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Closed-door sport gives fresh impetus to innovations in virtual hospitality

Photo by Extreme E

  • Agencies see uptick in conversations around virtual hospitality
  • Extreme E offering includes virtual reality headsets and home visits from personal chefs
  • But business networking elements difficult to replicate

There’s nothing like a crisis to force innovation. At various stages, the Covid-19 pandemic has sped up the launch of right-holders’ esports derivatives, encouraged sports bodies to use their media archives more creatively and stimulated new sponsorship activation ideas. Now widespread restrictions on mass gatherings are providing fresh impetus to efforts to rethink sports hospitality.

Faced with the likelihood that most events will take place behind closed doors until well into the autumn at least, some are asking whether virtual hospitality can help to shore up this important revenue stream.

Robin Fenwick, founder and chief executive of the Right Formula sponsorship agency, says he has seen a noticeable uptick in conversations between brands and rights-holders around the topic.

“I would say before the crisis we were probably having two or three conversation about virtual hospitality and now we are engaged in excess of 20,” he says.

“We’re working with Uefa, to understand the possibilities there. We’re working with Formula One, and F1 teams. We’re working in golf with the European Tour. We’re exploring it for our customers.”

Early mover

An early mover in this area is start-up electric off-road racing series Extreme E, which has announced virtual hospitality plans for its launch next January.

Its offering will include sending virtual reality headsets to guests; VIP access to a live streaming service; tours around team paddocks; driver interviews and track walks. For those willing to pay more, the new series will send a personal chef to their homes to prepare a ‘culinary experience’ based on the location of the week’s race. There are also plans to send out VIP hampers containing signed merchandise and other race-related products.

A press release from the new series referenced the public health emergency and how it ‘highlighted the need’ for ‘alternatives to how traditional sports are run’. But there are other reasons why Extreme E is pioneering this approach.

Described as ‘Blue Planet meets Dakar rally’, and organised by the people behind Formula E, Extreme E will make a virtue of highlighting the impact of climate change by racing in remote locations already ravaged by global warming. Given its green aspirations, it would be a bad look to encourage thousands of corporate clients to clock up carbon emissions flying out to races. Moreover, the race calendar includes stops in places like the Amazon and Greenland, locations which lack the basic infrastructure for corporate glad-handing.

Extreme E will race in remote locations to highlight the impact of climate change.

Because of the sustainability message, Extreme E chief marketing officer Ali Russell says competing teams will only be allowed seven staff members on site, meaning virtual hospitality will be a ‘core offering’ for sponsors. The series, which operates a centralised model similar to Formula E whereby it sells team franchises to individual manufacturers, will also make the suite of experiences available to teams and their sponsors.

Russell explains that the series is targeting corporate customers above all else.

“Clients can either come to your office, or go to a different location, and then you can have a virtual location where you feel like you’re in Greenland, or you feel like you’re in the Amazon. But actually, you’re in Germany, France, or the UK, and you have that sort of client entertainment opportunity in a socially distanced manner. It allows networks of people to be connected – like what we are all doing with Zoom at the moment.”

Additionally, he suggests sponsors could use virtual hospitality packages to engage and reward staff and this is another application that Extreme E will be targeting.

Will it take off?

Murray Barnett, Formula One’s former director of sponsorship and commercial partnerships, describes Extreme E’s virtual offering as an “elegant solution” that is faithful to the sport’s mission statement and serves to market the start-up as a “forward-thinking and ‘technologically-advanced” property. “You don’t look at it as being analogous to other sporting events,” he says. “Live hospitality was probably never going to be a significant revenue stream for them, if a revenue stream at all.”

Asked if virtual hospitality could provide a viable alternative for more traditional rights-holders which do depend more heavily on hospitality revenues, such as his former employer, he gives a qualified response.

“The main driver for hospitality, specifically in things like golf, cricket, and Formula One, is the sheer amount of time that you have with your clients,” he says. “Your ability to sit down with a client for the best part of 15 hours and get to know them really well is a very strong business-to-business tool, and I’m not sure you get that with this with these kind of virtual reality-type ideas.

Shell hospitality centre before the Brazilian Formula One Grand Prix in 2009. (Photo by Getty Images for Shell)

“Traditional hospitality buyers tend to be older, so if you got the strategy and the pricing right on this, there is a chance that this could make Formula One a little bit more appealing for a younger generation,” he says. “But there’s also the danger that you’d have to price in a way that the only people that can afford it are the people who don’t want it.

“I see this as quite a stunty thing that someone would do for one weekend, as opposed to somebody buying a year-long VR subscription to Formula One.”

Like Barnett, Fenwick doesn’t look at virtual hospitality as a direct replacement and can’t imagine it could ever fully compensate clients for the loss of real hospitality opportunities during the pandemic. But he does see it as useful asset to be kept in the commercial toolkit.

“I don’t see it as being a five-star experience; I see it as a four-star experience, but I believe it has a place,” he says.

Cost and convenience

He suggests his brand clients are suspicious of rights-holders who try to pass virtual experiences off as the real thing, yet could be more open to the technology’s possibilities as a low-cost and more convenient alternative to entertaining clients in far-flung destinations.

“There are CEOs of certain high-profile businesses, actually they work so hard the last thing they want to be doing is traveling by themselves to a sports event” he says. “But actually, they can afford to spend two hours, maybe Saturday or Sunday afternoon, immersing themselves in a football game or a golf event or a Formula One race as an example.”

Fenwick says a constant dilemma for brands is whether they invite key clients’ partners and families to hospitality experiences. The acceptance rate is much higher, but the costs also double. One advantage of virtual hospitality is that it allows sponsors to give their key customers an enjoyable experience they can share with their families.

Another potential benefit is helping brands overcome stringent restrictions governing corporate entertainment. Barnett say the UK Bribery Act has caused big corporations to shy away from taking a lot of hospitality at the British Grand Prix, to the point where races in less heavily regulated markets like Mexico and Abu Dhabi now make up a disproportionate share of F1’s hospitality revenues.

Fenwick notes: “I know for a fact one of our clients cannot accept a gift over $50, so it has to be fully declared otherwise they will lose their jobs. If I was to send them a VR headset or an iPad, they would still have to formally get that approved, but obviously it is less expensive than taking someone to the Monaco Grand Prix.”

He also envisages ‘hybrid’ hospitality models for those sports where premium experiences are limited.

“Using an example of the America’s Cup or SailGP, some extremely lucky individuals will have the chance to go on a boat,” he says. “That might not be available to everybody, but you could be put into a simulator with a virtual experience at the event. You could still experience all the lovely hospitality, the atmosphere and everything else, and maybe fuse the two.”

A hybrid hospitality model consisting of a virtual reality experience at a live event could be employed in those scenarios where premium experiences, such as a trip on a SailGP boat, are limited.

Quality

All agree that virtual hospitality programmes will stand or fall on the quality of the experience being delivered. And rights-holders will need to differentiate their offerings from the sort of behind-the-ropes access already delivered by broadcast partners.

To deliver an experience that meet the high standards expected by his clients, Fenwick reveals Right Formula has recently signed an exclusive agreement with an experiential hospitality provider with specific expertise in virtual reality.

“You’ve got to make the individual feel special because it’s still not going to be an inexpensive thing to do,” he says. “You’re probably going to have to send them a VR headset or an iPad or a box of goodies to their home so you could be talking hundreds if not thousands of pounds still, depending on the level you’d like to go to.”

Murray and Fenwick agree that some sports are better positioned to provide the sort of exclusive access that will be demanded by clients. Golf, for instance, could easily provide behind-the scenes VR footage of player lounges and practice ranges. Likewise, Barnett believes Extreme E’s centralised model and the less-celebrated standing of its drivers will allow it to deliver a more compelling virtual experience.

“Because of the way the sport is set up and the fact that the drivers are probably not so well-known, you will have amazing access. So, if they get the product right, you could have the ability to talk to any driver, talk to any team principal, to really see inside the garages.

“All of those things are a little more feasible in something like Extreme E than F1, where even Mercedes will tell you that the time that they have with Lewis Hamilton is so highly controlled.”

Brand integration

To make up for the lack of business networking opportunities, the thinking is brands will need to integrate themselves subtly into any at-home VR experience, without diluting the quality of the content.

Russell says Extreme E is already working on a VR content proposal for Continental to allow it to market a new range of more sustainable tyres made from a substrate of dandelions. But some hospitality activations will prove easier than others.

Fenwick explains: “To take one of my clients, SAP, as an example, describing how SAP is integrated into a particular sport is an easier conversation, than, let’s say, Hilton Hotels, another one of our clients.”

Whatever solutions brands and rights-holders come up with, he believes it will be a step forward for the sector.

“For a number of years, the industry has needed to evolve. I think it has got stuck in a relatively traditional white-glove experience in several high-profile sports. It would consist of an open bar, a three-course lunch, a Q&A and then the sporting event typically, and there’s not been a huge amount of innovation at all.

“It’s encouraging that we’re now starting to think differently and realise that there are other experiences that it is possible people can enjoy.”

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