Date: February 08, 2017
Author: Paul Vardy

Are your subscriptions just too cheap?

Interview with a Golf Club Manager

Q. How are things at the club?
A.  Holding on is the best way to describe it.  Actually, we’re losing more members that we’re gaining, about 30 -40 members a year more than we can replace.  This is having an impact on our ability to make a profit at the end of the year.  We’ve made small losses in the past two years.  This, added to the fact that members drop back to 6 and 5 day memberships, has hurt our financials.

Q. The car park is full.  How busy is the club?
A. That’s the irony – it’s as busy as ever!  In fact we’re pretty much full as far as the timesheets are concerned.

Q.  So you are losing members, losing money and yet activity is as busy as ever? 
A.  Yes.  What sort of business would lose money at full occupancy?  Don’t answer that one.  I shouldn’t joke like that but clubs are like people, full of inconsistencies.   Our strategy in recent years has been for small subscription rises coupled with cost cutting.

Q. You say that with trepidation.  What’s been your experience to date?
A. In setting budgets each year we’re cutting and trimming on everything we do, despite creeping rises in the prices of most things.  The problem I see is that we’ve been at the point for a couple of years now where trims, let alone cuts, show up in our service levels, our food quality, the quality of our course presentation and our ability to meet member’s needs.  Members are noticing.  They notice these things.

Q.  What about innovation, has that saved money?
A.  Yes it has and will continue to do so.  But golf clubs are a high service business.  Services require man hours such as food & beverage, course staff hours.  We introduced a members working bee once a month which has been terrific on many levels.

Q.  What is your club’s position on generating more revenue?
A.  Well interestingly, we had a strong push on generating more revenue from our hospitality.   In terms of F&B for members, we have prices at a point where they need to be put on hold for some time.  There’s a price point to which members react.  If we’re looking at trimming costs on operations we can’t be always putting up prices for members.   We lose money on member trading like almost all clubs but we make money from external events and that’s the way it should be.

Q.  How has that gone?
A.  The nett effect is that from non-member trading (functions/seminars etc.) in the last year we’ve  generated roughly an extra $100,000 and made an extra $25,000 in F&B profit, taking our F&B net profit to $120,000 or so.  It was a real focus last year but in the scheme of things, it’s not going to make the club as a whole generate a profit.  The thing with the extra $25,000 functions profit is that we probably had another $7,000 in costs in terms of admin & marketing, utilities, cleaning and general wear and tear.  So it’s handy money but it’s not as rosy as $25,000 presents.  

Each event, particularly weddings, take a lot of time with planning and set-up.  Clubs, unlike other hospitality venues, tend to provide such a broad range of offerings, timings, menus etc.  We largely have a captive market and limited times of the week and year to make high profit events.

Q.  So I guess you’re saying the function money will never replace the subscription money.   

Q.  If you had a magic wand, what would you change about your club’s financial issues?

A.  That’s simple.  As our timesheets are full and we’re losing money, our subscriptions are too cheap for the kind of club service we want to provide.  We can keep trimming costs but I believe an extra 2-3% subscription rise would get us trading profitably.

Q. What’s preventing the subscriptions going up?
There is a feeling that we can’t put the subscriptions up more than a conservative amount because we’ll lose members.  I don’t think that is right any more.  Members who are using the club are the heart and soul of the club but they are not likely to leave because of an extra 3%.    Like most clubs, the membership by and large use their membership.   The days of members not using the facilities has gone and those missing members are hurting the bottom line.   We also provide a very low annual competition fee that works out at $3 per week.  This is a bargain for the high user and like everything, not suited to the low user – which we don’t seem to have too many of any more.

Q.  What do you see as the future?
I actually think it’s pretty bright.  We have a great club but we are going to have to plan ahead rather than react and cut costs all the time.  We’re starting to do this by analysing our membership demographics and identifying the trends.  We’re going to have to make adjustments to rebalance the club so that the high users are required to pay a little more so as to make provision to be a club that offers value to the low users as well.   I wish we’d done more of this a decade or so ago as we may have been able to prevent some of them leaving.   We also need to be able to direct attention to the needs of young people and women so they see value in our membership offerings.  We need to make more use of development programs that now exist for these demographics.   Not everyone has the time to enjoy the club and this shouldn’t stay so stacked against them.

It won’t be easy as there are strong forces keeping the party going for our high use members.  They are the ones the club relies on but for the club to remain profitable and maintain and replace assets in the future, we’ll have to show greater leadership and greater communication so that we can show members what’s needed in the future.

Good luck.   Thanks for your time.