Oysters, scotch, and hoops

New sports arenas are dens of luxury. They may also fail.

BY WARREN COHEN

November 15, 1999 (878 words)

The Grand Reserve Club at Los Angeles's new Staples Center arena is a place where even a platinum credit card holder will get a condescending stare. It features a private patio, a fireplace, a wine cellar, and a personal humidor. No popcorn or peanuts here: The pregame snack of choice is oysters on the half shell and single-malt scotches. Roughly 200 people pay $ 10,500 for the privilege of membership. That's on top of the cost of buying either a premier seat membership, which runs between $ 12,800 and $ 14,800 a year, or part of a luxury suite, whose annual prices range from $ 197,500 to $ 307,500.

Oh, and there are sports too. It would be easy to overlook the basketball and hockey games amid the arena's opulence. Indeed, games seem a mere sidelight to the latest breed of sports palace. The new basketball season, which tipped off last week, will help inaugurate five new halls this season in Atlanta, Denver, Indianapolis, Los Angeles, and Miami. That's not counting the other pro arenas already built this year in Toronto and Raleigh, N.C., one baseball stadium in Seattle, and two new football shrines in Cleveland and Nashville.

Boom time. In all, 1999 has been a record year for sports construction, capping a decade-long trend that's still in full steam. During the '90s, more than $ 16 billion has been spent on pro and college sports stadiums and arenas, according to Dennis Howard, a University of Oregon sports marketing professor. That compares with just $ 3 billion spent in the 1970s and 1980s combined. Amusement Business magazine reports that 46 more projects are scheduled to open by 2003, with construction costs estimated at $ 6.5 billion. Last week, voters in San Antonio and Scottsdale, Ariz., approved new taxpayer-assisted stadiums. "These kinds of facilities are necessary for teams to compete in the business of sports today," says National Basketball Association commissioner David Stern.

Competing in sports, of course, has become a challenge for owners as pro teams' average payrolls have more than doubled in the past decade. And as voters are mostly loath to pick up the entire cost of arenas, owners are picking up more of the tab. Taxpayers put up about 43 percent of the cost of the Indiana Pacers' new home but less than 16 percent for each of the other four new complexes. To recoup their investment, owners have to target the most well-heeled clientele. But the latest luxuries are so overwhelming that even the rich are starting to be priced out.

Like all new sports edifices, the new arenas draw revenues primarily from luxury suites. In this season's five new arenas, there are 440 suites, versus just 61 in the ones they replaced. They range in price from $ 90,000 to $ 307,000. In Los Angeles's Staples Center, there are three sushi chefs on duty at private restaurants reserved exclusively for suite holders. Indiana's new Conseco Fieldhouse is like a giant high school gymnasium, with an arched roof with steel beams and 30-foot glass walls that bathe the court in sunlight. At Miami's new AmericanAirlines Arena, which will open January 1, some suites contain their own balconies that reach outside the structure overlooking Biscayne Bay. There will be boat slips as well, so fans can sail to the games. Six special star boxes will be leased for $ 500,000 a year, more than any other luxury box in America.

Ticket prices have also soared in the new buildings. Pro sports seats have climbed about 70 percent since 1991 even though overall consumer prices are only up 23 percent. Moving to a new arena allows teams to raise prices further. This year, the average National Hockey League ticket price rose 6.8 percent, but for the four teams with new arenas ticket prices climbed between 18.1 percent and 67.3 percent.

Too much luxury? Yet some analysts believe that loading up on luxuries could backfire. New stadiums used to be a sure-fire way to lure fans. Not anymore. Of the 16 teams that moved into new or refurbished stadiums in 1995 and 1996, nine saw attendance fall off by the third year. And team officials concede that it's tougher to get corporations to renew leases for luxury boxes, especially when a city is saturated with at least two premium facilities. "Ten-year leases are becoming five-year leases, which are becoming three-year leases," says Bill Dorsey, executive director of the Association of Luxury Suite Directors.

And, of course, an economic slowdown could be devastating for many arenas. Construction costs range from $ 170 million for Denver's Pepsi Center to $ 375 million for Los Angeles's Staples Center. Many of these loans will be paid off with revenues generated by luxury suites. "If companies don't renew their leases, arenas may have to resell suites five or six times over the 25 years it takes to pay back the money," says Howard. "That's an awful lot of optimism."

But the sports building boom may end because of a simple fact: New stadiums aren't so special if everyone has one. By 2001, 26 of 29 NBA teams will play in arenas less than 13 years old. Of the 28 hockey teams, 21 will be in buildings less than eight years old. By then, it might require more than just oysters and scotch to keep up attendance at the pricey venues.