Table of Contents
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1. Trends 2. Cost Savings Potential 3. Best Practices/Case Studies 4. How-To Tips |
5. Contact Information 6. Research/Articles 7. Legislation 8. Links |
1. Trends
Publicly contracted private management of stadiums, arenas, convention centers, and other such facilities began over 20 years ago when the Louisiana Superdome was privatized in 1975. Privatization is proving increasingly popular for new, multi-purpose sports and entertainment facilities, particularly in secondary markets.
By the time the 1990s end, at least 45 stadiums and arenas will have been built during the decade, and $4 out of every $5 spent on stadiums comes from public sources. In fact, of the 49 existing major-league football and baseball stadiums, 44 were built with public money. The other five were privately financed.
2. Cost Savings Potential
In 1995, after coming under private management, Kansas’s State Expo Center broke the $1 million dollar mark for annual income, finishing with its best financial performance since opening in 1987. Since privatization, increased efficiencies of the operation have cut an average of $600,000 a year off the original $1.4 million annual subsidy.
In the first year of private management at the West Palm Beach Auditorium, operating deficits were reduced by $531,878. In the three years before 1995, the facility had an average deficit of $746,600. In 1995, the deficit was cut to $214,722.
In Coral Springs, Florida, the City Center of Performing Arts’s first full year of operation under specialized contract management with Professional Facility Management saw attendance up 28 percent, revenue up 19 percent, and the city’s operating subsidy reduced by 33 percent.
The City of Riverside, California privatized its convention center in 1991 and realized savings of $400,000 in the first year alone.
3. Best Practices/Case Studies
Typically, the average term for private management of a municipal facility is three years, with the first year devoted to cost savings strategies and a decrease in bureaucratic layers. The next two years are devoted to the implementation of revenue generating programs by the private management firm. The management fees range from $50,000 to $200,000 per year plus incentives, which may be based on user ratings or on how closely management meets the original budget projections.
| Case Study: Cook Convention Center, Memphis, Tennessee — Contract Management |
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The first budget submitted by SMG, for fiscal year 1994, showed a reduction of $220,000 from the originally approved budget for the time period. The operations budget was further reduced for the next year from an operating deficit of $1.78 million to $1.25 million—a $500,000 savings. SMG officials attribute a large portion of the savings to restructuring the food and beverage system. Under the city’s management, the concession system was open to all caterers, and the center provided a portion of the concessions as well. SMG competitively bid out concession services to an exclusive provider, saving $250,000 per year. The transition of the Memphis Cook Convention Center to private management also resulted in very little, if any, disruption to former employees. SMG offered positions to 27 of the convention center’s 32 full-time employees. Those not retained found employment in other county departments. |
| Case Study: Colorado Convention Center, Denver, Colorado — Contract Management and Operation |
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The private contractor also created new revenue with the additions of food and beverage, electrical, telecommunications, and business services purchased by those who frequent the facility for exhibitions, conventions, trade shows, and special events. |
| Case Study: San Francisco and Denver Stadiums — Private Financing |
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Similarly, in Denver, the NBA’s Nuggets and the NHL’s Avalanche are building a private arena, the Pepsi Center. Ascent Entertainment plans to spend $150 million to build the arena, which will have 19,092 seats, 84 luxury boxes, and a 300-seat cafe. Ascent expects to match its initial investment with first-year revenues, including $90 million in ticket sales from 80 hockey and basketball games and 70 other events, such as rodeos and concerts; $17 million from luxury boxes and club seating; $20 million from naming rights from Pepsi; and $20 million from parking, concessions, and advertising. |
4. How-to-Tips
5. Contact Information
| Practitioners | Thomas R. Gibson President Spectacor Management Group 701 Market Street Philadelphia, PA 19106 (215) 592-4100 |
| Experts | John H. Nicholson Facility Consulting Associates 1203 Forest Park Drive Auburn, MA 01501 (508) 832-8685 |
Keith D. Curry 660 Newport Center Drive, #750 Newport Beach, CA 92660 (714) 721-9422 |