Pledge Of Allegiant: Analyzing The Raiders New Naming Rights Deal
BY ADAM GROSSMAN
In a post in December 2018, we analyzed why Allegiant Air’s new credit card partnership with Minor League Baseball (MiLB) was a good fit for the company’s strategic goals. More specifically, the company’s strategy is being one of the only airlines focused on targeting low frequency leisure travelers looking for direct flights to underserved cities such as the ones where MiLB teams play their games.
That may make the Allegiant Stadium announcement earlier this week, with the company becoming the official naming rights partner of the Las Vegas Raiders, seem counterintuitive. More specifically, Las Vegas is one of the most popular travel destinations in the world (i.e. not an underserved city) and the NFL is a much bigger organization than MiLB that also operates in larger cities.
Yet, the naming rights deal with the Raiders specifically does nevertheless appear to be particularly well suited for Allegiant’s business model. That is the result from the Block Six Analytics (B6A) Corporate Asset Valuation Model (CAV) which analyzes partnerships based on their ability for companies to generate lifts in their revenue and brand goals.
There are two key ways that this partnership enables Allegiant to better engage and monetize its target customers. The first is enabling Allegiant to more effectively target cities that are both larger and underserved to facilitate the company’s growth. More specifically, the company has targeted “selected medium-sized cities, to which major carriers have reduced service” including NFL cities Cincinnati, Indianapolis and Pittsburgh.
Redefining underserved cities has enabled the company to increase operating and net margins even as overall revenue increases. Naming rights deals typically excel in enabling partners to maximize brand awareness and brand perception. Because NFL games have large, national television audiences, the new naming rights deal in Las Vegas will enable Allegiant to reach leisure travelers in medium-sized NFL cities that would potentially want to fly to NFL games.
Encouraging its target audience to travel for experiences like NFL games is an important part of Allegiant Air’s strategy. Allegiant has been selling “third-party travel products, such as hotel rooms, rental cars and hotel shuttle products and show/park tickets bundled with the purchase of air transportation [emphasis added]” to this customer base. Selling these products has helped to fuel Allegiant’s rise, as the company has seen a 23.8% compound annual growth rate (CAGR) from 2005-2017 from these offerings.
Selling third-party products, however, is not unique to Allegiant. Most, if not all, of the company’s larger competitors offer these types of products, including credit cards. To continue with a comparable growth rate in the future, Allegiant needed to develop third-party products that would specifically resonate with its leisure customers that are increasingly in the medium-sized NFL cities that are key to its profitable revenue growth.
The naming rights deal with the Raiders specifically achieves this goal, as it is expected to include “exclusive access to customers of the venue at various events” at Allegiant Stadium. An increasingly important consideration is how to create unique experiences for customers through partnerships. The transportation industry as a whole is in the position of providing the planes, trains, cars, etc. that enable fans to get to their favorite sporting events.
Allegiant now has a competitive advantage in that it can now both transport, host, and provide exclusive access to the unique experiences its leisure traveler customer is passionate about. That includes both NFL games where a customer’s favorite team is playing the Raiders, Pac-12 Championship games, and UNLV football games.
Allegiant Air’s deal also comes with the knowledge that AEG Facilities, a division of venue and live-entertainment company AEG, will manage the venue when it opens. This includes the expectation that “AEG will be able to develop more than 40 events at the stadium” including a “planned a new music festival this year.”
Profitable revenue growth is difficult to achieve in all industries in general and the airline industry specifically, where margins for many airlines are tightening. Even though Las Vegas is a major travel destination, it is not clear that other airlines would receive the same value as Allegiant Air from this deal. It is by analyzing Allegiant’s specific business strategy, customer base, and brand goals that we can determine that good value will likely be created through its partnership with the Raiders.