Premium Revenue

November 23, 2005
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GRAND RAPIDS — Members of the Convention and Arena Authority next week will review the first new revenue source that could bolster funding for long-term maintenance and capital improvements to DeVos Place and Van Andel Arena.

The CAA Operations Committee approved a plan earlier this month to lease premium seats in DeVos Performance Hall, a strategy that has the potential of raising $400,000 in additional revenue over the next five years if all the seats are leased for that time frame.

“This is a great revenue stream,” said Lynne Ike, SMG marketing director, to members of the committee. “The timing is just perfect for us to start this program.”

But neither Ike nor SMG General Manager Rich MacKeigan felt that every seat would be leased for the next five years and the revenue intake would likely be less than the $400,000 maximum.

“Usage of these seats is never at 100 percent,” said MacKeigan. “During the first fiscal year we should realize $40,000 to $50,000 and that should grow.”

The program would offer 400 premium seats in the hall’s orchestra section, first to those who are leasing premium seats in the arena and then to the general public.

The rate to arena seat holders would be $200 per seat each year for one-, three-, or five-year leases. Rates to the public would be $200 per seat for a one-year lease, $200 per seat for the first two years of a three-year lease, and $225 in the third year; and $200 per seat for the first three years of a five-year lease and then $225 in the fourth year and $250 in year five.

Leasing a seat would guarantee a seat holder the first chance to buy tickets to all SMG-sponsored events booked in the hall — a minimum of 10 shows are guaranteed — but not for events put on by the building’s four arts tenants. If SMG doesn’t offer at least 10 shows, then a portion, or possibly all, of a premium charge would be returned to a seat holder.

“We’ve had a lot of great events there the last four years and have some more coming up this year,” said Ike.

George Carlin, David Copperfield, Grease, Tim Conway and Harvey Korman, and “Dora the Explorer” are five of the 22 shows that played the hall this past fiscal year. Performance dates for Jerry Seinfeld and Larry the Cable Guy will be announced soon. But the plan would also allow the hall’s arts tenants to make some of their shows available to seat holders.

“In preliminary discussions with the Broadway Theatre Guild, they are very definitely interested in it,” said MacKeigan.

There will be one difference between the arena and the performance hall’s premium-seat packages. A seat holder in the performance hall won’t be assigned a specific seat, as has been done in the arena. Instead, a seat holder would lease a seat within an area in the orchestra section.

The CAA needs to formally direct the premium-seat revenue to the capital improvement fund, which is expected to have a $12.7 million shortfall in 2016. Disbursements from the fund are expected to total $20.3 million from 2007 to 2016, while current revenue to the account over that time period has been estimated at $7.6 million.

“There are some specific and important needs that this money will address,” said Lew Chamberlin, CAA board member and chairman of the Operations Committee, of the new revenue stream.

Adding a premium-seat plan for the hall was one of four new revenue sources suggested last month by MacKeigan and CAA board member Gary McInerney to pump up income for long-term capital improvements and maintenance.

The other three suggestions were selling indoor and outdoor advertising at DeVos Place, having the CAA host an annual fundraising event, and capturing a portion of the convenience fee from ticket sales at the hall and arena.

“Recognizing our tenuous break-even position between the two buildings,” said CAA Chairman Steven Heacock, “we do need other revenue sources.”    

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