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A place in the sun | UFC’s Vegas tenancy

  • Deal allows UFC to promote its fights further in advance
  • Regular events more likely to attract public finance support
  • Constant throughput of visitors to Las Vegas will expose MMA to new audiences

The Ultimate Fighting Championship’s (UFC) tenancy deal with the T-Mobile Arena in Las Vegas could be a haymaker for both parties, analysts believe. However, rights-holders and stadium owners looking to benefit from similar arrangements will need to be swift on their feet.

At least four UFC events will be held at the 20,000-seat Nevada venue each year under the contract, which will also provide the sports brand with signage and retail space at the arena, as well as guaranteeing that the sport is not showcased at any other arenas in the desert city.

Both UFC and the arena’s joint owners, AEG and MGM Resorts, have hailed the potential of the deal, and sport business experts believe it could be replicated elsewhere. But they also urge caution of potential pitfalls and set out the important criteria of making a tie-up work.

Tenancy deals – where a rights-holder promises to put on a certain number of shows in one city – “should in theory benefit everyone,” according to Richard Peters, co-chief executive of consultancy Stadia Solutions.

“The tenant gets the facilities they need and the long-term assurance of a – presumably fixed-price – venue hire; and the venue has secured future incomes,” he says.

Commitment

The Populous-designed T-Mobile Arena opened last year after a $375m (€353m) construction project. Events scheduled for this summer include Iron Maiden, Tears for Fears and Depeche Mode.

The Vegas Golden Knights NHL ice hockey team will start playing at the venue later this year, and the Professional Bull Riders World Finals will be hosted in November. The addition of the UFC events though marks a significant addition to the calendar.

Peters says that a long-term commitment from “one of the biggest growth sports in the world” is a major boost to the stadium owners. “That’s a minimum of four sell-outs per annum, and likely to be more,” he adds, before outlining how UFC is also benefiting from the arrangement.

“It gives it what will be seen as a ‘permanent’ home in its home town. UFC will be exposed to the millions of visitors annually to the T-Mobile Arena.”

Therefore, the deal is attractive to everyone, but the hard work will be maintaining its allure.

“For the arena, it has a new long-term client to keep happy,” says Peters, who sets out the key duties of the stadium management team. “Ensure they deliver against the contract; be proactive in ensuring that UFC gets full benefits from its branding and exposure at the arena; and make sure they pull out all the stops for UFC events,” he says.

The challenge for UFC – and any other sports brand signing such a tenancy deal – is to use the venue as an asset beyond its four walls.

“For UFC, it needs to somehow let its fans know about its new home, even if they never visit it. Think about Wembley being the home of football; that should be the goal,” says Peters, who suggests activities such as promotional films, interviews, social media and the filming of events at the arena.

Expectations

Peters warns that arenas have evolved a great deal in the last five to 10 years. Expectations are ever-changing.

He asks: “What reassurances does UFC have that the T-Mobile Arena will be cutting edge in seven years’ time or more? The parties need to work out what is a reasonable investment in the venue and how much sway UFC has on a venue it doesn’t use for 360 days of the year.”

He also asks what would happen if UFC plummeted in popularity and struggled to fill the venue during the contract.

Gavin Peters, director of partnerships at sports marketing company Pitch, says that clauses are likely to be built into most tenancy contracts, allowing them to be dissolved if they are not working.

He adds that a key benefit of long-term deals such as these is to free up management time to focus on innovation and growth. “If you know where your event will be held, you can promote it earlier and think about mobile apps and digital experiences,” he says.

Tenancy relationships make sense for both partners, as long as they are well thought out. “If you have football in a stadium, for example, it might only be 25 days a year, but there may be restrictions on what can happen on the pitch in the days leading up to match day,” he adds.

Quick-turnaround events such as UFC bouts can make more sense as tenants, he explains.

Another consideration is sponsorship – will signage have to be removed to avoid clashes with another guest event’s partners? Has this all been factored in before an agreement is made?

Stuart Cain, managing director of commercial marketing at the NEC Group, says that tenancy deals have to be carefully set up.

“We’ve had the British Athletics Indoor Grand Prix the same fortnight every year for about 10 years,” he says. “We built an athletics track and committed to the event. We’ve done a similar thing with the All England Badminton Championships.

“The good thing for us is we have security in the calendar, but then again if Oasis wants to book the arena that week we can’t do it.”

Economies of scale

Long-term tie-ups between a sport and a venue can boost marketing effectiveness as well as benefiting from economies of scale; operational efficiencies; and third-party support.

“When we bid for the IAAF World Indoor Championships in 2018, we went in with Birmingham Council and British Athletics,” Cain says. “A tourist board or some hotel groups, for example, may help fund a series of events if it will benefit the area.

“The arena is happy because it has three or four nights guaranteed as a sell-out; the rights-holder is happy because it gets a cheaper deal and gets to know the venue and save time on risk assessments, setting up branding and so on. The hotels are getting customers.”

Picking the right time in a sport’s development can be as important to a tenancy deal’s success as selecting the right point in the calendar to showcase it.

“Rights-holders often want to travel around with a new concept to get more people exposed to it, and to build up more data on those people buying tickets,” Cain says. “If you commit to one arena then you may get the same 15,000 people coming back to each event.”

Risk

Then you have to choose the best location. You don’t want to limit your audience unnecessarily. “The biggest risk is the tickets not selling out,” warns Cain. “Could the concept become stale?”

This makes Las Vegas, with its constant influx of visitors, a great choice by UFC. “It’s a party town,” Cain says. “People are happy to travel there for a long weekend.” Negotiating the right terms is also critical for would-be long-term tenants and stadium leasers. “As a stadium owner, you can take on some of the risk and say, for example, the fee is lower but we’ll take £5 per ticket,” Cain adds. “The reward is potentially higher but so is the risk.”

All these elements need to come together to make a long-term tenancy deal work. However, most importantly, the two parties also have to come together. “One has an audience that loves the venue, the other has an audience that loves the sport – bring them together,” he says. “You can build a more strategic relationship if you’re working together for a longer time.”

One final piece of advice is that, while developing the newly cemented relationship is critical, neither party should lose sight of other commitments. “Work together to maximise the benefits but don’t lose sight of everything else,” Cain says. “If you own a stadium, don’t give away all the prime slots in your calendar.”

EXTRA: An Industry First

The partners behind UFC and the T-Mobile Arena describe their tenancy deal as “an industry first.”

They say in a statement: “The partnership, which also establishes T-Mobile Arena as UFC’s exclusive Las Vegas arena destination, marks the first time that a global sports brand, other than a professional sports franchise, has been named as an anchor tenant for a sports and entertainment venue.”

UFC president Dana White says that the deal makes Sin City the “official” home of the championships. The agreement calls for UFC to host a minimum of four events annually. It will receive priority scheduling for designated major events windows. Alongside fellow anchor tenants, local ice hockey franchise the Vegas Golden Knights, UFC will co-headlining the welcome sign in the stadium lobby, and enjoy concourse activations, signage and retail space.

The T-Mobile Arena, which opened last April, is owned by Las Vegas Arena Company, LLC, which is itself majority owned by AEG and MGM Resorts International. AEG chief revenue officer Todd Goldstein says the stadium owners are dedicated to creating a “showplace for the very best in concerts, championship sporting events, awards shows and special events.”

He adds: “T-Mobile Arena is truly a one-of-a-kind, world-class arena that will create the most outstanding stage and atmosphere worthy of the incredible events of all kinds UFC and [UFC owners] WME|IMG will bring to our venue and, most importantly, our fans.”

Bill Hornbuckle, president of MGM Resorts International, adds: “While UFC calls Las Vegas home, there are few brands as powerful globally. We look forward to welcoming visitors from around the world for years to come for the kind of spectacular events and entertainment that can only be found in this city.”

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