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Suite or sour?

Will Charlotte sports survive a luxury-suite glut?


Is the corporate world's love affair with luxury suites turning sour? That's what a recent Wall Street Journal article claims, and it could have implications for arenas and stadiums in Charlotte.

Two decades ago, most sports venues had no more than 10 luxury suites. Then the Miami Dolphins built a new stadium in 1986 with 215 luxury suites and raked in tens of millions of additional dollars. Soon sports teams around the country were demanding new stadiums stacked with luxury suites. The craze hit here, too. The lack of luxury suites in the old Hornets basketball arena was the chief reason Charlotte's city leaders gave for building a new publicly funded basketball arena uptown.

Today, with 12,000 luxury suites already on the U.S. market and 2,000 more coming on line over the next two years, some news outlets are beginning to warn of a potential glut. By 2012, the number of luxury suites available for lease is expected to grow by another 20 to 25 percent as over 20 new stadiums and sports venues open their doors, says Bill Dorsey, executive director of the Association of Luxury Suite Directors. The key market for all those suites, which can cost hundreds of thousands of dollars a year, are the same 5,000 to 6,000 companies.

The financial Web site also recently warned that the luxury suite boom of the 1990s, when free-spending technology and pharmaceutical companies blew big bucks entertaining clients, is over.

The Journal reported that across the country, some arenas and stadiums are having trouble leasing suites. The Seattle Mariners, Milwaukee Brewers and Chicago White Sox have all ripped suites out of the facilities they play in and replaced them with other seating. The White Sox tore out 10 of their 103 suites to build a new press box. And though there are still waiting lists for suites at some big-city venues like Boston's Fenway Park, other markets are beginning to feel the crunch.

New laws passed by Congress increasingly scrutinize corporate giveaways and are making it tougher to write off the use of suite space for business purposes. And big businesses who have hired consultants to study their return from suites are beginning to favor cheaper fishing and hunting trips over leasing suite space, and finding these trips are a better way to get face-time with clients.

According to the Journal article, Bank of America began cutting back on suites last summer after an analysis showed suites in some markets -- it won't say which ones -- weren't attracting enough clients to justify the bank's investment. The bank has since subleased 83 of its suites and is considering doing the same with 15 more, the article says.

The bank didn't return Creative Loafing's phone calls, and no one from Bank of America has gone on the record about the suite situation since late 2005, when Tren Hopkins, the bank's vice president of sport and event ticket management, told the Fort Worth Star-Telegram the bank would begin unloading some of its suites.

"A lot of teams built new venues in the 1990s when there was a more robust economy," Hopkins told the Star-Telegram. "People aren't willing to spend lots of money just to be a good corporate citizen anymore. Many companies are starting to ask, 'Is there value to having these suites?'"

So far, the Charlotte suite market seems to be healthy in many respects. Bank of America and Wachovia own the two mega-suites in the Bobcats arena. The Bobcats say they are closing lease deals on the last three of their 60 suites. But four years after the team first started selling seating in 2003, 10 of 36 Royal Boxes remain unsold and the team has struggled to sell club seats. Chase Gardner, director of premium sales for the Bobcats, says the boxes with the best locations sold early on and that the team is encouraged by its success here. Others aren't so happy.

"In my opinion, [Bobcats owner] Bob [Johnson] was sold a bill of goods," Bobcats investor Felix Sabates griped in the Charlotte Business Journal in January. "The NBA sold him a bill of goods and so did people in the local market. Success isn't going to happen overnight. Bob thought it would be overnight and I did, too. I wouldn't have invested a damn dime if I thought it would be this kind of struggle."

The Business Journal also reported last year that the Carolina Panthers were filling all their suites for home events, a turnaround from 2003, when 20 of the team's 158 suites went unused each game. Calls for comment to the Panthers weren't returned.

For now, the teams are likely in good shape as far as suites go. The leases on the Bobcats' suites -- which the team began selling in 2003 -- range from five to nine years. But the question is how they'll do in coming years as mega companies cut suites they don't need. It's likely to be smaller to medium sports markets that take the losses, Dorsey and others say.

"There's a fairly rich suite environment now in Charlotte," says Private Sports Consulting President Max Muhleman of Charlotte. "You have to count the speedway and the golf tournament suites, too. I don't know that there is necessarily a problem, but we are one of the places where there is lots of supply right now."

Muhleman expects national and local companies to scrutinize their suite inventories in Charlotte like they are doing across the country.

"Maybe there will be shrinkage among the multiple suite purchasers, but there will probably continue to be people who move up from six club seats to a 10-person suite," he says. "There are hundreds of new businesses that are probably sports suite capable moving to Charlotte."

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