Why Sports Stadiums Create Dilemmas

Before 2016, Arthur Ashe Stadium had no “roof.”

When the stadium, home to the U.S. Open, was first built, the planners decided the tradeoff between a roof and 5,000 seats was not worth it. Looking at a century of dry weather around the dates of the tournament, they gambled that they would not need a cover. So, after it rained five years in a row, in 2013, they started a roof project. Because the stadium could not bear the weight of a roof, instead, starting from the bottom up, they wound up with super columns that supported retractable Teflon panels.

Sports Stadium Dilemmas

Again considering their tradeoffs, now the United States Tennis Association (U.S.T.A.) is planning an Arthur Ashe Stadium renovation.

Knowing that the people that take a subway and those that have a driver attend the U.S. Open, they need to decide who to target as they plan a renovation. Commenting on the tradeoff, Billie Jean King emphasized, “I am proud today, almost two decades later, that the U.S. Open continues to welcome all tennis fans, providing access and the opportunity to see the greatest athletes in our sport.”

Currently, the stadium has 23,711 seats that, at the high end, can cost $8,000 for a day. For the crowd that will pay much more, there are two tiers of luxury suites with choice views, better food, and restrooms.

Looking ahead, planners are deciding whether to upgrade offices and player accommodations with a new building. More parking is also a possibility. Maybe though, the biggest decision (creating more of a divide between the haves and have-nots) involves adding super luxury bunker suites. Built below the surface next to the main court, they would have the gourmet food and service extras, a meet and greet with the players, early access, valet parking. As a result, the price could be in the vicinity of $175,000 for one person for the 2-week tournament. Also hoping to generate massive revenue, they are considering charging $3,700 for a single session or $93,000 for the two-week tournament at a new Rackets Club.

Our Bottom Line: Thinking Economically

Deciding whether to do more or less, the Arthur Ashe Stadium renovators are always thinking economically at the margin. Alfred Marshall (1842-1924) was the economist who first recognized the significance of the margin. He let us see that the cost of something extra is the key to understanding demand- and supply-side behavior.

To grasp “the margin,” let’s assume for a moment that you need access to a parking space near where you work. You can purchase a monthly pass that lets you park as many times as you want for 30 days. Or, you can pay for a spot every time you go to work. The deal you select determines your incentives. With the monthly, it is likely you will go to work more frequently. However, with the daily, you drive less frequently because you pay for each visit.

Similarly, the U.S.T.A. is thinking at the margin as they plan daily or total access to their new super luxury bunker suites.

While we do not yet know what they will decide, we can be sure it will create incentives at the margin.

My sources and more: A good start (and perhaps end), this NY Times article had all the facts. Here, they also told the fascinating tale of the new stadium roof.