After weeks of clinging to its hopes of holding the United States Open at its traditional New York home in front of fans, the United States Tennis Association has begun to seriously explore a series of alternative plans for the signature event that accounts for more than 80 percent of its revenue.
The scheduled late-August start of the tournament, one of the largest events in New York City, is still three months away. But the dual realities of the ongoing coronavirus pandemic and the financial peril the U.S.T.A. would face if it has to cancel have forced the organization to consider whether it can hold its premier event somewhere besides Flushing Meadows, the park next to the central Queens neighborhoods that have been at the epicenter of the Covid-19 outbreak in the city.
Any move from the Billie Jean King National Tennis Center — its home since 1978 — would be both unusual and an enormous financial sacrifice for a $400 million tournament that attracted 738,000 fans last year, generated most of the U.S.T.A.’s $161 million in ticket revenue and prompted hundreds of millions more in broader spending in the city on things like hotels and restaurants.
Yet as the public health crisis drags on, it becomes more difficult to see a path toward holding the event as originally planned.
Over the weekend, New York City officials floated the idea of using the site of the tournament as a quarantine center for people who have tested positive for Covid-19. Last month, a 12-court indoor facility at the tennis center was converted into a temporary 350-bed hospital, and another stadium on the grounds was used to prepare and distribute up to 25,000 packages of meals every day for patients, workers and children. Chris Widmaier, the chief spokesman for the U.S.T.A., said Wednesday that the last patient at the temporary hospital had left and that work to convert the building back into a tennis facility had begun.
“I think what they will end up trying to do is go elsewhere,” said Donald Dell, the longtime tennis agent and promoter who last month participated in a call with tennis officials and the White House about the logistics and financial details of staging tennis tournaments in the coming months.
Other options for the U.S. Open this year, though perhaps not in late summer, could be Orlando, Fla., at the organization’s 100-court training facility, or near Palm Springs, Calif., at the site of the BNP Paribas Open in Southern California, commonly known as Indian Wells.
In a statement, Widmaier said the organization “continues to plan and model numerous scenarios for the 2020 U.S. Open.”
“Obviously, cancellation of the event would have a significant impact on our Association but not an insurmountable one,” he said.
The crucial decision the U.S.T.A. is facing illustrates the difficult choices that sports organizations are confronting as they try to navigate a series of costly alternatives to large gatherings.
Bringing players back to the fields of competition — if government health authorities allow it — carries obvious risks to athletes and others who might participate, as well as to live spectators. The costs of not playing, though, are substantial, and the ramifications, including mass layoffs and the likely inability to fund sports development programs, will reverberate for years.
The U.S.T.A. is a nonprofit organization that has to disclose some financial information, which provides a rare window into the economic crisis that Covid-19 has delivered to professional sports. Beyond tickets, corporate hospitality sales produced $42.4 million last year, and the U.S.T.A. generates $140 million in media rights fees, including an 11-year, $825 million deal with ESPN. U.S.T.A.’s earnings come chiefly from the U.S. Open, and it makes some money from smaller tournaments.
Staging the tournament last year cost $242 million in direct and indirect expenses, including nearly $70 million in prize money.
Complicating its decision for this tournament, the U.S.T.A. made what in hindsight seems like a losing bet not to purchase cancellation insurance.
“Finding some way to stage the U.S. Open feels like a virtue we all want to deliver on,” said Ken Solomon, the chief executive of the Tennis Channel, a media partner of the U.S.T.A., adding that the first option remains doing the tournament in New York. “There is the idea of bringing it to Indian Wells, if that is the right answer and that can get it done.”
Serious discussions between the U.S.T.A. and Larry Ellison, the billionaire owner of the Indian Wells Tennis Garden and its signature tournament, have yet to occur, two officials with knowledge of the situation told The New York Times. The officials spoke on condition of anonymity because they were not authorized to speak about the specific planning for the tournament.
At the U.S.T.A.’s Orlando facility, there is no infrastructure for fans, and its courts would need to be wired for live television.
Each day, leaders of the New York-based U.S.T.A., one of the country’s most successful national governing bodies, watch the cases of Covid-19 increase globally as they wrestle with the financial implications of the moment. The $400 million generated by the tournament represents more than 80 percent of its annual revenues.
Its nearly $500 million budget includes about $200 million for employee salaries, tennis development programs, debt payments and other fixed costs that grew significantly in recent years as the U.S.T.A. borrowed $700 million to finance the construction of its Orlando campus and a renovation of the National Tennis Center.
“We do have reserves,” Mike Dowse, the U.S.T.A.’s chief executive, said during a conference call last month. “Having said that, we’ve had some pretty significant investments over the years.”
Widmaier, the spokesman, said many of the U.S.T.A.’s agreements with media partners and sponsors protect some cash flow in a way that will allow the organization to get through a “worst-case scenario” — a cancellation of the tournament.
However, according to two people familiar with those agreements, which account for about $250 million annually, minimizing the fallout of a lost U.S. Open would require negotiating new terms with sponsors and media partners, likely spreading out losses over several years. Such a move would have ramifications for the tennis business and efforts to grow the game at the junior and youth levels during the next decade.
Widmaier said the U.S.T.A. is already “aggressively controlling all discretionary spending, including instituting salary reductions, eliminating nonessential programming and curtailing capital expenditures, through the remainder of the year, to ensure our financial health and viability.”
The U.S.T.A. also last month pledged about $15 million in assistance to American tennis facilities, teaching professionals and grass-roots tennis organizations to deal with the fallout from the pandemic.
Since the terror attacks of Sept. 11, 2001, which occurred two days after the conclusion of the U.S. Open that year, the organization has considered purchasing cancellation insurance. The All England Club, which runs Wimbledon, and New York Road Runners, which derives much of its revenue from the New York City Marathon, spend several million dollars each year on cancellation insurance that covers a pandemic.
U.S.T.A. officials said they have opted not to purchase cancellation insurance because they deemed it prohibitively expensive and it would curtail spending on developing tennis. The risk, then, is that any change to the tournament will prompt deeper cuts than the U.S.T.A. has already made. One challenge: annual distributions of nearly $75 million to its regional chapters, known as sections, and other organizations to run tennis programs throughout the country.
In a recent note, the bond rating company Fitch expressed confidence that the U.S.T.A. would be able to cover its annual payments on the $700 million the organization borrowed for construction projects, even though the U.S.T.A. secured that debt by pledging revenue from its long-term media deals and future ticket sales.
The organization has $155 million in savings.
“They’d like to avoid using that, but if they don’t they are going to have to carve back what they distribute to the sections,” Dell said. “There is going to have to be a big cutback.”