Negotiating The Win-Win: 7 Keys For Rights Holders
26 Sep, 2016By: John McDonald,Lori McMahon Moore
Growing a tournament business is a unique career. While others dedicate themselves to traditional jobs, event owners have the opportunity to live a different lifestyle. At its best, you help kids and families share great experiences and contribute to the development of the character and well-being of young people. Yet the event business has become an increasingly complex landscape for event owners.
Hosting a sports event in another city means working with a number of entities outside of your own employees and athletes. And among the first decisions you’ll make, following the selection of the city, is the decision on a venue. In some cases, this venue is what actually drives the decision-making process.
Securing the best venues and negotiating win-win agreements is one of the elements that separates the most successful rights holders from others. How do you come up a winner in negotiations, and how do you let the venue benefit equally from the arrangement? These are the times you’ll be glad you have some insights from those in the industry. This article is intended to provide a road map for event owners to secure the best possible venue deals while establishing a long-term relationship that is equally beneficial to the destination and venue.
As general manager of the sports destination, Rocky Top Sports World in Gatlinburg, Tennessee, and former general manager of the Myrtle Beach Sports Center and now Regional Director for The Sports Facilities Management (SFM), we’d like to share with you the seven keys to negotiating a win-win with your preferred sports venue.
Both the rights holder and facilities have revenue goals. By initiating in open dialogue, finding a “right fit” for both parties is attainable. Popular venues hear from a lot of rights holders but the very best agreements are crafted through a collaborative, friendly dialogue where both parties seek a win-win. Start with an attitude of win-win and avoid the temptation to negotiate for win-lose or win-at-all-costs. Venue operators are more likely to work with event owners who understand that the venue, the event and the destination must win.
2. Think beyond the ‘one-off’
‘One-off’ events are considered found money. As facility managers, we have to think in terms of long-range goals. For our budgeting purposes, we look to find events that are in a growth mode and which are looking to establish a long-term business relationship. If a provider has multiple events, then we feel like we can parlay that into a multi-year relationship.
In addition, a multi-year relationship means we develop a better understanding of what you want and need as an event owner (and you develop a better understanding of what we as venue managers want and need); that in turn can evolve into a more satisfying relationship where both partners are benefitting each time the event takes place.
We have seen that multi-year contracts and extensions provide benefits for both parties; these include the following:
a. Ease in forecasting revenue/expense streams
b. Greater leverage in long-term promotion of events
c. Flexibility with rate structure
d. Greater ancillary sales opportunities for long-term partnerships
3. More than ticket sales: ancillary revenue
Ancillary revenue allows the venue to be more flexible on rental rates. At Myrtle Beach, for example, we focus on the number of teams and spectators because those numbers have a direct correlation with ancillary revenue.
It is key to strike a balance between ticket sales and ancillary revenue. Travel teams need to find value in their experience in order to ensure a repeat visit.
4. Prioritize safety
Safety is and certainly always should remain, priority number one. We are constantly looking at areas where we can improve. We analyze every detail of the facility to ensure safety – from adding extra police officers for basketball games to the placement of seating for player and spectator safety.
This is one item that cannot up for negotiation by either party. When we’re working with any facility, but Rocky Top Sports World is one great example, providing a safe and secure environment for young athletes is the #1 priority. Understanding this is key to demonstrating that you are a good potential partner.
5. Understand the Impact
The balancing act that most publicly managed or owned facilities face is between sports tourism/economic impact dollars versus facility profits. Economic impact drives the train, but direct revenue for the venue allows the owner to limit resources from the general fund that might have to be used for operating cost. Many event owners believe the economic impact should be enough, but as the owner’s representative, we have to operate a sustainable operation for the long term benefit of the facility and community. Event owners need to be cognizant of this, and to be ready to consider all factors.
Additionally, it is essential to realize that economic impact is the driving factor for facilities owned by the municipal government. With that said, the operating cost of a multi-sport indoor/outdoor facility must be a factor in price negotiation. Remember that keeping a facility running comes at a price, and that event owners need to share in those costs for the duration of their events.
6. Bring References
Your reputation carries among venue owners. Credible events with positive references go a long way towards booking at exceptional venues that have the power to help take an event to the next level. Seeking references from industry peers and contacts is a great starting place, especially those which regularly network at events in the sports planning industry. A mutual exchange of references between owner and facility is a best practice discipline.
With changing sports and recreation trends, new events are always popping up. If the event or event owner has missing or unfavorable reviews and a history of problems, they drop to the bottom of the list of potential events. If on the other hand, they can provide evidence that they have been a good partner, they are more of a priority.
7. Consider Partnering
If you have been in the sports business your entire life you may not think of diversifying beyond sports. However, venues regularly host non-sports events like concerts, political rallies, ceremonies, video gaming competitions and many others. Many have ample space with which to work, great facility features, and staff that are trained to handle nearly any kind of event. Don’t be afraid to ask about having a facility host your trade show, expo, awards ceremony or other non-sport events. They may have facilities and capabilities you don’t know about – and they’ll be glad to explain them to you.
If you approach a venue seeking to diversify your events, venue operators may be willing to partner to create new revenue streams. Consider launching a new event that you and the venue can co-own, invest in and promote together. This is where our very best customers evolve and it creates huge competitive advantages for rights holders willing to partner.
Beyond the seven keys, operators can strengthen their position with prestigious facilities by offering to share verifiable financials, references from prior venues and a history of successful venue. In all cases, relationships are key. Whatever you do, don’t show up with unrealistic expectations for an event. We see all types of events, have held space for events then been jilted and have learned to be skeptical of event owners who proclaim that they will massively outperform industry standards for like events.
In simple terms, venues are seeking to work with rights holders that are realistic, collaborative, seeking to grow an event over several years, and those who can establish credibility with references and financial information. We also want to be known as a service provider to take advantage of the offers we have to provide on-the-ground support. The less complicated your business is the faster you can grow. In the words of Karl Albrecht, “Start out with an ideal, and end up with a deal.”