Chelsea's latest line-up

Blue is still the colour, but football's no longer the only game at Stamford Bridge. Up to half the turnover of Chelsea Village, owners of Chelsea FC, comes from car rental, hotels, merchandising, restaurants and other off-pitch activities. But have they taken their eye off the ball?
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The Independent Online

Even in these football-obsessed days, there can't be many people prepared to lavish £10m on their love of the beautiful game. Yet AIM-quoted Chelsea Village plc, owners of the West London Premiership team Chelsea, are relying on there being at least 17 very rich "out-of-town" fans willing to pay precisely that to bag one of its under-construction "Millennium suites". Purchasers will have the sole use for 10 years of a large room high in the stands at Chelsea's Stamford Bridge ground described as "ideal for board meetings" or "entertaining", with panoramic views of the pitch.

Even in these football-obsessed days, there can't be many people prepared to lavish £10m on their love of the beautiful game. Yet AIM-quoted Chelsea Village plc, owners of the West London Premiership team Chelsea, are relying on there being at least 17 very rich "out-of-town" fans willing to pay precisely that to bag one of its under-construction "Millennium suites". Purchasers will have the sole use for 10 years of a large room high in the stands at Chelsea's Stamford Bridge ground described as "ideal for board meetings" or "entertaining", with panoramic views of the pitch.

Each room has 27 private seats outside, dedicated catering facilities and the right to "mingle with the [Chelsea] chairman's entourage". All well and good but that works out at £1m a year, or generously assuming 30 home games a season, £33,000 a match, although the suite can be used at any other time.

The suites are part of a huge multi-million development at the Fulham Road, west London, site - much of it already built - which will eventually encompass two large hotels, several restaurants, extensive conference facilities, a nightclub and other leisure attractions. It's not enough these days for a Premiership club just to field a football team if it wants to be a financial powerhouse, and up to half of Chelsea Village's annual turnover now comesfrom activities off the football pitch, including merchandising and even a car rental service.

So far, perhaps not surprisingly, only one Millennium suite has been sold, and that only in-house to new 9.9 per cent shareholders BSkyB. Finding buyers for the others will depend heavily on Chelsea's success on the field. With the Premiership season ending this weekend, Chelsea is under pressure to beat Aston Villa in the 20 May FA Cup final for the sake of its long-term financial security and support base. No-one will want to pay those sky-high suite prices to watch the Blues languishing at the lower reaches of the Premiership, dropping out of Europe and missing out on all the silverware, even with the luxurious surroundings and a sip of champagne.

The suites - thought to be unique in English football - are part of a grandiose development at the club's impressive Fulham Road ground. The work is entering its final stages after Chelsea finally secured planning permission for its lavish new West Stand after a protracted planning battle with the council.

Still to be built are an as yet unspecified visitors' attraction, which will apparently combine Chelsea displays with other sporting exhibits, and a health and fitness club in a market which the company itself admits is fiercely competitive. All are due for completion next year. A group commercial director - Tim O'Neill, formerly of Whitbread, BskyB and the BBC - has been appointed for the first time. His ambitious brief is to bring up to 200,000 non-football watching visitors to the club's 12-acre Fulham site every year. "I would like to do that within 18 months to two years," he says. "I'm starting dialogue with the tourist associations so that we become part of the tourist map. The visitors' attraction will be aimed primarily at tourists - we could bus them in here easily. We're clear what we want for the visitor centre and we're in talks with someone about doing something not just about football. We're also talking to experts about just how to make the fitness club something special. Both will be targeted at a broad range of people."

Two features of the fitness club, which starts construction this month, will be an outside running track and an unusually large swimming pool, but there are also possible plans for a giving-up-smoking consultancy and a state-of-the-art permanent hair-removal salon - all a far cry from the business of propelling a leather sphere between two wooden posts.

But Mr O'Neill admits there is still much to be done to convince people not attending matches or even supporting the club to use the existing range of hotels, bars and restaurants on site on non-match days. The last annual report recorded 70 per cent occupancy rates for the hotels.

Michael Russell, the finance director, says: "We have encountered some difficulty in getting the message across to people just what we have here. People don't realise we have four restaurants, two hotels and a bar. So far we haven't been particularly good at grabbing media attention but the restaurants will work if we get the right mix of customers and are performing better than we expected at this stage and the hotels have healthy occupancy rates."

It is certainly difficult to imagine non-Blues-supporting passers-by leaving the Fulham Road to walk down the 100-yard boulevard to the club just on the off-chance; most are unaware there is anything on offer inside other than football. Chelsea Village knows it must find out how to broaden its appeal.

The two four-star hotels, at least, appear to be winning the battle and are attracting conference trade as well as being fully booked in August, not a month normally associated with football excitement. "That proves that not just Chelsea fans are coming to the hotels, which offer the advantages of being near both Heathrow and central London," says Mr Russell. "If we were aiming everything we did at just Chelsea fans, we would have spent the money on building a bigger stadium not all this. But we want to create something which is used 365 days a year not just 25 Saturdays a season.

"(Chairman) Ken Bates's vision is to create a Covent Garden in west London and that is what we are doing. We are building the ultimate sports and leisure complex which happens to host a very famous football club."

Mr Russell is adamant that these businesses are complementary to the club and do not compete with the core activity of football. "The strength of the football club is of benefit to these ancillary businesses as it brings people to the ground initially and as the club grows in success its support will grow too and the success of the other businesses will be self-fulfilling."

A report in 1997 by an outside consultancy suggested there were 650,000 Chelsea fans in Britain, and real growth would depend on at least five years of success. After a dazzling few seasons - compared to anything that had passed since the early Seventies' glory days - Chelsea thinks it now has as many as 900,000 British fans. Many of them are thought to be starstruck youngsters inspired by the glamour of Champions' League matches against European giants such as Barcelona and Milan, fixtures unthinkable until recently.

But next year looks less exciting, after the club's disappointing failure to capture a successive lucrative Champions League place. The team's Premiership campaign has stuttered, so it must win at least one piece of silverware to keep the income coming in, and to qualify for the lesser European cup competition, the Uefa Cup. Only if it wins at Wembley on 20 May will Chelsea have automatic entry to Europe.

Failure would be a disaster. Even if the club does make it through to the Uefa Cup it will still be left counting the cost of missing out on the Champions' League, the winner of which is guaranteed up to £30m in TV and other income. Even the less successful qualifiers are guaranteed three lucrative matches and reaching the last eight this season earned Chelsea £12.5m.

By contrast the knock-out nature of the Uefa competition means it could be thrown out first time, and in any case matches are worth only a comparatively meagre £1m to the club's coffers. If Chelsea lose the FA Cup, they will have to endure the ignominy of competing in the "Mickey Mouse" Inter-Toto Cup even to try to win a place in the Uefa cup.

All this uncertainty on the pitch could not come at a worse time for Chelsea and means it may have to temper its ambitions to join the European super-élite and enjoy their level of earnings. It will have to go shopping for new, younger players this summer after a possible clear-out of its ageing squad, but the £19m attempted signing of Ruud van Nistelrooy by Manchester United showed how expensive such purchases can be.

Where the money will come from is unclear. Mr Bates has ruled out spending the £50m invested by BskyB on new players, but intends to plough it into the long-term future of the group as a whole. So there will be huge pressure on the club's kitty at a time when it already spends so much - £26.5m a year, or around two-thirds of the club's total revenues, on team wages while the Chelsea Village complex still remains an unproven source of income. Those Millennium Suites have got to sell.

So far Mr Bates has seen off the doubters, staging a series of coups including the BskyB deal which valued Chelsea at no less than £400m - second only to the Premiership Champions Manchester United who top the £1bn mark.

The stock market has different ideas, putting a price tag of less than £100m on Chelsea. And the investment has not yet started to prove its worth. Chelsea's last results for the year to 30 June 1999 showed a £507,000 pre-tax loss compared to a £2.1m profit before. This was in part due to a hefty interest bill on loans for the West stand while it was still fighting the local planners. But there were also problems at the recently acquired EDT travel agency where rapid expansion plus falling demand led to a £1m loss, and later investigations found a breakdown in financial controls.

This embarrassing episode led to Mr Bates strengthening his management squad, with the appointment of a group chief executive, Peter Bewsey, from Corporate Services Group.

Despite this appointment, Mr Bates remains the driving force of the group, (and he still lives in a penthouse flat right next to the pitch). But, while there has been no obvious let-up in his commitment, his age at 67 does raise succession questions.

The chairman has transformed a faltering team living on past glories and housed in a stadium it didn't own. He set up a separate independent company "Chelsea Pitch Owners", owned by fans, to buy the freehold of the Stamford Bridge pitch to protect it from development in perpetuity. Mr Bates has created a brand name here and abroad - a third of the club's website hits come from overseas. And he spotted commercial opportunities - not least the BskyB link-up which will look at ways of exploiting the wireless WAP technology to beam matches to mobile phones.

But he is still a long way from fulfilling his twin dreams of a west London leisure development to match Covent Garden and a football team capable of taking its place alongside Europe's greatest. The danger is that in striving for both he could end up with neither.

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