Arena Ad Budget Way Up


    GRAND RAPIDS — When Van Andel Arena enters its 11th fiscal year this summer, plans will be underway to celebrate the building’s 10th anniversary this fall.

    SMG General Manager Rich MacKeigan, whose firm has managed the building since it opened in October 1996, said 10 events will be held over six weeks starting in the middle of September to mark the arena’s 10 profitable years.

    One of those events is likely to be an open house, similar to the one held at DeVos Place in January 2004. Another will likely be a “low-cost event.” And another is likely to involve the building’s first and longest-running tenant: the Grand Rapids Griffins. MacKeigan said last week that more details on the events would be coming in a few weeks.

    But promoting the arena’s 10th year won’t come cheaply, as the building’s 2007 budget forecast features a spending boost for advertising of nearly $80,000 — an expenditure that is expected to reach $120,000 next year, or triple the $40,000 that was budgeted this fiscal year.

    “It will be money well spent,” said MacKeigan.

    And enough additional revenue has been projected in the coming fiscal year to cover that added expense.

    Although SMG has forecast that the arena will hold four fewer events next year than this year, income from those events is expected to be $217,661 higher than this year’s take. SMG expects that the arena will record $1.26 million in direct event receipts in FY07, up from the $1.06 million expected when this year ends on June 30. That’s because the projection for the fiscal year shows attendance at arena events rising by 57,261 over this year, to 680,500.

    More customers mean more ancillary income, too. SMG has projected that revenue to rise by $58,183, to $1.45 million. An increase in concession sales, which will be managed by SMG starting this year, accounts for $47,224 of the ancillary income hike.

    Revenue from concessions, catering, novelties, the video board and ticket sales should total $2.74 million in the coming year, or $275,844 more than the total event revenue budgeted for this year.

    MacKeigan told the CAA that the number of concerts for the upcoming year will be the same as this year — 22, but said the mix of artists set to tour contained more of the type that should make ancillary sales rise. Not all the acts that played the arena this year did that.

    “It looks like it’s going back to a normal trend for next year,” said MacKeigan.

    SMG Director of Finance Chris Machuta said the projected number of concerts only accounts for 18 percent of all the events that should play the arena next year, but those concerts should bring in more than half of the total event income.

    “That’s the nature of the business,” said Machuta. “The concert business is what we hang our hat on.”

    Other operating revenue, from items such as luxury seating, permanent advertising and interest income, is expected to rise by $28,450 during the coming year.

    In all, SMG projects the arena at $4.98 million in adjusted gross income for FY07 — up by $300,000 from FY06.

    On the other side of the ledger, indirect expenses will rise next year by $81,132 to $2.17 million. The hike in the ad budget accounts for almost all of that increase.

    The cost for labor should rise by $36,506 to $1.36 million, an expense increase that is partially due to the higher minimum wage that goes into effect across the state on Oct. 1.

    “The arena is going to take more of the brunt of that than the convention center,” said Machuta.

    Total expenses for the arena should reach $3.54 million for the coming year, well below the projected revenue of $4.98 million.

    Those figures leave the Convention and Arena Authority with a projected surplus of $1.44 million for FY07, a margin $223,162 better than what has been budgeted this year.

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