Better Than Expected

August 18, 2006
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GRAND RAPIDS — The unaudited year-end numbers for DeVos Place and Van Andel Arena are in and the figures show that total operating revenue to both buildings was above expenses by $719,462.

When the fiscal-year forecast came out last summer, the margin was $304,205.

“I’m pleased with the year. We ended up with a couple hundred thousand dollars better than budget, and budget was aggressive. So I’m feeling real good about that,” said Steven Heacock, Convention and Arena Authority chairman.

But when an incentive fee of $234,054 that SMG earned during the year for managing both buildings is added into the equation, the surplus drops to $485,408.

The Convention and Arena Authority lowered that management fee for the next three years, starting with this year, when it negotiated a renewal contract a few months ago with SMG.

The CAA will review the FY06 figures this week.

The arena continued its streak of recording at least a $1 million surplus for the 10th consecutive year. Operating revenue topped expenses by $1.26 million before the SMG incentive fee is calculated. After the fee is assessed, the margin is $1.21 million.

June was a particularly strong revenue month for the building, as net income was nearly $422,000 and was up by $345,000 from June 2005. Heading into June, the arena surplus was $845,130, and some board members wondered if the year-end figure would continue the $1 million streak. SMG General Manager Rich MacKeigan assured the board the string would continue.

“We saw the arena turn, as management told us it would, and it really caught up at the end of the year. Because of that excitement and the extra business at the end of the fiscal year, we’re hoping that it continues now into the new fiscal year,” said Heacock.

SMG Director of Finance Chris Machuta said two Kenny Chesney shows and one by Michael Bublé drove the event and ancillary income at the arena in June. Chesney sold out his concerts and the Bublé performance was well attended. On top of that, concertgoers spent more than $415,000 on concessions during the Chesney shows.

“Chesney was the highest-grossing event the arena has hosted. It was a strong mix of people wanting to drink beverages and buy merchandise. He is sort of a country version of Jimmy Buffet,” said Machuta.

The arena hosted 21 concerts during the year, only falling one short of the goal that MacKeigan and Machuta established for the building a year ago. Those shows accounted for 16 percent of the 131 events held at the arena, 26 percent of the attendance, and 46 percent of the total event income. Concerts were worth just under $1.15 million in event income this past fiscal year, or almost $55,000 per performance.

MacKeigan said Chesney would return to the arena next year.

But June wasn’t an exciting revenue month for the convention center, as DeVos Place lost over $275,000. The building was just $272,348 in the red at the 11-month mark of the fiscal year, and the loss the center recorded in June, the year’s last month, doubled its annual deficit to $547,577.

Still, the loss was $600,000 less than the $1.15 million deficit projected for the building last summer. The year-end loss, though, rises to $734,356 when the SMG fee is included.

“It performed well compared to the budget and forecast. All in all, the convention center performed very well as a whole,” said Machuta.

Conventions and trade shows accounted for 155 event days in the center and for $1.77 million in total event income. Those figures represent 24 percent of all event days and 40 percent of all event income to the building. Overall, DeVos Place had 651 events days, or 184 more than the 467 that were projected at the start of the fiscal year.

Total FY06 operating expenses for DeVos Place were $5.13 million, about $300,000 more than what was forecast. Expenditures for the arena came to $3.53 million, or $161,000 over budget.

The CAA budget showed $3.8 million in revenue and $3.1 million in expenses for a surplus of more than $700,000. The board also did $2.2 million in capital replacement projects, which are recorded separately from the general expense column.

“We’re feeling pretty optimistic about the future, particularly given our contractual arrangements. I feel that the CAA had a good year. We performed well and we look forward to a good year to follow,” said Heacock.

“We really are in much better financial shape than we’ve ever been on a going-forward basis.” 

Final Figures

DeVos Place and Van Andel Arena combined to record nearly $9.4 million in revenue over the past fiscal year, while accumulating expenditures of $8.6 million.

The following unaudited figures highlight the fiscal years for the convention center, the arena, and both.

DeVos Place

Van Andel Arena

Total

Revenue

$4,587,135

$4,808,468

$9,395,603

Expenses

$5,134,712

$3,539,430

$8,674,142

Net Revenue Above Expenses

($547,577)

$1,267,039

$719,462

Less SMG Incentive Fee

$186,779

$47,275

$234,054

Net Revenue Above Expenses

($734,356)

$1,219,764

$485,408


Source: SMG Financial Statements, June 30, 2006    

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