COMP NEWS – In the 12-month period ending in November, consumer prices rose 6.8%. What does this mean for inflation in sports? Maybe not much. Growth in the sports entertainment industry is seeing an increase and prices for fans are expected to remain at their pre-pandemic growth rates. Much of this can be attributed to low-interest rates that promote investment for current or prospective team owners.
Steve Vogel, managing director of the sports finance group at U.S. Bank, said in a phone call, “You have some inflation affecting certain areas. However, there hasn’t been a shortage of capital to support projects, and a lot of that has to do with the underlying strength of sports more broadly.”
While screaming chyrons tout the specter of the highest inflation rates in four decades, the impact isn’t being seen. “Could it impact capital expenditures? I will say right now my experience to that is no,” KPMG national sports industry leader Shawn Quill said in a phone call. “I have had a dozen conversations over the past two weeks on new practice facilities, stadiums, ballparks—there are a ton of owners looking at that.
Ultimately, sports teams realize that rises in inflation amount to less disposable income for potential ticket buyers. With this, many suspect that teams will not increase year over year ticket prices any more than they were doing before this recent surge in inflation.
In recent years, teams have been raising season-ticket prices on average between 5% and 7%, according to Steve Hank, chief commercial officer of SSB, which helps sports organizations maximize customer revenue. “For the last five years, annual inflation in the U.S. has averaged 1.9%. Therefore, ticket prices have been outpacing inflation on average from 3% to 5% annually. Given COVID, I do not see that outpacing continuing at the same level,” Hank, previously the longtime chief revenue officer for the University of Texas athletic department, wrote in an email. “Teams will look to capture as much of the inflationary increase as reasonable in their market, based upon their individual circumstance, but [will] absorb some of the hit to cushion the impact on their season-ticket holders for the short term.”
To learn more about how inflation is (and isn’t) affecting the American sports industry, click here.
For more Comp News, see our recent posts.
Comp News is brought to you by CompXL, the flexible compensation software provider that enables mid- to large-size organizations to implement competitive pay structures such as variable pay structures and multi-factor bonuses.
