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Page 1: [American Society of Civil Engineers International Conference on Construction and Real Estate Management 2013 - Karlsruhe, Germany (October 10-11, 2013)] ICCREM 2013 - Facility Management

Facility Management Model for Multi-Functional Sports and Entertainment Arena

Ala DAUGELIENE1, Rasa APANAVICIENE2 and Birute KUNEVICIUTE3

1Ph.D., Faculty of Civil Engineering and Architecture, Kaunas University of Technology, Kaunas, Lithuania, LT-51367, PH (370) 37-300480, FAX (370) 37-300480, Email: [email protected] 2Assoc. Professor, Ph.D., Faculty of Civil Engineering and Architecture, Kaunas University of Technology, Kaunas, Lithuania, LT-51367, PH (370) 37-300453, FAX (370) 37-300480, Email: [email protected] 3MSc., Faculty of Civil Engineering and Architecture, Kaunas University of Technology, Kaunas, Lithuania, LT-51367, PH (370) 679-54137, Email: [email protected] ABSTRACT

The last decade has seen unprecedented demand to host major sports events.

Although the venues for large sports events can be well used during events time, concern exists on how to effectively and sustainably operate it in the long run. The objective of the research presented in this paper is to develop a multi-functional arena management model in order to increase the effectiveness of sports and entertainment venue business. To that end, firstly a review of the literature is conducted to identify the existing sports facility management practice and explore their implementation. Afterwards, a model for the management of sports and entertainment facility is presented. Based to the theoretical assumptions and a study of the existing practice three alternatives are suggested and implicated in the multiple criteria evaluation: in-house, outsourced and combined facility management options. The findings reveal that success is based upon effective and efficient management of considerable costs while combining in-house and outsourced options for sports and entertainment facility operation and maintenance.

INTRODUCTION

The last decade has seen unprecedented demand to host major sports events, since they provide a potential for reviving economy of a region or country, helps to enhance their international reputation and boost relevant industries and business sectors (Liu and Wilkinson 2013). Hosting important events requires the development of the large-scale venues involving intensive capital investment and long-term operational and management expenses. To make the development of such venues projects more affordable and efficient the governments give the preference to alternative funding mechanisms, such as Public-Private Partnerships (PPPs). PPPs have been implemented for the development of sports and athletic events venue, such as the Beijing National Stadium (Bird’s Nest), Stadium Australia (ANZ Stadium), and the Singapore Sports Hub.

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The PPP models applied to different sports and entertainment venue projects vary (Liu and Wilkinson 2013). Cooperation with a private sector partner who can provide full-package services is considered beneficial; in case a full-service partner is not available, establishment of consortium is essential. As an example, for the Beijing National Stadium a state-owned enterprise and a private sector partner set up a Joint Venture Company to carry out full-package services in relation to the asset (Liu et al. 2009).

The core business of venues is organizing various mega-events. The requirement of functionality combined with the complexity of the venue business result in appearance of considerable costs associated with managing and operating of facility (Liang et al. 2011). Although the venues for large sports events can be well used during events time, concern exists on how to effectively and sustainably operate it in the long run. Whilst some sports and entertainment venues can generate an operating profit, the economic returns from operation do not generally bring to the initial investment (Liu et al. 2009). Therefore, a highly specialized sports and entertainment venue operator is essential for running successful venue business and controlling facility operating and maintenance costs. The venue operator faces the challenge of selecting the proper facility and customer relationship management strategies to optimize the costs of operating and contracting a suitable tenant for the facility in order to cover the maintenance costs.

The objective of the research presented in this paper is to develop a multi-functional sports and entertainment arena management model, which enables arena operator and managers increase the effectiveness of sports and entertainment venue business. Accordingly, a review of prevailing venue management trends in research is conducted to identify the existing sports facility management practice and explore their implementation. The paper introduces a sports and entertainment facility management model to evaluate and facility management option providing with appropriate costs for operation and maintenance. This is followed by the application of developed model to a real case study by consideration of in-house, outsourced and combined facility management options and implementation of multiple criteria evaluation methods.

RELEVANT LITERATURE ON THE LARGE-SCALE VENUE FOR SPORTS AND ENTERTAINMENT EVENTS

The literature review provided in this paper is centred on the area of facility

management for large-scale sport and entertainment facilities and associated topics. Six different focus areas have been identified and for each one different methodologies and streams of research are studied. The analysis highlights the importance of subsidization of sports venues, economic and social impact of sports facilities, PPPs for large-scale sports venues, sustainable facility management and crisis management in sports and entertainment industry (see Table 1).

The subsidization of professional sports facilities has inspired deeply contentious debates, as the opinion on the construction of new sports stadiums is one of the most controversial topics for observers of public policy. Current research focuses on identifying factors that induce voters to support or oppose plans for public funding of sports facilities construction or renovation.

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Table 1.Focus Areas in the Research on Sports Venues. Research focus areas Authors

Subsidization of professional sport facilities

Kellison and Mondello (2012) Lasley and Turner. (2010) Coates and Humphreys (2006) Thornley (2002) Siegfried and Zimbalist (2000)

Economic impact of sports facilities Grieve and Sherry (2012) Propheter (2012) Jones et al. (2010) Coates (2007) Gratton et al. (2006) Siegfried and Zimbalist (2006) Santo (2005) Coatesa and Humphreys (2003)

Sports facility as a social anchor Seifried and Clopton (2013) Ahlfeldt and Maennig (2010) Barghchi et al. (2009) Yuen (2008)

Sports venue PPPs Liu and Wilkinson (2013) Liu et al. (2009) Chan et al. (2009) Grimsey and Lewis (2004) Nelson (2004)

Sustainable facilities management Lee and Kang (2013) Mallen and Chard (2012) Koukiasa (2011) Mallen et al. (2010) Loland (2006)

Crisis management in sports venues Craig et al. (2006) Appelbaum et al. (2005) Whisenant (2003)

The vast majority of literature that investigate the community benefit derived

from the development of a new sports facility is dominated by two types of studies (Grieve and Sherry 2012): economic impact analyses undertaken for a specific proposed or existing sports facility or team and longitudinal or cross-sectional studies of sport facilities impact on city’s social life.

Independent empirical analyses are often used to refute assertions that sports stadiums can serve as economic catalysts. A large body of research has addressed issues of the professional sports teams and stadiums impact on their host communities. The broad conclusion of this literature is that stadiums and franchises are ineffective means to creating local economic development, whether that is measured as income or job growth. However, in combination with consumer surpluses from venue attendance subsidies may be efficient.

The other type of studies provides an overview of the first evidence for the

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welfare effects of the built environment as well as of expected stadium-related social costs and benefits. The conclusions of this literature suggest that sports facilities are, indeed, viable social anchors within communities and community networks. Further, they are capable of maintaining a collective image or creating a preferred image for both community members and a fan nation. Finally, based on this information, municipal investment into sports venues should not be strictly looked at as a vehicle to produce economic returns (Seifried and Clopton 2013).

Public-Private Partnerships (PPPs) are favoured by governments for venue development due to advantages, such as relieving public budgetary constraints, increasing the quality of public services, enhancing innovation and optimizing risk transfer. This study evaluates the application of PPPs in large-scale sports and entertainment venue development and draws on critical strategies applicable to venue PPPs.

In facilities management, sustainable issues are important since sports and entertainment buildings consume more resources and energy than typical, negatively impact the environment and generate a large amount of waste. This literature provides definitions that specify the objectives and scope of sustainable facilities management (SFM). These studies are focused on the implementation of SFM strategies by using energy-efficient lighting to control and reduce energy usage and greenhouse gas emissions, which may in turn result in lower operation and maintenance costs for the facility.

Public venues such as arenas, stadiums, and convention centers are prone to crisis daily because of the events and large gatherings drawn to them. Post September 11, 2001, crisis management in sports and entertainment venues has become an even larger focus for facility managers (Craig et al. 2006). Keeping the public safe during an event is a challenge as each facility and event is different, so the threat of crisis can vary from venue to venue. The purpose of these papers is to assess technologies, which may be used to assist sport facility and other venue operators in preempting a terrorist act or some other form of act of violence.

A lot of diverse problems related to the subsidization and development of sports and entertainment venue projects are investigated in academic literature. There are limited literature materials, which focused on efficient facility management particularly in the context of large-scale sports. This study contributes to filling this gap by identifying and prioritizing sports venue facility management approaches as well as exploring the suitability and benefits of each approach providing lower operation and maintenance costs. MODEL FOR FACILITY MANAGEMENT OF MULTI-FUNCTIONAL SPORTS AND ENTERTAINMENT ARENA

The investment of public money towards the building, renovating and maintaining of sports venues has regularly occurred over the past six decades (Seifried and Clopton 2013). Municipal and community governments have been subsidizing the construction of sports stadiums and arenas because they create changes and contribute to improving the quality of life, labor and business opportunities. While the construction of sports facility may serve the public interest

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beyond purely economic goals, the benefits of facility subsidization tend to be concentrated among a small number of powerful groups and individuals (Friedman and Mason 2005). In general, the following concession stakeholders’ classification can be adopted: owners, arena manager, salaried employees, contracting companies, events providers, tenants and spectators.

The model for facility management of multi-functional sports and entertainment arena is presented in Figure 1.

Figure 1.Facility management model for multi-functional sports and entertainment arena.

While accomplishing construction of multi-functional sports and entertainment

No

Owner

Sports and entertainment arena concession tender

Concession operator

Management of sports and entertainment arena

Administrative management

Space management

Technical management

Other services

Development of facility management alternatives

Evaluation of developed criteria system

Modelling of alternatives efficiency

Criteria: -technical; -legal; -economic; -social

-Expertise methods: Pairwise comparison method Ranking method -TOPSIS method; -other MCDM methods

Selection of facility management option

Facility management of multi-functional sports and entertainment arena

Do the findings coincide with the values planned?

Operation and management of arena

Yes

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arenas a tender for operation and management concession is held. The winner of competitive tender is awarded a long-term concession contract whereby the concessionaire is authorized for business activities related to the management, operation and supervision of sports and entertainment arena and provision of public services. When the owner transfers the management of sports and entertainment arena to the operator a new company is established. The new company is governed by applying flat organizational structure, which specifies the optimal number of subordinates for one supervisor.

According to a common definition, facility management can be defined as the management of premises and services required to accommodate and support the core business activities of a client organization, while constantly adding value to the stakeholders (Mudrak et al. 2004). Lithuanian sources take a narrower perspective of facilities management - they regard facility management as an integrated complex created to minimise the time and costs of handling issues related to buildings and grounds and to prolong the period of the comfortable exploitation of a building’s structures and engineering systems (Lepkova and Zukaite 2012). Zavadskas et al. (2002) presented a concept of facility management as the integer of four elements: space management, administrative management, technical management and management of other services.

While analysing facility management of multi-functional sports and entertainment arena the space management involves space organization, removals, inventory updating and various soft services such as catering, cleaning, vending machines, security, reception and other essential components to sports venue. Administrative services include staff training, health and safety management, procurement, budgeting and cost optimisation, coordination of services, property legislation and quality controls. Technical services include building access control, building management systems, public utilities supervision, closed circuit television (CCTV) monitoring, energy management, environment management, information technology and communications. These operations would typically include routine checks, consultancy services or upgrades and possibly an emergency contact.

All mentioned services pertain to the daily running of sports and entertainment venue therefore the arena operator considers various facility management alternatives. External facilities management companies can help to run the non-core aspects of sports and entertainment venue by providing a range of soft services, technical services or administration services. Technical services offered by contracting companies are clearly beneficial for improving the efficiency of sports venue operations. The advantages of outsourcing soft services to facilities management companies is perhaps less obvious. If sports venue has a core body of staff members who can manage the daily running of business, it would be an efficient and cost saving practice to contract an external company to cater for large events that require lots of additional skilled staff on a temporary basis. The key advantage is that facilities management companies try to provide a full turnkey solution for the daily running of sports and entertainment venue.

Methods based on a single criterion can hardly be used in solving the problems associated with selection of proper facility management option. To determine the value and the utility degree of different facility management

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alternatives under consideration and to establish the priority order of their implementation, multi-criteria decision-making methods (MCDM) can be used effectively. There is a variety of MCDM methods developed as well as case studies of their application presented (Antucheviciene et al. 2011): TOPSIS (Technique for the Order Preference by Similarity to Ideal Solution) as well as some other MCDM methods like SAW (Simple Additive Weighting), COPRAS (Complex Proportional Assessment) and ELECTRE (Elimination Et Choix Traduisant la Realite) are widely applied for ranking of various alternatives in management. In particular, TOPSIS or fuzzy TOPSIS (TOPSIS-F) has been implementing for selecting of resource-saving decisions and ranking of facility management or economic decisions (Zavadskas and Turskis 2011; Kalibatas et al. 2011; Liu 2011; Ginevicius and Zubrecovas 2009).

Often all MCDM methods criticized for the fact that in some cases using different methods, different results are obtained. Therefore evaluation of different methods and measuring objective congruence (incongruence) of the obtained results were maid by Antucheviciene et al. (2011). It was proved that the final decision should be adopted by giving the priority to the results of COPRAS and TOPSIS methods. Accordingly, multiple criteria evaluation results applying COPRAS and TOPSIS methods can be considered to be identical within the same probability. Therefore, the authors suggest applying TOPSIS method for selection of facility management alternatives for multi-functional sports and entertainment arena. The basic concept of the TOPSIS method is that the selected alternative should have the shortest distance from the ideal solution and the longest distance from the negative-ideal solution.

MCDM methods examine the problem of evaluating a discrete set of alternatives in terms of a set of decision criteria. The criteria of efficiency to be used in analyzing the arena facilities management alternatives are established. A set of criteria were developed according to the technical, legal, economic and social aspects of sports and entertainment facilities management aspects. The TOPSIS method, like most of the MCDM methods, needs the criteria weights, which can be determined by pairwise comparison method AHP (Analytic Hierarchy Process) or ranking expertise method. Based on the judgments of experts, the weights of the criteria are determined, and the concordance of expert judgments is checked.

Once the approach for facility management is selected, it can be implemented for the multi-use venue. Poor facility management could result in improper functioning of sport facilities, cost inefficiencies, inadequacy and unavailability of the facility for future needs. On the contrary, a strong facility management approach provides needed support to the core business of venue, greater operating and maintenance cost efficiency and the ability to anticipate results of current management decisions. APPLICATION OF DEVELOPED MODEL FOR ARENA FACILITY MANAGEMENT DECISIONS

Proposed facility management model is applied to the case study to determine an adequate facility management approach providing efficient management of operating and maintenance costs. The case study is a hypothetical project of

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multi-purpose sports and entertainment arena, corresponding the ordinary design of multi-functional arenas all over the world and usual experience in performance of common management functions, therefore the developed model can be applied on a large scale. The arena is designed as a universal hall for numerous sporting competitions and various concerts, exhibitions, fairs, conventions, and congresses, which also can serve as the home venue for one of the local basketball teams. With a total space that covers 40,000 square metres, and a total capacity of 15,000 seats, it is expected to be one of the largest indoor arenas in the Baltic States.

Total investment in arena project is slated to reach 169 million LTL, of which 32 million LTL is provided by private sector. The consortium is awarded the service contract to operate the sport and entertainment arena and ensure that it remains a sustainable multi-purpose venue for 25 years. It will operate the venue as well as manage and maintain the defined areas from multi-functional arena revenue. The arena creates revenue streams from various sources: concession tax, paid by the municipality, arena rental for events, luxury suite and club seats rental, naming and advertising rights, rent of premises.

The case study investigates the selection of facility management approach for multi-functional arena that provides the lower operating and maintenance costs. Based to the theoretical assumptions and a study of the existing practice three potential alternative decisions for facility management of multi-functional sports and entertainment arena are suggested and implicated in the multiple criteria evaluation. The alternatives include in-house facility management (alternative A1), outsourced facility management (alternative A2) and combined facility management option (alternative A3).

Various advantages and disadvantages of each selected alternative can be identified from the managerial point of view. Implementation of the first facility management alternatives provides uncomplicated organization of works due clear understanding of manager’s needs for regular employees; faster execution in the case of changing conditions and easy quality control and resolution of issues related to the poor-quality performance. On the other hands, in-house facility management causes several disadvantages such as lack of staff, staff qualification and experience, staff employment, staff training and specialty equipment. Besides, in the case of improper planning and organizing works the arena manager incurs losses.

Outsourced facility management of sport and entertainment arena includes quality performance of professional staff with high qualifications and work experience; savings on the purchase of specialty equipment; technics and means for the durability improvement of arena facilities provided by the specialized company. As the disadvantages of the second arena facilities management option can be indicated the slow performance of works in the case of changing conditions and wasted time due to failure of external companies to respond quickly to the arrised issues. Furthermore, the arena manager still has to spend a lot of time supervising and managing arena facilities.

The third option of arena facilities management presents a combined option of in-house and outsourced management practice. Facility management services involve attendance of engineering systems, cleaning, security and supervision and maintenance of building facilities. Facility maintenance and cleaning services can be

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provided by the regular employees; and the attendance of engineering systems as well as security - by the external companies.

The second stage is to develop the system of criteria, describing the suggested alternatives. For this purpose, a set of criteria was developed and the criteria system was adapted for calculations that were performed to determine the priorities of facility management alternatives. Valuable information, that is essential for the criteria selection and calculation, was obtained by conducting a questionnaire survey. The operators of three largest multi-functional arenas in Lithuania were questioned for this purpose.

For the evaluation of each facility management strategy the following criteria were taken into consideration including the quality of operations and services C1 (points), net present value (NPV) C2, payback period (PP) C3, internal rate of return (IRR) C4 and profitability index (PI) C5. Initial data for multiple criteria decision making of facility management problem was derived from the findings of the interviews with operators of three largest multi-functional arenas in Lithuania. Criteria, representing the investment efficiency, are calculated for the whole concession time (25 years) with discount rate of 5%. The criteria C1, C2, C4 and C5 are expected to reach their maximum values, while only C3 is targeted to minimum. The initial data for multiple criteria evaluation of facility management alternatives is presented in Table 2.

Table 2.Initial Data.

Criteria Dimensions Optimization

direction

Alternatives A1

(in-house) A2

(outsourced) A3

(combined) Quality works points max 9 8 8 NPV LTL max -8533.731 860.237 2278.181 PP years min 17 11 11 IRR max -5 0 0,53 PI max 0,01 0,53 0,60

The subjective weight of the attributes was determined by using expert

pairwise evaluation as a subjective approach. Pairwise evaluation of the criteria provided by experts is presented in Table 3.

Table 3.Subjective Weights of Criteria.

Criteria

Total C1 C2 C3 C4 C5

Weight 0,10 0,26 0,36 0,14 0,14 1,00

Multicriteria analysis of selected alternatives was performed applying TOPSIS method. By applying this approach the efficiency of the alternatives of facility management has been determined and following priorities for the alternatives was obtained: A3, A2, A1. The most efficient option for managing multi-functional sports and entertainment arena is the combined facility management. The calculation results are given in Table 4.

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Table 4.Data Obtained by Applying TOPSIS Approach.

Alternatives

A1 (in-house)

A2 (outsourced)

A3 (combined)

Efficiency value (%) 2,4 84,6 97,6 Priority order 3 2 1

The findings of study suggest operators of multi-functional arenas that they

can effectively contribute to enhance business performance by designing proper facility management strategies, assuring appropriate facility management approach and implementing effective maintenance actions. Several other eventual extensions of present study are considered to carry out, including development of methodology for assessment and selection of multi-functional arena tenants and events providers. CONCLUSIONS

This paper provided an overview on the different ways of carrying out facility management of multi-functional sports and entertainment venues and related topics. Six different focus areas have been identified and different methodologies and streams of research are studied. The analysis underlined the need for performing research, since very few studies have explored the prioritizing sports venue facility management approaches as well as exploring their suitability and benefits.

Although the venues for large sports events can be well used during events time, concern exists on how to effectively and sustainably operate it in the long run. Thus model for the facility management of multi-functional sports and entertainment arena is presented in the paper. The developed model provides arena operator with a needed support in selecting appropriate facility management option in order to increase the effectiveness of sports and entertainment venue business. The value and utility degree of different facility management strategies are defined by implementation of multi-criteria decision-making methods.

Proposed facility management model was applied to the hypothetical case study - a multi-purpose sports and entertainment arena located in Kaunas, Lithuania. Three facility management alternatives were suggested and implicated in the multiple criteria evaluation: in-house, outsourced and combined facility management options. There is determined set of criteria for problem solution and present multi-criteria problem solution model. The findings revealed that success is based upon effective and efficient management of considerable costs while combining in-house and outsourced options for sports and entertainment facility operation and maintenance. REFERENCES Ahlfeldt, G. and Maennig, W. (2010). “Stadium architecture and urban development

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