01 / Introduction
Top-tier sports clubs and, to a greater extent, lower-league clubs are increasingly dependent on diversifying stadium-borne revenue streams. Lower-league clubs too often miss out on potential media and broadcast income, while top-tier clubs are constrained by financial fair play rules that require them to balance spending against revenue in order to break even. As a result, clubs of all sizes are being forced to rethink how they operate. This move towards a more business-focused approach will contribute to protecting sport.
Changing consumer demands, modern construction methods and the digitalisation of stadiums – which facilitates, among other things, operational efficiencies and cost savings in security, ticketing, marketing and fan engagement – have made it easier for clubs to consider more innovative and dynamic ways of driving additional stadium income streams.
The combination of technology and establishing dual-purpose spaces opens up new opportunities. For example, matchday media areas, if designed well, can serve as a vibrant media cafe on non-matchdays. This can create a heartbeat to a main stand offer, but also provides a new type of media and tech space that can accommodate conference-style theatre setups for seminars, lectures and strengthening local partnerships with universities and start-up tech companies. Enhanced income and profit can be reinvested into the team to further the club’s position and performance on the pitch; thus, a stadium’s operating position can support the aspirations and growth of ambitious clubs.
If planned carefully, stadiums can become commercial profit-making assets and not the cost burden they so often can be. While initial capital expenditure is a consideration at the forefront of any stadium development, the costs of designing the facility poorly and in the absence of a clear business plan or operational concept can be a far bigger burden in the long term. Without a commercial vision to inform design priorities, the missed income opportunity and greater operational costs over the development’s lifespan will outstrip the initial cost investment of developing a stadium in the first place.
02 / Maximising and diversifying revenue stream
Many lower-league club stadiums have become outdated and fail to meet their club’s commercial aspirations or operating needs, while offering a disappointing experience for fans. New stadiums are becoming the central element in a commercial business plan that achieves investment payback within 10 to 15 years.
To achieve an attractive payback, the process must be driven from a commercial and operational standpoint, delivering against the requirements of the football club, fans, owners and investors. Resolving the functional design concept and maximising commercial opportunities from the outset enables a club to combine a high-quality design aesthetic with the peace of mind that this is deliverable within budget.
This means defining a detailed design and construction brief and a considered set of employer’s requirements that are underpinned by a robust business plan enabling the stadium to generate healthy revenue. This is achieved through having a mix of revenue streams, such as a diverse hospitality offer, flexible usage, retail and museum experience, dynamic ticketing strategy, diverse tenant mix and flexible workspace. The approach should be to invest capital into the areas where the stadium can generate the most income and have the biggest impact on the community and on visitor experience.
Appointing an experienced club owner representative, who is responsible for ensuring the investment is well looked after, will not only enable the development of a commercially sustainable stadium but also be vital in giving investors, funders and banks the confidence that their investment is secure and the cost of borrowing affordable.
03 / Cost drivers
Stadiums are unique buildings that need to respond to specific client, league, club, tournament, and spectator expectations and requirements. Their capital cost is driven by various factors such as demand, pricing structures, on-field success and operations. However, the principal cost driver is size as dictated by number of seats and expectations. The cost of larger stadiums exponentially increases above a 40,000-seat capacity as the building becomes intrinsically more complex and challenging.
The sweet spot of capital cost versus revenue opportunities for smaller stadiums is often around a 20,000-spectator capacity.
Based upon our recent experience with 40,000 to 80,000 FIFA approved stadium we submit that good value is derived from spending money where it makes a measurable difference this being achieved by identification of functionality as it related to cost and management of costs as they relate to budget. It is therefore important to appreciate the key factors that influence a stadium’s cost, while also recognising that added cost control mechanisms and time to facilitate them, may greatly improve the operating and revenue positions
The key cost drivers are as follows:
Capacity is the major determinant of brief, size, phasing, MEP, facade and roof type.
Gross internal area (GIA – the horizontal floor area including area under seats and excluding pitch area) is intrinsically linked to operational functions, flexibility of use, comfort conditions, hospitality offer, site and local demographics. Design solutions should seek to provide cost-efficient accommodation for functional nonrevenue-generating areas, while also maintaining the regulatory requirements and best practice set out in the Sports Grounds Safety’s Authority’s Guide to Safety at Sports Grounds, also known as the Green Guide. It is always valuable to benchmark functional areas on an area-per-seat basis.
Location will vary stadium cost significantly, as build prices differ globally. Project briefs also vary by region: for example, there may be a need to cool stadiums in hot climates, while concourse sizing and comfort conditions may vary across different geographies.
Massing and language with the surrounding site need careful consideration. Options such as basement, sunken pitch, podium strategy, and accommodation juxtaposition will influence not only user standards but also cost and GIA.
Hospitality offering is a vital revenue stream for all stadiums. Hospitality areas are more space-hungry and expensive to fit out than standard concourse areas. They also have the potential to offer non-match day revenue (through, among other things, conferencing, banqueting and corporate functions) – and providing the space flexibility to make this work may incur cost premiums.
Fit-out quality – as more area is given over to high income-generating space, the fit-out cost element increases.
Games mode and league requirements – the requirements of league standards differ in both national and global leagues. This not only influences spectator considerations, but also affects broadcasting and media requirements.
Flexibility of operations will impact overall building size and concourse arrangement. For example, a 20,000-seat football stadium may have the flexibility to hold 25,000 spectators in concert mode, with the consequence that concourses, toilets and concessions must be sized for the increased capacity or considered as temporary overlay operation costs. Similarly, seating arrangements may need to offer flexibility for other nonmatch day events, which can be done by replacing traditional permanent seating tiers with retractable options. It should also be noted that the greater the flexibility the greater the cost.
Other revenue streams such as hotels, gyms, 24/7 hospitality and retail all add to GIA and thus to building cost.
Tournaments and legacy – stadiums built for tournaments will need to account for event-specific overlay and any conversion costs to a legacy mode.
Construction methods – for example, steel versus concrete, piling versus raft foundations – will affect the costs, with each choice having its own advantages and disadvantages in terms of buildability, timing and cost. The fundamental design options should be tested early in the design development through cost/value benefit studies.
Facade and Roof solution is often one of the largest cost components and is driven by the Employers expectations. The various solutions available include cable stay, long-span truss, goal-post truss, back-stayed cantilever, tension ring and arch. Coverage is a key cost dynamic. New stadiums typically provide drip-line coverage with a central aperture above the field of play. Movable roof components over the field allow increased flexibility and control of internal and acoustic conditions. They are, however, very costly and, despite increasing the revenue position, prove challenging to support against the capital commitment (particularly in smaller stadiums). The opportunity for a design statement that the roof offers also requires careful consideration.
Envelope will depend on the client’s aspirations, tradition, local context, planning requirements and budget constraints. To save on cost, design may consider the use of open concourses in areas that do not necessarily need to provide an enclosed environment.
Bowl form can range from independent straight stands to oval bowl geometry, single-stand to multi-stand, symmetrical stadiums to asymmetrical stadiums; terrace tread depths and seat widths also vary, and this all influences the cost. A continuous stadium seating bowl has more complexity than a rectilinear solution and so is more expensive, but conversely is often considered to provide a better spectator atmosphere and environment.
Field of play will be influenced by various factors, such as sporting regulatory requirements, events calendar, broadcasting and league requirements. Options of natural grass, artificial or hybrid, undersoil heating and so on all address these requirements differently and can vary greatly in cost.
Audiovisual and technical aspirations are an increasing consideration. Costs associated are dependent not only on location, capacity and league or tournament requirements, but must also consider other stadium uses, for example holding concerts or other sporting events. Sponsorship arrangements can often be harnessed to help support the investment in audiovisual equipment.
Other project costs such as loose furniture, fittings and equipment, catering facilities, brewery costs, professional fees, finance costs, infrastructure and planning costs must also be taken into account. Typically, these will fall outside the main building contract, but must be considered within the overall development budget and business plan.
It is essential that clients know where various costs sit. Specific costs can move between construction and development budgets, depending on the client’s own preference and attitude to risk – for instance, the supply of catering and loose furniture and equipment. Sponsorship revenue can also be beneficial to the client, which should be encouraged to explore such opportunities and the potential for sponsors to issue equipment such as TVs and bar equipment.
04 / Procurement
Depending upon location, the pool of available contractors and consultants with the experience and desire to embark on stadium developments may be limited. This, together with budget and well-documented unsuccessful stadium contracting ventures, has, in our experience, driven stadium procurement typically towards a two-stage design and build procurement approach that facilitates all Client expectations and the budget into a tendered offer to a third party design. This often includes the novation of the client’s specialist stadium consultant team, either prior to or at the conclusion of a pre-construction services agreement. The timing of novation needs careful consideration as the award by the Client would be for a lump sum fixed price contract with the final design being completely fulfilling the Clients expectations.
The above two-stage procurement allows the client to pass the delivery risk on to contractors through a design and build approach. While the market is typically resistant to take on the full risk of single-stage traditional tendering process, budgets for projects based on a single-stage procurement may be manipulated by an adjustment of the Clients expectation via Value Engineering or de-scoping. It may therefore be said that if harnessing either a two-stage or single traditional approach the procurement should be set up to allow the contractor and client the opportunity to fully engage with the design team in working up the design and cost of the development. This allows it to understand the risks before committing to a fixed price and ownership of the design and project delivery. Based upon our experience, we favour a two-stage design and build approach.
Such an approach gives the contractor more confidence when considering whether to engage in the delivery of schemes of this challenging building type. Typically, the client will own the design until RIBA stage III to IV, prior to passing the ownership on to the contractor for delivery.