For investors, the hospitality industry’s deep links to seasonality and economic conditions increase its potential risks — and rewards.
When the economy is booming, hospitality spending tends to increase. During market downturns, travelers cut back their spending on luxurious vacations. Businesses that wish to invest in the hospitality industry need to carefully assess their strategies and position accordingly.
It’s no secret that high-profile spectator events that attract out-of-town spectators from around the globe are golden opportunities for hospitality vendors. And recent international tourism trends indicate that savvy travelers are beginning to embrace all-in-one packages that include accommodation, ticketing, travel, local transport and more for visitors attending major events like the FIFA World Cup, Euro Cup and the Olympic Games.
American sports leagues are catching on to this trend, too. Package deals are now common for “everyday” NFL and NBA games as well as signature events such as the Super Bowl. To boost profitability and create additional opportunities to monetize fans’ loyalties, these leagues are pursuing vertical integration initiatives, either by forming subsidiaries or acquiring already-existing businesses.
Is 'On Location Experiences' the future of sports tourism?
One good example is On Location Experiences, which creates customized experiences for fans attending various NFL events including the Super Bowl, international NFL games and others. For last season’s Super Bowl 50, On Location Experiences sold to its customers 7,000 customized packages which included a ticket to the big game, hotel room, airfare and even a special event in San Francisco.
The company — owned by RedBird Capital Partners, Bruin Sports Capital, 32 Equity (the entity that oversees the NFL’s private equity efforts) and legendary rock star Jon Bon Jovi — aims to do nothing less than disrupt the multibillion-dollar sports tourism market.
Can Cardinale and Pyne make the difference?
RedBird Capital founder Gerry Cardinale brings a wealth of media and entertainment industry experience from the private equity sector. George Pyne, a former executive for IMG Worldwide’s global sports and entertainment business, knows all about the business of organizing events.
(Gerry Cardinale RedBird Capital)
On Location Experiences is not looking to compete directly with giant hospitality players like Marriott International (MAR, Financial), Expedia (EXPE, Financial) or Starwood Hotels and Resorts (HOT, Financial). It’s positioned more as an all-inclusive alternative for upscale customers who want to get closer to the game — without sacrificing luxury or personalized attention.
Star power on and off the field
On Location Experiences also counts on the popularity of singer-songwriter Jon Bon Jovi in building the company’s brand. Jon Bon Jovi is best known as the founder and front man of the rock band Bon Jovi, but he’s also a renowned investor, philanthropist and sports fan.
Jon Bon Jovi is on the cusp of an exciting new trend. Over the last few years, companies have turned to brand ambassadors with global popularity — athletes, film stars and musicians — to stand out in increasingly crowded, competitive markets. It’s hard to imagine a better brand ambassador for an NFL offshoot than Jon Bon Jovi, a guy who’s been the face of American rock music for more than three decades.
On Location Experiences skeptics would do well to remember how quickly the hospitality business is changing. Five years ago, no one took Airbnb seriously. Today, it’s a major threat to the hotel industry. Rather than launching a direct rival to existing hospitality players, Airbnb created a fundamentally different business that offered individual home owners an opportunity to make money from their otherwise idle vacation homes.
On Location Experiences isn’t exactly following Airbnb’s path. But, from a business perspective, it has identified its target market and now looks to expand its foothold beyond the Super Bowl.
Expansion in the works
Where, exactly? On Location Experiences could tap into more sporting events and tournaments in the near future, including the FIFA World Cup — where it would be launching a direct rival to the football governing body’s World Cup 2010 and 2014 partner IMG Media, among others. Not to mention the potential opportunities with other athletic associations like the NHL, MLB, NBA and NCAA.
Backed by an impressive group of investors that includes RedBird Capital Partners, Bruin Sports Capital, 32 Equity and Jon Bon Jovi, On Location Experiences is quietly disrupting the hospitality business as we know it.
If all goes according to plan, the company will grow the market for customized event services — and, most exciting of all, could expand well beyond American football in the near future.
Disclosure: I have no position in any stock mentioned in this article.
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