Arena expects major profits

Basketballs will bounce, the Dave Matthews Band will jam and sweaty, shirtless wrestlers will do battle.
Together, these dribbles, notes and tussles will pump millions of dollars into the Charlottesville area.

The University of Virginia’s John Paul Jones Arena doesn’t open until July, but already sports and entertainment organizers for the mammoth 15,000-seat arena are promoting a full schedule and forecasting an enormous economic benefit.

The arena “is a jewel,“ said Timothy Hulbert, president of the Charlottesville Regional Chamber of Commerce. “It will be the best house in Virginia. It’s a defining facility for Charlottesville as a destination. People will come to Charlottesville for events.“

Organizers expect about 500,000 people to flock to the arena - the largest of its kind in the state - for entertainment and sports during the first year. Organizers hope entertainment ticket sales will gross about $4 million in the first year, said Richard Kovatch, associate vice president for business operations at UVa.

About 70 of the 100 or more events scheduled for the arena between July 2006 and July 2007 are non-athletic, said Larry W. Wilson Jr., general manager for SMG, the management company for the entertainment events at the arena.

SMG recently revealed the

preliminary schedule for the arena, including “Monday Night Raw” wrest-ling, Elmo, equine ballet, Disney On Ice, the circus and the Harlem Globetrotters. The Dave Matthews Band is the arena’s flagship show, Sept. 22 and 23.

According to the contract between SMG and the university, UVa reimburses the company up to $658,900 for pre-opening expenses and covers consulting fees. SMG contributes $500,000 to an event marketing fund, which will be replenished with excess event proceeds. UVa pays the company a fixed management fee of $120,000. SMG could earn up to an additional $120,000 if it brings in $3.6 million - the revenue target for the first fiscal year - and meets qualitative requirements.

The remainder of the entertainment revenue will go into UVa’s arena operating budget.

Although the arena can accommodate up to 16,000 people for entertainment events, a curtain system will allow SMG to pare down the arena for more intimate events, a feature that makes the place an attractive option for event promoters, Wilson said.

The construction of the arena began in spring 2003 and since has eclipsed the much smaller University Hall across the street. At a capacity of about 8,400, U-Hall is one of the smallest such facilities in the Atlantic Coast Conference. The first basketball game in U-Hall was played in 1965. The facility opened at the relatively paltry cost of $4 million compared with the hefty price tag of $129.8 million for the John Paul Jones Arena. One of the biggest financial contributors to arena construction costs was Paul Tudor Jones III, who by 2003 had pledged $35 million to the arena project in honor of his father, John Paul Jones.

No plans have been solidified regarding U-Hall’s fate, said Jon Oliver, executive associate athletics director at UVa. After the new arena is completed, U-Hall will still house a number of operations and additional programming, he said.

The arena will be primarily the home court for the UVa men’s and women’s basketball teams. University officials expect the move to a facility with nearly twice as much seating will equal more revenue. The athletic department expects the men’s basketball ticket revenue to grow by about $900,000 to possibly $2.25 million during the 2006-07 season, Oliver said. Although the department doesn’t have a comparable prediction for the women’s team, Oliver thinks the team’s revenue will surpass the $100,000 it brought in during the 2005-06 season. Revenues from the teams’ ticket sales, concessions and merchandise will go into the athletic operational budget.

Extensive concessions, a team store replacing a “sophisticated” table setup in U-Hall, improved basketball scheduling and moving from the typically sold-out U-Hall will bolster revenue, Oliver said.

“This building will give people quite an opportunity to expose themselves to basketball,“ Oliver said of the arena. “It will grow excitement for the area and interest in the program, create a hospitable environment for the program and help us recruit and train the best student-athletes. This building is a big part of keeping that going.“

Area merchants also will reap the benefits of the arena, whether visitors come for entertainment or basketball.

Tickets excluded, fans who flocked to Scott Stadium to see the Rolling Stones in October spent $3 million, according to the local chamber. Every hotel was sold out and restaurants were full. And, 40 percent of the ticket buyers came from Henrico County, which speaks to the popularity of Charlottesville as a desired entertainment venue and foreshadows the success of the arena, Wilson said.

Hulbert gave what he called a conservative estimate of the minimum economic impact on area restaurants, gasoline stations, grocery stores and hotels. If each of the 70 events attracts on average about 4,500 people, and if each person spends $50 in Charlottesville, the economic benefit from a year of the arena’s offerings would surpass $15 million, Hulbert calculated. Hypothetically, he said, the number would be closer to $20 million because of the expenditures of the cast and supporting staff who travel with the bigger events. Some of the larger shows, such as Disney On Ice and the circus, have between 100 and 150 cast members and supporting staff, Wilson said. They stay in hotels, eat in the area and visit Monticello and other attractions.

One expert cautioned against predicting the arena’s economic benefit because there’s no clear assessment of how many people from outside the Charlottesville area will attend shows or games.

“We will not be able to quantify the local impact of [the arena] until it has been in operation a couple of years,“ John Knapp, a senior economist at the Weldon Cooper Center for Public Service at UVa, wrote in an e-mail. “Then we will have better knowledge of how many spectators are drawn from outside the local area.“

Locals could redirect their entertainment spending to events at the arena, but that’s not necessarily new spending for the area, Knapp said. The basketball teams will continue to draw people from outside the Charlottesville area, but the primary new economic impact will be from non-Charlottesville residents at non-athletic events, he said. This will depend on the kinds of events and if the events are scheduled for nearby areas as well. Some of the concerts at the arena will be unique to the state, and people will drive from Roanoke, Washington and all points in between, Wilson said.

“People will be coming early, staying overnight, eating dinner and spending their dollars in our community,“ he said.

“[The arena] puts Charlottesville on the map for the entertainment industry. It’s a whole different ballgame as it relates to entertainment options for people in this area.“