Van Andel Arena Food Paying Off

August 27, 2007
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GRAND RAPIDS — The fiscal-year surplus wasn’t the only revenue figure that was up for the year at Van Andel Arena. Net income from concession sales and catering operations was also higher this past year.

Arena goers spent $3.7 million on food and beverages during the year, roughly the same amount they spent the previous year. But net concessions and catering revenue to the arena totaled $1.35 million for FY07, which ended on June 30, and that total was an increase from the FY06 net of $1.22 million.

How can gross revenue be about the same, but the net to the arena is higher? It’s because the Convention and Arena Authority, the group that oversees operations at the arena, grabbed a bigger slice of that revenue when it replaced Centerplate with SMG Food & Beverage LLC as the building’s food-and-beverage operator last year. The arena now gets 53 percent of the gross concession sales and 19 percent of the gross catering sales from SMG. The agreement with Centerplate gave the building 50 percent of concessions and 17.5 percent of catering revenues.

Gross concessions revenue was $2.9 million and gross catering income was $800,000 for the year. That $3.7 million was about $98,000 higher than the FY06 gross. The CAA’s share, though, should top the difference between grosses because the authority gets a larger cut.

When the board signed the agreement with SMG in April 2006, the CAA estimated the new contract would return an additional $350,000 to the arena over its three-year term. The first-year return should be about $129,000 above what the building received from the last year of the Centerplate contract.

But while arena revenue was up, so were expenses. Indirect expenses for FY07 were $3.8 million, roughly $200,000 more than FY06. Utility charges were nearly $914,000 last year, up from $805,000 the previous year. Those costs accounted for half the increase in expenses for the building last year.

Utility bills for the much-larger DeVos Place came to $1.58 million last year. But that expenditure was close to the $1.57 million recorded during FY06 to heat, cool and light the convention center.

SMG Director of Finance Chris Machuta said his management firm, which directs daily operations for both buildings, has been trying to keep utility costs in check.

“We still continue to look at different ways that we can do a capital-type purchase to try to help save money or just how we’re heating and cooling. We’re making sure the lights stay off. We’re just getting more aggressive in terms of how we’re doing that,” he said.

“The rates, obviously, continue to go up, and I don’t think we’re going to starting seeing savings necessarily in the utilities. But, hopefully, we’ll be able to offset some of the rate increases just from better efficiencies.”

One way SMG counters those charges in the convention center is by billing tradeshow exhibitors that use a lot of electricity.

“When you get the woodworkers’ show in, obviously they’re going to use a high amount of electric in the facility. There is not a lot we can do about that. We’re not going to go up to a booth and say, ‘You can only use your equipment for four hours,’” he said.

Income from those billings was $427,000 last year, which helped offset the total expenses of $5.36 million at DeVos Place last year. The building had a fiscal-year deficit of $467,534. The shortfall, though, would have been nearly twice that amount without the income the building received from the electricity bills paid by the exhibitors.

The $1.7 million surplus the arena had for the fiscal year was the second-highest in the 11 years the building has been open, as FY99 had a $2.2 million surplus. But quite remarkably, the arena hit that figure last year by hosting the fewest number of concerts ever to play the building during a fiscal year. Only 19 shows were held there last year, while FY99 had more than twice as many.    

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