Van Andel Arenas Outlook Rocks
The projected arena surplus for FY05, its ninth fiscal year, is $1.51 million — up nearly 2 percent from where the FY04 books should close on June 30.
“We’re looking at things holding constant,” said Chris Machuta, finance director for SMG, the firm that manages daily operations at the arena.
At a time when the arena surplus is needed to offset losses being incurred by the new DeVos Place, Machuta’s words are reassuring to the Convention and Arena Authority, the public body responsible for the operation of both buildings.
A look at the financials SMG compiled for the CAA show that the arena’s adjusted gross income should reach $4.79 million for the year, while expenses should total $3.28 million — leaving the building with its projected $1.51 million surplus.
Adjusted gross income in FY05 should rise by $144,720, or 3.1 percent, from FY04. But at the same time, expenses are expected to grow a bit higher over last year to 3.8 percent, or an additional $119,032.
On the revenue side, event income should rise by 6.7 percent and hit $2.81 million, and account for 59 percent of the adjusted gross income. Of all event income, which includes ancillary income from concessions and such, concerts will ring the building’s cash register the loudest. Twenty-three are expected to usher in $1.51 million, or 54 percent of the total take for event income in FY05.
SMG General Manager Rich MacKeigan said having a dozen concerts each fiscal year for a market the size of Grand Rapids would make for a good season. He thought the arena has captured more than its fair share of concerts because it has become a regional draw, regularly attracting concertgoers from a 60-mile radius.
“If we were not as strong in concert attendance, it would hurt,” said Steven Heacock, a CAA member and chairman of the board’s Fiscal Committee.
MacKeigan also said that many of those who attend concerts are accustomed to traveling for shows, some having spent years taking road trips to bigger markets in order to quench their musical thirsts before the arena opened.
“It’s so much easier to come here than it is to go to Chicago or Detroit,” he said, while noting the arena has hosted from 21 to 25 concerts each fiscal year.
But MacKeigan added that tickets to a few shows were getting a bit pricey. The average ticket price for the upcoming Simon & Garfunkel concert is about $100.
“We are seeing some price sensitivity on some of the higher-end shows,” he said.
Sports, family shows and a handful of other events, such as college graduations, should account for $1.24 million, or 46.1 percent of the arena’s total event revenue. Although these events are fiscally vital to the building’s bottom line, none come remotely close to matching the average $65,975 take of a concert.
“Concerts continue to be our bread and butter,” said Machuta.
The remaining 41 percent of the expected adjusted gross income should come mostly from luxury-seating fees, advertising within the arena, interest income, and ticket incentives. Revenue from these areas should reach $1.98 million in FY05, down $32,000 from last year.
As for arena expenses, labor costs should account for $1.25 million or 32.8 percent of all expenses. That figure includes payroll taxes and employee benefits, and should be $110,402 higher than it was in FY04. Costs for materials and services are expected to remain stable in FY05 at $2.02 million.
Four capital improvement projects are planned for the arena during the next fiscal year and these will cost $367,000. And the fee SMG receives for managing the arena should be about $237,000, a similar figure to what the company should earn this fiscal year.