Kent's ShoWare Center operator recommends paid parking, buying of shows to boost revenue
By STEVE HUNTER
Kent Reporter Courts, government reporter
November 29, 2012 · 10:57 AM
The ShoWare Center operator recommended to the Kent City Council that the city charge $5 to park, add a $1 facility fee to each ticket sold and kick in hundreds of thousands of dollars as a self-promoter to attract higher-caliber concerts and shows.
SMG, the Philadelphia-based company hired by the city to run the 6,100-seat arena, discussed the proposals Nov. 20 at a council workshop and distributed a 14-page report about how to raise revenues over the next few years at the financially struggling city-owned arena.
"These recommendations all have the potential to add money but the programming (concerts, shows) drives the others," said Steve Tadlock, SMG California-based regional general manager, at the workshop.
The arena brought in an estimated $25 million to the local economy in 2011, according to an economic impact analysis done by a Seattle consultant hired by the city.
But the ShoWare Center has lost more than $1.3 million in its first three years of operation. That figure could go over $2 million by the end of this year. The arena lost $451,723 in 2009, $398,013 in 2010 and $457,480 in 2011. SMG estimates a projected loss of at least $631,000 in 2012.
City officials set aside money each year in the city's annual capital budget fund to cover the anticipated losses at the arena. If not needed for the arena, that money could be used to help pay for improvements to city streets, parks, facilities and other capital projects.
With such large financial losses at the 4-year-old arena, the council and Mayor Suzette Cooke asked SMG for recommendations about how to raise revenue.
SMG manages the day-to-day operations of the $84.5 million center, including event booking, the budget, vendor selection, public relations and marketing and event staffing. The company also has the arena's food and beverage contract.
A parking fee of $5 per space could bring in an estimated $50,000 to $75,000 per year, according to SMG. Parking is now free at the 550 spaces in the center's lot.
"Many venues charge in the area so it's something we want to look at," said Tim Higgins, ShoWare general manager.
ShoWare adds a $2 facility fee to each ticket sold. A $1 increase in the fee to $3 per ticket could bring an additional $100,000 per year.
SMG also wants the city to consider creating a fund (possibly partially funded with revenue earned through parking and facility fees) to try to "buy" as many as four to eight high profile concerts or shows per year. The city's self- or co-promotion of events could bring in more than $100,000 per year.
Councilwoman Jamie Perry asked SMG how much the city would need to put up to attract one concert.
"It'd be anywhere from $100,000 to $200,000 per event," said Higgins, who added that's what the cost to the city would be if not one ticket was sold. "It would guarantee that show that amount of money. It would be mitigated through ticket sales and concessions."
Other venues, including Comcast Arena in Everett, put money up front to attract concerts, Tadlock said. Or venues find a promoter to help put up some of the money to attract a concert.
"In most cases, it's $50,000 or less risk," Tadlock said.
Tadlock said such a promotion if successful could bring in anywhere from $20,000 to $50,000 in revenue per high profile concert for the ShoWare and maybe as much as $80,000.
Tadlock emphasized that when shows go on the road it's no longer possible for a venue to simply charge a rental fee and be able to attract events.
"The world has changed with how you attract events and when a show goes on tour how they select venues," Tadlock said. "Nowadays there's a tremendous risk for tours to go on the road. They look for partners to share the risk. And there are a lot of choices in the Seattle area. There are aggressive buildings that buy talent directly or find a promoting partner to attract shows."
If a promoter cannot be found to partner with the city, the city could be the sole promoter.
"If you do it multiple times you can meet the demand to increase the caliber of programming and that drives suite sales and other revenues," Tadlock said. "It puts more money in the pot."
The term used in the arena industry is a venue needs to have "skin in the game," Tadlock said.
Councilman Bill Boyce said if the city put up money to attract shows, he wants to make sure there's bang for the buck.
"Where is the accountability?" Boyce asked about the potential losses of hundreds of thousands of dollars. "If you use taxpayer money and put it at risk for two or three shows, the worst-case scenario is nothing comes out of it."
Ben Wolters, city economic and community development director who helps oversee the ShoWare Center, said the accountability comes with the city's contract with SMG and whether to extend that contract if revenues improve or not. The council extended SMG's contract in 2011 for three more years. with an expiration date of Dec. 31, 2014.
"I'm willing to do something different, but it needs to be solid," Boyce said about the potential to increase revenue by self-promoting.
City officials also asked officials from the Seattle Thunderbirds junior hockey team, the anchor tenant of the arena, for recommendations about increasing revenue.
Russ Farwell, T-Birds general manager, didn't offer specific ways to increase revenue, but said the team continues to market ticket sales and sell advertising. He said hockey attendance has increased each year since the team moved in 2009 to the ShoWare from KeyArena in Seattle with an average of 4,206 fans per game during the 2011-12 season.
The T-Birds noted in a written report to the city that the free parking at the ShoWare "is a significant part of the extra value that patrons of the ShoWare feel they are getting when our venue is compared to others in the area."
Farwell said city officials can help by putting a more positive spin on the arena.
"We need to be getting focused on talking positively and selling the building every chance we get," Farwell said. "We need to talk about the quality of the venue and the success of the events."
In its written report to the city, the T-Birds said "the sooner the city and all involved can become ambassadors for the positives that the ShoWare brings to our community the sooner and better the bottom line will look each year."
Farwell agreed, however, that a higher quality of concerts would help bring more people and revenue to the arena.
Councilwoman Elizabeth Albertson told Farwell she agreed the city needs to be more positive about the ShoWare.
"People are proud of the building and love going to graduations and other events and going to Kent Station," Albertson said. "If we keep yelling that the ShoWare is awful and a big drain, we help create a negative image. We have debt but we have bonded debt across the city, including Kent Station. We need to be a cheerleader for this facility and not put out a name as if this is a goose egg in town. This is a good thing for Kent."
SMG also proposed other revenue ideas, including ice time rental to bring in about $20,000 per year; hiring a third party to sell unsold arena advertising for an estimated $50,000 revenue per year; and selling VIP Club memberships to non-hockey events with certain parking and food perks to bring in about $40,000 per year.
Now the council must figure out whether to go along with any of the recommendations. No timeline has been set for any decisions about changes at the ShoWare.
"We need to continue this discussion and decide what to do next," Council President Dennis Higgins said to conclude the workshop. "This has been a very productive discussion about a topic that a lot of us have lost sleep over."Contact Kent Reporter Courts, government reporter Steve Hunter at email@example.com or 253-872-6600, ext. 5052.