City Sports Authority Votes To Take Over Operations At Arena
Written by Paola Iuspa on December 20, 2001
By Paola Iuspa
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Arguing that manager SMG was not doing enough to bring events to the city’s arena, the Miami Sports & Exhibition Authority fired the firm and plans to run the venue itself.
"The change should have happened years ago," said Maritza Gutierrez, an authority board member.
James Jenkins, authority executive director and CEO, said the authority’s decision not to renew SMG’s contract could decrease operating costs by 56% at the old Miami Arena.
That, he said, would mean the arena’s deficit this year, ending Sept. 30, would be $533,766 instead of the projected $948,630.
Revenues are planned to grow 13% to $1.8 million, he said.
Mr. Jenkins joined the authority last year after 18 years of experience in entertainment marketing and branding with Walt Disney World. He said SMG would continue operating the arena until Dec. 31 and stay on board for a two-month transition.
The authority is a City of Miami agency in charge of promoting sports, cultural and community events in the city. The Miami Arena is the only property it owns as well as the first it would operate.
The authority is approved to operate a proposed Greater Miami Visitor Center on Watson Island. It is also negotiating with the city to do the marketing of the manmade island, with many projects planned, as an entertainment destination.
Roger Newton, SMG regional vice president, said his company, based in Philadelphia, would help make the change painless.
"We are going to be very cooperative in the transition process," he said.
After having studied for at least three months the possibility of having its own operators, the authority’s board voted in favor of getting rid off the management firm for one reason.
"They are doing nothing to promote the venue," Ms. Gutierrez said. "They don’t go out to knock on doors and bring new events. They sit and wait for calls. We are paying $150,000 to someone that doesn’t stimulate business at this beautiful arena."
Board member Eli Feinberg cast the only dissenting vote.
"If we move away from a professional management group, we may incur more losses," he said. "To take it in-house when there are no events out there is not a good idea."
SMG’s journey at the arena lasted a year. The group, which runs 125 venues worldwide, including the Miami Beach Convention Center, the Jackie Gleason Theater on Miami Beach and the National Car Rental Center in Sunrise, bought the management rights from Decome Miami Associates in 2000, Mr. Newton said. Prior to that, Decome had run the 12-year-old arena since it opened.
Savings are projected to result from cuts in salaries, repair and maintenance costs, insurance and utilities.
"For once we are going to save the $150,000 we pay in management fees," Mr. Jenkins said Tuesday at a board meeting. "We will also save more than $200,000 in SMG’s department head’s salaries."
He said he estimates the change would save at least $162,539 in compensation.
He said new revenue sources would include branding the arena, estimated to bring in $200,000; naming rights for $200,000, and advertising sales worth $100,000.
Adding food & beverage concessions while increasing fees by 50 cents would generate about $120,000 in new revenues, according to the business plan Mr. Jenkins presented to the board. He plans to spend $34,998 more than SMG to promote the arena.
In an effort to avoid liabilities, the authority might need to create a corporation to run the arena, said Olga Ramirez-Seijas, an assistant city attorney.
Mr. Jenkins said the authority would hire a general manager, a promotions and media director, a production director and a director of marketing. Those positions do not now exist.
He said he tried to work out a deal with SMG in which the group would absorb part of the losses as well as get part of revenue excess, but it was rejected.
"They said they are in the business to manage arenas," Mr. Jenkins said, "not to lose money."