Van Andel Arena revenue picks up

March 12, 2011
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January was a good financial month for Van Andel Arena: The building cleared $310,487, a take that was capped by a sold-out Kid Rock concert.

“The arena had a successful month,” said Chris Machuta, SMG director of Finance.

The arena recorded a surplus of $277,623 from July through January, or the first seven months of the fiscal year, and the take in January pushed the building into the black for the first time for the year. But the surplus for the current fiscal year trails the $705,000 margin the arena posted for the same period a year ago.

“The problem is the first five months of the fiscal year, which only had one concert,” said Machuta.

The arena had hosted just seven concerts by the end of January, drawing about 52,000 ticket buyers and accounted for nearly $430,000 in event revenue to the building. The arena has been home to 20 concerts in most fiscal years and has cleared at least a $1 million surplus every year since 1996, the year it opened.

It will be a challenge, though, to meet that revenue mark this year. Not as many artists are touring as they did in past years. “I think it’s coming back slowly,” said Machuta of the industry. “I think we’re getting our share, when we’re compared to our peers.”

In addition, some established performers such as Bryan Adams and James Taylor, who once were big draws for big arenas, are now choosing to play in smaller venues such as the 2,400-seat DeVos Performance Hall.

“We’ve made some good money in the theater,” said SMG Regional General Manager Rich MacKeigan.

The performance hall has held more events and drawn more event income than was forecast at the start of the fiscal year. Income topped $487,700 for the first seven months — $50,000 higher than the projection. Of course, the building’s four art tenants have made strong contributions to that number. But a concert by Adams hasn’t hurt the bottom line either.

MacKeigan said more touring groups need to be developed as promoters aren’t very “bullish” about investing in the concert trail right now. He said the building’s exposure for partnering with a promoter for a concert would run from $200,000 to $500,000, depending on the artist. The Convention and Arena Authority has allocated $100,000 a year for that purpose, and those dollars have been spent so far on events for the performance hall.

As far as the concert-booking process goes, MacKeigan said he first meets with a promoter to run the numbers and see if a show makes financial sense. Often, he said a performer is guaranteed 90 percent of a show’s profit. So if a concert nets $300,000 in ticket sales, then $270,000 would go to the artist and $30,000 would go to the promoter. And the promoter makes the rent deal with the building.

“A promoter is in a tough position,” said MacKeigan. He said that’s why the industry has grown into large national companies like Live Nation. That’s also why so few local and independent promoters are around today. “The exposure is extremely high,” he added. “The people who played with their own money have retired.”

MacKeigan said the arena’s exposure depends on the promoter and varies on a case-by-case basis. For instance, he said the Lady Gaga concert didn’t require a guarantee because everyone involved knew it would be a sold-out show. But he also said the business was a “feel industry,” meaning there isn’t a hard-and-fast formula to determine what amount a guarantee should be. MacKeigan said it also is a “relationship industry,” one that develops over time. “You’ve got to get creative to sell tickets,” he said.

MacKeigan said an arena makes much of its concert revenue from food and beverage sales and, to a lesser extent, merchandise sales. But he mentioned the current trend of artists playing theaters like the performance hall. Booking them in smaller venues lowers everyone’s financial exposure but it also results in less event income and ancillary revenue from food and beverage sales for the venue.

CAA Chairman Steven Heacock asked why more urban artists aren’t being booked at the arena, and MacKeigan said, “Promoters can’t make money on those (shows).” CAA board member Floyd Wilson asked if more boxing matches could be booked in the building. MacKeigan said most of the bigger fights have to be held in larger markets like Atlantic City. He said local favorite Floyd Mayweather gets a guarantee of seven to eight figures per fight, and the arena can’t afford to be part of that.

CAA board member Lew Chamberlin said the recent expansion of the arena’s northwest concourse has proved to be a big improvement in reducing the congestion. “I think it’s really functional. It’s a great space. I think it adds to the arena.”

Grand Rapids Griffins COO Scott Gorsline said the investment the CAA made in the arena this year has had a positive effect on foot traffic throughout the concourse and to fans’ experiences. He added that attendance is basically flat from last season. The team accounted for 47 percent of the arena’s total attendance and 24 percent of its event income through January.

The Community Legends Project, which was started by the Peter Secchia family, has commissioned artist J. Brett Grill to sculpt a statue of the late Jay Van Andel. The finished work will be installed in front of the arena that is named in his honor. He was the lead private contributor to the building’s construction project. The 7-foot-tall statue will be the third the Secchias have commissioned.

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