Facilities Management Workshop Business Plans. Strategic Partners Official Partners Supporter P.1

Transcription

1 Facilities Management Workshop Business Plans Strategic Partners Official Partners Supporter P.1

2 The aim of the document is to give investors and entrepreneurs a high-level overview of the opportunity and key considerations they should take into account while entering a similar business. This document has been prepared for marketing purposes only. All analysis and conclusions in this report are based on various assumptions that are subject to uncertainty. Future results or values could be materially different from any forecast or estimates contained in this document. Investors and entrepreneurs should independently evaluate the opportunity for their business case. No representation or warranty, express or implied, is made as to accuracy or completeness of underlying assumptions, estimates, analyses or other information contained in this report, and nothing contained herein is or shall be relied upon as a promise or representation as to past, the present or the future. Economic Policies and Research Department For more information, please contact to: qsbc@mec.gov.qa P.2

3 TABLE OF CONTENTS Facilities Management Commercialise Existing Venues Digitalising the Stadiums Sports Venue Operations & Maintenance P.3

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5 We have the pleasure to share with you several opportunities to invest in sports businesses in Qatar. These opportunities will help you play a key role in the development of one of the fastest growing economies in the GCC. Sports and sports related industries have been a key focus of Qatar s economy and we invite you to participate in these long-term opportunities. The nation is making its mark in the international sporting arena and aims to become a leading sports business hub in the near future. Overall, Qatar s key differentiating factors are: - Fast growing economy - Focus on the sports industry - Highly developed infrastructure - Supportive regulatory environment - Gateway to the GCC and wider MENA region - Support 4 across all the phases of the business cycle: Pre-operation, start-up, growth and maturity - Preferential treatment by government entities to Qatar based companies We hope that you will find these business cases helpful in your initial assessment of setting up a sports business in Qatar. 2 1 Sports business industry International sporting centre: 2006 Asian Games, 2019 IAAF World Championships, 2022 FIFA World Cup TM 2 Economic stability Investments in petrochemical, manufacturing, industrial, financial and real estate sectors contributes to fast growing GDP Highest GDP per capita in the world 4 3 Energy & Infrastructure Leading player in the global energy market Tremendous investment in world class infrastructure 4 Knowledge Economy Qatar invests heavily on innovative knowledge-based projects: Education City and Qatar Science & Technology Park Attractive to innovative corporations and entrepreneurs 5 Ministry of Economy & Commerce Ministry of Youth & Sports Sport Business Opportunities Forum Flagship Business Cases Supreme Committee for Delivery & Legacy Qatar Olympic Committee Aspire Zone Foundation 3 P.5

6 P.6 SPORT BUSINESS OPPORTUNITIES FORUM Facilities Management

7 Introduction Facilities management presents a lucrative opportunity for Qatar-based companies wishing to provide services for planned sports venues in Qatar and the GCC The sports industry is complex in nature and covers a wide range of interlinked and interdependent activities. Seven areas of opportunity have been identified to analyse the sports market, as outlined in Exhibit 1 and detailed below: Event management & promotion: refers to the entire process of staging an event from the bidding phase to event delivery and postevent services Sports development: focuses on the engagement of people with sports, particularly at a young age, both from an elite (professional) sports as well as from an amateur sports perspective, eventually leading to the participation in top level competitions Venue construction: comprises of the necessary steps that need to be taken for the construction of venues and training facilities including planning, design development and construction Sports goods & equipment: refers to the entire process required to design, produce, distribute and sell sports goods & equipment Sports commercialisation: refers to the activities that aim to monetise the commercial rights of an event (e.g. broadcasting, sponsoring, ticketing) and bring revenues to the rights holder Sports tourism: revolves around the necessary steps taken to influence traveling to participate in or observe sports or other entertainment events Venue operations & maintenance: comprises of the activities necessary to operate and maintain stadiums and venues Exhibit 1: Areas for sports opportunities SPORTS Event management & promotion Sports development Venue construction Sports goods & equipment Sports commercialisation Sports tourism Venue operations & maintenance Facilities management Opportunities in venue operations & maintenance One opportunity for potential investors in Qatar is the provisioning of facilities management services. This opportunity falls under the venue operations & maintenance area, and operates specifically within stadiums operations. Venue operations and maintenance opportunities can be classified into five parts, as follows: Assets management Stadiums operations Event operations Sales & Marketing Services To operate a stadium or an event, one must have access to a stadium or venue, either through leasing or ownership. Stadiums operations include non-event related activities that need to take place in order to maintain the stadium in good condition and ensure it can be used for events, athlete s training or other purposes. Event operations include the activities required to take place in order to stage an event at the venue like catering, security, ushering and ticketing. Sales & marketing refers to the ability to attract either permanent tenants (e.g. football clubs), regular events (annual), or one-off events (concerts) to guarantee a healthy event calendar and revenue stream. Services at stadiums and events can include concessions to food and beverage companies, availability of WiFi, technology and retail shops among others depending on the type of event. Sport Business Opportunities Forum Flagship Business Cases 3 P.7

8 Introduction Opportunity overview A business opportunity exists for Qatar-based companies to provide facilities management (FM) services for existing and planned sports venues in Qatar and the rest of the GCC. Facilities management companies support in creating a world-class environment that will keep the athletes and audience coming back time after time. This includes daily maintenance routines, parking management, administration services, technical services, event set-ups and cleaning. Capability and capacity constraints in the Qatari market create an opportunity for SMEs Being one of the fastest growing economies in the world, Qatar presents a wealth of opportunities for the FM sector. Qatar has a busy calendar for both international and national events. The government is investing significant funds in the sports sector through different entities such as the Ministry of Culture and Sports (MCS), Qatar Olympic Committee (QOC), Aspire Zone and the Supreme Committee for Delivery and Legacy (SC). Most of the existing and new sports venues (including eight new FIFA World Cup TM stadiums and training pitches) in Qatar are owned/managed by government or government-related entities. In addition to sports venues, there are privately owned venues such as commercial and residential buildings which provide additional opportunities for facilities management companies. At present, the facilities management market in Qatar is fragmented and evolving. Only a limited number of players (international and local) are capable of meeting service requirements for these high profile venues. Furthermore, few Qatari companies have international experience that they can leverage. The opportunity may require new/currently operating companies to collaborate with international competitors to deliver these services. Most of these venues/facilities are high profile facilities and host events of national and international importance. FM companies play a key role in helping venues make a lasting impression on all the stakeholders. This provides an opportunity for local Qatari entrepreneurs or Qatarbased companies to play a more prominent role in providing facilities management services to meet growing demand. The facilities management sector in Qatar represents more than 8% of the Middle East market, third only to KSA and UAE The country s facilities management sector is expected to exceed the regional CAGR of 4.1% Sport Business Opportunities Forum Flagship Business Cases 4 P.8

9 Market overview (1/2) Qatar market The facilities management market in Qatar is expected to increase from ~QAR 12 billion in 2016, to ~QAR 25 billion in The sports facilities management market however is in the developing stage and is expected to grow from ~QAR 213 million in 2016 to ~QAR 701 million in Market drivers The primary factors driving the demand in Qatar are: Infrastructural development: The construction industry in Qatar accounted for ~10% of the GCC market in Growth is driven by key projects such as Qatar Metro, investments across hospitality, commercial and retail sectors and construction of the World Cup venues Regulatory development: Customers are facing increasing pressure from health, safety, and environmental (HSE) regulatory bodies. In an effort to focus on their core mission, they are outsourcing their regulatory compliance to FM service providers Increased service integration: Demand for integrated solution providers that offer a single point of contact, efficiency and financial certainty Demand for value added services: Customers are increasingly demanding that service providers deliver solutions that would help them drive their social, economical and environmental corporate initiatives FM providers in Qatar The FM market in Qatar is structured into three groups: single service providers, bundled service providers and integrated FM providers. Most players in the market are single service/bundled service providers and are dominated by SMEs. International companies (such as MMG and DTZ) have either partnered with a local sponsor or are working on a project by project basis. Mosanada, a joint venture between Qatar Olympic Committee, DTZ and Aspire Katara Investments, is a significant facilities management specialist in the region. The market also features large Qatari flagship businesses such as QF s AMLAK Holding. Sport Business Opportunities Forum Flagship Business Cases Exhibit 2: Qatar market size 1 for sports related opportunities (QAR millions) 213 Exhibit 3: Qatar market size 2 for non-sports related opportunities (QAR billions) Exhibit 4: Sports venues in GCC and other key regional countries Regional total % % Legend: Non GCC For 23 shortlisted sports venues including new eight FIFA World Cup stadiums, team base camp (TBC) and training sites GCC (Non-Exhaustive) Source: Middle East Facilities Management Association 2 Includes residential and commercial buildings and other venues such as exhibition centres P.9

10 Market overview (2/2) GCC market Qatar-based companies also have potential to expand in 2019 to other GCC markets. The pathway to expansion includes options such as organic growth, acquisitions, orjoint ventures. The GCC market is estimated to be QAR 136 billion in 2016 with a CAGR of 8%, including inflation. KSA and UAE are the biggest markets in GCC The facilities management market in KSA is expected to reach QAR 83 billion in 2016 (market share of 56%). However, it is still unsophisticated, with much of the market being served by labour supply companies. The rate of outsourcing FM services in KSA is less as compared to UAE, Qatar and Bahrain. UAE is the second biggest market in GCC with forecasted size of ~QAR 40 billion in Asset owners in the UAE are the most willing to outsource facilities management services to professional service providers compared to other countries in the GCC. Although Bahrain has high outsourcing rates and high spend on facilities management (as a percentage of GDP), the market is small as compared to other GCC countries. Oman and Kuwait are both evolving markets and asset owners still seems to prefer to insource facilities management services. More marketing effort is required in these markets to make asset owners aware of the benefits of facilities management. Exhibit 5: GCC market size (QAR billions) % Includes both sports and non-sports related markets GCC market size of QAR 136 Bn in 2016 and high CAGR of 8% provides additional opportunities for Qatari companies Exhibit 6: Growth drivers of growth for GCC countries, USA, UK and Germany Global market The global facilities management market is displaying growth trends in both emerging as well as mature markets. The global FM market is estimated to reach $394 billion by 2017, growing at a CAGR of 3%. Source: Middle East Facilities Management Association and Credo; Facilities management in KSA Sport Business Opportunities Forum Flagship Business Cases 6 P.10

11 Industry overview: GCC and Qatar There is an opportunity for Qatari companies to provide premium, differentiated services in Qatar and the GCC Supplier power Supplier market is fragmented with wide variety of consumables, manpower and equipment suppliers Threat of substitutes Main tenants (e.g. sports clubs) and venue operators can perform facilities management services internally thereby undercutting the need for a professional facilities management service provider Unavailability of any practical substitutes for facilities management services Industry rivalry In general terms, the market for facilities management features high rivalry Operators outbid each other on securing new assets to manage, often taking significant risks on their ability to monetise and increase commercialisation Barriers to entry The long-term nature of the contracts for venues limits the threat of new entrants Low initial investment required for medium-sized operations when operating in mid-low segment Limited regulatory hurdles for new entrants Fragmented market Buyer power Venue owners, often the public sector or large developers, benefit from significant bargaining power as there is a large number of suppliers available Owners typically sign long-term contracts thereby giving them bargaining power to negotiate Low switching cost for residential and commercial buildings but high switching cost for commercial venues such as stadiums and conference centres Limited differentiation of services among operators in mid/low end segments but high end commercial market is differentiated Impact of complementary products The rise in construction projects in the Middle East presents enormous value by boosting the need for related sub-sectors including facilities management Green building techniques, which involve professional maintenance of buildings are gaining traction in addition to an increased focus on energy conservation Sport Business Opportunities Forum Flagship Business Cases 7 P.11

12 Financial plan (1/2) Investment To capture the whole opportunity, an investor must be capable of investing ~QAR 360 million. Such an investment has a NPV of ~QAR 218 million for the next ten years (2016 to 2025). The expected IRR for this opportunity is 15%. Local businesses with limited financial capability and risk appetite may capture part of the opportunity by investing less than the maximum required investment as detailed in the scenarios below: 1. An investment of QAR 180 million (50% of the maximum investment) would generate a NPV of ~QAR 109 million 2. An investment of QAR 18 million (5% of the maximum investment, captured by ~20 SMEs), would generate a NPV of ~QAR 11 million 3. If an investor is limited to an initial investment of ~QAR 5 million, the resulting NPV would be ~QAR 3 million Revenue If one company were to capture the full facilities management opportunity in Qatar and the GCC, its revenues would increase from ~QAR 507 million in 2016 to ~QAR 1.2 billion in However, investors with a lower financial capability to invest or lower risk appetite would still experience significant revenue growth (refer to Exhibit 10). The opportunity is expected to expand to the rest of the GCC region in This market is expected to account for ~9% of total company turnover. Larger and less specialised facilities management companies will have a wider and more diversified revenue base, allowing them to spread their fixed operating costs over a greater number of customers and make them less susceptible to seasonal and popularity trends of individual sports and venues. Sport Business Opportunities Forum Flagship Business Cases Exhibit 7: NPV for 2016 to 2025 (QAR million) Investment 3 3 Investment = Start-up CapEx + (DSO/365)* operating costs for first year Exhibit 9: Revenue (QAR million) Qatar Other GCC Years % Exhibit 8: Investment breakdown based on benchmarks (Illustrative) 4% CapEx Pre-operating expense Working capital 38% Staff wages Office lease Marketing 1, Investment (QAR million) 1, ,171 Total ( ) 58% Warehouses Maintenance equipment Vehicles Furniture IT hardware Exhibit 10: Annual revenue vs. Start-up investment (QAR million) ,081 8, P.12

13 Financial plan (2/2) Operating costs Typically, 90% of the total cost for a facilities management company is costs of goods sold, the largest component of which is cost of labour. Purchases represent the second highest cost to this industry. Purchases mostly include smaller types of equipment, office requirements, retail products, consumables, chemicals and other miscellaneous items. Some of the larger players have negotiated buying agreements with suppliers to secure low equipment prices, particularly for sports equipment, such as balls and goals. Staff wages represent 71% of SGA cost, based on industry benchmarks. However, industry operators are integrating facilities management and scheduling software to reduce facilities headcounts and keep industry facilities profitable. Advertising and marketing expenses are approximately 5% of SGA based on industry benchmarks. Rent is less than 7% of SGA. Exhibit 11: Operating costs 90% CapEx intensity: 10% Exhibit 12: CapEx and Opex intensity Low Facilities management is not a CapEx intensive industry, with expected CapEx primarily related to start-up costs OpEx intensity: Medium SG&A Highest cost is the staff cost followed by rent and marketing cost Costs of goods sold Labour cost represents the majority of COGS followed by purchases i.e. consumables Keeping labour cost low will help to maintain a moderate OpEx intensity Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) EBITDA is projected to reach QAR 73 million in 2025, with an EBITDA margin of 6%. This is based on the cost structure and revenue analysis for this opportunity. Exhibit 13: Projected EBITDA in 2016 to 2025 (QAR millions) EBITDA% 32 Due to initial startup investment EBITDA 4 For full opportunity, assuming 100% investment of investment Sport Business Opportunities Forum Flagship Business Cases 9 P.13

14 P.14 SPORT BUSINESS OPPORTUNITIES FORUM Commercialise Existing Venues

15 Introduction Commercialise existing venues by catering to local preferences and attracting premium international teams to play a series of exhibition matches in Qatar The sports industry is complex in nature and covers a wide range of interlinked and interdependent activities. Seven areas of opportunity have been identified to analyse the sports market, as outlined in Exhibit 1 and detailed below: Event management & promotion: refers to the entire process of staging an event from the bidding phase to event delivery and postevent services Sports development: focuses on the engagement of people with sports, particularly at a young age, both from an elite (professional) sports as well as from an amateur sports perspective, eventually leading to the participation in top level competitions Venue construction: comprises of the necessary steps that need to be taken for the construction of venues and training facilities including planning, design development and construction Sports goods & equipment: refers to the entire process required to design, produce, distribute and sell sports goods & equipment Sports commercialisation: refers to the activities that aim to monetise the commercial rights of an event (e.g. broadcasting, sponsoring, ticketing) and bring revenues to the rights holder Sports tourism: revolves around the necessary steps taken to influence traveling to participate in or observe sports or other entertainment events Venue operations & maintenance: comprises of the activities necessary to operate and maintain stadiums and venues Exhibit 1: Areas for sports opportunities SPORTS Sports goods & equipment Sports development Venue construction Venue operations & maintenance Sports commercialisation Event management & promotion Sports tourism Commercialise existing venues Opportunities in sports tourism One opportunity for potential investors in Qatar is commercialising existing venues by catering to the local population s preferences. The focus is on attracting premium international football teams to play a series of exhibition matches in Qatar. The opportunity falls under sports tourism, defined as follows: Assets Packaging Sales & promotion The availability of two categories of assets sports related and enabling non-sports related- is needed to develop sports tourism. Sports related assets can include a motor track for example, while nonsports related assets can include the rights to hold an event. Some assets can be bought, such as rights to an event, while other assets can depend on other factors such as geographical location, etc. Packaging refers to the ability of sports tourism destinations to package interesting and targeted offers that will attract local, regional and international tourists interested in specific events or sports (e.g. golf tourism). Offers do not have to only focus on the sport or event itself, but rather bundles the sport or event along with hospitality or travel can help increase the induced benefits of sports tourism. Attractive packages should be tailored to suit different audiences and reach a large number of potential customers. Proper media and marketing can help organisers capitalize on sporting events and entertainment. Sport Business Opportunities Forum Flagship Business Cases 2 P.15

16 Introduction Opportunity overview Post 2022 FIFA World Cup Qatar, the nation will have a number of world-class venues which it should utilise going forward. Football is a clear preference in the region, hence, Qatar should build on the preferences of GCC residents and work with QTA and event managers to attract such events. Specifically, there is a keen interest in watching games played by premium international football teams such as PSG, Bayern Munich, FC Barcelona and others. Qatar should attract these teams and organise a series of locally-held exhibition matches as either part of the pre or regular season games, commercialising all-inclusive packages to international spectators. It is common for these international premium teams to take part in warm weather training at Aspire s world-renowned facilities during the winter (e.g. Bayern Munich in January 2015), and hence their presence in Qatar during this time can be leveraged to host pre-season exhibition matches. Over 50% of respondents in Qatar and the UAE indicated an interest in international football tournaments Existing assets and local interest provide Qatar with the opportunity to commercialise venues and earn extra revenue Surveys reveal that residents of Qatar, the UAE and Saudi Arabia have modest interest in sport in general with higher interest in watching sports. Mediocre levels of attendance at sports events due to many reasons including lack of substantial promotion of events, poor scheduling and low quality or otherwise, present investors with an opportunity to cater to local preferences by attracting premium international teams, and addressing such issues in order to properly commercialize existing venues. Surveys also indicated that football is overwhelmingly the most popular sport in the region with 80% of respondents indicating their interest. Additionally, over 50% of respondents in Qatar and the UAE have shown more interest in international football matches compared to local leagues. It has become common for premium international teams in the West to head to the Gulf for stable warm-weather training during the cold months of winter. Professional teams such as Manchester United have opted to train in Qatar to make use of Aspire s advanced facilities. This time can be used to host exhibition matches to cater to the local community and its interests, as well as to commercialize existing and often idle venues. In preparation for the World Cup, Qatar is building a number of advanced stadiums and venues. These venues will be available after post the event. Event management companies with connections to stadium owners and operators (e.g. Aspire Zone, QOC) can capitalize on local and regional community interests in order to commercialise the venues and earn extra revenue. Football is overwhelmingly the most popular sport in the region with 80% of respondents indicating their interest Sport Business Opportunities Forum Flagship Business Cases 3 P.16

17 Market overview Qatar market Currently, key customers in the region tend to watch international football tournaments on TV as games that the local population is interested in are typically held abroad. However, keen interest has been shown by the local community in watching international football teams play games in Qatar (e.g. Bayern Munich vs Aspire in January 2015). The market size for commercialising existing venues in Qatar is expected to increase from ~QAR 15 million in 2016 to reach ~QAR 35 million in Market drivers The primary factors driving the demand locally are: Premium teams: Ability to attract premium international teams to fly to Qatar to train and play exhibition matches is key. Investments by QSI in premium international teams such as PSG also work in favour of Qatar Interest in sports: Keen interest in the sports exhibited by the local and regional community for continuity and growth Advanced facilities: Access to advanced facilities (e.g. Aspire Zone) is a crucial aspect capable of attracting premium teams to attend Scheduling: Proper scheduling of such exhibition matches is necessary to guarantee attendance, a key issue highlighted by residents in a survey conducted by Qatar Sports Tanmiya Disposable income: Higher levels of disposable income drives demand for exhibition matches Key market considerations Sport Business Opportunities Forum Flagship Business Cases Exhibit 2: Qatar market size for commercialising existing venues (QAR millions) % Exhibit 3: MENA sport preferences* The current competitor structure is comprised of SMEs focused on event management and promotion. Some companies are sports events focused (e.g. AspireInfront), while others are more generic. Any company with experience in hosting a large-scale event is capable of organising such an event in Qatar, given it has access to advanced facilities and premium teams. However, companies such as AspireInfront could be the key organiser for such an event due to its connections to both the premium teams and the advanced facilities. Other event management companies can also host such events by first building relationships with the international teams as well as with owners of advanced stadiums -more soon to come online as a result of the FIFA World Cup In addition, investors need to work closely with key parties in Qatar such as MCS, QOC, QSI, QTA and Qatar Airways to supportthe enablement of such events. Commercialising the venues does not have to be limited to sports, but companies can also focus on commercialising venues by hosting concerts, conferences, and other events capable of attracting a large number of people. 8% 8% 11% 10% Football Swimming Wrestling Basketball Handball 80% * Interest recorded as individuals who rate themselves as interested in sport Source: Repucom SDNA January 2014/15 4 P.17

18 Industry overview: Global Commercialising existing venues by attracting premium international teams to play preseason matches in Qatar is attractive due to interest shown by the local community Suppliers power Premium teams have high bargaining power when it comes to playing exhibition matches. Typically their schedules are busy between training and season games and hence, it is unlikely for these teams to travel to Qatar purely for the exhibition matches, but it would rather be as part of their warm-weather training during the winter Threat of substitutes Substitutes are either watching local teams play (low interest from the local community), or watching premium international teams play on TV. The local community rarely has the opportunity to watch these premium games live, thus garnering interest On the other hand, event management companies can commercialise venues by hosting concerts, conferences, and other non-sports related events Industry rivalry The market for commercialising existing venues by hosting matches by premium international teams is small and fragmented, however, other event owners may commercialise existing venues by hosting concerts, large-scale events, conferences, etc. This is dependant on consumer interests and regional preferences Barriers to entry The threat of new entrants is quite low given the fact that there are only a select number of stakeholders that would be able to attract and convince premium international teams to fly to Qatar to play a series of exhibition matches Partnerships and collaboration with entities such as Aspire, QOC and QTA are key to enable successful deployment of such events Buyer power Buyers tend to have a low bargaining power as these games typically do not take place in the region, but rather in Europe where most of the football premium teams are located. They are dependant on the availability of these teams and their willingness to come to Qatar to play a series of exhibition matches or to train during the cold months of winter Impact of complementary products Access to advanced facilities such as Aspire Zone can have a drastic effect on the event owner s ability to attract both the premium international teams as well as the attendees to the games Winter-time training at Aspire Zone s advanced facilities attracts premium international teams to its grounds, which can act as an enabler for commercializing these venues QSI s future investment plans in premium international teams (e.g. PSG) works in Qatar s favor Sport Business Opportunities Forum Flagship Business Cases 6 P.18

19 Financial plan (1/2) Investment To capture the whole opportunity, an investor must be capable of investing ~QAR 9 million. Such an investment has a NPV of ~QAR 11 million for the next ten years ( ). The expected IRR for this opportunity is 19%. Local businesses with limited financial capability and risk appetite may capture part of the opportunity by investing less than the maximum required investment as detailed in the scenarios below: 1. An investment of QAR 4.5 million would generate a NPV of ~QAR 5 million 2. An investment of QAR 0.45 million would generate a NPV of ~QAR 0.5 million Investors with less than QAR 0.45 million may face hardships in realising the return on investment for this opportunity. Revenue Commercializing existing venues by holding two friendly tournaments per year, each with four matches, will provide the investor with around QAR 15 million in revenue in year one. The revenue will increase to around QAR 35 million in 2025 with the expectation that the games will gain more traction as the tournaments goes on. This number can be increased if other non-sports events are taken into consideration, as long as they cater to local and regional preferences. Investors with a lower financial capability to invest or lower risk appetite can still experience significant revenue growth from this opportunity (refer to Exhibit 7). Exhibit 4: NPV for 2016 to 2025 (QAR million) Global Investment Exhibit 5: Investment breakdown Costs that will be incurred and financed by the company until the first revenue is earned (e.g. stadium rent, payment to teams, etc.) Includes mainly salaries, office rent and marketing necessary to kick-start the company 39% Exhibit 6: Revenue (QAR million) % % 39% NPV Includes laptops, furniture, hardware, software, etc. Revenue (QAR million) based on investment level Investment (QAR million) CapEx Pre-operating investment (2015) OpEx Exhibit 7: Revenue vs. Investment (QAR million) Years Total ( ) Sport Business Opportunities Forum Flagship Business Cases 7 P.19

20 Financial plan (2/2) Operating cost structure Cost of goods sold comprises mainly of the payment made to the teams, which constitutes roughly 52% of the total operating cost. Stadium rent however represents only 10%. The ratio of revenue being paid to the teams is an estimate and will change depending on the exclusivity and importance of the teams participating in the exhibition matches. On other hand, SG&A costs make up the other 38%. Salaries of the company organising such an event make up the highest percentage of SG&A, accounting for roughly 22% of the total operating cost. Smaller cost categories include office rent (10%) and marketing which stands at 5%. The company structure is flexible and can either be a standalone party or the event can be run by an already existing all-encompassing event management company or venue operator. Exhibit 8: Operating cost structure COGS SG&A Marketing Office rent 5% 10% Salaries 22% 10% CapEx intensity : Low Stadium rent Exhibit 9: CapEx and Opex intensity 52% Payment to teams CapEx is only required in the first year in order to set up the back office side of the business OpEx intensity : Medium OpEx in this opportunity is focused on the hosting of the event itself, including: payment to teams, stadium rent, office rent, salaries, etc. Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) EBITDA is projected to reach QAR 3 million in 2025, with an EBITDA margin of 8%. This is based on the cost structure and revenue analysis for this opportunity. Exhibit 10: Projected EBITDA in 2016 to 2025 (QAR millions)* EBITDA% EBITDA 1 1 Due to investment in CapEx and OpEx required until first revenue is realised * For full opportunity, assuming 100% investment of CapEx Sport Business Opportunities Forum Flagship Business Cases 8 P.20

21 SPORT BUSINESS OPPORTUNITIES FORUM Digitalising the Stadiums P.21

22 Introduction Digitalising the stadium experience provides event owners and venue operators with the opportunity to increase attendance at matches and earn more revenue The sports industry is complex in nature and covers a wide range of interlinked and interdependent activities. Seven areas of opportunity have been identified to analyse the sports market, as outlined in Exhibit 1 and detailed below: Event management & promotion: refers to the entire process of staging an event from the bidding phase to event delivery and postevent services Sports development: focuses on the engagement of people with sports, particularly at a young age, both from an elite (professional) sports as well as from an amateur sports perspective, eventually leading to the participation in top level competitions Venue construction: comprises of the necessary steps that need to be taken for the construction of venues and training facilities including planning, design development and construction Sports goods & equipment: refers to the entire process required to design, produce, distribute and sell sports goods & equipment Sports commercialisation: refers to the activities that aim to monetise the commercial rights of an event (e.g. broadcasting, sponsoring, ticketing) and bring revenues to the rights holder Sports tourism: revolves around the necessary steps taken to influence traveling to participate in or observe sports or other entertainment events Venue operations & maintenance: comprises of the activities necessary to operate and maintain stadiums and venues Exhibit 1: Areas for sports opportunities SPORTS Event management & promotion Venue operations & maintenance Venue construction Sports goods & equipment Sports development Sports tourism Sports commercialisation Digitalise the stadium experience Opportunities in sports commercialisation One opportunity for potential investors in Qatar is digitalising the stadium experience. This will help increase stadium attendance, improve the customer journey and increase overall revenues. The opportunity falls within the sports commercialisation area, defined as follows: Sports rights & property acquisition The first step of commercialisation is the establishment or acquisition of a sports property (e.g. event, league, brand) or its commercial rights (e.g. broadcasting, sponsoring, etc.). Production & servicing Event production is the business of preparing and delivering an event. It is a highly competitive and international business that is typically outsourced by the rights holders to different parties. Sport Business Opportunities Forum Flagship Business Cases Distribution & packaging Distribution and packaging of commercial rights is the process of converting rights into actual sellable products and distributing them to the clients It is typically conducted by the rights holder or its appointed agency. Retail channels Wholesalers/rights acquirers distribute and sell the material through retail channels that make it available for the wider public. Services Services to clients may include sponsorship account management (activation, marketing etc.), customer service for private clients (ticketing) and other 3 P.22

23 Introduction Opportunity overview Today s in stadium experience has not changed much from the fan experience of over 20 years ago; the number of stadiums globally that show video replays on match screens, or statistics on team or stadium apps remains limited. A business opportunity exists for Qatar to digitalise the stadiums and sports venues in line with recent global market trends and developments. Sports clubs around the world are struggling to maintain high attendance levels to all of their games, as the unique in-stadium experience has now been replaced by the comfort of watching a game from one s own home. Television quality has reached an impressive level of clarity, and supporting replays and interactive analysis embedded into the programs have provided customers with an enhanced customer experience. As a result, revenues from ticketing and concessions have decreased. The use of technology and digital applications can be used to attract customers back to the stadium. This includes offering real-time updates to fans on traffic or weather, providing entertainment in waiting zones, pre-game and post-game discussions on social media, as well as showing replays and live interviews. Additionally, this could include digital payment solutions, ordering food to seats or getting different views (e.g. bird view) of the game. Providing seamless processes and a unique experience to in-stadium customers will improve stadium attendance and increase overall revenues from concessions, and targeted advertising. Digitalising the stadium experience as a way of luring fans back to the stadium Levels of attendance at local events does not mirror the strong interest and popularity shown by the regional population in watching sports. To induce local spectators to attend the matches, tickets are either made inexpensive or free. However, this has distorted gate revenue potential and has not resulted in a significant improvement with regards to stadium attendance. A technology network company found that 57% of young fans prefer to watch games at home, as they view stadiums to be a black hole of connectivity. As such, global venue operators have started the process of digitalising the stadium experience in order to lure millennials and others back to the stadiums for an in-house game experience. Most of the existing and new sports venues (including eight new FIFA World Cup stadiums and training pitches) in Qatar are owned and/or managed by government or government-related entities. These venue owners can team up with companies such as Ooredoo or Vodafone in order to help digitalise the stadiums and partner with companies such as bein Sports to improve the overall customer journey and experience in Qatar. It is a win-win situation for all key stakeholders: venue owners and event managers earn additional incremental revenue from ticketing; concessions and merchandise sales go up; bein Sports or similar earn additional revenue from advertising and telecom service providers earn money from rental services. Sport Business Opportunities Forum Flagship Business Cases Source: 2011 Cisco Connected World Technology Report By 2020, the number of online devices will be approximately 6.5 times more than the total world population 57% of young fans globally prefer to watch games at home as they view stadiums as a connectivity black hole 4 P.23

24 Market overview Qatar market Along with the new and upcoming eight FIFA World Cup stadiums, Qatar will have a large number of stadiums and venues waiting to be utilised by the local market. Given that stadiums have exhibited low attendance levels, not a true reflection of the local population s interest in sport, digitalising the stadiums may be one way to address this issue. By digitalising the stadium ecosystem, venue owners are able to provide their customers with a more unique and customised fan experience. Increased customisation allows venue owners, teams and sponsors to engage in hyper-targeting, (Exhibit 3). Hyper-targeting will soon become the new norm, enabling fans to get what they want, when and where they want it. This will aide in creating content that truly resonates with the sports fans. Market drivers The primary factors driving the demand in Qatar are: Fan allegiance: Teams with strong and large fan bases tend to have higher attendance rates at sports tournaments and events Disposable income: Higher levels of disposable income drives attendance at games Tech savviness: Access to tech savvy individuals plays a key role in both the digitalisation of the stadium as well as the actual use of such technology by the fans Sports data and digital solutions companies: Partnering with companies such as bein Sports can provide in-stadium audience with a unique experience, driving greater demand for attending games in-stadium Sports stadium digitalisation in Qatar Exhibit 2: Qatar sports assets Non-exhaustive 11 Exhibit 3: Hyper-targeting will be the new norm, empowered by a digitally integrated ecosystem Along with the completion of the newly constructed stadiums for the FIFA World Cup 2022, Qatar will pride itself with around 16 stadiums. These stadiums will need to be commercialised and attract audiences to matches and events in order to generate revenues. Venue owners can enhance the fan experience by personalising and customising content through the use of a digital ecosystem (Exhibit 3). In order to do so venue owners can partner with Ooredoo, Vodafone and other digital technology providers to enable the infrastructure within the stadium. Over and above, they can partner with Qatar-based anchor tenants such as bein Sports to provide advanced technology (including supporting replays and interactive analysis) on applications with the end goal of competing with the in-home experience, and lure more fans to the stadium Sports stadiums & complex 2 Stadiums Complex 4 2 Aspire Zone Foundation 7 4 Others Sports Medical Facility Youth & cultural centre 32 Total Sport Business Opportunities Forum Flagship Business Cases 5 P.24

25 Industry overview: Qatar Digitalising stadiums will improve stadium attendance, the overall customer journey, and provide venue managers with extra revenue Supplier power The suppliers (i.e. providers of wireless infrastructure) have high bargaining power given that there are only two providers in Qatar that are capable of providing the stadiums with proper connectivity in a high-density location. Suppliers of specialised digital technology solutions (e.g. bein Sports) is also limited Threat of substitutes The most prominent substitute for making use of digitising the stadium is for stadiums to keep the level of technology adopted at the stadium to a minimum (i.e. current state) Other substitutes include other forms of entertainment such as half-time shows, aftergame concerts, etc. Consumers can use other online channels/websites to review content while at the stadium Industry rivalry There are a large number of stadiums available in Qatar, and many others coming online in the next few years as a result of the FIFA World Cup 2022 The main rivalry lies in the stadiums hosting high-profile events and digitalising the stadiums in order to increase attendance The market will become more competitive as more stadiums use this approach to host more events Barriers to entry To digitalise a stadium, it is important for the venue owner to have access to a stadium, and some capital needed to fund the upgrading of the stadium Venue owner will need to work with telecom companies such as Ooredoo or Vodafone to enable the infrastructure Access to sports media and data analytics companies (e.g. bein) is important to enhance the customer experience Long-term contracts signed with telecom companies or bein can act as a barrier Buyer power The customers (audience) using such technology and increased connectivity are the fans attending the games in-stadium. However, these fans do not actually purchase the service, as it is made available to them for free by the venue owner (as a means of increasing attendance and ancillary revenue) Other potential customers can include sponsors and those wishing to advertise on such platforms to reach a targeted customer base. Such customers have medium bargaining power Impact of complementary products Access to smart phones and dependence of people on the use of internet and social media will drive usage of the digitalization of the stadium and attendance thereafter Access to merchandise, upgrading seats, weather updates, etc. will drive consumption of the digital technology utilized by the stadiums and their owners Digitalizing the stadium experience will improve stadium attendance, which will result in an increase in revenues from ticketing, concessions, merchandising, etc. Sport Business Opportunities Forum Flagship Business Cases 7 P.25

26 Financial plan (1/2) Investment To capture the whole opportunity, an investor must be capable of spending around QAR 778 thousand in 2016, an annual fee paid to the technology service provider such as Ooredoo or Vodafone. It has been assumed that the fee will increase at the rate of inflation to 2025, however, this will depend on the agreement with the service provider. This investment has an NPV of ~QAR 11 million for the years The incremental revenue gained by the stadium is as a result of increased sales from ticketing, and does not take into consideration an increase in revenue in other complimentary areas such as targeted advertising, concessions and merchandising. The investment, an annual fee to the telecom provider, is meant to provide 5,400 people, on an average, with Wi-Fi connectivity at any given point in time. The annual fee may change depending on the expected maximum number of people connected at any one point in time. Revenue Incremental stadium revenue from ticketing as a result of digitalisation is expected to increase from QAR 0.8 million in 2016 to approximately QAR 3.6 million in This number however is highly dependent on whether or not stadium owners are able to provide their fans with a unique and customised in-stadium experience. Such an experience is made possible by leveraging Qatar s existing assets stadiums, telecom providers, bein Sports and Al-Kass. It is not necessary to digitalise all the stadiums, but rather only the ones which will be used most frequently and host most of the events. By creating a digital ecosystem within the stadium, the venue owners will be able to increase their revenues through ticketing, concessions, merchandising, advertisements and by simply providing a unique experience to their customers. The revenue shown in Exhibit 5 takes into consideration only incremental revenue gained from increased ticketing. Sport Business Opportunities Forum Flagship Business Cases Partnerships In addition to providing internet connectivity to attendees in the stadium, venue owners must work to provide additional services to its attendees. This can include a partnership with bein Sports for additional services on other devices, often referred to as the second screen. These services can include different camera angels, special player or game stats, etc. Other partnerships can be with concession or merchandise providers to provide in-seat services or during-game discounts. According to Google, 63% of searches during the 2014 UEFA Champions League match were done on mobile Source: Think with Google, Sports Fans and the Second Screen Exhibit 4: Cost (QAR thousands) ,063 1,111 1, , Exhibit 5: Revenue (QAR million) % P.26

27 Financial plan (2/2) Operating costs The costs relating to digitalising the stadium experience lie within the fees that need to be paid to the telecom provider on a monthly or annual basis. The fee is calculated based on implementing fibre broadband coverage within the stadium. The service fee covers the majority of the cost (~80%). This cost item covers both service provision of WiFi services in a high-density area on a consistent basis, in addition to any required maintenance services. The rest of the cost includes equipment rental, which accounts for approximately 20% of the total operating cost. This cost relieves the stadium owner of any CapEx, meaning that the stadium owner does not need to purchase any equipment. Instead, necessary equipment such as access points, are rented on a monthly or annual basis through the telecom provider. Exhibit 6: Operating costs Equipment rental 20% 80% Service fee Exhibit 7: CapEx and Opex intensity CapEx intensity: N/A There is no CapEx required for this investment OpEx intensity: Medium OpEx required in this opportunity is focused on the monthly charges paid to the telecom provider which includes the service fee as well as equipment rental Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) EBITDA is projected to reach ~QAR 2.5 million in 2025, with an EBITDA margin of 68%. This is based on the cost structure and revenue analysis for this opportunity. Exhibit 8: Projected EBITDA in 2016 to 2025 (QAR millions) EBITDA (%) EBITDA Sport Business Opportunities Forum Flagship Business Cases 9 P.27

28 P.28 SPORT BUSINESS OPPORTUNITIES FORUM Sports Venue Operations & Maintenance