Ever since Michigan State University drew a world record hockey crowd of 74,544 to Spartan Stadium in October 2001 to witness the so-called Cold War against Michigan, it seems that hockey teams everywhere have been taking the game outside.
The National Hockey League got in the act in November 2003, and for the last four years running has staged the Winter Classic outdoors on New Year’s Day. Sites for outdoor hockey games have stretched from Edmonton’s Commonwealth Stadium to as far south as Chicago’s Wrigley Field.
In 2011, the city of Calgary hosted the Heritage Classic at McMahon Stadium, with the Flames defeating the Canadiens 4-0 in front of 41,022 fans. As I watched the game I couldn’t help but wonder what the cost to stage an outdoor hockey game would be. Can you actually make money by hosting this type of risky one-day event?
Staging An Outdoor Hockey Game: Stadium Conversion
Any outdoor installation, particularly one tied to a major event, carries with it some financial risk. All of the preparation and expenses to convert the stadium to a hockey rink will be incurred prior to the event so the longer it is used, the more economic sense a temporary rink makes. Organizers are basically paying several hundred thousand dollars for the first minute of ice, and then 50 cents for each subsequent minute of use.
According to Ice Rink Events (the main supplier of seasonal ice rinks in North America), the cost to install an 85′ x 200′ ice rink would be in the neighborhood of $850,000, including $150,000 for a refrigeration unit that will ensure quality ice for the players. This does not even include the costs associated with additional seating in the stadium, as well as the extra labour that is required to put on the event. Outdoor stadiums are also typically ‘winterized’ after their last football game of the year, which means that water is drained and shut off. Bringing washroom facilities back online in the middle of winter would represent another significant cost and challenge for organizers.
Revenue Generation
Leading up to the Heritage Classic the Flames organization was unsure if they would break even on this event. But with tickets ranging from $110 – $250 and over 40,000 fans in attendance, I don’t see how that is possible. Add parking, merchandise, and concessions to the total ticket sales and you can easily see a $5M revenue day for the Flames. And that doesn’t even take into account any sponsorship or advertising deals they had made for the event.
For NHL teams, the risk may look relatively small compared to the revenue pay off and public relations benefit. But back in November 2010, the Fort McMurray Oil Barons of the AJHL hosted an outdoor hockey game in front of a league record 5,726 fans. The estimated cost of $850,000 could hardly be off-set by ticket revenues alone, so why go to the trouble to host a guaranteed money losing event?
As it turned out, the City of Fort McMurray viewed hosting the game as an opportunity to gain some positive PR after being the target of increasing criticism from environmental groups over the oilsands. And fundraisers were held long before the event to gain the necessary corporate support and sponsorship dollars.
Real Life Lessons
In business and investing you are always taught to never put all of your eggs in one basket. A restaurant or bar is better off building their business slowly on one or two nights a week rather than trying to pull off a massive one-time event (like an outdoor concert). Much like an investor should diversify their portfolio over many different sectors rather than risking their money on just one particular stock.
The NHL has proven that with enough fan support you can turn a high risk event into a huge money maker. But as the outdoor hockey game becomes more ubiquitous than unique, we will come to see more and more smaller organizations attempting to hold these events. And given the unpredictability of the weather and the huge upfront set-up costs involved, it’s only a matter of time before one of these organizations gets left out in the cold.
