As attendance declines, NASCAR Hall of Fame considers big budget cuts
Wednesday, Oct. 13, 2010
Struggling with declining attendance, the NASCAR Hall of Fame said Wednesday it may cut between $2.5 million and $3 million in annual expenses to balance its budget.
The hall lost $280,509 in August, which some had expected to be one of its strongest months because children are out of school for most of that time. That loss, coupled with overall revenue coming in far short of projections, has led the Charlotte Regional Visitors Authority to ask the hall to consider additional budget cuts, including layoffs.
Since its May opening, the hall has already undergone some belt-tightening, including cutting back on day-to-day expenses and cutting the hours of part-time employees.
We have asked that the hall look at all aspects of its operations, said CRVA chief executive Tim Newman. Labor is one area we are looking at.
The $200 million hall was built by the city of Charlotte, mostly through a 2 percent increase in the hotel/motel occupancy tax. The city manages the hall through its subsidiary, the CRVA.
The city said Wednesday its general fund which pays for things such as police officers and roads is still protected from hall losses. But the CRVA has already used money that had been dedicated for other tourism-related functions, such as managing the convention center and venues such as Ovens Auditorium, to pay the halls bills.
There are many, many backstops to this, said assistant city manager Ron Kimble. CRVA will have to manage this in a way that keeps the funding within the hospitality and tourism and revenue streams. There wont be any invasion of the general fund.
Revenue could decline this winter
The halls budget for this fiscal year called for $3.31 million in revenue in July and August. Actual revenue for the two months has been $1.43 million.
In an interview Wednesday, Newman acknowledged that the upcoming winter months could produce even less revenue. Sports halls of fame often see their biggest attendance during summer vacation season.
The hall hasnt released September attendance yet, but its likely to be significantly less than August, when 23,534 people visited the racing shrine. Spot-checks by the Observer suggest that September attendance could be around 15,000 people.
Whats unknown is if late fall and winter attendance will decline even more. Newman said the hall is making a big marketing push to attract locals with events such as a Halloween promotion on Oct. 30 and 31 when children in costume are admitted for free. The hall is also hoping for large crowds this week as racing fans come to Charlotte for Saturdays Bank of America 500.
If those efforts succeed, the halls budget cuts might be less severe, he said.
A NASCAR Hall of Fame presentation to the CRVA board said the attendance lag is due in part to the economic recovery (being) much slower than anticipated.
In addition, attendance penetration from local market is less than anticipated.
The report also said that event rentals have been popular but that revenue is lower than projected.
The hall initially projected first-year attendance would be 800,000. If the halls first four months of attendance continued throughout the year, attendance would be about 360,000.
But if the hall follows the seasonal attendance models of other sports halls, such as the Pro Football Hall of Fame, first-year attendance could be roughly 225,000 people.
The hall also will also face a challenge in keeping people coming back. Halls often see declines in attendance of 25 percent in the second year.
While revenue is running at 43 percent of budget projections, the hall began cutting expenses even before Wednesdays announcement. The halls expenses for July and August were $1.62 million. The budget called for $2.4 million in expenses during the same time period.
Hall spokesperson Kimberly Meesters said the hall has reduced the number of part-time employees who work on the hall floor to help guests. She said the hall initially overstaffed.
The hall also lost money at the end of fiscal year 2010. The hall opened May 11, and had nearly two months of operation before that end of that year, in which it lost $84,000. It had projected a nearly $300,000 profit.
The CRVA covered that loss.
The CRVA manages the Charlotte Convention Center, Ovens Auditorium, Bojangles Coliseum as well as tourism marketing for the city. The buildings it manages operate at a loss, and the deficits are covered by the existing hotel/motel occupancy tax, as well as a 1 percent prepared food and beverage tax.
The hall was supposed to turn an operating profit of just under $800,000 on budgeted expenses of $15.3 million.
To make the hall financially whole, the CRVA can shift money to the hall from other CRVA operations - something it has already done. The initial pre-opening budget for the hall was $5 million, but that was increased to $8 million by using money from existing tourism taxes.
Another option for the CRVA is to ask City Council permission to tap into a $24 million reserve fund for the hall, which was created with money from the 2 percent hotel/motel tax.
But much of that fund is already accounted for.
If the annual collection from the hotel/motel tax falls short of its debt payment for hall construction, the city would use that reserve fund to cover the difference. Much of the $24 million is set aside for building maintenance and to change exhibits.
The reserve fund may also be used to pay for a shortfall in royalty payments that NASCAR is obligated to pay the city.
NASCAR generally receives 10 percent of all hall revenues. In 2008, to help pay for hall construction, NASCAR agreed to pay the city the first $1 million in royalty payments from the hall each year for the next five years.
But the hall may not generate $10 million in total revenues this year, meaning NASCAR might not have enough royalty money to pay the city the full $1 million.
Hall of Fame attendance
May 11-May 31: 35,051
July, August budgeted revenues: $3.31 million
July, August actual revenues: $1.43 million
July, August budgeted expenses: $2.37 million
July, August actual expenses: $1.62 million