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Luxury suites rule in professional sports revenue
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All 137 luxury suites at Lucas Oil Stadium were sold out months before the opening
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With a minimum reported price of $80,000 per box, that
kind of money has turned luxury-suite revenue into one of
the most dominant forces in sports, analysts say.
"Luxury suites have been growing in importance since the
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Whether it's the NBA, NHL or Major League Baseball,
suites now account for anywhere between 5% and 20%
of total team revenue, according to the latest statistics. What started out as a status
symbol has evolved into a necessity.
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"With greater payroll expenses from player free agency, owners have to find ways to raise
more revenue," says Mark Conrad, an associate professor at Fordham University's school
of business. "Luxury boxes provide a constant flow, no matter how good or bad the team
is playing. The payment is already made and it's part of the revenue generated by the
facility."
The money can be huge. While the number of suites varies — the new Yankee Stadium
has 68 while Dallas Cowboys Stadium has 300 — any given suite can sell from $224,000
to more than $900,000 per year.
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Demand is high, even if the suite — or stadium — has yet to be built. The NFL's San
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Luxury suites rule in professional sports revenue – USATODAY.com
http://www.usatoday.com/money/economy/story/2012-02-04/cn...
Francisco 49ers want to build a new facility, and even
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As for who's buying the suites, it's a matter of money, as
well.
"Corporations and high net-worth individuals are
purchasing suites," says Chad Estis, president of
Legends, the premium ticket sales company that handles
teams such as the Cowboys and Yankees.
"The most common reasons to purchase a suite are to
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entertain and build relationships with clients and
prospects or for families to spend time together," adds
Estis. "And if you deliver the right experience, suite
holders can be some of the most loyal supporters of a
team."
What suite holders get for their generosity is definite luxury. The benefits most often
include:
• Luxury, theater-style seats
• Multiple flat TVs
• Private entrance to the stadium on game day
• High-end food and premium liquors
• Access to team events and players
Luxury suite buyers get sweet tax benefits as well. Corporations that buy them can deduct
anywhere up to 50% of their cost, as well as that of refreshments for business purposes.
Not everyone, however, sees a perfect game plan with luxury suites. Larry DeGaris, an
associate professor of sports marketing at the University of Indianapolis, says there are
pitfalls.
"The danger in chasing corporate dollars is that they tend to evaporate during down
financial times," DeGaris argues. "Though luxury suites seem to have weathered the
recent economic storms well, probably because corporate profits have been healthy."
But not all luxury suite buyers make it through the bad times.
Phil Matalucci runs Luxury Suite Alternative, an online firm that matches event buyers with
suite owners. He once sold luxury suites for the Philadelphia Eagles and the NBA's 76ers,
but found some buyers wound up over their heads.
"One guy came to me and said he wanted to get out of his suite contract, so I started
reselling his seats," says Matalucci, who registered $2 million in sales last year.
"The economy turned upside down and some businesses were asking, 'What do I have
this box for?' " Matalucci says. "Other firms say, 'Why do we need to go to all the games?'
They need help in selling the tickets, and that's where I come in."
Tickets for the traditional fan are also caught up in the luxury box rage, says Kara
Boatman, an economics professor at Saint Mary's College of California.
"With more luxury suites, that meant fewer regular seats, and team owners raised prices
to cover some of the cost of building the suites," she says.
Boatman argues that the luxury-suite phenomenon was pushed by the NFL's revenuesharing model, which until July 2011 allowed owners to keep all funds from luxury suite
sales and drove up the average ticket price.
Because the revenue from luxury suites in the NFL must now be shared with players, as it
is in Major League Baseball, that could change how suites are viewed in the future, adds
Boatman.
"NFL owners still have some enticement to build suites, but the lower revenue will reduce
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Luxury suites rule in professional sports revenue – USATODAY.com
http://www.usatoday.com/money/economy/story/2012-02-04/cn...
the incentive relative to what it is now," she says.
As for the average fan who occupies the less expensive seats, don't worry about them,
says Bill Ordine, a former sports reporter in Philadelphia and Baltimore who now runs a
sports fantasy and promotion website.
"Fan loyalty is always based on team performance rather than a sense of being
disadvantaged because of luxury suites," Ordine says. "Besides, most fans aspire to be
rich enough to afford a suite."
There's no question about the ongoing loyalty for luxury boxes from team owners. While
the building boom of new or renovated stadiums may be over, says Fordham's Conrad,
luxury suites and their revenue are literally set in cement for now.
"Luxury suites are here to stay for the next few decades. Most franchises have them. You
can't really tear them down," says Conrad. "As long as there is demand, they will be a
good source of revenue."
Copyright 2012 CNBC.com.
For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards
Editor Brent Jones. For publication consideration in the newspaper, send comments to [email protected]. Include name,
phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.
Posted 2d 12h ago | Updated 2d 8h ago
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Luxury suites rule in professional sports revenue – USATODAY.com
11 comments
http://www.usatoday.com/money/economy/story/2012-02-04/cn...
Add a comment
Andy Hapka ·
Subscribe ·
Top Commenter · Racine, Wisconsin
I may be a conservative GOP'er, but even I find this ridiculous: "Corporations that buy them can
deduct anywhere up to 50% of their cost, as well as that of refreshments for business purposes."
I think the amount of money going to pro sports is pretty sickening, especially given that us
taxpayers then need to pay to build the stadiums.
Reply ·
7 · Like · Follow Post · Saturday at 8:08am
Jacob Smyth · Brown University
My sentiments exactly; all I kept thinking while reading the article is the fact that we,
the taxpayers, are the ones to foot the bill for building these new stadiums just so
that billionaire owners can make more profits! WTF?!
Reply ·
6 · Like · Saturday at 8:27am
Travis Yarbrough ·
Top Commenter · ITT Tech Torrance
I agree with this statement 100 % give one of the boxes revenues to pay back the tax
dollars at least.
Reply · Like · Saturday at 1:27pm
Philip Wilson ·
Top Commenter · Babson College
Notably Patriots owner and philanthropist Bob Kraft built Gillette stadium with his own
funds. As a fiscal conservative I agree that it's corporate welfare allowing companies to
deduct such largesse as a business expense.
Reply ·
Frank Mix ·
2 · Like · Yesterday at 9:27am
Top Commenter · Binghamton University
Hopefully cities will stop bending over to pay for these stadiums. Let the teams build them
without any taxpayer subsidies. In addition, renting these boxes should not be a tax deduction;
they're for leisure, not business. As for me, I prefer watching from my own living room for "no
charge".
Reply ·
2 · Like · Follow Post · Saturday at 10:56am
Kevin R. McCandless · Urbana High School
Frank, If those building the stadiums and spending on the suites are not allowed to do
it the way it is being done, the days of "no charge" pro football on TV are over. They
also pay for the advertising that supports the broadcast on free and cable TV.
Someone has to pay for it or it's gone.
Reply · Like · Yesterday at 7:31am
Jerry Cox ·
Top Commenter · City Colleges of Chicago
"Corporations that buy them can deduct anywhere up to 50% of their cost, as well as that of
refreshments for business purposes." -This is just wrong - just more tax cuts for the rich. Congress allows this sort of thing - I bet they
get to use the suites, often.
This is why congress' rating is so low. They have no ethics or morals.
Reply ·
2 · Like · Follow Post · Saturday at 8:07am
Thomas Funari ·
Top Commenter
GAS PRICES !!!
Notice not one candidate, or Oscama, has said a word about oil companies gouging us and
profitting trillions every quarter; yet not building one new refiery to bring down prices...
Corporate puuppets all
NFL = No Fan Loyalty , not 1 jersey made in America !!!
Reply ·
1 · Like · Follow Post · Saturday at 8:58am
Bruening Clague ·
Top Commenter
Pump price up .15 in last week, .50 since New Year. We are being sneaker taxed.
Corporate profits up, wages down. How about some revenue sharing with the
workforce?
Reply ·
1 · Like · Saturday at 9:24am
Thomas Funari ·
Top Commenter
Kleg Brewer JPMorganChase, for example, has settled six fraud cases in the last 13
years, including one with a $228 million settlement last summer, but it has obtained
at least 22 waivers, in part by arguing that it has “a strong record of compliance with
securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have
settled 15 fraud cases and received at least 39 waivers.
Reply · Like · Saturday at 10:18am
Travis Yarbrough ·
Top Commenter · ITT Tech Torrance
Have you checked out gas prices in any other country ??? No. Idiot. Stay on subject.
Typical Republican.
Reply · Like · Saturday at 1:29pm
Jerry Cox ·
4 of 5
Top Commenter · City Colleges of Chicago
2/6/12 5:14 PM
Luxury suites rule in professional sports revenue – USATODAY.com
http://www.usatoday.com/money/economy/story/2012-02-04/cn...
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