate new spending in the community, expanding local employment. – Team attracts tourists/companies to the host city.

– New spending has a “multiplier effect” as increased local income causes still more new spending and job creation.

Why Cities Subsidize Sports (cont.)

• Overstatement of the benefits of stadiums – Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers – New sport facility: Extremely small effect on economic activity and employment – Sport facilities attract neither tourists nor new industry – A professional sport team creates a “public good”

Facility Ownership and Management Staff

• Goal: To provide a clean, safe, and comfortable environment for patrons • Functions: Security, clean-up, marketing and sales, scheduling and booking, operations, event promotions, and finance and box office operations • Private management: Provides expertise with dedicated personnel and network of facilities that create leverage in cultivating key event relationships and in-turn event bookings

Facility Marketing: Marketing

• Account for location of venue, culture of community and production of events • Internet has allowed easier booking of events • Saturated markets – markets with several venues in the local vicinity • Local economy will be driving force for ticket sales

Facility Marketing: Promoting

• Co-Promotional model – facility and promoters split the risk and revenue • Rental agreements – promoters pay specified amount up front and other costs covered by promoter • Majority shows brought by out side companies – Live Nation, AEG Live, Feld Entertainment

Facility Marketing: Facility Revenues

• Ticket sales offer lion’s share of revenues • Ticket rebate – surcharge on ticket that goes to facility • Ancillary revenue – sale of food, beverage, parking, fees, sponsorships • Marketing fund – profits from other shows put aside to invest in future programs

Career Opportunities: Marketing Director

• Fast-paced, highly stressful, enormously challenging career track • Acts primarily as in-house advertising agent for the various events booked into facilities • Job responsibilities: Buying media (TV, radio, print, billboards, etc.), coordinating promotions, and designing marketing materials (TV commercials, brochures, flyers, newspaper advertisements, etc.) • Multiskilled performers who possess excellent people skills, sales ability, and written and oral communication skills

Career Opportunities: Public Relations Director

• Forges solid working relationships with TV and radio news directors, newspaper editors, and reporters • Coordinates TV broadcasts from the facility, writes press releases on upcoming events, works with the media concerning events and activities in the facility • Possesses a strong writing ability, creative mind, and the ability to respond while under pressure

Career Opportunities: Event Director

• Acts as the point person for the facility during each show • Must be able to think and react quickly to any problems arising during the event and must be able to deal calmly with show promoters, angry customers, lost children, and other situations

Career Opportunities: Booking Director

• Position devoted to booking events for the facility • Much time is spent talking on the telephone with agents and promoters, and attending conventions to solicit events • Negotiating contracts is also part of the job © Diego Cervo/ShutterStock, Inc.

Career Opportunities: Operations Director

• Supervises facility preparation for all types of events • Coordinating, scheduling, and supervising the numerous changeovers that take place each year as one show moves in and another moves out • Job requires a mechanical knowledge of a facility’s inner workings • Must also possess superior people skills

Career Opportunities: Advertising, Sponsorship, and Signage Salesperson

• Responsible for selling signage and event sponsorships—an important source of revenue for facilities • Salespeople must possess excellent interpersonal and presentation skills

Career Opportunities: Group Ticket Salesperson

• Primarily responsible for selling large blocks of tickets for various events to corporations, charity organizations, schools, Boy Scout and Girl Scout troops, and other parties • Needs to excel on the telephone and in face to-face presentations

Career Opportunities: Box Office Director

• Responsible for the sale of all tickets to events as well as the collection of all ticket revenue • Must be patient, have a calm demeanor in dealing with the public, and possess good supervisory skills

Current Issues: Security

• • Ensure safety and comfort of • Increased focus, attention, and resources after 9/11 • Includes physical barriers to entry, surveillance technology, and an increase in security personnel presence

all

spectators

Crowd management plan:

Categorizing the type of event; knowing surrounding facilities and/or environment; being aware of team or school rivalries, threats of violence, the crowd size and seating configuration; having an existing emergency plan, and using security personnel and ushers

Current Issues: Sustainability

• Public facilities consume more energy per square foot than any other retail industry • Facilities working to build green buildings – Reduce waste, cut pollution, recycle • Makes financial sense – Reduces operating expenses – Builds brand

Current Issues: Americans with Disabilities Act

• To prevent discrimination against qualified people with disabilities in employment, public services, transportation, public accommodations, and telecommunications services • Requires new facilities to be accessible to people with disabilities • When a facility is renovated, the renovations must comply with the act

Current Issues: Cutting Edge Facilities

• Estimate nearly $6 billion spent on facility construction or renovation in 2009 • Fueled by finding new revenue sources and modernizing facilities – University of Phoenix Stadium – new Yankee Stadium