from the Hamilton Spectator:
At first blush, it all seems counterintuitive.
How can building new stands on the north side of Ivor Wynne Stadium not cost more than renovating the current ones?
And how can the significantly reduced seating capacity — from the original 25,000 seats to a reported 22,500 — not negatively impact the Hamilton Tiger-Cats’ bottom line?
Those were among the nagging questions after it was revealed last week that plans for the Pan Am Stadium on the current site of Ivor Wynne now call for the entire north stands to be torn down and rebuilt, instead of being refurbished atop the current infrastructure.
“This is absolutely and positively the most cost-efficient and responsible decision,? Ticat president Scott Mitchell answered Wednesday. “This isn’t a good thing, it’s a great thing.?
By agreeing to the reduced seat inventory, the Ticats made a major concession to Infrastructure Ontario to keep construction costs at the original estimate.
And, Mitchell says, potential builders will welcome the idea of constructing the north stands from the ground up, rather than trying to work around existing flaws, many of which are major.
“That’s 100 per cent accurate,? Mitchell said. “This creates cost certainty in the construction phase. You never know what you’re going to find out when you renovate. It might have involved all kinds of (capital) expense that wasn’t anticipated. And this prohibits the city from potentially having to spend tens of millions of dollars in maintenance of the north stands in the next few years.?
Additionally, having renovated north stands with uncomfortable bench seating and the same washroom and concession facilities as in the past would have meant that the Cats, and the city, were going to operate, in effect, two different facilities.
“What was clearly emerging was a have-versus-have-not scenario on the two sides of the stadium,? he said. “And that’s not conducive to effective cost management or a good in-stadium experience.?
The Tiger-Cats need to derive $10 million per year, or roughly $1 million per game, from ticket sales. Mitchell, bound by a confidentiality clause, would not comment on the exact capacity of the new stadium. But assuming the 22,500 figure is accurate, at an average $50 per ticket, the Cats will cover the $10 million as long as they sell out most games.
And a smaller stadium actually helps dramatically with that. Increasing the demand for tickets because there is a limited supply should translate into more season ticket holders than the current number, estimated to be slightly under 15,000. The Chicago Cubs and Boston Red Sox have always operated that way because of their old, small stadiums, but in 1990 the Baltimore Orioles became the first professional sports team to deliberately build a new stadium smaller than their old one. That forces fans to buy season’s tickets for fear that they won’t be able to get the tickets for games they really want. Then, weather and the competitive state of the team don’t affect sales as profoundly. The Montreal Alouettes had the same situation with the 20,000-seat Molson Stadium, and sold out every game for years.
The Ticats average between 23,000 and 24,000 spectators per game but about 20 per cent of them enjoy complimentary tickets, significantly lower than the figure from three years ago but still nearly double the industry standard. Tightening up on contra (tickets instead of cash, paid for services) and special group sales will allow the Cats to realize full income from a far greater percentage of the seats.
“So the biggest casualty in the capacity reduction will be those contra deals and big corporate buys,? Mitchell said.
The break-even point for most CFL teams is believed to be about $15 million in total annual income. With recent huge increases in TV viewership, broadcast revenues are expected to double or triple in the next couple of years, taking a big bite out of the $5 million income required beyond ticket sales. While the number of high-rent corporate boxes and club seats slated for the new stadium have not been revealed, there are going to be at least twice as many as there are now, adding more income potential to the Cats’ balance sheet.
“And clearly, we’ll have major increased revenue from concessions and merchandising because of an enhanced stadium experience,? Mitchell says. “It will also be a better experience for our corporate partners.?
The Ticats plan to cap individual season ticket sales at between 17,000 and 18,000. Season’s tickets prices for 2011 range from $14 per game in the end zone to $160 for the box seats at midfield. Those prices are expected to rise by two per cent next year.
But the team announced Wednesday that season’s tickets for 2012, the last season at Ivor Wynne, would cost the same as tickets for 2014, the first season in the new stadium.
“We wanted to nip in the bud all the talk that ‘I won’t be able to go to the new stadium because I can’t afford it,’? Mitchell explained.
Mitchell also said that the $1.3 million rent the Cats will pay the city in the new stadium will be the highest in the CFL and that the more income the club makes, the more the city will make on their rake-off of the profit, over and above the rental agreement.
And, he says, the seating capacity on opening day doesn’t have to remain that way. He wouldn’t comment directly, but the configuration of the new stadium has to include room for enough temporary seating to reach the 40,000 minimum required to play host to a Grey Cup Game.
“Infrastructure Ontario will deliver a great stadium, but obviously there’d be nothing stopping us, as far as far as post-Pan Am Games go, from adding more seating ourselves.?