Can hockey survive in the desert?

By Chris Kudialis

Monday, Aug. 1, 2016 | 2 a.m.

An NHL team can be a lucrative hallmark of a city’s identity. It also can be a money-bleeding thorn in a city’s economic side.

In hockey towns on the level of New York, Toronto and Montreal, where the sport is deeply embedded in the culture, pro teams bring their owners as much as $100 million a year in profit and enrich their home-base economies with millions more, according to a November report from Forbes.

But in less traditional markets, teams can lose money and have a negative economic impact. Take Phoenix and Miami. Last season, the Arizona Coyotes had an operating loss of $4.5 million, according to the Forbes report, while the Florida Panthers lost nearly $20 million. Both teams in the bottom-dwelling NHL cities play in arenas funded primarily by taxpayer dollars.

In Arizona’s case, the Coyotes’ Gila River Arena welcomed 13,433 visitors per game last season. That’s just under 79 percent capacity and good for 29th of 30 NHL teams, according to ESPN attendance numbers that generously include the players, vendors and team staff. Comparatively speaking, Montreal averaged 21,288 at its Bell Centre, over its 21,273-seat capacity.

The Florida Panthers, who made the playoffs last season as the third seed in the NHL’s Eastern Conference, filled 15,384 seats, or just over 80 percent of its home arena. But like Arizona, Florida’s team is relatively new by NHL standards. The Panthers were established in 1993, the Coyotes in 1996. Neither team has won a Stanley Cup or established a legacy of winning.

“It helps to have a team that wins, especially in nontraditional sports markets,” said Victor Matheson, an economics professor and sports economist at College of the Holy Cross in Massachusetts.

In defiance of its newness to the league and unconventional character, Las Vegas is hoping to be more like sister NHL cities in the northeastern United States and Canada. Franchise majority owner Bill Foley said the city has long been hungry for professional sports. He believes so strongly in that untapped audience that he threw down $500 million as part of the NHL’s fee to expand here.

“This is a winner,” Foley said. “It’s unbelievable how much the community is behind this team.”

Las Vegas is palpably stoked. But will that excitement bank, given the intense competition for the dollars of locals and tourists, and the massive stadium project that could add the NFL to the mix?

Foley is unfazed. “We’re going to do great,” he says.

• • •

On Feb. 9, 2015, the first day he collected $100 season-ticket deposits to get the NHL’s attention, Foley had nearly 4,000. Within a month, he had 10,000 of the 13,000 deposits needed, and the tally is now well beyond.

The response was enough to convince the California businessman, owner of Jacksonville-based Black Knight Financial Services, to buy a home in Las Vegas (one of four he owns across the country). Foley, whose love for hockey goes back to his playing as an elementary schooler, said he also planned to invest in a 15 percent ownership stake in T-Mobile Arena, where his team will play. MGM Resorts and AEG Entertainment paid a combined $375 million to build the Strip-side venue, which opened in April. Of 82 regular-season games, 41 will be played at home, adding to an annual schedule at T-Mobile that features sellout music acts and awards shows.

As ticket deposits passed the 13,000 mark in July 2015, Foley formally submitted an application for NHL expansion to Las Vegas. He waited nearly a year for official confirmation from league Commissioner Gary Bettman, who announced June 22 that the NHL’s 31st franchise would call the valley home. The puck will drop on T-Mobile Arena ice next fall for the 2017-18 season.

While game-by-game economic forecasts for the new franchise’s impact haven’t been conducted, the team will draw both locals and tourists, said Brian Gordon, principal at Las Vegas-based economic research firm Applied Analysis.

“Las Vegas now has 41 more reasons to have out-of-towners jump in a car or hop on a plane bound for the city of lights,” Gordon said of the annual number of home games.

Gordon added that citywide economic analyses aren’t typical for a venture like this, because private ownership groups don’t have to be concerned with the value to the supporting community. At the end of the day, he said, owners are more focused on their own pocketbooks and making sure the team succeeds. That “almost always” results in a positive contribution to the local economy.

Foley put a finer point on it.

“I don’t want other teams knowing what we’re going to make, and they don’t want us to know what they’re making, either,” he said.

In pitching his team to the NHL, Foley used league averages to project salaries for a crew of 75 that would include front-office staff and team employees such as trainers, scouts and marketing staff. A maximum of $73 million a year can be spent on player salaries, as defined by the NHL’s current cap.

All would work between T-Mobile Arena and a proposed practice facility on Pavilion Center Drive between Rosemary Park Drive and Summerlin Centre Drive, slated for construction in October.

The owner of Las Vegas’ first major pro sports team said he wanted to model his franchise after the Anaheim Ducks or San Jose Sharks, which are based in nontraditional hockey markets and have brought results on the ice and the financial spreadsheets.

Las Vegas is the first expansion team to hit the league since 2000, when owners of the Columbus Blue Jackets and Minnesota Wild franchises paid $80 million each to join. Comparatively speaking, Foley’s $500 million price tag is staggering. Content with its scope, the NHL has made expansion almost prohibitively expensive.

“There’s no effort crying out for immediate expansion,” Bettman said in 2014.

• • •

While the tourism industry is celebrating the new team, some sports scholars dispute its chances for long-term success in the valley.

Vanderbilt University sports economist John Vrooman said hockey was likely to survive but not thrive, pointing to Las Vegas’ “fluid fan base” and competition from the gaming industry and attractions.

“It’s highly doubtful the expected cash flow from hockey in the desert can justify the bloated expansion sticker price,” he said. “Visitors are not coming to Vegas to watch hockey, and unstable transient fan bases do not create value in the corporate-client driven NHL.”

Among cities more suited to pro hockey, according to Vrooman, are Quebec City, Quebec; Seattle; Portland, Ore.; and even Hartford, Conn., the latter three of which did not submit bids for expansion. Or, Vrooman said, the NHL would have been better off by “doing nothing,” avoiding expansion altogether. If Las Vegas’ franchise ends up like Arizona’s, Florida’s and as many as five other teams that operate in the red each year, it could add another skid mark to a league becoming a distant fourth among the country’s four major sports. Vrooman said he was surprised that Las Vegas’ franchise didn’t come in the form of a relocated team from one of the league’s struggling markets. Instead, he says, the NHL is taking a risk.

Holy Cross’ Matheson agreed.

With no “natural” hockey fan base, Las Vegas will have to hope for the team’s novelty to drive it through the first few seasons, Matheson said, adding that he doesn’t see it being profitable for more than five years.

“I would say they’re going to have a tough go at it,” Matheson said, “but if a private investor wants to gamble their own money, they should be able to do that — either in a casino or on a hockey team.”

With Las Vegas’ plethora of entertainment and dining options outside of T-Mobile Arena, Matheson estimated that the hockey team wouldn’t add to the economy. If anything, he argued, Las Vegas’ NHL team would subtract from it, when patrons who might otherwise spend their evenings inside a casino spend it inside the arena, and the team’s players from other countries take their salaries home in the offseason.

While other amenities have been cutting into the gaming pie for years — such as dining and nightlife — many are within casinos.

“It’s a lot easier for a person to spend money in a casino than in an arena for a hockey game,” Matheson said. “I don’t think these are people who would otherwise be doing nothing.”

But Foley believes the team will only grow the city’s capacity to satisfy locals and tourists, and he criticized out-of-town analysts for underestimating the team’s value to the community.

“Vegas has become about concerts, sporting events and great restaurants,” he said, “and we’re going to fit into that mold.”

Matheson said he couldn’t think of any professional sports franchises that rely primarily on tourism and visiting fans to fill stadiums.

Both scholars agreed that in the “unlikely” event that Las Vegas is awarded an NFL franchise, the NHL team’s chances of survival would diminish even further. A Las Vegas Raiders or Chargers franchise would ultimately make the NHL team the city’s “stepchild,” Vrooman said.

Vrooman compared the possible Las Vegas scenario with Nashville, where the NHL’s Nashville Predators, who arrived in 1998, lost some of their corporate sponsors and fan base when the new Adelphia Coliseum opened the next year for the NFL’s Tennessee Titans.

Foley, however, said he had sponsors “lined up,” and didn’t believe a proposed NFL team would interfere. He went so far as to say he’d welcome an NFL team and even buy season tickets. To Vrooman’s argument that Las Vegas is too economically shallow for hockey to thrive, Foley said thriving wasn’t necessarily his goal. Instead, the newest NHL franchise owner wants to sustain the Las Vegas team for the long haul.

Foley said he’s “very confident” the team would make money, but acknowledged the importance of winning to that future. He aims to make the playoffs within three years, and to win the Stanley Cup within eight.

Asked what it would take to keep the NHL team from moving on to another city if it didn’t win here, Foley said he’d do “whatever it takes” to keep it rooted, even as a loser.

“The team is going to be in Las Vegas forever,” he said. “It’s not going anywhere.”

10 things to know about Las Vegas' new team

1. Everyone has an opinion on what the team’s mascot should be — the Black Knights, Neon Knights, Mob, Outlaws, etc. Foley may reveal the name in September at the T-Mobile Arena party for season-ticket holders. He ruled out anything to do with snakes or the Rat Pack and purchased multiple website domain names to cover the eventual decision.

2. Majority owner Bill Foley, who spent $500 million to secure an expansion franchise for Las Vegas, is all-in on making this our team. He even bought a house in Summerlin. But, because of the triple-digit weather, Foley has spent the summer with advisers at his Montana ranch, planning the franchise’s future.

3. Foley’s goal is for the Las Vegas franchise to make the playoffs within three years and win the Stanley Cup within eight.

4. Foley is building a $20 million practice facility near Downtown Summerlin. The space will include locker rooms, coaches’ offices, a rehab center and more. The team will play its games on the Strip, but Summerlin will be its home.

5. Las Vegas won’t have any players until the expansion draft in June 2017. It is required to select a player from every existing team and spend at least 60 percent of its salary cap, which is projected to be about $75 million.

6. The new franchise is guaranteed a top-six pick in the entry draft, which will be staged after the expansion draft.

7. George McPhee, recently named the Las Vegas team’s general manager, spent nearly two decades in the same position with the Washington Capitals. He helped the Caps reach the 1998 Stanley Cup Finals and drafted Alex Ovechkin, one of the game’s elite players. A coach won’t be hired until the spring.

8. Assigned to the Pacific Division of the Western Conference, Las Vegas will compete with Anaheim, Arizona, Calgary, Edmonton, Los Angeles, San Jose and Vancouver. The 82-game regular season runs from October to April, and Las Vegas will play four or five games against each divisional opponent.

9. While sports economists say Las Vegas isn’t a hockey city, Foley hopes to make it one. His vision includes running youth leagues out of the practice facility, educating a younger generation on the ins and outs of the sport, and encouraging their fandom.

10. Season-ticket deposits already exceed 15,000 seats of the 17,500 layout at T-Mobile, but the sales push continues. Foley is shooting for 85 percent season-ticket holders, saving some seats for single-game buys, which are estimated to cost $20-$220.