Foodservice providers at professional sports stadiums are changing their game plan as the slowed economy threatens to dampen spending for luxury suites and higher-cost food items.
Working to blunt any recessionary impact, stadiums nationwide are creating less expensive and more flexible game-day packages for customers as well as rethinking their menu offerings.
At the same, however, the segment continues to attract new players optimistic about the future of sports in America.
Most recently, the New York Yankees and the Dallas Cowboys teamed up with investment bank Goldman Sachs and CIC Partners, a Texas-based private-equity firm, to form Legends Hospitality Group, a new on-site firm that initially will provide foodservice and facilities management at the billion-dollar stadiums the Yankees and Cowboys are scheduled to open next year.
“This new company is amazing to me,” said Bill Dorsey, executive director of the Cincinnati-based Association of Luxury Suite Directors. “I’m told they got $100 million [in start-up money]; that was the financing. Of course, they already have multiyear contracts with the Yankees and Cowboys.”
There are about 12,000 luxury suites in today’s market, and that number is expected to rise to approximately 14,000 by 2012, Dorsey said.
“The big question is whether corporate America can withstand that amount,” he said. With the price of a suite now valued at anywhere from $300,000 to $1 million, not including food and beverage, companies will look at ways to entertain clients in a more cost-effective manner, such as purchasing club seats, which are cheaper than suites, and by ordering food items from concessions stands instead of from the chef-driven catered menus they had been using, said Chris Bigelow, founder and president of The Bigelow Companies, a Kansas City, Mo.-based consulting firm specializing in sports and entertainment.
“With all the consolidation in the financial world and more layoffs coming, it’s going to be more difficult to justify [big spending],” he said. “They won’t want the public seeing them partying, so there will be basic belt-tightening like with everybody else.
“I think you’re going to see renewals on suites get tougher,” he continued. “In many cases, [businesses] are saying they want club seating and will cut back on food and beverage, so caterers are looking at offering packages [where food is included] instead of the old á la carte deal.”
TD Banknorth Garden, home of the National Hockey League’s Boston Bruins and the National Basketball Association’s Boston Celtics, has undergone a number of renovations in the last year in order to create more affordable options for fans and businesses alike, said John Wentzell, president of the Boston facility, which is owned by on-site foodservice provider Delaware North Cos. , as is the Bruins hockey team.
“With the economy being what it is, businesses are no longer interested in entertaining for every game of the season,” Wentzell said. “They’re looking for a smaller footprint, so that is what we’re trying to satisfy now. We have taken a significant complement of suites and converted it into other concepts, like The Boardroom, a food-inclusive product where people pay for membership but do not pay for admission or a ticket until they actually show up. It is the ultimate in flexibility.”
Wentzell added that Buffalo, N.Y.-based Delaware North last month introduced a new concept at TD Banknorth Garden called The Loft, which he said is “sold in 10-game packages [where the customer] owns four seats, and food, including a five-course tapas menu, is inclusive.”
Likening it to an “upscale and trendy opera box,” Wentzell reported that The Loft is “off to a great start.”
“We started only a few weeks ago, and 25 percent are already sold,” Wentzell said, “and I would be shocked if it wasn’t 50- to 60-percent sold in the next two to three weeks.”
Wentzell said that club seating at TD Banknorth Garden averages around $50,000, while suites cost approximately $350,000. Memberships to The Loft and The Board-room, however, range between $5,000 and $15,000.
“It’s extra important that we put our money where our mouth is to offer various price and package points,” he said. “That’s the trick.”
In addition to creating more moderately priced seating options, foodservice companies are reworking their menus to lower costs, said Dorsey of the Association of Luxury Suite Directors.
“You are going to see some menu engineering,” he said. “Things will be simplified a bit, and items that were on the menus just to please customers even though they weren’t profitable will be eliminated. And there’ll be more grab-and-go concepts. The quality of food is not something [team] owners will want to deteriorate. They still want the customer to be happy.”
Despite these economic concerns, officials at Legends Hospitality Group see a bright future for their new venture. Legends will be based in Newark, N.J. Michael Rawlings, a former president of Yum! Brands Inc. ’s Pizza Hut  business, will lead the company as chief executive.
“We’re all unsure of what is going to happen in the next year,” Rawlings said of the economy, but, “premium seating is not flat—not at the Cowboys’ stadium or Yankee Stadium. Our job is to get ready for the opening games, which will be huge events in America.”
Dorsey reported that the new Cowboys venue boasts 300 suites that cost around $300,000 each and 15,000 club seats sold with personal seat licenses that go for anywhere between $2,000 to $100,000 over 20 years.
“I’ve never seen anything like it,” he said after a recent tour of the facility.
He added that despite the economic downturn, suites at both Citi Field, the new home of the New York Mets, and Yankee Stadium are selling well, with all 39 boxes at Citi Field sold out and 40 of 47 at Yankee Stadium already sold.
New York-based restaurateur Danny Meyer, whose new Hudson Yards Sports & Entertainment catering division is providing the foodservice at Citi Field in partnership with contract concessionaire Aramark Corp. , said he is “counting his lucky stars that our first venture is with the Mets and Citi Field.”
“Apparently they knew what they were doing, because they’ve sold 100 percent of their luxury suites and none were to financial companies that went out of business,” Meyer said. “They sold the big stuff when they needed to sell it, and the excitement for this stadium is going to be huge.”
Still, Meyer said, he knows consumers are and will continue to be more careful about how they spend their money.
“I feel like somebody somewhere in some city will say, ‘Let’s not go to the game this week’ to save a few hundred bucks,” he said. “That’s happening with every single discretionary spending opportunity in this country right now.”