Increasing profitability of multifunctional sport stadiums

Abstract

In recent years, the sporting world has become an industry of millions, sometimes even billions (Deloitte, 2012). The commercialising within the world of sports has had several effects. One of these effects is that private investors are starting to see the possibilities of investing in sports real estate, stadiums. In addition, there is a declining willingness of local, national and European governments in facilitating financing for stadiums and other flagship projects (PWC, 2011). The consequence of this shift in facilitating and thus ownership of sports stadiums is the fact that the focus will change from a more social perspective (government), to a perspective that is purely focussed on financial value (private investors). These investors see much more potential in stadiums than the single-day use that is most common. Investors acknowledge that the potential of modern stadiums could be much broader. Think of other sporting events, concerts, promotional events, business meetings, etc. These make that sport stadiums nowadays have a much more multifunctional purpose than they had previously. Multifunctionality is a major aspect that could increase profitability and should therefore be researched even more (Jakimovska, 2007). This research will focus on enhancing profitability of sports stadiums through the design of the stadium. The research question that is formulated for this problem is: “How can a decision support model contribute in enlarging the return on investment, based on the lay-out of flexible and multifunctional sports stadium projects, in order to increase feasibility?” The research results in a model of an inductive nature, which means it can also be used for other stadium developments and/or renovations. The model covers all the different areas that have an influence on the potential return on investment over a predefined period of time. This ranges from ticketing, functions but also construction costs. The research therefore covers a number of different areas of expertise. Besides the field of design and decision support systems, the research also covers building economics, and weighs the costs of a newly built stadium against the costs for renovation an existing one. The created tool can greatly contribute to the decision making process in the early stages of decision making, but can also serve as a useful tool in retrospect. The case that has been chosen for the research is De Kuip, the stadium of football club Feyenoord in Rotterdam, The Netherlands. Because of its proximity here in The Netherlands, it is a project with more familiarity and it can be visited for a deeper insight into the project. The stadium of Feyenoord has been a subject of discussion for the past few years, with the owners being unsure if to build a new stadium or to renovate the existing one. The final decision of this issue came in the beginning of 2014, with an advisory commission insisting the renovation of the stadium. Project developer BAM had been awarded the development rights after a competition with another project developer, but failed to come up with a feasible design for the renovation of the existing stadium. The research uses the information of this failed project to investigate if a more feasible design solution had been possible. Two other cases, the Amsterdam ArenA in Amsterdam and the GelreDome in Arnhem are analysed as well to enhance information on the project and to serve as comparison. The results of the research are according to the initial hypothesis. The two stadiums that were analysed for comparison show a profitability that is in line with the minimal expected Internal Rate of Return that is required for stadium projects. The main case of the Kuip however, shows a feasible project, but a project that is not feasible enough for investors to take part in. The next chapters in the research go into detail on how the design of the stadium can be adjusted to make the project feasible again, and the initial bid of project developer BAM is recreated and analysed as well. Overall conclusions initially show that no such approach is ever used in stadium projects. Implementations of this method might not be as smooth initially since the approach adds a great deal of transparency to the negotiation process, which is something that is not always beneficial for all involved stakeholders. Further research and further development of the resulting model has to be carried out to give a more accurate representation of reality, making the model even more useful in the negotiation process.