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Hotel and restaurant owners have lauded the success of the Virginia Beach Sports Center for increasing their sales since it opened two years ago, but a recent audit revealed the facility is losing money.
The Sports Center, at the Oceanfront on 19th Street near the convention center, is one of the largest multipurpose indoor sports facilities on the East Coast. It has hosted nearly half-million athletes and spectators.
But it already has lost millions of dollars, according to City Auditor Lyndon Remias, who shared the findings of the audit with the City Council at Tuesday’s meeting.
The attraction has helped make the city more of a year-round destination as the council wanted, Remias said, but the city has concerns about the financial sustainability of its operations.
The Sports Center houses 12 basketball courts that can be converted into 24 volleyball courts. It also contains a 200-meter hydraulically banked indoor track, capable of hosting NCAA and World indoor track and field meets. The venue can host wrestling, gymnastics, field hockey, cheerleading, pickleball, cornhole and more.
The city built it to grow the sports tourism industry in Virginia Beach. It’s funded by tourism taxes collected through lodging, meals and admissions.
Eastern Sports Management of Fredericksburg operates the center under a 10-year agreement with the city. Virginia Beach Convention & Visitors Bureau books the events.
The economic impact of the Sports Center during its first two years is estimated to be $132 million, according to the operator. But Remias’ report concludes that the methodology to determine the impact is flawed.
Eastern Sports Management receives a monthly management fee of $30,000 as well as a revenue-based monthly incentive for the operation and maintenance of the center.
In its first year of the operation, the operator lost $1.3 million and $1.4 million the following year. The company has already depleted $750,000 in a reserve account to pay unanticipated operating costs and has requested to borrow $260,000 more from the city, Remias said.
He recommends the city and the operator identify ways to increase operating revenues by hosting more events during the summer and selecting optimal price points and minimizing discounts.
High hotel costs and difficulty blocking rooms have limited the number of events that can be held during the summer, so the operator relies on local camps and league play instead, according to the city.
The report also recommends suspending Eastern Sports Management’s incentive fee until funds provided by the city have been returned and to place the company on probationary status until expectations are met.
In response to the audit, Eastern Sports Management’s owner John Wack wrote a letter to the city.
“High traffic from events and a post-Covid staffing reality have caused facility operations to be stressed,” he wrote.
Wack added that the facility’s expenses are more than originally anticipated due to the Convention & Visitor Bureau’s effort to offer competitive pricing on bookings, the number of large events and maintenance standards.
“Everyone loves the Sports Center, but I think we need to get a better handle on income and expenses,” Councilman Worth Remick said after the presentation.
Remias is hopeful the situation will improve if the city and the operator follow his recommendations.
“I see nothing but growth in that facility,” Remias said. “I’m very confident they can turn things around from a fiscal standpoint.”
Stacy Parker, 757-222-5125, email@example.com