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The Paradigm Shift in the Premium Seat Market

Bill Dorsey, Association of Luxury Suite Directors
Friday, 14 May 2010 | 9:30 AM ET

Darren Rovell is on assignment and unable to post today - but Sports Biz lives on. Today's special Sports Biz Guest Blogis from Bill Dorsey, Association of Luxury Suite Directors.

In the four major sports leagues in North America, there are 8,000 corporate customers who control 12,000 luxury suites.

This is approximately a $2.5 billion line item.

Football stadium seats
VEER Scott Barrow | Getty Images
Football stadium seats

In the rest of the suite marketplace, consisting of MLS, colleges, racing venues, minor leagues, etc., this $2.5 billion is roughly equaled.

In addition to suites, there are 800,000 club seats in the top 75 markets, which translate to another $5 billion in revenue. So at present, the premium seat marketplace is valued at $10 billion.

But it is changing and changing fast.

I have served as the executive director of the Association of Luxury Suite Directors(ALSD) for the past 20 years, and I have seen a tremendous paradigm shift since the financial meltdown of 2008. Value has replaced luxury, and political correctness has replaced conspicuous consumption. Today's corporations, in some instances, still derive plenty of benefits from corporate hospitality, but they do so more quietly than in the past. For example, they ask that their names be taken off their suites. Or they have cut back on their level of corporate hospitality expenditures.

As the economy improves, some of this is certainly changing. But the days of long-term ten year “Founders” leases and exclusively publicly financed venues appear to be over — at least for the next 18 to 24 months.

In their place is a new reality for the premium markets, one that in the long run might actually be better for the sports business marketplace, because it relies on developing a larger customer base.

Welcome to the age of the per-event suite.

With occupancy rates down at least 10 percent on the premium side, more teams are beginning to tap into selling suites on shorter leases, shared leases, split leases or day of game leases.

In the old days, a typical company that could afford a suite lease usually had to do about $20 million in the local economy. In an average size major league market, that translated to about 400 or 500 major companies.

In the large markets, such as New York, or in the wealthy markets, such as Dallas, the number is larger, but the competition is much stronger also for premium suites.

Now, selling those suites is getting tougher. It's not just that the economy has slowed — there are other factors, including a "been there and done that" kind of mentality. And some teams have clearly overpriced their inventory or overestimated the corporate appetite for their product.

However, where there is occupancy, there is also opportunity. In most markets now, you can buy suites on a per-event basis. This increases the base of suite company prospects from 400 to 500 at least tenfold, from 4000 to 5000. For MLB suites, which can often be purchased for less than $2000 per-game (16 tickets averaging not much more than $100 per ticket), that number is even higher.

It is not unusual for bachelor parties, weddings and other personal events to buy suites these days. Indeed, per-event suites are common today, and there is now a dedicated site called SuiteAgent.com devoted on a national level to the buying and selling of suites on behalf of the teams themselves.

So the market has not caved. It has changed. With more companies now ultimately being able to afford suites, the marketplace has an opportunity to expand, grow and morph into something that it clearly was not only two years ago.

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More about today's Guest Blogger: Bill Dorsey founded the Association of Luxury Suite Directors 20 years ago and tracks the occupancy and utilization curves for the $10 billion premium seat marketplace. The ALSD holds an annual conference and tradeshow with nearly every professional sports team and many major corporations taking part in this year’s show in New York City. Bill can be reached at Bill@alsd.com

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