What's Actually Happening in Premium Ticket Sales

Premium ticket and hospitality sales were hot topics last week with pieces in VenuesNow and Sports Business Journal talking about the space coming out of the annual luxury suite directors conference. The pieces are well researched and include insights from a number of experts in the space. We have a bit different take. The changes aren't as generational as they seem and flexibility isn't a new trend.

 Three things happening in premium seating teams and leagues won't say publicly and why "flexibility"- the premise of both articles - isn't new, it just necessary now due to the mistakes of the past.

 1. Premium sellers have been incorrectly incentivized and it has burned entire swaths of customers in each market.

The second generation of premium sellers now find themselves having to try and convince customers who are "once bitten twice shy" that, this time, they'll have a different experience.

 Premium hospitality and luxury suites exploded on the scene in the late 90's as a new long-term repeatable revenue source for new, and recently upgraded, live events venues. An entire industry of professionals made a career of becoming experts on selling the various amenities teams offered. Some worked directly for the teams while others worked for consulting businesses contracted to sell premium for buildings.

Demand was off the charts leading most everyone to follow the same playbook. They would pit the demand against the buyer to squeeze every penny possible from them. The most money, the longest terms, and the most inventory possible. There were plenty of vendors who helped build the building to sell long-term deals to and, once those ran out, the phones were ringing off the hook with inbound calls.

Teams hired reps or outside firms who pillaged the market for as much revenue as possible. And why wouldn't they? These sellers were only working on the project for a few years then they'd be off to the next job or project opening the next new building or remodel.

What they left behind was a disaster. Buyers who should have had an eight person suite for a half season at one team were sold ten year full-season leases with twenty-four seats per game to every team, concert and ice show coming through town. And they bought because they had to or they'd be left out. So they sat empty. They still do. Just this past season we helped a company sell a suite to an NBA game between two playoff teams for $280. Total. For all 18 seats.

Renewal was 5 to 10 years away and most of the sellers would be long gone by then.

These mismatched incentives led to #2…..

 2. Churn has been too high for too long and now new buyers are hard to find.

When suites really hit their stride in the late 90's/early 00's they were "the new thing everyone wanted." With so much demand, buyers were competing for the best spots and the mis-incentivized sellers could sign 10 and 20 year lease deals to the new shiny toy in town. If the buyer didn't want it? So what. We'll just sell it to the next company who called us. I saw this first hand working at the relatively new Staples Center during the Kobe/Shaq dynasty. The "sales" reps weren't selling. They were taking orders from people calling in.

In both the VenuesNow and SBJ pieces, professionals offered reasons why "flexibility" is the new buzz word. Some say the demand for flexibility is driven by covid while others claim it is a generational change.

It isn't. Though there are some key differences in how the generations transact (we'll get there in a second), All generations wanted flexibility. Trust me, I was there. They just didn't have the leverage.

Boomers and Xers hate getting cold called as much as Millenials and Z's despite the opinions of a few of the sources in the pieces from last week. Don't believe me? Ask Jerry Seinfeld.

We sold plenty of deals at StubHub in the mid-00s up to $200k without phone calls. Longer term deals with higher sticker prices- especially five and ten year deals- will always involve multiple phone calls with legal on the buyers side. If it doesn't, you may want to check on the viability of the customer signing as you could be dealing with another Spongetech. There have been plenty of those. Companies signing multi-year, multi-million dollar contracts without phone calls and reviews is fantasyland.

Churn has been too high for too long to support the current overbuilding of premium assets. And churn compounds quickly. The number of companies who actually should own a full suite hasn't actually changed much. What has changed is the number of companies who were sold way too much, got burned, and didn't renew. This cycle occurred over and over the past 20 years and now we see teams trying to control re-sale markets as most all of them have too much unsold inventory. A simple chart which shows the impact of just 5% churn YoY for an industry. The churn rate for suites is much higher than 5% btw....

 To find new buyers teams are starting to have to go down-market. And those buyers know they have the leverage to demand flexibility.

3. Teams are fighting the resellers they would benefit from partnering with as the innovators dilemma strikes again. 

 It's really that simple. When the long term leverage is gone and the team has to go downstream to shorter term buyers, the communication changes and so does the storefront

 There are mountains of data showing Gen Z/Millennials:

• Are much more likely to shop at the marketplaces than from the teams. The marketplaces and Ticketmaster are where people go to shop*
• Don't sign long-term commitments as they've seen what happened to the generation before them
• Don't care if they share a suite with others

So many teams are trying to build their own marketplaces, restrict resale (suites resale is crummy in the first place. See oversaturation in #2) or try and find vendors who they can put limitations on which the resellers and brokers would never accept as it caps upside long term. We saw this with Vivid Seats opting not to get involved in the NFL deal which led to a sizeable market share boost for VS.

It's silly. And ultimately both the teams and their customers they are trying to renew, lose. For every Super Bowl Suite sale championed on social media from Suite Resale Marketplaces, hundreds of others go unsold.

Sports sales is notorious for being way behind other industries in their sales practices for a myriad of reasons. Now that the teams are going downstream and selling shorter term access, they would be best served to put that inventory where the eyeballs are. Teams are already doing this with regular tickets through the many consolidators.

There's too much pride on the team side. As one of my sales managers used to say back at Staples Center: "Forget pride. Pride is in the wallet"

 Conclusion: The premium seat market is still relatively new. As it evolves, we hear a number of theories as to why the changes we see are happening from those with an economic interest in the market itself.

Our belief is simple: Premium sales is being forced to move downstream. And downstream buyers who don't have to worry about scarcity have always demanded more flexibility, required fewer touches, and want to sign shorter term deals.

Sellers hear the tales of grandeur from those who sold before them, the heroes who broke the bank opening the building and selling it out. But those tales leave out the part of the story where the customers don't renew and never come back. When that part of the story is told, the churn is usually blamed on the housing crash of '08 or Covid when the reality is those customers were already leaving.

There is more inventory than ever before to sell into markets which have already been pillaged by the last new stadium(s).

The buyer has the conch.