With its opening a year away, NASCAR Hall of Fame officials remain confident in their business plan despite economic forces that could affect sponsorship sales and visitors.

The Hall of Fame plans an annual revenue budget of $10 million to $12 million or more against expenses in the high seven figures after it opens in May 2010. It also forecasts that more than 800,000 visitors will walk through its doors in the first year to sample its interactive displays and view its impressive collection of artifacts, shop at its store and eat at its restaurant.

The nearly $200 million Hall of Fame seemingly spared no expense. The architect, Pei, Cobb, Freed & Partners, worked on the expansion and renovation of the Louvre, as well as the Rock and Roll Hall of Fame in Cleveland. The NASCAR Hall of Fame will include a 270-seat theater, a speedway replica called Glory Road, cars, haulers and other equipment.

But as the Hall of Fame enters the home stretch before its opening, NASCAR's grandiose new epicentre comes with a shrinking reality, one of a sobering business environment, sagging attendance at the track and TV ratings that are down double-digit percentage points this year.

It all has executives in the industry wondering how the Hall of Fame will generate the sponsorship revenue it expects and questioning whether the attraction will draw the 831,000 annual visitors the city of Charlotte projects.

"We've got a very solid model," said Winston Kelley, the Hall of Fame's executive director and one of the most familiar voices on NASCAR radio broadcasts over the past 20 years. "Am I aware that the economic circumstances have changed since we started this in 2006? Absolutely. We know that we've got to fight for that entertainment dollar. But being new and exciting, we've got the opportunity that, if we do a good job, it'll take care of itself."
Seeking tenants

In the sport's early days, Charlotte gradually became the home to NASCAR teams and the rest of the sport's support industry has followed over the years. The city won a battle with the other finalists, Daytona Beach and Atlanta, to build the Hall of Fame.

While it maintains its headquarters in Daytona Beach, Fla., NASCAR has a research and development office north of Charlotte, its licensing office downtown and its media group just south of downtown.

When the Hall of Fame opens, much of NASCAR's presence in Charlotte will come together at the development, with the Hall of Fame serving as the anchor, although the sanctioning body remains adamant that Daytona is its official home. NASCAR will move 260 of its current employees into the 19-story NASCAR Plaza office tower, representing its media group and licensing division. The R&D center will stay put.

NASCAR has agreed to a long-term lease that occupies 120,000 of the tower's 390,000 square feet of office space. The majority of NASCAR's real estate will be devoted to studio and production facilities for the media group that could one day form the home of a NASCAR television network.

CB Richard Ellis, the leasing agent for the office tower, said one other tenant has been locked in, the Charlotte Regional Partnership, which helps the area recruit business. About 265,000 square feet remain available.

NASCAR is not on the hook financially for any of the unleased property, but the slow-moving process to attract tenants and sponsors to a building that will be among the crown jewels of Charlotte's downtown reflects the challenging business climate.

"We're starting to see more movement, but everyone is still very cautious," said Cristy Nine, part of the CB Richard Ellis team leasing the office space. "You see people kicking the tires a lot more and just an overall hesitancy to make a decision. But we've got several people we're talking to, and we're optimistic about the future."
High hopes for attendance

Kelley said the estimates for Hall of Fame traffic were formulated by a city consultant who used the Rock and Roll Hall of Fame and the Country Music Hall of Fame in Nashville as comparables. Those attractions, which draw 400,000 to 500,000 visitors a year, are in cities that more closely resemble Charlotte, Kelley said, whereas the traditional sports halls of fame are in smaller markets--Canton, Ohio (Pro Football), Springfield, Mass. (Basketball), and Cooperstown, N.Y. (Baseball).

The most recent tax return available for the Rock and Roll Hall of Fame revealed a little more than $22 million in revenue for 2007. In the same year, the Baseball Hall of Fame reported revenue of $20 million.

The NASCAR Hall of Fame's first-year projection of 831,000 visitors takes into account an anticipated first-year spike in attendance, and it is expected to settle in at about 400,000 visitors annually in subsequent years. In comparison, the football, basketball and baseball halls each draw 200,000 to 300,000 visitors a year.

"It's a tough time to be starting anything right now, but hopefully next year will be a good time for the NASCAR Hall to open," said Dave Motts, vice president of marketing for the Pro Football Hall of Fame. "Sometimes you can get those big (attendance) numbers, but trying to predict can be a little crazy. In Charlotte, they've got great weather, they're in a great spot for the fans and hopefully the economy will get better by then."

NASCAR's revenue from the Hall of Fame will come from royalties designated by its licensing contract with the city. Admissions will be the No. 1 revenue generator, Kelley said, even though prices have not yet been established. NASCAR will receive 10 percent of all admissions revenue.

The next-most prolific revenue area will be rentals of the building by third parties, food and beverage, and rental from retail and restaurant partners. NASCAR will take 5 percent of the restaurant revenue, 7.5 percent from catering and 10 percent from retail revenue.

The city is contractually obligated to negotiate first with NASCAR's restaurant and retail partners. Talks with the Cordish Co. for the restaurant broke down and the city has issued an RFP (request for proposal). Similarly, the city couldn't come to an agreement with HMSHost to run the embedded store, so an RFP has been issued for that as well, Kelley said.

Other streams of revenue for the Hall of Fame, of which NASCAR takes a 7.5 percent to 10 percent cut, include special events, sponsorship and any other miscellaneous income. The city also will contribute a minimum of $100,000 annually to the NASCAR Foundation.

"We're still working on the budget," said Kelley, who anticipates a full-time staff of 25 to 30 employees and 15 to 20 additional part-timers.

"There are just some more areas where we need more specifics. Toward the latter part of this year or early next year, we will have more specific revenue and expense streams. Insurance on the building, insurance on artifacts, maintenance, paper towels, toilet paper, we're continually refining the numbers."
Will sponsors buy in?

Sponsorship remains one of the most significant variables in the NASCAR Hall of Fame's revenue equation and one of the reasons the project has taken somewhat of a conservative outlook. So far, none of the 10 founding partner positions has been sold--the asking price is $300,000 to $500,000 apiece.

The Hall of Fame's marketing partner, Just Marketing International, Indianapolis, is leading the sales effort.

Construction costs are being covered by a city arrangement that includes loans from Hall of Fame banking partners Wachovia/Wells Fargo and Bank of America, hotel/motel taxes and private funds. Sponsorship revenue will be used to pay back about $20 million in loans from the banks.

"The Hall faces an uphill battle due to the overall competition for sponsor dollars, specifically in this sport," said Brian Corcoran, executive vice president of Fenway Sports Group. "More teams, tracks, media and NASCAR are all fighting for a smaller pie. The Fortune 500 companies currently involved in the sport are happy with their existing investment, but many are not willing to spend more on activation assets such as the Hall."

Just Marketing has run into myriad obstacles to selling sponsorship, not the least of which is the unfavorable sales environment. But the feedback from sponsorship prospects goes deeper than the recession.

First of all, the Hall of Fame doesn't open until May 2010, so prompting sponsors to write a check ahead of time has been difficult. The Hall of Fame and Just Marketing are just now entering the selling period for 2010 sponsorship, even though they've been on the street with it for well more than a year.

"We're pounding the streets and there is interest," said Zak Brown, CEO of Just Marketing. "But no one is selling much of anything right now. Certainly, we've had to recalibrate our estimates (of sponsorship revenue). They were obviously higher before the economy crashed."

There's also a sense of entitlement among the sport's most enduring sponsors. Companies that have been among NASCAR's biggest spenders over the past several years believe they're entitled to a place in the Hall of Fame, through their visibility on cars and at the track.

For a company such as Sprint--that's already spending $80 million a year to be the title sponsor of NASCAR's top series--is it going to fork over another million or so for a place in the Hall of Fame? And what Sprint doesn't know yet is how much of a presence it will have in the Hall of Fame, just as a series sponsor.

Are its marks so ubiquitous throughout the sport that it will be well-represented on the walls of the Hall of Fame anyway, even without buying sponsorship? Does it need to spend that extra money? Those are questions the brand is contemplating.

"That's a big additional investment to make to get your brand in front of the same fans who they're in front of 38 weeks a year already," said Mark Coughlin, vice president of Octagon Racing, the agency that represents Sprint. The wireless carrier is considering sponsorship options, but no decisions have been made.

There also is a restriction written into the contract between the city and NASCAR that hamstrings the sales effort. Any Hall of Fame partners that are not NASCAR official partners cannot use the Hall of Fame marks outside of the actual building, unless NASCAR grants permission.

For example, if UPS, a NASCAR official partner, declines to sponsor the Hall of Fame and Just Marketing then sells a deal to FedEx, FedEx will enjoy a significant presence in the Hall of Fame, but it won't be able to use the NASCAR Hall of Fame marks outside of the building. NASCAR said the restriction protects its official sponsors.

"It's a delicate balancing act," Kelley said. "With us being a licensee, we have to be respectful of NASCAR's officials. It's a factor (in the sales process). But it's a restriction that we've known about since day one."

Despite the glacier-like pace of sponsorship sales and the lack of tenants in the new office tower, Hall of Fame officials are moving full speed ahead toward the opening next May. The grandiose vision for NASCAR's new epicenter hasn't dissipated.

"I remain as optimistic about the Hall of Fame as the day it was announced in March 2006," Kelley said. "Every bit as optimistic."
by Michael Smith
Michael Smith is a reporter with SportsBusiness Journal

Related Articles