30 March 2016

A "Suite Deal" For Who?

Guest post by Leon Moore

During the industrial revolution, working people began to attend sporting events. The increase in real wages created a middle class and people with disposable income. This extra money could be spent on a ticket to a ball game and maybe a hot dog. Sports belonged to the everyday person. (6)

With this in mind, I looked on the Boston Celtics website at ticket prices. Single person tickets ranged anywhere from $25 to $300.(3) This to me seemed like a natural range, one in which the common person could find an affordable ticket. Then I saw the cost of renting a luxury suite for one game. It ranged from about $3000 to $5000.(2) The consumer of this did not fit with my image of the middle class sports fan.

What a person gets when they rent a luxury suite at the TD Garden includes 18 tickets, theatre-style seating, catering options, several televisions, and a private restroom. (2) The average fan would never buy this, so who is?

According to Chad Estes, the president of a premium ticket sales company that does business with the New York Yankees and the Dallas Cowboys, the consumers are “corporations and high net-worth individuals.”(1) He says that people buy suites with an aim towards building relationships with clients and sometimes as a way to create family time.

Suites are a great deal for owners as they provide steady cash flow throughout the season, and can be counted as Stadium Income, which in many cases is not subject to league revenue sharing operations. (1) In some cases, a suite can cost up to $900,000 for a year. (1)

With premium seating being great for owners, it surprised me to find that they only became mainstream in stadiums in the last 20 years. According to Emily Sparvero, assistant professor at the Sports Industry Research Center at Temple University, "Luxury suites have been growing in importance since the 1990s and are an essential part of any new stadium being built." (1) The two owners credited with starting the premium seating trend are Jerry Jones, of the Dallas Cowboys, and Joe Robbie of the Miami Dolphins. (4) Joe Robbie Stadium opened in 1987, and the debt incurred building the stadium was paid off in 10 years from luxury seat revenue at $16 million a year. (4) This success and other successes lead to the creation of many new stadiums, all built with premium seating included.

Yet the question of why these luxury seats began to be built in the 1990’s still remains. Almost certainly it involved a change in the consumer market. As previously mentioned, the consumers of premium seating are mostly corporations and high net-worth individuals. So in the 1990’s was there a change in this group’s resources?

From 1950 until 1980, corporate profits after tax increased from about $20 billion to to about $200 billion. From 1980 to 2000, the number increased $300 billion to $500 billion total. And in the second quarter of 2015, the profit was up all the way to $1,844 billion. (5) I cannot claim to fully understand what these numbers mean, but I do think I can say that they mean corporations today have more money to spend on things like luxury boxes. This could possibly explain why in the 1990’s many stadiums were built to include premium seating.

Another factor that could be creating a consumer market for premium seating is the increase in the wealth at the top of society. Political campaign’s today, like that of Bernie Sanders, are gaining traction because of the populus’ anger at the wealth inequality. This wealth inequality could be creating a market for premium seats. Stadiums at most only have a couple hundred luxury boxes that they need to sell for a season. When wealth is concentrated, the people with it can afford to buy an expensive entertainment item, like a luxury box. And because the owners only need to sell a relatively few amount of these boxes, it is not a problem that the wealthy people are so few in number.

But how will this change sports? I do not think luxury seats by themselves will change sports. A regular fan can still have a regular sports experience with a hotdog and beer even if someone is drinking fine wine eating smoked gouda in a luxury box above them. I believe what could change sports however is increased corporate profits and wealth inequality. This could and is helping to shrink the middle class, which could then decrease the number of fans in regular seats. This would harm the atmosphere of being in a raucous and wild arena or stadium.

To preserve the middle class fan base and therefore the sports experience, fans should do their research and support political campaigns that help foster a strong middle class. It is a shame that a fun thing, sports, should be tied to something which has such a negative connotation, like politics. But maybe we will lose our fun thing if we cannot do the unpleasant thing.

1 http://usatoday30.usatoday.com/money/economy/story/2012-02-04/cnbc-super-bowl-suites/52948968/1

2 http://www.nba.com/celtics/tickets/premium/bb-luxury-suite-rental-pricing-schedule.html

3 http://www.nba.com/celtics/tickets/individual-game-tickets?cfc=TICKETS_INDEX

4 http://www.vanderbilt.edu/econ/faculty/Vrooman/VROOMAN-NFL.pdf

5 https://research.stlouisfed.org/fred2/series/CP

6 http://www.bostonfed.org/peanuts/sptspage/inning2a.htm

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