Why the stadium hotel revolution is on its way

Images: Heart of Midlothian

The sale of the Dallas Mavericks is the latest example of sports clubs finding new ways to cater for existing fans and diversify their income, with the construction of a hotel central to plans for the new owners.

Last month the NBA Board of Governors approved Mark Cuban’s $3.5bn (£2.7bn/€3.2bn) sale of his majority stake in the basketball franchise to casino mogul Miriam Adelson.

Cuban will still remain involved with operations and has shown his support for ambitions to build a new state-of-the-art arena complete with hotel and casino.

The vision is for the downtown Dallas complex to become a go-to entertainment destination for Americans all over the country, with the hotel facilitating longer stays and bigger bills.

Although casinos and almost all forms of gambling are illegal in Texas, Adelson is lobbying to change things with multi-million-dollar investments into political action committees. Governor Greg Abbott has expressed his support to legalise gambling in the state.

Should they be successful, the hotel could prove a fruitful investment and yet another source of income to a franchise that already made $429m in the 2022-23 season.

Cuban and the Mavericks would not exactly be pioneers of this move in the United States as it has proved popular with franchise owners all around the country.

When discussing his vision of moving the St. Louis Rams to Los Angeles, owner Stan Kroenke had ideas spanning much wider than the $5bn, 70,240-seat SoFi Stadium.

The stadium, which is due to host the opening ceremony of the 2028 Olympic Games in just over four years’ time, sits on a 298-acre Hollywood Park site.

The site is home to an artificial lake, a 6,000-seat theatre, and space for millions of square feet of offices, shops, restaurants, apartments, and hotels.

Hotels are already popping up all around the stadium and it is thought to be just a matter of time before Kroenke decides he wants a slice of the pie that his team has baked.

US sports clubs realised years ago that they can wring more revenue from their land and become a hub where people can live, work, shop, eat, and drink.

All of this can be achieved while furthering the brand value and awareness of their teams as they can dictate how money is spent around their stadiums.

The trend that is turning billionaire team owners, like Kroenke, into city planners is also making its way over to Europe.

Dutch football team FC Groningen was an early adopter of having more than just football within the stadium’s grounds. Since 2006, the club has played at the Euroborg stadium, which was designed by renowned firm Wiel Arets in Maastricht.

It is considered to be an architectural gem of the city alongside the Martini Tower, Groninger Museum, and Gasunie Building.

The complex is comprised of two rings which, in addition to the 22,500-capacity stadium, boasts residential apartments, offices, a cinema, shops, a casino and educational spaces, but is yet to have a hotel.

Ben Veenbrink of The Stadium Consultancy was appointed managing director of Euroborg N.V., the owner of the stadium, and claims it has been hugely beneficial for the city.

He joined the project six months before commissioning the stadium and implemented a variety of changes to improve the operability of the building.

“The stadium was the catalyst for redeveloping an old brownfield site and urban regeneration,” Veenbrink told TheStadiumBusiness.com. “A whole new city district has developed over the years.”

He thinks sports teams in countries like the Netherlands and Belgium will increasingly look towards mixed development complexes as they “operate with relatively low budgets” and seek out ways of maximising revenues.

Despite no hotel being run by FC Groningen at the Euroborg, Veenbrink is open to the idea due to its commercial potential.

“[A hotel] will contribute to the non-event day business of the stadium,” he said. “For larger MICE (meetings, incentives, conferences, and exhibitions) events you would need hotel capacity in the vicinity. Also, there is a benefit on matchdays, with higher room rates.”

As with any business venture there are key decisions to be made. With a stadium hotel, one of the major dilemmas is how to operate it.

Should the club stick to core business and hire a hotel operator? This results in a hassle-free process and less risk but consequently lower profit margins.

Or, like the Hilton Garden Inn at the Emirates Old Trafford cricket ground, is it best to operate alone as a franchise? It comes with higher risk, requiring experience and expertise, but has the upside of higher earnings.

There are also downsides like restrictions on operations. The hotel will have to be very well designed to separate operations on a matchday and not become a security risk.

Furthermore, for certain events like the UEFA-run Champions League and European Championship it is imperative to provide a “clean site” to the organisers which could pose a problem.

UEFA’s clean site principle states that a hosting stadium should be free from any sponsorship and advertising agreements.

Premier League club Chelsea has found a way around this by using its Millennium and Copthorne Hotels exclusively for club and UEFA personnel during the latter’s competition fixtures at Stamford Bridge.

One team choosing to operate internally is Scottish Premiership side Heart of Midlothian FC, which opened the United Kingdom’s first club-owned and operated hotel inside a football stadium earlier this year.

The Edinburgh-based team welcomed guests to the new 25-bedroom facility at its Tynecastle Park earlier this year and believe it is a symbol of pride for Jambos.

“Tynecastle Park Hotel has undoubtedly resonated with fans, who take pride in its association with Hearts,” the club’s hospitality operations director Graeme Pacitti (pictured below) told TheStadiumBusiness.com.

“Beyond offering convenient accommodation for match-goers and visitors, the hotel symbolises the club’s commitment to innovation and is a symbol of how far the club has progressed from being in administration a decade ago.

“We have had some wonderful feedback from fans who appreciate the quality amenities and hospitality services provided by the hotel, including our award-winning Skyline Restaurant, which further enrich their experience and strengthen their connection to the club.”

Although a number of British clubs have hotels, they are all leased out to a larger hotel chain – with the exception of Hearts’ facility.

The hotel has been a great success so far and has been almost fully booked since opening to the public on February 3, with the first month of trading seeing it take in more than £300,000 worth of business.

Pacitti believes that with the potential to attract visitors year-round and not just on match days, the hotel is a great way for visitors who would otherwise have no connection to the club to come and spend money.

He has identified the downsides but states that the club has carefully considered them and will be able to navigate around them.

“There are also some challenges that having a hotel within a stadium can presents, particularly on matchday,” he said. “Increased congestion in common areas, noise and disruption for hotel guests during events and matches are just some of those.

“Despite these challenges, careful planning and management can mitigate these risks and maximise the benefits of having a hotel in a stadium.

“We believe that the positives far outweigh the negatives, and we can offer a completely unique hotel experience unlike any other in Edinburgh, Scotland and across the UK.”

Tynecastle Park operates as a football stadium for 25 days of the year so it is a commercial no-brainer for the club to want to maximise revenue on the other 340 days. It will not be long before others realise the potential and look towards the possible profits of a hotel.