Arena Looks At Yet Another Good Year

June 9, 2008
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GRAND RAPIDS — SMG Director of Finance Chris Machuta expects the upcoming fiscal year to result in a “fairly consistent” bottom-line for Van Andel Arena. He has projected a $1.4 million surplus for the arena in FY09, its 13th year of operation.

The building has turned a surplus of at least $1 million in each of its dozen years since it opened in October 1996, and one type of event has been most responsible for that deep well of black ink.

“Concerts are the driving force for the arena,” said Machuta to the Convention and Arena Authority of the building’s solid upside.

As for the arena’s risky downside?

“The risk is concerts. If that dries up, that is where the risk is,” said Machuta.

As in previous years, Machuta has 23 concerts playing the building in his 2009 forecast, with those events being worth $1.6 million in event income to the arena. That dollar figure represents 56 percent of the building’s total event income of $2.8 million for the upcoming year, while concerts are projected to be just 19 percent of the 118 events the arena hopes to host next year.

Machuta has projected each concert to be worth an average of $69,700 in event income to the building in 2009, and that number doesn’t include the revenue from food, beverage and merchandise sales during a show.

But what about the economy? Will it harm concert ticket sales and lessen the turnout and number of performances?

SMG Regional General Manager and CAA Executive Director Rich MacKeigan felt the state’s lackluster economic condition offers good and bad news for the arena. MacKeigan said concert-goers may not attend as many performances each year as they did when Michigan was in better economic shape. But he also noted that some people are canceling trips they see as being too expensive and are treating themselves to a concert instead.

Even higher gas prices are having a yin-and-yang effect on these shows. The price for concert tickets has risen since a gallon of gasoline and diesel started going up. Tours travel by bus and semi-trailers, and higher transportation costs are being passed on in ticket prices. Some big name artists, such as Eric Clapton, are charging $50 more for a ticket in major markets than two years ago.

At the same time, though, higher fuel prices have forced artists to take a closer look at how a tour is routed. Keeping stops closer together is an effort to save on energy costs and keep ticket prices lower, and that move could benefit the arena because of its location.

MacKeigan said most artists have always paid attention to routing, as they’ve wanted the next stop to be within a 6- to 8-hour drive of the show they’ve just completed. But with more money being spent on fuel, routing is drawing more attention — and that is good news because it could result in more stops at the arena.

“If you draw that 6- to 8-hour circle around Grand Rapids, you’ve got a whole lot of markets. Everyone thinks of Detroit and Chicago. But the reality is we’ve got Toronto, Columbus, Fort Wayne, Peoria, Cleveland and Milwaukee, too. There are a whole lot of communities that are good concert communities that are within that 6- to 8-hour drive,” said MacKeigan.

MacKeigan said he believes an artist’s manager, not the booking agent, is pushing the hardest for shorter drives. Keeping expenses down means a bigger cut for the performer, and artists like to walk away with about 65 percent of a show’s total take. With fuel prices up by 20 percent from a year ago, a need for shorter trips has become more important to an artist’s take-home pay.

More good news is a venue’s age seldom enters into a routing plan. So when the arena becomes a teenager in the next fiscal year, it shouldn’t hurt the building’s concert business.

“They’re happy to play an older arena if the check is good,” said MacKeigan.

Four concerts were on the arena’s schedule at the end of May for the first quarter of the new fiscal year, which begins July 1, leaving SMG 19 more to book by next June 30 to hit the building’s usual number of 23 for the year.

“There are still things that are falling in place for the first quarter,” said MacKeigan, while noting that the book hasn’t closed on the first quarter yet. “It is frustrating that we don’t control that (booking) area. We can’t put artists on stage.”

Arena Event Income By Type Of Event

The SMG fiscal year 2009 forecast for Van Andel Arena shows adjusted gross income of $5.32 million with total expenses reaching $3.91 million, leaving the building with a surplus of $1.41 million. The forecast pegs total event income at $2.87 million, and here is how that revenue breaks down by type of event.


Event
Type

Sports
Family Shows
Concerts
Miscellaneous*
Total


Number Of Events
53
37
23

118

Projected Event Income
$604,465
$628,192
$1,603,561
$40,992
$2,877,210

Income
Per Event
$11,405
$16,978
$69,720
$8,198
$24,383


Percent Of Total
21%
22%
56%
01%
100%

*Includes graduation ceremonies, religious meetings and other events.

Source: SMG, Van Andel Arena Operating Budget for Fiscal Year Ending June 30, 2009

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