Academic journal article Sport Marketing Quarterly

Perceived Motivations for Corporate Suite Ownership in the 'Big Four' Leagues

Academic journal article Sport Marketing Quarterly

Perceived Motivations for Corporate Suite Ownership in the 'Big Four' Leagues

Article excerpt

Abstract

Selling luxury suite inventory is a priority for professional sport organizations, yet little is known about the motivations of those who purchase suites. There are 12,400 luxury suites in the NFL, MLB, NBA, and NHL (Association of Luxury Suite Directors, 2009) accounting for over $600 million in gross revenues (Lee & Chun, 2002). In the current recession, selling suites is a challenge as many corporate suite clients are leery of the public perception of owning a suite and are being held more accountable for spending than ever before. This study sought to gain a better understanding of how luxury suite sales professionals perceive their corporate client motivations for purchasing and renewal as well as to explore similarities and differences between the "big four" leagues. Results indicated that there are few differences between leagues and that relationships between the team and the suite client are critical to selling suites and retaining corporate clients.

Perceived Motivations for Corporate Suite Ownership in the 'Big Four' Leagues

From a business perspective, premium seating revenue is a critical revenue stream (on par with media rights, sponsorship, and general ticket sales) that sport organizations rely on to cover their operating costs. The annual sport marketplace in the United States is estimated to range between $425 and $450 billion (Plunkett, 2009) with the professional sport luxury suite industry segment accounting for over $600 million in gross revenues (Lee & Chun, 2002). Badenhausen (2008) reported that 20% of NFL and 35% of NHL team revenues come from sponsorship and premium seating. Lawrence, Contorno, Kutz, Hendrickson, and Dorsey (2007) found that teams realized an average of $9.8 million on luxury suites alone each year. With a substantial amount of revenue at stake for professional sport organizations, it is essential that sales executives have extensive knowledge of their suite clients and why they purchase suites.

As early as 2002, Bacon predicted that corporate "bean counters" would look to eliminate premium seat ownership in a down economy. In 2010, with the current recession, this prediction may be a reality. One corporate executive involved in sport sponsorship indicated that their sponsorship budget is driven as a percentage of revenues and because of this, a 5% decrease in sport sponsorship spending was budgeted for 2009 (as compared to 2008) (Seaver Marketing Group, 2008). Additionally, some companies are hesitant to be perceived as spending thousands of dollars on client entertainment while also laying off employees or accepting federal bailout money. Thus, spending on sport hospitality is down 25% (Schoettle, 2009). The exact impact on the sport industry from the recession is yet to be fully understood. Unlike past times of economic crisis where sport was insulated from impact, there are likely to be lingering effects of this recession for years (e.g., McCarthy, 2008; Seaver Marketing Group, 2008; Van Riper, 2008a; Walker, 2009). Sutton (2009) summed up the status of the suite industry well by writing, "we need to look at everything we have been doing and determine whether to continue, abandon, or modify" (para. 1).

Within the realm of luxury suites, sales professionals should recognize the potential impact of the recession and be proactive in seeking to understand clients beyond their basic demographic and psychographic characteristics. To truly impact suite sales, executives must appreciate the motivations of corporate clients to purchase and renew suites and adjust sales and retention tactics accordingly. In many industries, this type of research has been available for years, but in suites it is still an emerging area of inquiry. It is also important to explore the similarities and differences between the NBA, NFL, NHL, and MLB because it is unknown whether there are differences in motivations for suite purchases between leagues. Leagues currently do not share information related to sales strategies and thus may be hindering luxury suite sales by holding the assumption that one league differs from another. …

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