New Gila River Arena management bolsters budget return

[Chart courtesy City of Glendale]

In its first year of managing city-owned Gila River Arena, Anschutz Entertainment Group Facilities more than tripled the budgeted return to the city for its 2016-17 fiscal year, according to the fiscal year overview presented to city council August 15. Both AEG and the city believe the arena will continue to improve and has turned a corner from its poor sales performances since 2010.

“We were trying to prove to people, obviously, that you could play here and do well,” said Dale Adams, the arena’s general manager for AEG. “And we certainly did.”

After receiving $5.6 million in operating fees from the city, AEG was expected to return $523,000. Mr. Adams announced to the city council the group would instead return $1.6 million. That return puts the net operating cost of the arena at around $4 million, less than half of operating costs north of $9 million two years ago. AEG took over the contract that for fiscal year 2017, which began July 1, 2016. They are signed to manage the arena for five years, through fiscal year 2021, and have an option to extend the agreement for an additional five years.

Though the arena held one fewer events than it did the prior fiscal year, the total paid tickets for non-hockey events increased significantly, marking the highest total since the 2009-10 fiscal year. This was due to the highest average paid tickets per show for non-hockey events since the stadium opened in 2003. However, the arena was still far behind the peak non-hockey total paid ticket numbers from fiscal year 2009.

“I think it’s kind of taking baby steps and continually pushing the limits and trying to get other events in here,” said Mr. Adams of the arena’s improvement and how to return to the numbers it once put up. “So, when we get (back to numbers like that), I’m not sure. Could be next year, could be two or three years down the line, it depends.”

In addition to improved sales, AEG made dozens of capital improvements to the arena with the $1.9 million the city allocated for capital improvements in addition to the $5.6 million operating fee. Areas of improvement included mechanical equipment, security, IT, engineering and improved food and beverage options. AEG hopes to further improve food and beverage options in the coming year.

The base city contribution for capital improvement is $500,00 per year, but Assistant City Manager Tom Duensing said that the arena had overdue improvement needs that AEG was addressing this year, and that $400,000 of that $1.9 million was carried over from the previous year.

Mr. Duensing said AEG came in with a five year capital improvement plan.

“Because this is what they do for a living, they have a good handle on the state of the building,” Mr. Duensing said.

AEG has started the 2017-18 fiscal year in a much better position than it did last year. When the group took over the contract for the fiscal year that began July 1, 2016, only two non-hockey shows had been booked for the coming fiscal year. It managed to finish the year with 24 non-hockey events, just under the total from the year before. However, at the time of the council meeting, AEG had already booked 23 events for the fiscal year 2018, putting it on pace for a considerably higher total.

The new management has brought extensive experience to Gila River Arena. AEG manages 120 venues around the globe, including four other arenas that house NHL teams. Mr. Adams, who also operates as Vice President of Entertainment Development, assists in booking events for all those venues. Mr. Adams also has experience working with an NHL tenant. He managed Prudential Center in Newark, New Jersey, home of the Devils, through its construction and first year. AEG’s parent company owns the Los Angeles Kings.

AEG is not new to Glendale either. They managed Gila River Arena from 2006 to 2009, including the arena’s record high of total paid tickets in fiscal year 2008-09.

Gila River Arena more than tripled its return to the City of Glendale during its first year of management by. Anschutz Entertainment Group Facilities. [Independent Newsmedia file photo]

Hockey sales, however, have remained dismal. The Coyotes ranked second to last among NHL teams in average attendance, the 10th straight year the team has posted one of the three worst attendances in the league. The arena also sold 13,885 fewer tickets, 339 fewer per game, than it did during the 2015-16 season. Ticket prices were no help either. The Coyotes tied with the Florida Panthers for the lowest average ticket price in the league, $47, for the 2016-17 season, according to a report released by ticket-purchasing website Vivid Seats March 6, about a month before the end of the regular season.

The black cloud over Gila River Arena is the Coyotes’ contract at the arena, which expires at the end of the upcoming season. Coyotes ownership has expressed a desire to leave Glendale for other parts of the Valley in recent years but have yet to secure another place to play after their contract in Glendale expires.

City Manager Kevin Phelps said that AEG, which is handling negotiations with the Coyotes, has told IceArizona, the Coyotes’ ownership, that it would be willing to extend the current agreement into a multi-year deal but provide IceArizona an opt out of that agreement, should it find a new place for the Coyotes to play. But IceArizona has yet to respond to that offer.

Though Mr. Adams s eemed optimistic about the nature of negotiations with IceArizona, he expressed an optimism for the future of Gila River Arena even if the Coyotes should leave, noting that their regular season and preseason games take up only 44 games a year.

“If there’s 365 days a year, and you’re losing a tenant — if that happened — there’s still plenty of dates to book anyway,” Mr. Adams said. “So, my hope would be with or without them, we’re booking a lot of dates.”

Because of their bulk deal of 44 events per year, plus the possibility of postseason games, Mr. Adams said the Coyotes receive a more generous split than an act that plays the arena one or two nights a year. Therefore, AEG is less concerned with attendance at Coyotes game than it is with other events. Still, the Coyotes account for the lion’s share of traffic to the arena, with a total attendance of 536,878 last season versus a paid attendance of 180,000 for non-hockey events, which was about 50,000 higher than fiscal year 2016, Mr. Adams said.

Because of that, the city has a greater motivation to keep the Coyotes in Glendale. Mr. Phelps described Gila River Arena as a loss leader, because it does not generate profit itself but produces economic spinoffs, jobs and revenues through the traffic it brings to the area. Phelps said the city is looking to do more to promote community investment in the Coyotes through helping them market and working with the Chamber of Commerce to help promote the team in a variety of ways. The team also has a responsibility to put a better product on the ice — the Coyotes have made the playoff three times in their 14 seasons in Glendale — but is encouraged by the direction the new owner, Andrew Barroway, and the new CEO, Steve Patterson, are taking the team.

As for the short term, Councilwoman Joyce Clark hypothesized that it would be in the team’s best interest secure at least one more year in Glendale because they do not yet have another place to play. AEG Facilities COO Chuck Steedman and Phelps could not get into negotiation details at the council meeting because of a non-disclosure agreement with the team, but Mr. Steedman described the negotiations as an open and honest dialogue.

“I will not pursue (the issue an extension of at least one-year) any further, but I will take it as a good sign,” Clark said.

“And please do,” Mr. Steedman replied. “You’d be right to do that.”

New Glendale Today editor Mark Carlise can be reached at 623-876-2518 or mcarlisle@newszap.com.

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