FEASIBILITY STUD Y ex ecutive summary

Transcription

F E AS IBI L IT Y S T UDY e xe cu t i ve s u m m ar y
ARENA
August 28, 2012
Contents
1.0 Executive Summary
2.0 Strategy Development
3.0 Market Comparisons
4.0 Site Analysis
5.0 Arena Financial Opportunities
6.0 Market Analysis
7.0 Public Opinion
8.0 Conclusions
9.0 Acknowledgements
1.0
EXECUTIVE
SUMMARY
E X EECXUETCI V
U ET I V
SU
E MS M
UM
AR
MYA R
1.0
Y
ARENA
In the spring of 2011, the City of Virginia Beach was presented with
an unsolicited and unexpected proposal regarding the development
of a 23,000 seat arena capable of hosting a professional sports
franchise. While that specific proposal was determined not to be of
interest to the City, civic leadership believed that the concept of a
properly planned major sports, entertainment and convention venue
warranted further study and consideration.
e x e c u t i v e s u m m a ry
1.1
The Virginia Beach Development Authority retained the services of HKS Sports and
Entertainment to assist the Authority in determining:
»» Whether Virginia Beach and the surrounding region possessed the population and
economic strength to properly support a modern arena of 18,000+ seats
»» Whether the existing sports and entertainment venues in the region were providing
residents with sufficient number and variety of events to properly service public demand
»» Whether the region possessed the demand to properly support the potential arrival of a
major league sports franchise
»» Whether enough corporate support existed in the region to commit to the important
arena revenue sources such as Naming Rights, Premium Seating and Corporate
Partnerships
»» Whether an attractive site was available in the City to properly develop a state of the art
arena venue of approximately 750,000 square feet
»» Whether transportation infrastructure currently exists to properly service and
accommodate approximately 150 events per year, with over 1 million people attending
those events
»» Whether hotel and tourism infrastructure currently exists to properly host and support a large number of anticipated out of town event attendees
»» Whether a large state-of-the-art arena could have significant positive impact on new development in the surrounding Strategic Growth Area
Beginning in the spring of 2011 and continuing
through the issuance of this report, HKS Sports
and Entertainment conducted a thorough and
comprehensive study to properly address all of
the issues and questions listed above.
It is important to note that this extensive study is actually the cumulative
result of four separate engagements between HKS and the Virginia Beach
was only approved after a full review of the results of the previous phase.
As each new phase was begun, new questions and issues were targeted
and the proper specialists in those respective disciplines were added to
the team to properly address those specific needs.
Much of the initial work was performed by HKS specialty teams such as
HKS Sports and Entertainment, HKS World Events, HKS Brandspace and
HKS Urban Design. As the goals and objectives expanded, new entities
were added to the collaborative team. Each firm that joined the study
team is highly respected in their respective fields.
1.3
Development Authority. Each phase was designed to a specific scope and
TEAM MEM B ERS I N C L U D E :
Comcast-Spectacor
One of the largest companies operating in the live sports and entertainment industry, ComcastSpectacor entities include Global Spectrum venue management, Ovations Food Service, New Era
Ticketing, Front Row Marketing and the Philadelphia Flyers (NHL) and Wells Fargo Center arena in
Philadelphia. Global Spectrum manages the Sandler Center for the Performing Arts in Virginia Beach
and the Ted Constant Center in Norfolk. Ovations provides the food service at Harbor Park and
Norfolk Scope.
Live Nation
The world’s largest producer and promoter of live music events, Live Nation Entertainment also
includes Ticketmaster, the largest ticket company in the industry. Live Nation has been partners with
the City of Virginia Beach in the Farm Bureau Live Amphitheater for over 16 years.
AMP (Aristarchus Management Partners)
Leading edge market research and financing solutions firm, founded by former senior executives
from Wal-Mart, Blockbuster and McDonalds.
On Message Sports
One of the country’s most respected public opinion research firms specializing in issues related to
the development of sports and entertainment venues.
Kimley Horn
Well respected engineering firm with unequaled experience with traffic and parking issues.
Hipple and Co.
Public relations firm specializing in project messaging and the development of public image
strategy.
Former President of Old Dominion University and Professor Emeritus of Economics.
Meridian Group
Multi dimensional full service marketing, public relations and interactive media group based in
Virginia Beach.
Chmura Economics
Richmond based economic research firm specializing in quantifying statewide economic impact
of large scale developments.
1.5
Dr. James V. Koch
During the evolution of this study, various presentations were made to
the Development Authority and other members of the City’s business
and community leadership to solicit reaction and information that
served to improve the findings of our collaborative effort. When new
concerns or specific issues were raised, we found the best experts in
the region and industry to properly research and provide solutions.
We would like to thank all who participated in the development of this
report as we believe that each person’s input has made this a more
complete and vibrant document.
Throughout this report, you will see the respective findings, opinions
and results of the work provided by each of these firms and
individuals. While the full work product is included in the complete
study, summaries of each firm’s findings are included in the Executive
Summary edition.
2011 Project Timeline
2011
PHASE 1
PHASE 2
Outside consultants added:
1.7
RBC Center
(now PNC Center) arena
tour and meetings with
civic leaders
Authority
approved
commencement of
arena study
Authority
approved
continuation of
arena study
2012 Project Timeline
2012
PHASE 3
Outside Consultants added:
PHASE 4
Dr. James V. Koch
VBDA Progress
Report:
January 17, 2012
Authority
Approved
continuation of
Arena Study
Authority
Approved
continuation of
Arena Study
2.0
STRATEGY
DEVELOPMENT
STRATEGY DEVELOPMENT
ARENA
The initial focus of this study was to determine if the City of Virginia
Beach and the surrounding region possessed the attributes needed to
enhance the success of a new sports and entertainment venue. This
phase of our study specifically focused on the following:
»» Overall size and characteristics of the market
»» Competitive venues in the market
»» Proximity to markets with major league sports franchises
»» Presence of corporations capable of providing support to the
financial success of an arena
2.1
s t r at e g y d e v e lop m e n t
»» Events that do not currently appear in the market
Size and Characteristics of the Market
The Virginia Beach/Hampton Roads DMA includes over 1.7 million residents, including Virginia
Beach, Norfolk, Chesapeake, Hampton, Portsmouth, Newport News, Suffolk, Williamsburg and
parts of Northeastern North Carolina. According to Nielsen, this represents over 710,000
households and ranks as the 43rd largest television market in the United States.
During our research, we became aware of the fact that significant amounts of tickets for events
held in the Farm Bureau Live Amphitheater are sold in zip codes associated more directly
with the Richmond/Petersburg television market. That market is ranked by Nielsen as the 58th
largest in the country populated by approximately 1.3 million people represented over 553,000
households. Information provided by Live Nation and Ticketmaster shows that, depending on
the artist genre performing, between 13 and 20% of ticket sales come from the Richmond market.
F URT H ER RESEAR C H O F SIMI L AR MAR K ETS I N C L O SE
P R OXIMITY P R O D U C E D SIMI L AR RESU LTS
Tulsa and Oklahoma City - 110 miles from downtown Tulsa to downtown Oklahoma City
Since the Chesapeake Energy Arena opened in 2002, major concerts and other events held in
OKC sold an average of 15% their tickets in the Tulsa market. The arrival of the NBA Oklahoma
City Thunder in 2009 has increased the percentage of tickets purchased in the Tulsa market
– approaching 20% on weekend games. Conversely, the 19,000 seat BOK Center in Tulsa has
enjoyed similar ticket sales patterns since its opening in 2008. Major concerts events such as
Paul McCartney, The Eagles, Lady Gaga and Taylor Swift have all consistently sold between 15
and 20% of their respective tickets in the Oklahoma City market.
Austin and San Antonio – 85 miles from downtown Austin to downtown San Antonio
Since opening in 2002, the AT&T Center has been the home of the NBA San Antonio Spurs. The
arena annually hosts 25 or more major concerts and the San Antonio Stock Show and Rodeo,
as well as 44+ Spurs games each year. The events consistently sell an average of 17-20% of their
tickets in the Austin zip codes.
These historical sales results are applicable to major events such as NBA games, concerts, championship athletic
competitions and tournaments.These events normally play only one venue in a defined market, creating greater demand for
the tickets in that specific region. Shows such as Disney on Ice and Ringling Brothers Circus traditionally perform in multiple
venues in a defined market, thereby reducing the distance that patrons usually travel to see the performance.
C O N C L USI O N
For the purposes of determining the size of an “event selling” region, solid precedent exists to
combine the Virginia Beach/Hampton Roads and Richmond/Petersburg television markets into one.
We have developed the name Southeastern Virginia as our term to represent the attributes of this
combined market. Southeastern Virginia thereby is home to over 3 million people, including over
1,300,000 television households. In the Nielsen rankings, Southeastern Virginia would rank as the 21st
largest television market in the United States – similar in size to St. Louis, MO and Portland, OR.
Coincidentally, during our study, we became aware of a similar and more organized effort to actually
combine the two markets into one.The Merger of Hampton Roads MSA and Richmond-Petersburg
MSA group is aggressively pursuing this new status and is spearheaded by Tom Frantz, CEO of
Williams Mullen law firm.Their official position paper can be found in the larger version of this study.
2.3
Competitive Venues in the Market
The Southeastern Virginia region currently has four mid-size arenas capable of hosting major
events such as concerts, family shows, professional and collegiate sports and large assemblies.
Constant Center Old Dominion University, Norfolk – Opened in 2002, “The Ted” has a
maximum seating capacity of 9200 and hosts ODU athletics, concerts and family shows.
Norfolk Scope Opened in 1971, Scope has a seating capacity of approximately 10,200 and
hosts the Norfolk Admirals AHL team, college and high school basketball, concerts and family shows.
Hampton Coliseum Opened in 1970, the Coliseum can accommodate up to 12,000
depending on configuration. The venue hosts concerts, family shows and motor sports events.
Richmond Coliseum Opened in 1971, the Coliseum has a capacity of approximately 12,000
and hosts events such as concerts, CAA basketball, minor league sports and family shows.
The Farm Bureau Live Amphitheater in Virginia Beach is an open air venue and therefore has a limited season of operation.
For the purposes of this report, the amphitheater is not considered as a competitive venue.The venue does not compete for
sports events, family shows and other major indoor shows.
The lack of a modern, state of the art indoor arena with a capacity of at least 13,000 seats
severely limits the number and magnitude of the events that can perform in Southeastern
Virginia. For example, major concert artists such as Lady Gaga, Madonna, Bruce Springsteen, etc.
will simply bypass the region because there is not a large enough indoor venue to accommodate
their productions and ticket selling capacity. The only venue in the entire state of Virginia
currently capable for consideration is the John Paul Jones Arena in Charlottesville – 175 miles
from Virginia Beach. The closest additional large arenas are Verizon Center in Washington, DC
and PNC Arena in Raleigh, NC – both approximately 200 miles from Virginia Beach.
Sought after athletic competitions such as the ACC Men’s Basketball Tournament, NCAA
consider the existing arenas in the region as viable venues.
C O N C L USI O N
A modern, large arena in Virginia Beach would have the instant ability to attract many prestigious
and lucrative events. Our research shows that Southeastern Virginia is the largest market in the
United States without a state of the art arena with a seating capacity of at least 13,000.
2.5
basketball tournament, NCAA Women’s Final Four and other national competitions will not
Proximity of Major League Sports Franchises
Washington, DC 200 miles from Virginia Beach – home to the Washington Redskins,
Washington Capitals, Washington Nationals, Washington Wizards and the MLS DC United.
Raleigh, NC 200 miles from Virginia Beach – home to the NHL Carolina Hurricanes.
C O N C L USI O N
Southeastern Virginia is the largest market in the United States without a major league sports
franchise. In fact, Southeastern Virginia is larger than over 20 other markets that are home to a
major league franchise, including many markets that posses multiple major league teams.
Presence of Major Corporations
The presence of major corporations is a key to the potential financial success of both an arena
and a professional sports franchise. Funding of large venues and the health of professional
sports teams rely heavily on the success of Contractually Obligated Income (COI) – multiyear
commitments for corporate partnerships for naming rights, premium seats and corporate
sponsorship.
The ability to market these important revenue products to a mix of large corporations and
consumer facing brands will help ensure the viability of both the venue and a franchise.
Southeastern Virginia is home to 10 companies currently listed in the Fortune 500
»» Amerigroup
»» Genworth Financial
»» Norfolk Southern
»» CarMax
»» Smithfield Foods
»» Dominion
»» Dollar Tree
»» MeadWestvaco
»» Altria Group
»» Owens and Minor
2.7
In addition, Southeastern Virginia is home to 365 companies with annual sales in excess of $25
million and almost 600 companies that employ 250 or more people. Historically, companies that
fit these profiles buy club seats/loge boxes, become corporate partners with teams/arenas and
purchase large amounts of tickets for use by employees and customers.
When compared to other markets across the country looking to support a large arena and
potentially attract a major league sports franchise, Southeastern Virginia fares quite favorably. A
specific market comparison can be found later in this report.
C O N C L USI O N
Southeastern Virginia is home to a very wealthy and diverse cooperate base – more than
capable of providing important support to the potential arena and professional sports team.
3.0
MARKET
COMPARISONS
MARKET COMPARISONS
ARENA
For this report, we have prepared comparisons to:
»» Markets often mentioned as potential homes for a new or relocated sports franchise
»» Markets that are currently home to one major league franchise
m a r k e t co m pa r i s on s
3.1
Markets mentioned as potential relocation sites
These cities have all developed state of the art arenas and are often mentioned as potential new
homes for either relocating or expansion franchises in either the NBA or NHL
K A N SAS C ITY
Arena: Sprint Center (2007)
Capacity:19,000
Events per year: 150
Major League Teams: Kansas City Chiefs, Kansas City Royals, MLS Sporting KC
TV Market: 940,000 Homes, 31st largest
Fortune 500 Companies: 2
Median Income: $44,123
Outlook: The market has a new, NBA/NHL caliber arena, but already has three major league
franchises with three new or recently renovated venues that would compete for both fan and
corporate support.
N AS H VI L L E
Arena: Bridgestone Arena (1996)
Capacity: 19,000
Events per year: 150
Major League Teams: Nashville Predators, Tennessee Titans
TV Market: 1,024,000 Homes, 29th largest
Median Income: $45, 726
Outlook: The market has a viable NHL arena, but already has two major league franchise plus
Vanderbilt University that would compete for fan and corporate support.
L O UISVI L L E
Arena: KFC Yum Center(2010)
Capacity: 22,000
Events: Home of the University of Louisville basketball programs.
Major League Teams: None
TV Market: Louisville and Lexington total 1,162,000 homes and would be the 25th largest
Outlook: The market does not have a current major league team. However, the financial terms
in the lease between the arena and the University already allocate almost all of the revenues
derived from Naming Rights, Premium Seating and Corporate Partnerships – leaving very little
for an additional tenant. In addition, the presence of both the University of Louisville and the
University of Kentucky would strong competition for both fan and corporate support.
3.3
L AS VE G AS
Arena:Thomas and Mack Center (Opened in 1983 / renovated in 1999)
Capacity: 19,000
Events: Home to UNLV athletics, National Finals Rodeo Championship and the Professional Bull Riders
Championship.
TV Market: 737,000 homes, 40th largest
Fortune 500 Companies: 3 (all gaming companies)
Outlook:The market does not have a current team, nor would the existing arena qualify as a potential
arena home. Recent efforts by both the public and private sectors to develop a new arena have
repeatedly run into many roadblocks. In addition, the NBA and NHL have expressed concerns
regarding the potential conflict between legalized sports gambling and the presence of a home franchise.
S O UT H EASTER N VIR G I N IA
Arena: None
TV Market: 1,300,000 Homes, 21st largest
Outlook:The market is the largest in the country without either a major league franchise or a state
of the art arena. Also, the market does not have a major college conference athletic program to
compete for the major fan and corporate support. Reasonable prognosis is favorable for success in
both.
3.5
One-Team Markets
Teams that are the only major league entity in a region can experience consistent financial success
because they are not competing with any other teams or venues for events and revenues. Markets
that possess only one major league franchise provide unique opportunities for that team to
capture fan support, corporate partnerships, media coverage and broadcast revenues.
SA N A N T O N I O
Team: NBA San Antonio Spurs
TV Market: San Antonio and Austin Markets would total 1,566,000 homes, 16th largest
Overview: Since the San Antonio Spurs joined the NBA in 1976 (from the ABA), the team has
consistently enjoyed enviable success. While putting a winning team on the court is always
helpful, the franchise has built a very strong bond with the entire region. Since moving into
their new home – AT&T Center in 2002, the team has enjoyed attendance levels averaging over
95% of capacity. Additional revenues from regional broadcast rights, corporate partnerships
and merchandise sales annually place the franchise in mid-upper tier status in the NBA team
financial rankings.
O K L A H O MA C ITY
Team: Oklahoma City Thunder
TV Market: OKC and Tulsa markets would total 1,241,000 homes, 22nd largest.
Fortune 500 Companies: 4 (all energy companies)
Overview: The Chesapeake Energy Arena (originally Ford Arena) opened in 2002 as part of
a master plan to use sports, entertainment and convention venues to revitalize downtown
Oklahoma City. Opened without a major league tenant, the arena served as the temporary
home of the New Orleans Hornets from 2005-2007 as the team was forced to relocate
because of Hurricane Katrina. The unexpected success of the franchise in Oklahoma City during
those two cities enticed a group of local businessmen to pursue the relocation of an NBA team
that could permanently move to OKC. In 2008, the Seattle Sonics became the Oklahoma City
Thunder and began play in their new city. Despite league concerns about the market’s capacity
to financially support the franchise, the Thunder are shattering all expectations for revenue
generation.
3.7
C O N C L USI O N
Southeastern Virginia has the population demographics and corporate potential to successfully
host a major league franchise in a new arena. Research included later in this report will also
show that sufficient resources appear to exist to successfully support a new venue with or
without an anchor tenant.
4.0
SITE
ANALYSIS
SITE ANALYSIS
ARENA
For the purposes of this report, we focused our study on a site across 19th street from the
Virginia Beach Convention Center.
Attributes of this site include:
»» Property is already owned by the City of Virginia Beach.
»» Large enough to accommodate a 750,000 square foot venue.
»» Large enough to allow for future complementary development around
the venue.
potential issues needing serious mitigation.
»» Close proximity to the Virginia Beach Convention Center creates significant potential for
revenues from joint event booking and substantial operating synergies.
»» Already supported by transportation infrastructure capable of successfully moving large
amounts of traffic in a timely manner.
»» Initial study indicates the existence of sufficient parking – both public and
privately owned.
»» In close proximity to large amounts of hotel rooms and restaurants.
»» Close to a planned entertainment district.
4.1
s i t e a n a ly s i s
»» Initial evaluation indicates that the site is free from any soil contaminants or other
A Site Ready to Go
I D EA L L O C ATI O N F O R A N O C EA N F R O N T
S P O RTS , E N TERTAI N ME N T & C O N VE N TI O N D ISTRI C T
»» City-owned property
»» All related infrastructure in place or under development
»» Infrastructure accommodates 6,000,000 tourists annually
»» Close to Resort/Hotel base with 8,500 rooms
»» Planned regional light rail line adjacent to site
»» Approved resort area master plan
HOTEL
N
ENTIO
CONV TER
CEN
LK
N WA
15 MI
ENT
TAINM
ENTER TER
E
C N
ARENA
4.3
ARENA
Development Potential and Impact
HKS Urban Design conducted a thorough review of the site as well as the surrounding property:
Birdneck Road and the Oceanfront
I-264 and 17th Street
Entire Resort Strategic Growth Plan District
Led by Randy Morton, HKS Urban Design has extensive experience with assisting cities to realize
the full potential available from the development of a large entertainment and sports venue.
Randy’s experience includes sports facility districts in Miami, Washington, DC and Newark.
HKS Urban Design believes significant potential exists for the Arena District to positively impact
the entire Resort District:
»» Attracting large numbers of new visitors to the Oceanfront – many from
September to May
»» Creating exciting synergies with the planned entertainment district
»» Providing environmentally friendly connections between the Virginia Aquarium
and Laskin Road.
»» Creating an increase in property values.
Highlights of the HKS Urban Design report are provided.
19th Street Central District:
Connecting to Rest of the Neighborhoods
4.5
Comprehensive Open Space Plan
4.7
Park, Bike Trail and 19th Street Come Together
Concept Sketch: Mixed Use and
Entertainment District
4.9
Traffic and Parking Analysis
The study team engaged Kimley Horn and Associates to conduct an inventory of:
»» Existing highway and interchange infrastructure.The study assumed a sellout crowd of
18,000 people travelling in approximately 6000 vehicles.The traffic counts were applied to
conditions expected during the late rush hour period for an event starting at 7:30 pm.
»» Existing road patterns adjacent and near the proposed site.
»» Available existing parking lots and structures within walking or shuttle distance of the
proposed site.
H I G H L I G H TS
The existing highway and interchange network in the area will still operate under full capacity
with 6000 vehicles arriving in the late rush hour period.
No new interchanges will be needed to accommodate the expected flow.
Kimley Horn recommends reallocating traffic lanes to allow for faster ingress and egress.
S ufficient surface and structure already exists close to the arena site to accommodate the
expected needs.
vailability of City owned beach trolleys may be utilized to shuttle people from City owned
A
decks to the arena.
Development of private property for event parking is considered likely, but those numbers are
not reflected in our review.
Sold-out arena parking scenario
18,500 seat arena – Sold Out
2.5 guests/veh = 7,400 veh
3.0 guests/veh = 6,200 veh
Staffing
~ 900 – park off site
Assume 1.0 staff/veh
Other (i.e. media)
~200 – park off site
Mode/Split
Off-season 95% veh/5% other = 5,890 – 7,030 veh
Tourist season 70% veh/30% other = 4,340 – 5,180 veh
Other events attract 8,000-14,000 patrons
4.11
Traffic: Key Routes
18,500 Occupancy
2.5-3 Vehicle Occupancy
All arrive in 1 hour
6,200-7,400 Vehicles
With mode split:
- Off-season 5,890 – 7,030 veh
- Tourist season = 4,340 – 5,180 veh
4.13
Tourist Volume and Capacity
Based on tourist season volumes
4.15
C O N C L USI O N
The proposed site provides a very attractive location for the development of a major sports and
entertainment arena. Development costs can be kept to a minimum because of the substantial
investment in support infrastructure already made by the City. Significant potential exists for the
arena to positively impact the value of property and establishments located in the Resort District.
5.0
ARENA FINANCIAL
OPPORTUNITIES
ARENA FINANCIAL OPPORTUNITIES
ARENA
Our study considered two scenarios to prepare the event forecasts and resulting financial
considerations and opportunity:
»» Arena without a major league tenant – estimated to cost approximately $275 million
»» Arena with a franchise in either the NBA or NHL – estimated to cost approximately
$350 million
a r e n a f i n a nc i a l oppo rt u n i t i e s
5.1
Arena without a Major League Tenant
For this phase of the study, we enlisted the assistance of the two largest firms currently
providing event programming and venue management in Southeastern Virginia – Live Nation and
Global Spectrum. We asked them to build an aggressive, but realistically attainable schedule of
concerts, family shows, professional and amateur sports, religious assemblies and conventionrelated events that could all be hosted in a large state-of-the-art arena. We were careful to
consider what events might prefer to stay in their present venues (because of size, location,
etc.), and develop a conservative calendar projection.
Both Global Spectrum and Live Nation then compared the proformas with the performance at
comparable venues in similar markets to ensure the accuracy of their forecasts.
In addition, we focused on the many large events that cannot currently be hosted in existing
venues in Southeastern Virginia.
These events include:
NCAA Men’s Basketball Tournament 2nd and 3rd rounds, Regional Sweet 16
NCAA Women’s Basketball Tournament Final Four and Regional Sweet 16
ACC Men’s and Women’s Basketball Tournaments
CIAA Men’s and Women’s Basketball Tournament (combined event)
Conference USA Men’s and Women’s Basketball Tournament
NCAA Frozen Four Hockey Championship
NCAA Volleyball Championship
NCAA Wrestling Championship
U.S. Figure Skating Championships
U.S. Gymnastics Championships
Joel Osteen Ministries
Women of Faith
Major Religious Assemblies (Southern Baptists, Presbytery, Church of God in Christ)
All of the events listed above rotate between cities and venues that meet their respective
requirements for seating capacity, hotel room inventory, transportation infrastructure and
adjacent meeting and exhibition space. Currently, the Virginia Beach Arena site meets all of
the requirements necessary to host these attractive events on a regular basis. Of particular
their host cities.
For example:
CIAA Men’s and Women’s Tournament - $44 million annual economic impact
ACC Men’s Basketball Tournament – Atlanta - $27 million in 2012
NCAA Women’s Final Four – Denver - $20 million in 2012
NCAA Frozen Four – Pittsburgh - $10 million estimated in 2013
US Figure Skating Championships – San Jose - $25 million in 2012
US Gymnastics Championships – Hartford - $10 million expected in 2013
5.3
importance is the significant economic impact these events have been proven to generate for
F I N A N C IA L ASSUM P TI O N S
Global Spectrum and Live Nation believe that the arena would:
»» Host an average of 150 events per year,
»» Sell approximately 800,000 tickets
»» Attract additional 200,000 people attending non ticketed events such as conventions,
religious assemblies and trade shows (booked in consort with the Convention Center)
»» Generate revenues sufficient to pay all direct operating expenses
»» Direct City tax revenues generated from ticket sales, food/beverage operations and
merchandise sales are substantial and could be considered for the financing of the arena
»» Projected indirect impact on revenues related to hotel and restaurant spending
are substantial
Their proforma forecasts an annual profit when including realistic assumptions for revenues
available from event rentals, commissions from food and merchandise sales, parking and arena
related fees. Large additional revenues are available from the sale of Naming Rights, Premium Seating
and Corporate Partnerships.
Arena with a Major League Tenant
Our team also studied the event and financial activity of the arena is successful in attracting a
team in either the NBA or NHL. The resulting proforma is also included in the full version of
this report.
»» Total event activity increases to almost 200 per year
»» Annual attendance approaches 1.5 million
»» Considering the substantial increased spending for tickets, food service and merchandise,
we can reasonably expect at least an additional $5 million in direct tax collections
»» Hotel restaurant activity should be expected to substantially increase. Downtown
Oklahoma City reports that each home game of the OKC Thunder directly generates
$1.2 million of spending in hotels and restaurants.
»» Gross revenues from Naming Rights, Premium Seating and Corporate Partnerships
increase significantly.
5.5
Financial Opportunities
We believe that an arena with or without a major league tenant will generate revenues sufficient to
cover the debt service and operations of the project through:
»» Arena Operating Profits, Lease Payments and other related arena fees
»» Funds Realized from Naming Rights, Premium Seating and Corporate Partnerships
»» Tax Revenues directly generated from the sale of tickets, food service and novelties
»» Financial impact – both direct and indirect - on hotel and restaurant spending because of
the arena activity
6.0
MARKET
ANALYSIS
MARKET ANALYSIS
ARENA
This portion of our study was created to accurately predict the potential of Southeastern
Virginia residents to support the 150+ annual events through the purchase of tickets,
premium seating products, various levels of hospitality, food service and merchandise. One
of the challenges for this study is the fact that there are currently no large modern venues in
Southeastern Virginia to give us a regional series of precedents. The closest large modern venue
offering some of the products above is the John Paul Jones Arena at the University of Virginia.
To accurately survey and anticipate the buying habits and power of this region, we enlisted
the services of Aristarchus Management Partners (AMP). AMP was founded by former senior
executives of major corporations such as Wal-Mart, Blockbuster and McDonald’s and has one of
6.1
m a r k e t a n a ly s i s
the most detailed and sophisticated consumer data bases available.
MACRO Demographic Take Aways
T O TA L METR O P O L ITA N MAR K ET SI Z E
San Antonio Metro2.2M
Sacramento Metro Area2.4M
Oklahoma City Metro Area1.8M
Southeast Virginia Metro Area3.0M
H O USE H O L D S A N D AVERA G E I N C O ME
San Antonio Metro1.1M$77,844
Sacramento Metro Area1.2M$77,480
Oklahoma City Metro Area931K$67,660
Southeast Virginia Metro Area
1.36M
$79,860
The following target segments for NBA / NHL
P REMIUM SEATI N G
Behaves the same way across all 4 markets:
D UA L I N C O M E H O U S E H O L D S E A R N I N G $ 1 0 0 K O R M O R E :
Make up about 19.6% of all Households in Southeast Virginia Area Market
Discretionary spending habits are heavily “Activity” related
Highly sensitive to “Macro Economic Conditions”
Adjust their spending habits according to “Macro Economic Outlook”
B USI N ESS O W N E R S E A R N I N G $ 1 0 0 K O R M O R E :
Discretionary spending habits are heavily “Brand” related
Adjust their spending habits according to specific industry performance
More apt to make medium-term, “Brand - Status Driven” purchase decisions
E L ITE P R O F E S S I O N A L S E A R N I N G $ 1 0 0 K O R M O R E :
Discretionary spending habits are highly specialized
Very low sensitivity to “Macro Economic Conditions”
Adjust their spending habits according to “What’s New / What’s In”
m a r k e t a n a ly s i s
6.3
C O N C L USI O N
While currently lacking a venue with modern amenities and premium product, it is clear that
this region possesses significant buying power and should be inclined to actively support the
new arena. We also believe the region would also buy expensive tickets and premium products
that would be available with the potential presence of a major league sports team.
7.0
PUBLIC
OPINION
PUBLIC OPINION
ARENA
Public Opinion Research
We believe in the importance of accurately seeking the opinions of the region’s residents to
gauge how a large venue development might be perceived. The research garnered will assist
in designing the optimum venue for the market and also give us in direction in building public
support for the project.
For this portion of the study, we enlisted the assistance of On Message Sports, a well respected
public opinion research firm that specializes in the development of sports and entertainment
venues. On Message Sports has participated in the development of the Amway Center in
Orlando, as well as the Jacksonville, FL Stadium and Arena.
Virginia Beach.
7.1
p u bl i c op i n i on
In November 2011, On Message surveyed approximately 500 likely voters in the City of
Most Important Issue Facing Virginia Beach
Right Direction/Wrong Track
7.3
Opinion: Amenities & Facilities
Opinion: Economic Development
7.5
C O N C L USI O N
»» Virginia Beach residents believe a sports and entertainment venue is a desirable
city asset
»» Virginia Beach residents believe a new venue will create new jobs and serve as a
economic development tool
»» Virginia Beach residents will support a new venue as long as it is part of a comprehensive
economic development strategy
»» Large support from residents 45 and younger
»» Challenge is to prove merit to seniors
8.0
CONCLUSIONS
CONCLUSIONS
ARENA
T H E S O UT H EASTER N VIR G I N IA MAR K ET IS :
»» The largest market in the United States that is not served by a state of the art arena with a capacity
of at least 13,000 seats
»» The largest market in the United States without at least one major league sports franchise
S O UT H EASTER N VIR G I N IA P O SSESSES :
»» The personal income and buying power to support ticket sales, premium seating products, hospitality
offerings and arena food and merchandise operations
Rights, Premium Seating and Corporate Partnerships
T H E C ITY O F VIR G I N IA B EA C H H AS :
»» Proven track record of responsible large scale development projects that have improved the City’s
economy and public image
»» Transportation infrastructure capable of moving large crowds to and from major events
»» Hotel room base capable of supporting large scale arena events that will attract large numbers of out
of town visitors
»»
8.1
concl u s i on s
»» The corporate strength to support the arena and potential team through the purchase of Naming
T H E P O TE N TIA L ARE N A SITE IS :
»» City owned
»» Clear and clean for development
»» Located in close proximity to the Virginia Beach Convention Center
»» Situated within a highway and road network to efficiently handle event traffic
»» Close to more than adequate parking spaces needed to support large events
T H E ARE N A W I L L :
»» Host 150+ events per year including major concerts, professional and collegiate sports, family shows
and convention assemblies
»» Attract large scale events such as NCAA Championships that will generate significant economic
impact
»» Provide substantial activity in the Oceanfront during the time of the year that is considered the
Resort’s “Off Season.”
»» Generate enough direct and indirect revenues to cover the cost of project development
»» Provide national media exposure to Virginia Beach
9.0
ACKNOWLEDGEMENTS
ACKNOWLEDGEMENTS
ARENA
H K S S P O RTS & E N TERTAI N ME N T
The HKS Sports & Entertainment Group, ranked as one of the top sports and entertainment
designers by BD World Architecture, has ushered in a new generation of multi-revenuegenerating, world-class facilities. The group’s portfolio includes Metrodome Next Venue,
Liverpool FC Stadium, Cowboys Stadium, Lucas Oil Stadium, Miller Park and major renovations
and additions for U.S. Cellular Field and Dodger Stadium. These venues are known for enhancing
and leveraging team brand, delivering an enhanced fan experience, and serving as destination
environments. HKS is ranked among the top five architectural/engineering firms, according to
Building Design+Construction magazine, and operates from 29 U.S. and worldwide offices.
HKS Brandspace is dedicated to helping clients create dynamic and meaningful
branded environments that engage, energize and earn. Our work springs from
research that identifies existing brand equity and develops a strategy for leveraging
the brand into the built environment. We believe that every decision should work
toward clearly defined branding, identity and theming goals. It is, quite literally,
“design from the brand out,” and has been phenomenally successful in helping our
clients achieve maximum leverage and extension from their brand assets.
H K S W O R L D EVE N TS
HKS World Events provides an exciting platform for producing events such as the Olympic
sports competitions, NCAA Championships, college conference championships, major golf
tournaments and large concerts and festivals. Another key goal for HKS World Events is to help
clients create new profit centers around their mega events.
9.1
a cknowl e dg e m e n t s
H K S B RA N D S PA C E
AM P
Aristarchus Management Partners, Inc. is built upon the experience and skill sets of our Founder
and Partners in the field of consumer data analytics. This core competency was born out of
the necessity to build predictive financial models for the effective scaling and revenue growth
of major retail chains from the 1980s through the early 2000s. Since then, we have applied our
proprietary methodologies and analytical algorithms outside the retail world, proving the value
of highly accurate predictive consumer buying behavior across a variety of industries. Over the
past decade, AMP, Inc. has applied these tools to private equity transactions in order to facilitate
predictable revenues and improved returns on invested capital.
C O M C AST S P E C TAT O R
Comcast-Spectacor is the Philadelphia-based sports and entertainment firm, which has
established itself as a leader in the sports management industry, providing high quality sports
and entertainment to millions of fans around the world. The company operates in 46 of the 50
United States. The company owns:
G L O B A L S P E C TRUM
Comcast-Spectacor is the principal owner of Global Spectrum, the fastest growing firm in the
public assembly management field. The company manages and operates public assembly facilities
throughout the world. Global Spectrum provides complete management and operational
services to its clients and offers a full service, in-house marketing department at all of its
facilities to increase ticket sales for the events and to enhance the image of its facilities.
L IVE N ATI O N
Live Nation Entertainment is the world's leading live entertainment and eCommerce company,
comprised of four market leaders: Ticketmaster.com, Live Nation Concerts, Front Line
Management Group and Live Nation Network. Ticketmaster.com is the global event ticketing
leader and one of the world's top five eCommerce sites, with over 26 million monthly unique
visitors. Live Nation Concerts produces over 20,000 shows annually for more than 2,000 artists
globally.
O N MESSA G E
clear, compelling and consistent message. Our methodology aligns your company’s strengths and
9.3
true point of difference with customer needs to create a messaging platform that elicits optimal
OnMessage is a messaging infusion company with a proven model for helping you develop a
engagement across all communication channels. This methodology, when combined with our
employee training programs and demand generation services, enables you to achieve the highest
return on every connection you make by infusing effective messaging into your company, culture
and customers.
K IM L EY- H O R N A N D ASS O C IATES
As one of the country's premier design consulting firms, Kimley-Horn has many disciplines but
only one expertise: making our clients successful. Whether your project is national or local,
involving public infrastructure or private development, we understand your challenges. Our
engineers, planners, and environmental scientists work within your vision and your organization,
using collaboration, experience, and innovation to achieve your goals. Today, tomorrow, and in
the future you envision, we create the solutions you need.
D R . J AMES V. K O C H
James V. Koch is Board of Visitors Professor of Economics and President Emeritus at Old
Dominion University. He also has held teaching and research positions at Illinois State University,
California State University at Los Angeles, the University of Grenoble (France), Brown
University, Rhode Island College, Ball State University, the University of Hawai'i, the Royal
Melbourne Institute of Technology in Australia and the University of Montana. He served as
President of the University of Montana (1986-1990) and Old Dominion University (1990-2001)
and was named one of the 100 most effective college presidents in the United States.
Dr. Koch has published ten books and 100 articles in refereed journals. His research has
focused primarily upon applied microeconomics topics. His journal articles on the economics
of intercollegiate athletics, the economics of discrimination and affirmative action, TQM, and
the economics of education have been reprinted and cited frequently. Recently, he has done
extensive work in the economics of e-commerce and currently is doing a book on Caterpillar
that explores the sources of this Fortune 500 manufacturing firm’s success.
C H MURA E C O N O MI C S & A N A LYTI C S
Chmura Economics & Analytics provides applied economic consulting, quantitative research, and
software solutions requiring the integration of advanced economic analysis. Chmura publishes
Virginia Economic Trends, electronic publications, and forecasts.
HIPPLE&CO
Hipple&Co Reputation Management is a strategic communications and organizational change
consulting firm helping companies stand out and manage change.
MERI D IA N G R O U P + L AU N C H I N TERA C TIVE
Meridian Group + Launch Interactive is an integrated marketing communications firm with
over thirty years of experience in guiding both small and large companies and organizations to
become the leaders in their respective category.
9.5

FEASIBILITY STUD Y ex ecutive summary

Transcription

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