Bergen-Hudson University’s Location Decision

With the steady growth in attendance at weekday home basketball games, Bergen-HudsonUniversity’s president, Dr. Mike Wallace, had reached a decision. The existing stadium, with seating capacity of 60,000, simply would not suffice. Forecasts showed increasing interest in the program, and complaints by loyal fans and big-money athletic club boosters revealed the need for premium-class seating and luxury amenities not found in a 1960s-era stadium.

But the choice of what to do was anything but clear to President Wallace. His vice president of development, Roi Juarez, had presented three options: (1) expand the existing stadium to 75,000 seats, adding numerous luxury skyboxes and upgrading most of the yardline seats to include comfortable backings; (2) build a brand-new stadium three miles from campus on land, worth about $3 million, donated by a team booster; and (3) signing a 10-year contract with the Meadowlands Authority to rent their stadium, 28 miles away, for a fee of $200,000 per game.

Each of these options had clear benefits—yet each had at least one very strong negative as well. Expanding the current facility carried a $12 million price tag, with an annual fixed cost of about $1 million and with a variable cost of about $1 per attendee. If the job were not completed in the nine-month off-period between seasons, the team would be left without a home field on which to play in 2004. This meant reneging on contract dates with powerhouse teams that were signed some 3 to 4 years earlier. Contract violations are not a matter taken lightly in the NCAA or the Big National Basketball Conference.

Building a brand-new stadium off-campus would yield a plush, state-of-the-art facility, but it had to be named after the donor of the land. It also meant a huge fundraising drive on the order of $35 million by President Wallace, plus likely bond insurance placing a 25-year debt burden on the college’s balance sheet. He tentatively concluded that fixed cost would be in the neighborhood of $5 million per year and variable cost about $2 per attendee.

The third option had definite advantages from the perspective of many, if not most, of the fans who attended the games. A large number already lived in the Bergen and HudsonCounties area and would be spared the long commute and horrible traffic jams that always seemed to occur on game days. Clearly, however, students would be unhappy and buses would have to be provided by RU, for free, to bring students from New Brunswick to Secaucus. While the actual noted price of $200,000 per game seemed high on the surface, the $1 million per season (there are five home games a year) was a drop in the bucket compared to the other options. However, the Dean of Students said the school should expect the bus transportation to be about $10 for each of the 15,000 student tickets sold for each game.

Prior to asking the VP of finance to do the detailed analysis, President Wallace asked Juarez to survey three groups that held personal stakes in the project: students, booster club members, and college faculty/staff. Selecting 50 people at random in each of these groups, Juarez asked them to “grade” each possible location on five factors. The results are shown in the table below.

Existing New Site 3 Miles Meadowlands
FactorsSitefrom CampusFacility

Boosters’ Ratings of Locations

Convenience 2 210

Guaranteed Availability
for Next Season 8 610

Comfort 6 810

Cost10 610

National Image668

College Faculty/Staff Ratings of Locations

Convenience842

Guaranteed Availability
for Next Season10610

Comfort6108

Cost1048

National Image 8 8 6

Students’ Ratings of Locations

Convenience10 81

Guaranteed Availability
for Next Season 6 410

Comfort 81010

Cost102 8

National Image28 8

Juarez decided to give equal weight to the grading of each of these groups. But the administration did not equally weigh the five factors. “Cost” and “guaranteed availability” were rated twice as important as “convenience,” which in turn was ranked twice as important as “comfort” and “national image.”

DISCUSSION QUESTIONS

1. Prepare a crossover chart based on the information provided.

2. Are the factors Juarez selected for evaluation reasonable and complete? What others might be included?

3. Which location do you recommend, and why?