Sports Facility Agreements: A Financial Snapshot

For sports fans, our focus is mainly on the teams, the athletes, and the outcomes. However, one of the most crucial parts of the game are the venues and facilities used to host a given match. There are many elements that are considered before finalizing facility deals for sports clubs and sporting events. Facility contracts are generally drawn up between the facility operator and team that will be utilizing the facility for its tournaments. However, in cases where the facility deal is done with a committee or conference, seen more frequently in tournaments such as the Olympics, there are several different ways a facility deal could be drawn up. One of the more common ways to create a facility deal between the facility operator and the committee is through a financial partnership for the duration of the tournament. This blog will provide insight on a typical financial breakdown of such a partnership within a facility contract. 

There are three main issues that are considered and agreed upon by parties within the four corners of a basic facility contract; financial/economic, technical/operational, and liability considerations.  Although no two facility contracts are the same, the financial and economic considerations of such contracts have the highest degree of variability.  In the cases of tournaments such as the Olympics, creating a financial partnership between the committee and the facility operator is one common method that can be utilized. A breakdown of this portion of the facility contract would detail the distribution of net revenue as well as the division of the responsibility surrounding the expenses.

From a financial standpoint, the contract would detail the a set percentage of net revenue from the tournaments that is decided on by all parties to be paid forward to the facility operator within an agreed upon time frame (e.g. 90 days) after the completion of the tournament. In facility contract cases such as the Olympics, the facility operators of stadiums and arenas that are built for the Olympic Games are operated by the host city of the games. This net revenue is derived from the gross revenue less the expenses that are accrued. The gross revenue generally consists of the tournament ticket sales, tournament sponsorships, net merchandise, and program revenue. Each of these categories that form the entirety of the gross revenue is reviewed and the details are agreed on by all parties involved in the financial partnership within the facility contract. For example, all parties (In this case: facility operator and the committee) would analyze and reach an agreement on ticket prices, which include the different seating prices for individual matches as well as set prices for tournament package ticket sales.

The second financial aspect of a facility contract is the delegation of expenses. Given a tournament such as the Olympics, the facility operator and committee would have to agree on who is financially responsible to cover which costs. In most cases, the facility operator is responsible for the expenses and appointments that are related to the operation of the tournament. Such items might include but are not limited to, court set-up and breakdown, security, police, post-event cleaning, emergency medical technicians (EMTs), announcers, sales staff, meals, ticket printing, sound technicians, and hospitality areas. On the other hand, the committee is responsible for the tournament expenses such as hiring and paying game officials, scorekeepers, and statisticians. In the case of the Olympics, where the duration of the tournament is over a longer period of time and involves teams and athletes that participate from all around the world, the expenses go beyond just competition venue and tournament expenses. For example, other expenditure considerations for the Olympics include training venues for the athletes to prepare for their events and non-competition venues. Due to the nature of the Olympics (time frame and magnitude of competing teams and athletes), some examples of non-competition venue expenses consist of Olympic villages, other villages, International Broadcast Centre (IBC), Main Press Centre (MPC), and transportation such as airports, parking, and railways.

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