Final Paper/ Powerpoint

profileclavo22
3UnitPaperMSA643.docx

Running Head: Suite Ownership 2

2

Suite Ownership

Trae’Von Clavo

Belhaven University

MSA 643

Suite Ownership

Over recent decades, luxury suites have gained significant importance as an essential part of newly constructed sporting stadiums. The key reason is because of the huge amounts of revenue generated by the luxury suites. Therefore, suite ownership has increasingly become a highly profitable venture. Today, most new stadiums are built because of their financial feasibility to generate a good amount of capital or revenues. For instance, a study conducted for the Dallas Cowboys estimated that a new stadium built in the region would add about $12.48 billion to $27.65 billion to the local economy within a thirty-year lifespan. In the U.S., the average luxury suites revenue amounts to about $9.8 million per professional sports venue every year (Lawrence et al., 2016). A large amount of revenue comes from the sale of luxury boxes and club seating. Additionally, luxury suites contain various essential features and amenities, such as hotels, bars, lodging, entertainment areas, and others that generate more revenue. This paper primarily focuses on discussing the importance of revenue generated from suite ownership, some of the concerns associated with suite ownership, and the factors determining the suites' pricing.

As stated earlier, luxury suites in sporting stadiums generate huge amounts of revenue for the owners. The revenues generated from the suite ownership have several benefits to both the owners, the local government, community members, and other key stakeholders. For instance, the revenues may be used to repay the debts incurred during the stadium and the luxury suites construction or renovation. Suite ownership requires huge capital investment; hence the finances may be acquired through borrowing from different sources. Therefore, the revenues generated by suites play a critical role in settling these debts (Lawrence et al., 2016). The revenues are also an important source of income for the suite owners. Suite ownership revenues also contribute largely to the local economy. The revenues contribute to increased tax income to the local government, which is used to develop the local economy. For instance, the Manhattan football stadium was estimated to generate about $72.5 million in new tax income (Hitchcock). As a result, suite revenues play an essential role in boosting local economies. Moreover, luxury suites and incomes that come from suite ownership helps to create new job opportunities for the local community members. For instance, the suites contain various amenities, such as hotels, bars, entertainment, and refreshment areas that attract employees, thus creating job opportunities for the locals. An economic impact study conducted by Deloitte & Touche indicated that the Ballpark and its surrounding development would support about 5,268 new jobs (Hitchcock). Therefore, this is a clear indication that the revenues generated from suite ownership enhance the creation of employment opportunities.

There are various concerns associated with suite construction and ownership. For instance, one of the key concerns relates to the source of financing for the suite's construction. Most of the luxury suites in sporting stadiums are financed heavily using public funds. Therefore, the public should be educated and explained clearly regarding the expected benefits of these projects. Also, the views and opinions of all public members should be heard and considered. The other concern relates to corruption issues by officials during the construction or renovation of luxury suites. For instance, the San Diego City officials were accused of the mismanagement of public money set for the development of a new stadium consisting of luxury suites. Moreover, when public funds or taxpayers' money is used to facilitate new stadiums and luxury suites construction, other essential public services may be cut. Therefore, this affects the provision of other crucial services to the public. Additionally, economic impact assessment is another issue of concern for luxury suites. An accurate economic impact report is essential to determine the feasibility or the economic benefits of the particular suite ownership. If the suite was funded through public money, it should also benefit the public, and not the owners only (Hitchcock).

Just like other commercial properties, luxury suite pricing is set based on various factors. One of the key pricing determinants includes the interior and amenities. The pricing is highly determined by the suite’s interior design, the facilities and amenities that are offered. For instance, some suites are highly luxurious with great finishing, interior design and excellent amenities that attract more customers; hence they are priced highly. Stadium capacity also determines suites pricing. Stadiums with large capacities accommodate many people who are potential customers, hence resulting in increased demand for the luxury suites. Therefore, the suite prices rise due to high demand. Again, the demographic location of the suites affects their pricing. The prices of suites located in different geographical locations usually differ. Moreover, the type of event also plays an essential role in determining the pricing of luxury suites. For instance, some events are highly priced compared to others, depending on the nature of the event, its popularity and ability to attract a huge number of fans or spectators. League affiliation is another primary determinant of the suite pricing. Highly famous leagues tend to attract high prices for luxury suites (Shapiro et al., 2012).

References

Hitchcock, M. Welcome to PETCO Park: Home of Your Enron-by-the-Sea Padres. University of California Berkeley Law.

Lawrence, H. J., Kahler, J., & Contorno, R. (2016). An examination of luxury suite ownership in professional sports. Available at SSRN 2858343.

Shapiro, S. L., DeSchriver, T., & Rascher, D. A. (2012). Factors affecting the price of luxury suites in major North American sports facilities. Journal of Sport Management26(3), 249-257.