Management admits its marketing failures

The facility's executive director admits sales goals were overestimated.
By DAVID SKOLNICK
CITY HALL REPORTER
YOUNGSTOWN -- Chevrolet Centre management has acknowledged that its failure to sell naming rights for various locations in the building as well as poor sales results hurt the facility's profit margin.
Responding to pointed questions from Councilman Rufus Hudson, D-2nd, at Wednesday's council meeting, Roger Swanson, the center's interim executive director, said those issues are a significant part of the facility's financial shortfalls.
The city-owned facility, managed by Global Entertainment Corp., had budgeted about $1.6 million for naming rights to be paid over a period of five years, Swanson said.
Fallen short
The only naming right sold to date is to General Motors to call the facility the Chevrolet Centre. That deal calls for GM to pay $175,000 annually in cash and provide $25,000 in vehicles for the facility. Over five years, that would be $1 million.
Global has failed to get anyone to pay for naming rights to its VIP lounge, patrons bar, community room and art gallery.
Also, Global has sold a little more than half of its 500 club seats, Swanson said. Those seats are wider and more plush than other seats at the venue. Revenue from each seat is about $1,000.
Out of 20 larger indoor advertising signs, eight remain unsold, costing the facility about $500,000 to $600,000 in income, he added.
"We overestimated some of our sales goals," Swanson said after the council presentation.
Swanson, who's run the Chevrolet Centre for less than a month, said Global must do better to market the facility.
The center's management last summer -- led by Jeff Kossow, who left last month as executive director to run a three-building entertainment facility in Kennewick, Wash. -- had projected the 2006 profit at $1,153,802. Repeated attempts to contact Kossow this week were unsuccessful.
Besides the sales and marketing problems, Swanson said the summer projection also grossly overstated the attendance of Youngstown Steelhounds minor league hockey home games. The summer estimate was 5,100 fans a game; the team is averaging about 2,700 a game, Swanson said.
He updated council on the facility's new financial projection, which is about half of the summer estimate.
Included in figures
The 12-month forecast includes actual financial figures for this past October and November and projected figures for the following 10 months. Actual December figures should be available by mid-February, Swanson said.
The updated financial projection estimates the center will have a $645,221 net operating income from October 2005 to September 2006.
That is more than $100,000 less than the city's projected annual debt to pay off a $12 million loan to make up a funding gap between the actual cost of the center and the federal grant funding the city received to construct the facility.
The center management projects the city's debt service at $750,000. City Finance Director David Bozanich says the figure is closer to $767,000. The city will pay the debt annually, sometime in late September, Bozanich said.
Despite a net income of less than the city's annual debt for the facility, the management's financial projection shows a surplus for the 12 months.
That's because of the inclusion of two one-time revenue sources that add $300,000 to the facility's bottom line.
The center management's projected surplus is $195,221 for the 12-month period. It would be $17,000 less using Bozanich's debt service projection.
One-time revenue
One of the two one-time revenue sources is the return of $200,000 the city initially paid for start-up costs for the center, Swanson said. The remaining $100,000 is an estimated savings on construction costs.
There are disputes with center contractors on payment for services that total about $200,000, Bozanich said. Some of those disputes could end up in court, he added.
Swanson said he was optimistic that at least $100,000 of that money wouldn't go to contractors, and would be put in the center's budget.
Listed among the center's income is $284,950 for parking revenue. Tickets for center events include a service fee, with about $1 of it for parking revenue.
What is not listed on the center's budget is the $210,000 annual fee the city is paying to USA Parking Systems of Cleveland to provide 2,027 spaces at decks and lots throughout downtown. It's not listed because it's a city deal and not a center one, Swanson said.
If the $210,000 is included, the center would lose money during the 12-month period regardless of the two one-shot payments.
Opening shows' profits
The facility opened Oct. 29 with a concert by 3 Doors Down -- with a net profit of only $3,764 -- and a Tony Bennett concert the next day -- with an even lower net profit, $2,556.
Those were the only two events at the facility during its first month.
While the updated operating income for the facility's first 12 months is about half the summer estimate, Swanson is optimistic that its second 12 months, beginning in October 2006 will be significantly better.
It will improve in part because there will be more events this October than last year, and Global is getting a better handle on the local entertainment marketplace, he said.
Oversight committee
Council agreed to create a center oversight committee to review the facility's event schedule, financial reports, staffing levels, ticket sales, concession issues and parking.
Swanson apologized to council and other city officials because Global failed to provide financial information about the facility since September. The delay, he said, was caused by Kossow's departure and the center employees' needing additional training.
Global will attend one council meeting each month to give updates on the facility.