Stadium Design: History and Impact

Teams, Stadiums and Municipalities

• New stadiums and arenas lead to increased attendance in the years following construction.

• The "honeymoon effect" of a new facility on attendance is temporary.

• All else being equal, attendance typically falls back to original levels within about ten years.

• The honeymoon effect is shorter for hockey and basketball compared to baseball.

• In European football, the effect typically fades after two seasons.

• New stadiums affect ticket prices, particularly luxury boxes.

• Until the Astrodome in Houston opened in 1965, luxury boxes were uncommon.

• Since then, luxury boxes and premium seating have become standard features.

• NFL teams mostly retain their revenue from luxury boxes.

• Studies show a 20-30% increase in ticket prices in the first year of a new stadium.

• Revenue from luxury boxes increases after a stadium is built.

• The market values of teams with more luxury boxes are higher.

• For example, the Dallas Cowboys in 2020 had a market value of $5.7 billion, $1.3 billion more than the New England Patriots.

• Team owners claim that increased attendance and revenue will allow them to build better teams.

• Research suggests the link between new stadiums and better teams is weak.

• Stadium age does not impact winning percentages; except in baseball, where effect is small.

• There's no proof teams in new stadiums spend extra revenue on better players

• Cities and clubs can determine the worth of teams, stadiums, or events by calculating net present values (difference between current value of revenue and cost).

• The present value of a revenue stream is calculated as V = R1 / (1+r) + R2 / (1+r)^2 +...+ RT / (1+r)^T

• Where R is the annual received revenue and r is the periodic interest rate.

• V represents the current value of future returns and can be used to determine whether a project is profitable (V > C, where c is the cost of building the stadium).

• New stadium projects will only be undertaken if their value exceeds the cost.

• Fans benefit from better seating arrangements.

• Multi-purpose stadiums were built in the U.S. in the 1960s, 1970s and 1980's, specifically designed to host both football and baseball.

• Baseball average stadium capacity (1960s-1980s) was 52,659 and football average capacity was 60,380.

• New baseball-only stadiums in the 1990's typically are smaller than multi-purpose stadiums.

• Also, football only stadiums are usually larger than multi purpose stadiums.

• Circular stadium designs were attempted to meet needs of both sports without much success.

• Stadiums in Europe often include athletics track which is now uncommon.

• In baseball stadiums most seats typically are closer to home plate in the infield.

• Hockey and basketball teams often share facilities because of similar court sizes.

• 10 pairs of NBA/NHL teams share arenas.

• No MLB/NFL teams share arenas.

• Conflict between hockey and basketball teams is mainly financial.

• NBA teams usually get more financial benefits from shared arenas.

• Hockey teams often get less benefits financially.

• Many soccer fans dislike football markings on soccer fields.

• European football stadiums are often smaller.

• Governments often subsidize facility construction because of the beneficial effect on the community.

• These effects may be direct (increased employment in construction) or indirect (increased business activity from fans).

• Direct benefits from constructing new facilities may include increased ticket prices.

• Overall, increased revenue may come from new facilities, but expenses may increase as well.

• There is an important consideration that new facilities may just shift revenue distribution in the city that is hosting the event.

• Governments often subsidize new facilities to increase local employment and create a more attractive city to live and work in.

• However, funding facilities involves a trade-off between efficiency and equity, as taxes can impact the ability of citizens to spend their money.

• Cities often find it beneficial to fund the facility, but may struggle due to the potential negative effect on surrounding cities.

• Major sports facilities often generate higher costs of land in urban centers.

• Sports facilities often choose locations outside urban centers due to high land costs.

• Public subsidies for sports facilities are less common in Europe compared to the United States.

• In Europe, stadiums are usually publicly funded to host large events or mega events.

• In Europe, the relationship between the local clubs, and the host cities is tightly knit, which provides less bargaining power for club owners when considering relocation and less incentive to obtain subsidies for stadium construction.

• In North America, franchises operate within closed leagues with a fixed number of teams.

• This monopolistic structure gives franchise owners substantial bargaining power to relocate their teams if cities are unwilling to provide subsidies.

• In Europe, sports leagues use promotion and relegation, where clubs can be promoted to higher leagues based on season performance.

• This structure helps balance financial concerns and prevents a few large cities from dominating.

• In Europe, stadiums tend to be publicly funded for special event hosting like Olympics or world cup, but cities rarely fund facility construction.

• In North America, stadiums are usually privately funded without mega-event stipulations.

• The most expensive stadiums worldwide include SoFi stadium in Los Angeles, Allegiant stadium in Las Vegas, and U.S. Bank stadium in Minneapolis.

• The cost and location factors for stadium construction can be expensive.

• Most expenses related to stadium construction come from the price of land (location).

• Taxes are often imposed on residents to fund new facilities.

• Sometimes these taxes are imposed on goods or services used by visitors.

• However, residents are often unhappy with this as it burdens people who aren't directly connected with the team.

• Government may resort to other tactics to raise money for the stadium such as tax increment financing.

• This approach has a specific goal of using a new stadium to generate new revenues, that can be used to pay for its construction.

• Tax breaks or subsidies are not uncommon to further assist team owners.

• Some economists believe governments should depend on user fees for facility construction.

• There are benefits to financing through user fees as it directly links fees to use of the facility.

• Taxes collected should be targeted towards providing services or goods directly to the citizens, rather than on an event or facility.

• Municipal bonds offer lower interest rates, allowing cities to fund stadiums at a lower cost.

• This funding mechanism often involves future generations having to pay for a facility that was constructed in the past but not used in tandem with existing financial infrastructure.