by Michael Horn
There are many major decisions that go into planning a profitable sports facility, from size and location to the economics of your market, to the future, well before breaking ground.
“There are dozens of factors that need to be considered,” says Norm Gill, who has overseen many facility projects from his own days as an operator to his current position as partner of industry consultant Pinnacle Indoor Sports. “It’s not rocket science, but it’s not nearly as intuitive as you may think. We’ve eaten at thousands of restaurants, but I’m not sure that prepares us to go and open a restaurant.”
Economics
Gill says one of the biggest factors he has learned over the years is the influence of socioeconomics or lack thereof. “We have found communities that are very middle class that pay double what some communities with very high disposable incomes pay,” he says. “It’s not a function necessarily that they can afford it or not; it’s a function of who sets the bar.” If there is already competition, especially from a municipality-operated facility or non-profit, pricing may be out of your hands, which can hamper your business model. “Just because you build a nicer facility or operate things better, people generally aren’t going to pay double for the same product.”
Even communities that have no established sports facility can already have built-in pricing. For example, there may be a community that doesn’t have enough basketball courts. A facility may be able to provide more, but pricing already exists. “We ask them, ‘Where do you play now?’ ‘We rent the school gym for $10 an hour.’ That price point isn’t going to work for you as a commercial venture, and to make it work, you have to charge $50 an hour – they’re not going to pay that.”
Location
Gill says location is important for a facility, but as a destination-based business, it’s not essential. “For most facilities, it’s not a business where people drive by, see the building, and go, ‘Let’s play some indoor soccer.’ They sign up, they come to the facility when you tell them to, based on a schedule.” A good rule of thumb is to be able to describe the location in about two sentences. “Do you know where the new Walmart is? We’re right behind it.”
“It needs to be convenient and easy to describe,” says Gill, “but it does not have to be on prominent property, because you probably can’t afford that property.”
He also says that security needs to be a consideration. “If you’ve driven into an industrial park and there’s concertina wire around all the businesses, that probably is not a good place to be.”
Seasons and Size
While it’s not true for all regions or all facilities, many facilities are the busiest in the winter. Gill warns, however, that building your facility for peak months may not be wise. “If you build that big, you’re most likely going to be crushed under the weight of the debt in the slower seasons,” says Gill. Rather, he advises to invest in building as steady a year-round business as possible. For example, to offset a slower summer, consider developing camps. “You’ve potentially gained tens of thousands of new clients while school is out. These kids need summer camps and places to go during the day.”
This leaves spring and fall, the transition seasons from outdoor to indoor and back, as the “shoulder seasons”. Regardless of when league and camp seasons fall in a particular region, the point remains.
“You want to build a facility that can, from a business model standpoint, financially be successful. But for the most part, we see a lot of facilities try to overbuild because they say the demand is there for the winter; then they get crushed because of their overhead the balance of the year.”
Planning for Expansion Rather than overbuild at the start, it may be worth leaving room for expansion when finances and the business plan can support it. While it may be easy to design a building with a wall that can easily be removed for an addition, operators should be sure to understand the additional needs for parking, restrooms, and water retention, etc. “Infrastructure-wise, you can plan for the bigger one and phase into it, but you don’t want to come back after you’ve already put in your X-Y-Z size retention pond and have to double that,” Gill advises.
Still, stocking away some assets up front may seem too tempting to avoid. Under these circumstances Gill still says owners must be wary.
“We’ve seen a lot of facilitates never get to expand, because in their hopes of wanting to do that, they have bought more land, they have paid for infrastructure, they have accumulated all these additional costs on day one; and because they have all those costs on day one, they never get to the point of expansion because they can’t afford it. It’s a dual-edged sword.”
It’s “YOUR” Market
Most importantly, it’s vital to remember there is no single formula that fits all or most facilities. Every town and every project is different, and what works in one location may not work a short distance away. Gill has seen this play out with many of his projects in the northeastern U.S. “I can go 100 miles in any given direction, and find two similar communities from a statistical standpoint. And in one community they’re paying $1000 to sign a team up for a league, and 100 miles away they’re paying $3000. And both of them think that’s perfectly normal.”
Even if the startup costs in the two towns were identical, other characteristics in the towns can make them vastly different. A feasibility study from one of USIndoor’s consultants can pinpoint those differences and make a significant difference in your plans. “Seek those who know how to look at your community the right way,” says Gill.
