As normalcy returned to the sports world after the 2020 shutdown due to COVID-19, the industry continued to evolve. The traditional business model had to change.
In this month’s column, we’ll look at how the industry has assessed its needs and what additional changes lie ahead in the future.
Sports real estate typically generates revenue from four general areas – attendance, media, concessions and other sources. Over time, the dollars generated from ticket sales have fallen and broadcast dollars have risen. Not attending a sporting event in person reflects changing consumer behavior and the availability of numerous viewing opportunities.
During the track construction boom of the 1990s, new venues were built and existing facilities expanded across the country, with a focus on new markets. This was a successful formula when the stands were full, but interest waned over time.
A sell-out crowd watched the final race of the NASCAR Cup Series at the two-mile Auto Club Speedway in Fontana, California. The track will be redesigned into a half-mile oval. (Photo by HHP/Andrew Copley)
Grandstand capacities of more than 125,000 seats with 100 luxury suites around the track were no longer necessary. TV footage of empty grandstand sections did not look good, and sponsor signage often covered empty seats.
Attendance declines impact many parts of the sports venue ecosystem. Less of everything (seating, restrooms, concessions, parking, etc.) is needed.
Tracks require large footprints to accommodate their racetrack, grandstands and infrastructure – a track can range from 500 to 1,000 acres.
Companies bought as much land as possible to meet their current and future needs and also to create a buffer.
Circuits are typically underutilized facilities with peak usage. Two big weekends and a few other big events could total 30 days a year. Overall, it envisages a lower level of activity (track rentals, manufacturer product testing, festivals, etc.) during the remainder of the track’s annual schedule. The aim is to monetize this property at the highest possible rate throughout the year.
Secondary property development has become a larger part of sports-related businesses. You don’t have to share the earnings with other teams, leagues, etc. It is a source of income that complements the primary sports and entertainment activities.
Motorsport has not typically been a large user of public funds for track development, as the industry has traditionally relied on private funding. Owners have more reason to think creatively and strategically while maximizing the financial return of their facilities inside and outside the race floor.
Tracks with nearby developments that include hotels, retail and entertainment make them more attractive for events, conferences and vacations. This results in a positive economic impact and marketing value. Prime examples include One Daytona and Hollywood Casino.
Change is part of the NASCAR playbook. This happened with the recent news about California’s Auto Club Speedway. The track, owned by NASCAR, is being redesigned from its longstanding two-mile layout to a half-mile short track.
Originally built by Roger Penske in 1994 on the site of the former $80 million Kaiser Steel Mill, the track was initially successful. Almost 30 years later, the demand for commercial storage space in the area is high. Track officials said they will sell most of the land for more than $550 million.
NASCAR completed a similar type of transaction on undeveloped Staten Island land years ago and is evaluating similar alternatives for other existing motorsport facilities.
A key mantra in real estate is highest and best use. If its income-generating ability serves other purposes, consider the option. Racing is somewhat similar in that participants are constantly trying to find different ways to go faster.
This story appeared in the March 22, 2023 issue of SPEED SPORT Insider.
Comments are closed.