Publisher's Note: This article originally appeared in the Beaufort Observer.
The local mullet wrapper is pushing the Turnage again. It recently published an article about the bank putting the building on the market for sale. Between the lines the piece fantasizes about the Turnage surviving. It speaks about getting a hotel downtown and maybe the City will bail out the idea.
So we think it appropriate that we say it one more time. There is no hope for saving the Turnage. Here's why.
The simple fact is the Turnage does not have enough seats to ever break even as an entertainment venue, even if there was a hotel across the street. People who dream otherwise simply do not understand the business principle of unit costs vs. unit revenue. It is an immutable law of economics that your revenue must exceed your costs if you are going to sustain a business. There is no way for the Turnage to do that. Bill's Hot Dogs proves it.
Imagine is Bill's operated as a sit down restaurant. How many hot dogs would it have to sell if the only way it sold hot dogs was for you to go in, sit at a table, booth or stool and order the hot dogs to be brought to your table. How much would each hot dog have to sell for? Could that be done?
The Turnage is reported to have less than 500 seats. To fill those seats you would have to offer attractive events or shows. To do that you have to pay the current market rates for entertainers. The best entertainers command high fees. There is a reason they do. They can get what they are asking for somewhere else. If you try to book less expensive entertainers people will choose to go elsewhere where then can see the best. It is very difficult to cut your unit costs in the entertainment business. This simple fact is why you are constantly hearing about professional sports teams wanting larger stadiums. If you have to pay more for the product (entertainers) sufficient to draw ticket sales you have to sell enough tickets at a given price to bring in enough revenue to cover your costs--operating costs plus the product costs. If you increase your ticket price beyond the market's point of diminishing returns you lose revenue. If you lower your ticket price enough to produce enough sales you have to sell more tickets. If your seating capacity is limited you simply cannot produce enough revenue to sustain the operation.
The only way the Turnage could survive as an entertainment venue is to be subsidized. That would come from either philanthropists or the government. If enough people are unwilling to give donations to support an enterprise then eventually the government will be unable to sustain the political ability to do so also. Short term the government can use public funds and get by with it, but eventually enough people will turn against the officials voting to subsidize a failing operation so that even the government cannot continue to subsidize it. That is true even if the government subsidy comes in the form of "grants." Eventually the grantors will not increase their contributions sufficient to sustain the enterprise if the unit costs continue to rise faster than the revenue. Subsidization eventually yields to the immutable Law of Supply and Demand.
To prove the point about the Fatality of Subsidization consider this: The argument most frequently given for justifying the Turnage is that it will generate traffic downtown. If that were true the merchants downtown would be willing to pay a tax for the Turnage. They are not willing to do that. And the reason they are not is that the Turnage would not increase their unit revenue as much as their unit costs would go up as a result of the tax.
Now for the economists reading this we acknowledge that in reality it is not a dilemma of "unit" costs and revenue but margin costs vs. marginal revenue. But that complication is not necessary to settle the question of whether the Turnage could survive.
The problem with the Turnage is that the well-intentioned people who dreamed that "if we build it they will come" did not factor in the eventual unit cost vs. unit revenue dilemma. And specifically, they did not factor in the inherent limitation imposed by the number of seats in the facility. Even if you operate more days per month, it simply digs the hole deeper if your unit costs exceed your unit revenue.
We said it when they started talking about reviving the Turnage: It cannot survive over the long term.