The American mall is not the only part of discretionary consumer economy on the wane. There is a quiet rumbling among owners and operators of sports venues—stadiums, arenas, and the like—that their attendance figures are in secular decline. Football and baseball teams themselves may not care. In most cases, they make money whether their fans watch them in person or tune in at home.
The supply-demand equation is harder to pinpoint at large-scale sports facilities than at shopping malls. One reason: sports venues are often owned by municipalities. Politicians may be hard pressed to reveal the truth behind that jobs-for-money bond levy. In the world of shopping malls, by contrast, retail stores renew or cancel leases in beat with the economic tempo.
We are intrigued by what has been happening at the Daytona International Speedway over the past six years. Track officials have spent more than $400 million to revamp the facilities in response to a stunning $100 million drop in revenue they experienced between 2007-2012. The site is managed by publicly-listed International Speedway Corporation, requiring disclosure that may not be readily available from other venues.
The iconic NASCAR track was originally built in 1959 under a leasehold agreement with the City of Daytona Beach. And while there have been selected renovations since then, nothing has matched the recent torrent of construction, or rather deconstruction. Among the changes, track officials removed about 40,000 seats in the backstretch, where sightlines had always been poor. Those seats were not replaced as part of a “less is more” redesign. They also added multi-use entry points to the venue, which feature concessions and exhibition areas.
The attempt to improve the attendee experience aligns with what we have seen at shopping malls across America. A core survival strategy is business diversification. Increasingly, shopping malls are making their way through the retail apocalypse by turning themselves into entertainment centers, including virtual reality rides and vibrant food courts. Similarly, the Daytona complex—as part of its redevelopment effort—now heralds a high-end lounge above the speedway and its own “entertainment plaza” across the street. That area is framed by two hotels and a coordinated selection of retail stores.
The Rolex 24 Lounge above the Daytona track is set to be a lively profit center for the company. On its website, Daytona International Speedway now advertises a two-day lounge package for upcoming events at $1,200 per person. That sticker price includes buffet, bar, and seating, with free parking in the mix. Why bother with discounted ticket revenue from the hoi polloi?
Others in Florida and elsewhere in the country may mimic the effort in Daytona. But we believe the future for sports complexes is as hazy as ever. The commercial realities of running a massive site that is often underutilized do not make as much sense as they once did. Investors can blame lifestyle changes that have evolved from the consumer-electronics revolution. The largest metropolitan areas of course can support an outsized stadium. But second and third tier cities should accept the notion that the payoff from such facilities is akin to an intangible brand asset. ■
Our Vantage Point: The redevelopment effort in Daytona is an important case study for owners and operators of large-scale sports facilities. Some of these complexes may start masquerading as entertainment venues, when in truth, that are better defined as social infrastructure with community benefits.
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Image: In the United States, stock-car racing ranks alongside golf in sports popularity. Credit: Alkir at Can Stock Photo Inc.