Stadium ownership: competitive or costly? | KPMG | AU

Stadium ownership: competitive or costly?

Stadium ownership: competitive or costly?

The sporting industry is showing interest in building and owning boutique venues, but teams and codes must be aware of the risks and challenges before leaping in.

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Melbourne cricket ground at night

Across Australia, governments at all levels have invested heavily in stadium infrastructure. There are numerous major stadium projects at various stages of development including the new Perth Stadium, Western Sydney Stadium and Townsville Stadium.

Increasingly, however, sporting codes and teams are investigating the option of managing and/or owning their own venues. Recent examples include the purchase of Etihad Stadium by the AFL and the proposition by the Central Coast Mariners to buy Central Coast Stadium from Central Coast Council.

Benefits

The benefits of owning a venue are clear, not least that it can be a way for teams and codes to ‘control their own destiny’. Teams and codes see opportunity to create purpose-built venues to boost the fan experience.

They can also see the possibility of avoiding ‘revenue leakage’ by being the sole recipient of various revenue streams, from ticketing to premium seating and food and beverages. Stadium ownership allows them to create and sell new signage, sponsorship and corporate products to existing and new partners, which incorporate both the team and the venue.

Risks

However, with every advantage there is of course risk, and there are a number of consideration for venue ownership.

First and foremost is the cost. The upfront costs of major stadia developed or redeveloped in Australia over the past 10 years is approximately $10,000 per seat. This means a 20,000 seat boutique stadium translates to capital costs in the order of at least $200 million, not including the cost of securing an appropriate site.

Then there are costs for ongoing maintenance, repair and reinvestment. This can be more than 2 percent per annum (e.g. 4 million per annum for a $200 million stadium). Add to this that few codes and teams in the Australian market have strong facilities management capability, and the advantages start to balance out.

Another challenge is the event calendar. Can a team afford to spend $200 million for a venue which is used for just 10 to 15 regular games per year? While some venues may attract international events such as musical artists, there is a limited market for major events due to Australia’s population and uncontrollable factors such as exchange rates.

This means few major stadia in Australia can generate a financial return commensurate with the level of investment and the degree of risk involved – hence the limited private investment to date.

Reward?

However, if the code or team investigating venue ownership is strategic and well informed of the risks and challenges, there could still be a competitive advantage in venue ownership.

The planned and desired developments underway in Australia present an interesting opportunity to observe whether the Australian sporting and economic landscape is ready to reward those willing to take the punt.

For further detail on the opportunities and risks of sports stadium ownership for codes and teams in Australia, download our report below: Stadium ownership: competitive edge or unwanted burden?

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