The share of private funding in the financing of professional sports infrastructure has doubled recently, leading to two trends.
In the past, it was common to implement projects with a public-private partnership (PPP). As a result, half of the stadiums of those German football clubs that regularly play in the Bundesliga were built with PPP. At the same time, even stadiums built exclusively with the money of private investors received state support in creating new routes to public transport and roads. The participation of the state in the development of stadiums is also due to the fact that these objects are of great public importance and can play an important part in the economic development of a region. Public-private partnerships help to avoid bureaucratic obstacles and thus reduce the cost and shorten construction time. Recently, however, the trend has changed somewhat, with state’s contribution to infrastructure development in developed countries higher than before. If several years ago PPP was the most common type of financing, now almost all the facilities in Europe and the United States are being built with money from private investors.
As the world becomes increasingly globalized, there are more and more investment opportunities in different industries. One sector that has been greatly affected is sports facilities. Due to private investments, many of them are now transformed and this has changed the way they’re managed. The most important role of the business plan is to correctly assess financial flows, ensure profit, and be profitable. We’ll drill down on this in more detail tomorrow.
The use of sports infrastructure can be analyzed from many different perspectives, including how beneficial it can be for hosting events for the business as well as how well it runs on a day-to-day basis.
The first point is about the increase in profit on the day of a match, as well as the use of arenas for alternative purposes – things like concerts and other events. The discussion of match-day profits is another big topic, but here we’ll talk about the additional features that our stadiums offer.
For instance, the Amsterdam Arena is rented by other companies an average of 80 times a year for events like concerts by popular performers to Sensation, the annual dance music festival. It’s also used for private events like weddings.
Even more telling are the O2 arenas in Hamburg and London. The German arena O2 World has been turned into one of the most sought-after entertainment venues: the hall, designed for a maximum of 16,000 seats, annually hosts up to 140 various sports and social events. The total number of visitors exceeds 200.000 on average per year. On the other hand, according to the spokesperson of FC Schalke 04, Gerd Voss, non-core events are always less profitable for the arena: “according to him, the club would prefer any concert to play with a team, even one that is in last place in the Bundesliga.”
The second aspect – the arena as real estate – includes the diversification of options for using the facility by including various new functions in it: retail and hotel space, conference rooms, residential real estate, a business center.
If a venue has the appropriate facilities, it will be able to host any number of events, such as conferences. For example, the Amsterdam Arena has the infrastructure that enables it to host a range of different events: the stadium has 14 rooms for meetings and negotiations with a maximum capacity of 3.5 thousand people.
Growing needs for different activities such as sports and entertainment led to the expansion of the facility. You can see this happening in Sweden, where a new Globen City complex opened with everything from a football stadium to concert halls. Globen City offers everything you need for a memorable outing with your family, friends or colleagues!
In St. Gallen, Switzerland, during the summer break in the football championship a cinema hall with 1,500 seats was set up at the local stadium. Thanks to the canopy over the stands, spectators may enjoy films unchmoed by rain at an outdoor cinema. They can still avail themselves of the stadium’s traditional catering services. The Feltins Arena in Gelsenkirchen hosts annual biathlon starts and in 2010, 77,000 spectators attended the opening match of the Ice Hockey World Championship. This type of event is possible due to the design features of this stadium – a retractable field and a retractable roof.
The theory argues that sports facilities are comparable to commercial mobility. As discussed in the last paragraph, arenas and stadiums serve different categories of customers, just as retail does.
First of all, viewers can be present at the stadium or follow a match from outside the arena. For example, they may use a TV broadcast. For example, a football arena must meet the needs of consumers – profits mainly come from them.
The second type of clients are companies that use sports facilities for their business purposes. For example, sports clubs or promotional agencies may organize concerts. There are other stadiums & arenas which can be rented to host concerts, etc., if not for sports clubs. So in a mature market, the demand for such facilities is high and there are plenty of competitors.
Stadium’s can offer catering which helps them to be more profitable and one of the most common ways to do this is to include catering options in their service. For instance, the company Aramark is paying a lot of money to supply food services at Hamburg’s Imtech Arena: they have an eleven-year contract worth more than twelve million euros. There are still a few different types of clients the event center deals with – the shopping mall operates in a similar way, but sponsors differ. On one side there’s sponsors for sports teams, on the other side sponsors who obtained the rights to this stadium’s name. Such transactions operate.
Sports facilities, like retail facilities, depend on a variety of factors. Population, popularity & the physical condition of the facility are all crucial when determining what services these facilities will have to offer. The population factor is characterized by the number of people residing in a given area or city. These companies are also vital to a stadium’s local market presence. They can become corporate clients of this arena and contribute by purchasing VIP tickets or signing sponsorship deals that help to fund the stadium’s operations.
This may be for a variety of reasons – for example, the arena/stadium might have some great sporting feats associated with it or perhaps it has an excellent location. Either way, if you want your stadium to fill up come game day in front the TV, this could be a key factor.
Quality management and marketing are the keys to success in real estate. The quality of your property is determined by the quality of its management, your marketing strategies, and how well-designed it is.
Despite certain similarities with other types of commercial property, sports facilities have unique features. Firstly, there are only a few days on which matches are played. Even with the capacity to host. Secondly, the investment in building sports facilities is huge and most often goes poorly without state support. Thirdly, there are not many potential stadium tenants that can make a big difference for the owner. No matter what the building is, it’s difficult to rebuild. Turning an office building into a hotel is easier than looking for an alternative use for a stadium. Plus, there’s no secondary market for these kinds of buildings: they’re not sold on the secondhand market. In the field of sport, finance is a key factor in the financial success of a club. The unpredictability of this on an investor’s livelihood makes it an unstable investment.
Considering these factors, we analyzed the potential for an expansion of the current building. We looked at the world’s best practices and what other companies have done to determine what would be feasible, local influences should be taken into account early on in the development process and working with professional management companies is essential.