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.
By definition a contrarian is a person who takes a contrary position or attitude, i.e. a person who goes his own way and doesn’t follow the crowd. The most common view is of an investor who buys shares of stock when others are selling, and sells when others are buying. There are some other instances where it makes sense to follow your own judgment or instincts rather than take the “accepted” or common route.
Home Ownership
While owning your own home is desirable and is often the cornerstone of building financial assets, a 25-year mortgage isn’t always in your best interest and sometimes it makes more sense to rent than to buy.
Someone in a mobile career who doesn’t expect to remain in the same city for more than a couple of years can often be enriching their realtors rather than making good financial choices if they purchase a residence in every move.
When house prices are high, people with low income or non-stable jobs just can’t afford to take on a mortgage and all the other costs of buying a house – being “house-poor” isn’t all that much fun.
Deferred gratification or life avoidance?
The fact is contributing the maximum to RRSPs and TFSAs can take a big chunk out of your net earnings. Yes, save for the future, but not at the expense of enjoying your life today.
What if you save for 40 years, putting off all kinds of pleasure and opportunities, then get hit by a bus the day before you retire? If you like having a latte every morning, going to a nice restaurant, taking regular mini-vacations, or any other experiences – then go ahead. The key is to enjoy the things you value.
Buying equities for growth
It’s a known fact that adding stocks to your portfolio provides the potential for higher returns. However, some people are not comfortable with the risks they associate with owning shares and prefer “safer” investments. My father invested in nothing more than Canada Savings Bonds and GICs all his life and still managed to pay cash for all his homes other than his first one, retire at age 59 and spend several years travelling around the world.
Cutting expenses
Every budgeting program will tell you to look over all your expenses and cut out anything unnecessary. But, instead of cutting expenses to the bone, why not increase your income? Get a higher paying job, ask for a raise, do consulting on the side or turn your hobby into a part-time business.
Higher education
I am a strong proponent of post secondary education especially since it’s one of the best ways to earn a higher income, but some people are not cut out for the routine of classes. Highly ambitious entrepreneurs, inventors and artistic people work hard to become successful by pursuing their own unique talents. I don’t think Bill Gates ever returned to college to earn his degree.
Don’t retire
You may want to retire from a particular job and then move on to something else. Many people don’t necessarily want to stop working altogether when they reach retirement age and it may have nothing to do with earning money. Just because you turn 65 doesn’t mean you can’t have new interests or new goals to work toward and 25+ years of leisure just isn’t appealing to some.
When I was young and wanted to do what my friends were doing, my mother used to say the ubiquitous “If everyone jumped off a bridge, would you do it too?” The old saying is still true. You don’t need to do what everyone else does. Be a contrarian and do what’s best for you.
Inflation targeting has been the cornerstone of monetary policy in Canada since 1991. The Bank of Canada aims to keep inflation rates at the 2 per cent target, the midpoint of the 1 to 3 per cent inflation-control target range.
Since 1991 that is exactly what has occurred, as inflation rates have averaged out to be 2 percent per year over the past 20 years. But in December 2010 the total Consumer Price Index went up by 2.4%, leading many to believe that rising inflation is becoming a serious threat.
Inflation Rates: Are Things Really That Expensive?
Rising prices really get people worked up in our society, and rightfully so. It means more money coming out of your budget each month for essential purchases and less money available for savings and discretionary purchases.
We love to complain about the prices at the pump, the cost of chicken at the grocery store, and our monthly cell phone bills. But are things really that much more expensive than they were 5 years ago? Are you better off now than you were 5 years ago?
I find it interesting that when prices are falling we don’t make such a big deal but when prices are rising it seems like there is no end in sight. How often did we hear about the price of oil going to $200+ per barrel back in 2008 when gas prices hit a record high of $1.42/litre in Canada? But later that year prices at the pump fell sharply down to $0.73/litre and we barely noticed.
The average Canadian gas prices in the Spring of 2006 were exactly the same price as they are today, at roughly $1.13/litre. Meanwhile how much has your income risen over the last 5 years?
It’s Volatile But Not Out of Control
People are more familiar with the volatility of the stock market since they see these charts more frequently than commodity price indexes. Yet the same patterns emerge within commodities markets, so we have to expect similar peaks and valleys as we do with the stock market.
Yes, the cost of certain commodities have risen substantially over the past few years, but that doesn’t mean that our standard of living has diminished just because the price of coffee has doubled. But the doom-and-gloom forecastor’s would have you believe that we’ll be rationing our cans, standing in line for bread, and rioting in the streets.
Financial Uproar posted an article about how food prices are rising, but that most people would barely notice in North America since food does not make up a huge part of our monthly budgets and because companies are cleverly packaging their product at lower weights. This is true, especially here in North America.
We take it for granted that our expenses for essentials are cheap compared to other parts of the world, and especially compared to our incomes. We’ve had some tough economic times here lately, but I would guess that the majority of working Canadians’ wages have risen by at least 10% over the past 5 years to keep up with inflation.
It’s Not Inflation That We Need To Worry About
The Bank of Canada is in a difficult situation right now because in order to keep inflation rates from moving above the target rate of 2 percent they will need to increase the overnight lending rate. This triggers interest rates to rise and the dollar to go up, then causing a decrease in demand which leads to lower production, and results in lower prices.
The problem is, interest rate hikes will aggravate 2 additional problems – the exchange rate and the real estate market, both of which are critical to the continued economic recovery.
The Bank of Canada will continue its monetary policy of keeping inflation low, stable and predictable. So while Mark Carney stick handles his way through this economic recovery, we shouldn’t worry so much about the rising inflation rates. What we need to be concerned about is the effects of containing inflation by raising interest rates, and how it will impact the exchange rate and our housing market.