The question on the minds of stakeholders in the sports sector worldwide. COVID-19 has forced the postponement and cancellation of sporting competitions and continues to pose a threat to major international sporting events in 2021 despite an already packed calendar.
Venues and stadiums have been left vacant for months on end owing to government restrictions. What was previously a reliable income stream of matchday revenue has dried up, with knock-on impacts to hospitality and sponsorship revenue. This has severely impacted Clubs and Federations, with the England Rugby Football Union reportedly facing losses of revenue of £138m as a result of the pandemic. The issue is even more acute in the lower-tiers of competition events, where clubs do not have the relative safety net of media revenue.
While traditionally more ‘wealthy’ sports clubs can more easily ride out short term losses, for many, it’s more difficult to stay afloat. At the end of 2020, the UK Government released a Sport Winter Survival Package to provide £300m of funding, largely in the form of loans, to support the sports industry. While this will help in the short-term (if successfully delivered quickly and to the points most in need), it is by no means a permanent solution.
We discuss the steps sports clubs and organisations must consider to develop their Sports Infrastructure strategy to protect the short and long-term viability of their physical assets.
Sport must evolve.
Sports venues have evolved in the past to overcome financial challenges, with many becoming multi-purpose venues to diversify and boost supplementary revenue generation. This focus on adaptation and transformation will be key in redeveloping infrastructure strategies in response to COVID-19.
A core element of the immediate strategy must be engaging with fans to attract them back to venues, even if only partially in the short term. Existing operating and commercial models for sports venues are founded on the spectator experience drawing crowds to venues consistently.
It is thought that there is pent-up demand for sporting events. However, there is a risk fans may not be forthcoming in returning to sport venues, if the sports product is not of the same quality as pre-COVID.
There are concerns over extended safety measures diluting the experience. For example, fans will likely be required to arrive at matches significantly earlier to avoid crowd congestion, fans will likely need to wear masks and be asked to restrict goal celebrations and avoid singing or chanting. In addition, financial challenges, time opportunity costs and the increasing popularity of alternative products (e.g. ESports), all arising as a result of the pandemic, could impact the return of fans.
An area that should be considered is ticketing structures and how to transform existing rigid structures into more accessible, flexible solutions that incentivise fans:
Existing operating and commercial strategies for sports venues are founded on the spectator experience drawing crowds to venues consistently.
More dynamic pricing
Low ticket prices when tickets are initially released for a game to attract fans and gradually increase the ticket price as ticket sales reach capacity. This could work in the opposite way if capacity is not expected to be reached.
A cancellation window could be introduced for tickets. As matchday approaches, multi-buy offers could be presented or targeted pricing introduced to drive up matchday attendance.
Some sports organisations have begun rolling out digital ticketing which allows tickets to be easily transferred between fans, incentivising fans to continue buying tickets in an environment of fast-changing government restrictions.
These options would allow clubs and venues to more easily capitalise on demand as it arises, remaining agile to cope with the risk of fans reduced propensity to commit to inflexible ticket plans including season tickets and full price tickets.
Whilst there is the current challenge of making venues ‘COVID-secure’ and making sure the right ticketing structures are in place when fans do return to venues, change needs to extend beyond this. Other key areas of long-term opportunity, lie in the extraction of value from existing and planned assets to generate revenue including:
What do fans want from clubs during their in-game experience? Carrying out surveys and social media polls will help clubs to understand and focus on the right strategies to increase participation, maintain fan loyalty and maximise revenue generation.
In PwC’s Sports Survey 2020, enhanced digital media fan experience was noted as the top opportunity to increase revenues, reinforcing the value of both immersive and interactive technologies to compensate for a lack of ‘in-person’ experiences.
‘Safe standing’ rail seats have risen to the forefront of media coverage once again. This has been used in German football stadiums since 1999 and Wolverhampton Wanderers were the first Premier League team to introduce rail seats in 2019. These can help to keep ticket prices low, sustain fan interest, as well as keep attendance at venues high. Operating in a pandemic-secure way represents a challenge to these solutions, but the ‘attraction’ prospects for fans are significant if the idea can be adapted to comply with potential future health regulations.
Technological advancements will need to be accelerated and incorporated into the design of sports venues (e.g. virtual health passports). Development and integration of technology for monitoring of crowd density in facilities or in queues for merchandise and hospitality is already an emerging commercial reality. Away from health considerations, there is also a need to use technology to enhance the in-game fan experience. For instance. through the installation of screens and interactive fan boards (e.g. the ‘Filter Fan Cam’ at Mercedes Benz Stadium in Atlanta, US).
The conversation around ‘stadium of the future’ will only be accelerated by COVID-19 for both existing and planned stadia projects. The need extends beyond the venue itself. If fans are required to be at the stadium for longer, sufficient infrastructure needs to be in place to manage, and even monetise this (e.g. fan parks with additional food, drink and merchandise outlets). The surrounding infrastructure (e.g. transport, security, digital infrastructure) needs to be able to cope with pandemic-secure movement of fans before, during and after events. This will require investment.
These are just a selection of the high-level considerations for sports infrastructure for evolving in a post COVID-19 world. The gradual introduction of vaccinations globally provide hope, but this will take time and is unlikely to be the magic wand many are hoping they might be in a bid to return to normal. Flexibility and adaptation is critical.
The Corporate Finance Infrastructure team at PwC have a wealth of experience advising clients in extracting value from infrastructure assets in the sports sector, developing innovative financing solutions, as well as adapting and optimising their sports infrastructure strategies. Our breadth of expertise across our firm delivers a comprehensive service offering in all aspects of sports business models. Given the immediacy of the need for change in this industry, we are ready to help. Please contact Harry Ryan-Smith and Blake Larsen to discuss how we can help you with this.