New Orleans Arena adds more amenities for fans willing to pay for luxury
“These improvements do many things. First and foremost, it improves the game day experience for our fans. But secondly, it also gives us the financial stability where we won’t have to rely on the state like this franchise has done in the past.” Dennis Lauscha, president of the Pelicans and the Saints
When the New Orleans Pelicans take to the court Wednesday for this year’s first regular-season game at the New Orleans Arena, it will be more than just the debut of a rebranded team in a renovated facility. It also will be, or so arena and Pelicans officials hope, the start of an era in which both of the city’s professional teams no longer need to rely on annual cash payments from the state to keep them afloat.
In the offseason, the 14-year-old New Orleans Arena underwent a $35 million renovation, the first of a two-phase, $50 million improvement aimed at relieving the state of having to pay annual subsidies to the team.
“All of this was designed to generate more income for the team,” said Doug Thornton, a senior vice president of SMG, the company that manages the New Orleans Arena and Mercedes-Benz Superdome. “Hopefully, it’ll be significant dollars, because certainly all of those improvements were done with an eye toward creating revenue.”
Many of the changes were made to the arena’s club and suite level, which now feature expansive common areas and more diverse dining options. A patio area outside the Capital One club on floor level now has a fire pit.
What had been an infrequently used meeting room is now the Chairman’s Club. For those fans willing to pay a premium for tickets to games, entrance to the club includes a view of the hallway outside the team locker room, with an unobstructed view of players as they come and go.
A new bar has been installed on the 300 level overlooking the arena. The “party perch” could also feature live entertainment during games, said Dennis Lauscha, president of the Pelicans and the Saints.
Thornton said the arena’s architects were going for an “urban loft look,” with exposed concrete, sleek finishes and clean lines that would be attractive to a young, hip crowd.
“Obviously, you have to evolve and try to stay modern, and that’s what we’re doing here with these upgraded features,” Thornton said.
The renovation also includes changes in the team’s facilities. There are new showers and sinks in the locker room, a larger weight room, a players’ lounge, and new coaches’ offices.
In the second phase, the arena’s lobby will be extended to the curb and the entrance reoriented to face Champions Square. The Pelicans team store will also be expanded. Athletic gear manufacturer Adidas has signed on to operate the 3,000-square-foot shop, which will be renamed the Pelicans Shop by adidas .
The total renovation will cost just more than $50 million, Thornton said. The Legislature authorized a capital bond issue to fund the renovation.
The makeover is the building’s most extensive since it was constructed in 1999 at a cost of $114 million.
“These improvements do many things. First and foremost, it improves the game day experience for our fans,” Lauscha said. “But secondly, it also gives us the financial stability where we won’t have to rely on the state like this franchise has done in the past.”
The renovation is part of a deal that will free the state from making payments to the team each year, similar to the agreement the state reached with the Saints in a 2009. In that deal, the state agreed to foot the bill for renovations on the Superdome to create new revenue streams and maximize old ones. In the renovation, more than 3,000 seats, a retail store, upgraded concession offerings and other amenities were added to the stadium. The Saints also were allowed to negotiate a sale of the building’s naming rights.
Car-maker Mercedes-Benz bought the naming rights in 2011, in a deal worth up to $60 million over 10 years.
What the Pelicans have done is “very reflective of what we did with the Saints in that we’re trying to move away from inducement payments and guaranteed payments,” Lauscha said. “We wanted to have the ability to generate revenues by ourselves.”
Lauscha said the Pelicans hope to cover the $7 million to $10 million annual payment the state formerly made to the team. They also hope to entice a company to buy naming rights to the arena.
“I think it’s going to be the thing that’s going to get us over the top,” Lauscha said. “I’m fairly confident these improvements are going to sell the naming rights.”
But consistently attracting patrons willing to pay for the new amenities is easier said than done, said Andrew Zimbalist, an economics professor at Smith College, who studies the business of arenas and stadiums.
“In order to create revenue you have to get people into the seats, and the way to do that is to have a good team or superstar players,” he said. “To a small degree, there will be those who go because they want to see the new suites and upgrades. But that’s very short-lived.”
Zimbalist said selling tickets to concerts and other special events at the arena can’t make up for poor sales of game tickets.
“You might be able to charge a little bit more for going to a concert or a rodeo or circus,” Zimbalist said. “But that’s going to be really small potatoes related to the magnitude of the investment.”
The New Orleans Arena ranked 100th in ticket sales among arenas worldwide in 2012, according to Pollstar, which tracks the concert industry.
“New Orleans, in terms of its demographic, is not a particularly large city, not a particularly wealthy city, and doesn’t have a lot of company headquarters. So all of those facts make it difficult to generate more off of premium seating,” Zimbalist said. “If you were doing this in New York City or Chicago, it would be a lot more attractive than if you were doing it in a small city like New Orleans.”
But Lauscha said the improvements are things that fans asked for, so he believes they will respond by paying for them.
“The food that we’re serving and the premium drinks that we’re serving all increase the (per capita spending),” Lauscha said. “People will spend if the lines aren’t very long, if we can get them processed through quickly, if the product is good, if the beer is cold, all those types of things. If we can do that, we’ll be successful.”