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Demand for Luxury Boxes

2007 February 17
by Skip Sauer

Teams in Chicago, Milwaukee, Minnesota and Seattle are tearing out luxury boxes. Some are being replaced with midscale, less private “party areas,” which go for $125 a ticket. Russell Adams argues in the WSJ (free content) that demand has declined:

Bank of America’s decision to cut back on suites got started last summer. The company examined employees’ use of the suites to find out how many of the free tickets were actually going to customers. It found that in certain markets, which the bank declines to identify, the suites weren’t attracting enough clients to justify a full-season lease. In response, the bank decided to sublease a handful of its 83 suites, and says it is considering doing the same with as many as 15 more of its suites.

Bank of America employees now have to fill out a form detailing the names and affiliations of the clients they are bringing and why those guests deserve a spot in the suite. The tickets, which are kept in a central location, are assigned a client identification number and are sent only after the company grants approval.

For other companies that are cutting back on suites, different factors are in play. One is a 2004 tax provision that requires executives to pay taxes on business expenses (like entertaining clients in a skybox) that aren’t a formal part of their compensation. More broadly in the post-Enron, Sarbanes-Oxley landscape, executives are skittish about accepting both in-house freebies and outside gifts that could be construed as a conflict of interest. In Washington, Congress has already been tightening its rules on gifts such as access to skyboxes.

…In the late ’90s, almost all of the more than 120 luxury suites at the Cleveland Indians’ Jacobs Field were sold. The team says it has fewer than 90 suites leased for this season. The Seattle Supersonics used to lease more than enough of the 48 suites at KeyArena to cover the team and city’s debt on the facility. Now only half of the suites are full and the team is deep in the hole and asking for $300 million in public funds to build a new arena.

The story is full of interesting facts. Some teams, such as the Braves and the Red Sox, are sprucing up their suites to maintain interest in the concept.

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