With the Calgary Flames’ recent announcement that last summer’s arena deal to split the cost between the city and the owners is off the table, both parties have retreated to their benches.DEREK LEUNG/Getty Images
Rollin Stanley is the former chief planner of Calgary, where he also led three city departments. He previously led planning efforts in the Maryland suburbs of Washington, D.C., worked as the head city planner for the Mayor of St. Louis and spent 21 years in Toronto’s planning department.
Last fall, two new NHL arenas hosted their first hockey games: The Seattle Kraken played in the Climate Pledge Arena, and the New York Islanders took the ice in the UBS Arena. It took just five years for both arenas, each costing US$1.1-billion, to move from development proposal to opening day.
At the same time, the Calgary Flames and the City of Calgary were skating in circles over who would pay for a new $608-million arena. With the Flames’ recent announcement that last summer’s arena deal to split the cost between the city and the owners is off the table, both parties have retreated to their benches.
How did the Seattle and New York efforts succeed, while the Flames and Calgary have failed to seal the deal?
Flames ownership attributed the cancellation of the deal to the millions of dollars in cost of adding solar panels and other green initiatives. Yet, Seattle’s Climate Pledge Arena is 100-per-cent powered by renewable energy, and the hockey players skate on ice made from rainwater collected from the roof. Further, the naming rights purchased by Amazon, who then named the facility the Climate Pledge Arena, is a marketing bonanza for them and the other sponsors.
This proves that the private sector can finance new arenas that comply with the NHL’s green initiative. So it’s not these costs that are at the root of the problem. Rather, it’s a question of whether the owners can find suitable partners in the private sector, if municipalities make clear that they will not put money into building these facilities. Local governments may have the land and be willing to split ownership, but they may demand that the venue be built privately.
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Requests by team owners for public financing have long been a part of constructing professional sports arenas. How much a city should contribute can drag on for years. In Seattle and Nassau County, N.Y., residents quickly nixed any discussion among elected officials about subsidies, voting overwhelmingly in ballot measures against providing millions of tax dollars for the new arenas. In those communities, if sports teams wanted new facilities, they would have to find private-sector financing. In Seattle, the vote led to the move of the NBA’s Supersonics to Oklahoma City.
In response, the owners of the two U.S. sites decided to seek privately-funded proposals to build and operate new arenas. Oak View Group – a global sports and entertainment company that bills itself as offering a full slate of venue management and event-programming services – won the rights to build and manage both arenas.
OVG manages 15 arenas, convention centres and university sports and entertainment venues. The company oversees all aspects, from bookings to food and hospitality services, to create a “visitor experience” beyond just watching live sports. Their co-ordinated-management approach promises to boost revenue through media exposure, merchandising and licensing and real estate opportunities.
Consider this diverse set of experiences: In its first full month of operation last November, the Climate Pledge Arena hosted 20 events, including seven concerts featuring such names as Andrea Bocelli and the Eagles, nine NHL hockey games, and four university events. This March, there are 13 events, including two concerts by pop star Billie Eilish. Meanwhile, the UBS Arena hosted 15 events in December. Five of those were concerts, including Genesis. There were also assorted college sports, World Wrestling Entertainment and eight hockey games.
This full-service approach stands in stark contrast to the way Calgary manages the Saddledome: In November, it hosted six NHL games, four WHL games, and one lacrosse game. James Taylor did perform, but that was in September.
OVG’s management style is based on economies of scale, innovation, technology, climate awareness and community partnerships, all of which lead to bigger, higher priced and more frequent events – ultimately resulting in increased ticket sales. OVG also maximizes its global reach by creating multiple bookings for a star act across its arenas.
Any savvy partner knows that the value of a sports team is largely about the local market potential to support a range of arena experiences. Calgary needs to learn that modern venues require a top-shelf professional management structure that taps into entertainment trends quickly, and has the connections to book a range of events with repeat showings. A well-managed arena that can attract big-ticket events, beyond hockey games, can make a team more valuable.
For example, OVG paid the final installment on its US$650-million NHL expansion fee for the Kraken last April. By December, Forbes magazine estimated the franchise was worth US$875-million. The owners had realized a 35 per cent rise in value before their team had even put skates on the ice, in part because of other events that OVG has been able to draw to the arena.
Forbes estimates the Flames are worth US$680-million, up 42 per cent in one year, a return any investor appreciates. Yet the Edmonton Oilers are estimated to be worth US$1.1-billion based on their revenue potential. The Oilers’ large fan base, which translates into strong ticket sales and television viewership, has helped boost its value. But Edmonton’s Rogers Place, built in 2016, also contributes to that greater revenue potential.
The payoff in a modern arena is in revenue from entertainment bookings, premium seating prices, concessions, merchandising and parking. In Seattle and New York, the managing partners clearly believe future revenue streams are worth the private investment. While Calgary’s population is small compared to Seattle, market size should not turn off Calgary decision-makers from considering a venue management partner. Consider the fact that OVG is also building a new 11,500-seat arena for the Kraken’s WHL-affiliate in Palm Springs, and intends to make it profitable by bringing in the same events they are booking into the bigger market venues they operate.
Does the City of Calgary need a new arena in order to support event experiences that would attract an operator like OVG? Current Saddledome events are below the calibre and number other cities venues are hosting. It’s a strong indicator that the facility is lacking in amenities and perhaps management.
A timeout is needed. Elected officials are not experienced in the marketability of sports arenas. Calgary should follow Seattle and New York’s lead in first, asking the public whether or not they want to subsidize a new arena, and second, seeking – as owners of the land – proposals from partners whose business it is to operate profitable event spaces.
Any responses to that request would establish if a new event centre can sufficiently attract the size and number of events, aside from hockey games, that are needed to make the facility profitable.
In the meantime, the Flames owners need to consider: Do their revenue predictions justify the investment needed to build a new arena, and can they attract investors to operate it successfully? Or are the owners more interested in selling or moving the team, regardless of whether the city or investors build a new arena?
Perhaps all involved should skate to the penalty box and use that time to state their intentions. Or better yet, let the taxpayers and hockey fans of Calgary decide.
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