Foreign companies see business opportunities at Workers' Stadium in Beijing, the football venue for the 2008 Olympic Games. [Provided to China Daily]

Stadiums built at huge expense need not sit idly by

Where some of us see nothing but white elephants, others see only milch cows obediently waiting to pump out bucket loads of cash. Such is the case as Western sports management companies cast their eye over dozens of stadiums that have been built in China over the past 10 years.

What these companies offer is a wealth of stadium management experience in their home countries, where sports marketing is well established.

"The Chinese market has great potential, because there are a lot of customers and the economic level is rising, with more money spent on tickets for entertainment and sport," says Henk Markerink, CEO of Amsterdam Arena, the biggest stadium in the Netherlands, in a telephone interview.

"Also there is enormous need because people like music and entertainment a lot, so in that way it is really a big, growing market. Many ideas and concepts successful here will be successful in China."

Last year the company entered China by signing an agreement with Sportswindow Development Co, which operates the Workers' Stadium, Tianjin Olympic Stadium, Dezhou Stadium and Shanghai Hongkou Stadium, to cooperate in events and training programs. Markerink says he will introduce classical music and football games from Europe to China within three years.

Amsterdam Arena is not the first overseas outfit to walk out onto the Chinese market arena. The world's top sports management companies are also exploring what is regarded as an under-tapped market, including the sports and entertainment company AEG and International Management Group (IMG), which specialize in global sports and media events.

For many Chinese stadiums the main concern is not so much white elephants as red ink, and the help the overseas companies offer could not come at a better time. Eric Gao, director of the International Association of Venue Managers (IAVM), China Region, says most stadiums are running at a loss, including many A-list stadiums built for world-level or national-level games such as the Olympics and the National Games.

"Most stadiums are losing money as a result of high utility fees and maintenance fees," says Barbara Zhang, general manager of IMG Consulting China.

"Even if they aren't, like the Workers' Stadium, their major revenue comes from the real estate property affiliated to them, rather than from the daily operation."

The National Stadium in Beijing, known as the Bird's Nest, is often cited to illustrate how expensive running a stadium can be. It cost about 3.5 billion yuan ($555 million, 421.8 million euros) to build, and running costs are more than 70 million yuan a year.

The General Administration of Sport of China says there are thousands of stadiums of all sizes in China, most of the bigger ones being located in provincial capitals and other developed cities.

Gao reckons that these assets are worth more than 10 billion yuan, and a lot of money is there to be made if proper ways are found to manage them.

Stadium management in China lags far behind that in the US and Europe, Zhang says. She cites the Staples Center in Los Angeles, saying it has three tenants, the NBA Lakers and Clippers, as well as the NHL Kings, each using the facility for 43 home games, guaranteeing that it is used on no less than 129 dates. And the Staples Center has sold other dates to various events and games.

"Most stadiums in China have a lot fewer events all year round," Zhang says.

IMG was among the first to detect the business opportunity in stadium management in China. It entered the country about 33 years ago and has completed more than 3,000 projects across the country.

Its most recent project was in Kunming, Yunnan province, where it did consulting work for a local stadium on land use, positioning, and daily operations.

Zhang says the company's revenue came from three sources: acting as agent for sports stars, managing games, and doing consulting work for stadium managers.

"The number of projects has increased over the past few years, but the competition is becoming fierce because foreign competitors are coming to take part in the gold rush," Zhang says.

Unlike stadiums in the United States or in Europe, where companies own venues, in China most stadiums are built and operated by local governments. IMG has found the most practical way to deal with this is to work closely with government officials.

"We have worked with China Football Association, China Basketball Association, General Administration of Sport of China, and local governments to do projects," Zhang says.

Although the market is not well established, she believes things are changing.

"Government officials are becoming more and more open-minded about our services, which is great news for professional sports companies."

Even governments in second- and third-tier cities are willing to call on their expertise to make the local stadium financially viable, using the venue to create a positive image of the city.

An IMG competitor, AEG, has gone a step further, taking over the operating rights of two big stadiums.

Even before the Beijing Olympics in 2008, AEG had signed an agreement with Bloomage International Investment Group Inc, owner of the basketball venue, now named the MasterCard Center, to work together on operations and organizing events.

The MasterCard Center officially opened a little over a year ago, and AEG put on 65 events there last year, 60 percent more than in the previous year.

"The income of the center mainly depends on sponsorships," says John Cappo, president and CEO of AEG China. "It makes up 70 percent of the company's revenue, including naming rights and founding partnerships."

The center was closed for redesign after the Olympics to transform it into a multi-purpose 18,000-seat venue that can stage various sports events, music concerts and corporate events.

NBA, a partner of AEG in China, is involved in the stadium, too. In addition to selling sponsorships and naming rights, the pair have tried to bring more NBA games to China.

For sports and events marketers in China there are as many challenges as there are opportunities, one being to deal with the problematic design of some of these stadiums.

Gao says most of the A-list stadiums were built for big games, making them single-purpose venues that are hard to transform for other events. That applies particularly to outdoor stadiums, and many of China's venues fall into that category, says Dennis Howard, of the University of Oregon, who specializes in sports marketing.

Cappo of AEG suggests that making a venue successful and sustainable begins with the design.

"It is a lot less expensive to make changes on blueprints than it is in cement. The venues need to be multi-purpose, which means they can transform from a basketball court to a concert venue to an ice-skating rink within hours. They also need to have a loading dock, a reinforced ceiling with the ability to rig tons of equipment and a scoreboard from and retractablChina e seating."

Another challenge for the overseas companies is to attract enough events for the venue, which is especially difficult for China, which does not have big, highly popular and regular sports events, such as is the case in Europe with football leagues.

Howard says events are the life blood of stadium managements. "The key to the economic viability of any sports facility is attracting and sustaining anchor tenants, teams that lease or occupy the facility on a regular, long-term basis, which guarantees the facility will be used on a regular basis.

"In the absence of anchor tenants it's very challenging, if not impossible, for a facility management company, like AEG, to successfully operate a large-scale facility."

The international sports marketing companies, who have strong connections with events providers and tournaments organizers, are, of course, awake to this problem. They are playing a match-making role by bringing more events to Chinese stadiums that are hungry for them.

Since coming to China, IMG has brought to the country events and teams such as triathlon, professional tennis and Manchester United and Real Madrid.

As well-established national events are rare, Zhang suggests foreign companies work with local stadiums to create events both suitable for the venues and which would be welcomed by the local population.

"The Chinese market is very different from those in Western countries. Each city has different preferences. For example, Dalian has a lot of soccer fans, which offers big potential for open-air stadiums, while Chengdu's weather creates an optimal environment for tennis. Stadium managers need to consider the local preference and do thorough market research before they squander money on building stadiums."

Otherwise, she says, all they may be left with is a white elephant.