NHL Uncategorized

Will hockey succeed in Las Vegas?

The NHL season started last night, and soon we will have an opening night in Las Vegas. Can the team succeed in the desert?

As we enter the new NHL season, the biggest story of the offseason was the decision to expand the league and add a new team in Las Vegas. For those of you that don’t know, the NHL announced in June of this year the expansion of the league by adding a 31st franchise in Las Vegas, Nevada starting in the 2017-2018 season. The team will be brought into the league by Bill Foley, who paid a $500M expansion fee to the league and who will play in the newly built T-Mobile arena just off the Vegas strip.

The last time the NHL expanded was in 2000, when the league decided to add the Wild in Minnesota and the Blue Jackets in Columbus. For many reasons outlined below, the Columbus and Vegas franchise expansions appear to be very similar. With a new franchise on the horizon and now 16 seasons later, we wanted to compare the two situations and look back at how the Blue Jackets franchise has fared business-wise since joining to determine whether or not the expansion to Vegas will be successful.

Arguably some of the most important factors for a franchise to succeed financially is the market size and interest of the city for an NHL team. These are extremely similar factors when comparing Columbus and Las Vegas as both cities are ranked outside the top 30 of traditional city markets with Columbus currently 32 and Las Vegas 42.

There is also the risk of potential lack of interest due to the fact that neither had been home of an NHL team, with neither area being known for its hockey culture. Another item of note in terms of hockey interest is the fact that both cities housed ECHL minor league teams in the years prior to expansion. The Columbus Chill recorded an 83-game sellout streak prior to the professional team coming to the city, which was a minor league record at the time.

The Las Vegas Wranglers, however, ended their run prior to the 2015-2016 season after being unable to secure a venue to host home games. This is a definite warning sign, as even with the success of the minor league team, attendance has begun to wane in Columbus as the Blue Jackets have seen a 24% decline in attendance over the past 10 years which is the worst in the NHL and has put the franchise on the brink of possibly collapsing.

Another issue to consider is the long-term economic growth both for the new expansion franchise as well as for the city in which it has populated. According to Forbes team values, the Columbus Blue Jackets are currently ranked 27th out of 30 teams in terms of franchise value at $226M, and have recorded negative operating income in 8 of the past 10 years.

Although the Blue Jackets have not necessarily been the most successful franchise economically, the team has increased in value from $80M when they were originally purchased to $173M in 2012 when they were sold again and now up to $226M. Also, the financial effects on the city of Columbus were originally extremely successful as a report suggested that the team and arena represented more than $2 Billion in economic impact in the Columbus area over the 10 year period beginning in 2000.

However one point to keep in mind is that in 2012 the struggling franchise renegotiated its arena contract to now be owned by the city, which is expected to cost the city $250M over the next 25 years and it remains to be seen if the economic impact of the team will persist on the city of Columbus in the future.

After looking at the case of the Columbus Blue Jackets as an expansion franchise, I would be extremely hesitant in claiming the NHL expansion into Las Vegas as a success. There are many warning signs that the franchise owners are going to need to sort out going forward, but based purely on the lack of success from a similar situation in Columbus, I believe the Bill Foley and the rest of the franchise are going to have a rough few years ahead of them.

 

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