by Dale Petrie
For years clubs have longed to make events free to members. General managers, department heads, and even members serving as club governors have espoused the desire to have events on the course or the courts remain free to participants. This desire is well-intentioned, but in the long run, it is unfair to most members and a disservice to the financial health of the club.
As we head into a new financial year and prepare forecasts and budget materials for department heads, general managers, club treasurers and boards, it’s a good time to reflect on costs that often go unnoticed.
Back in my marketing days, a wise mentor once said to me: Set your first price carefully. Check your margins and costs of marketing before settling on a price.”
“Why?” I asked.
“Because you can never raise a price,” he said. He was right. Have you ever seen a store advertise: “That’s right! We are raising the price $10! What a deal!” Once in a blue moon we will hear, “due to the scarcity of avocados, we have had to raise our price to our loyal customers,” but this is done to heal the wound of a higher cost to the patron caused by a well-publicized occurrence. What clubs want to avoid is having to assess their members at any time and avoid bad publicity which might cost them new memberships.
Realize Your Costs
Committee members are fast to spend club dollars – those dollars aren’t their own. They are also not always in tune with the costs of an event. Take a tournament for example, across 8 courts. Most committee members we’ve worked with will say: “Well, it’s just the cost of the balls. Draw of 32 means 31 matches. Basically $100 for a case and a half of balls.”
Let’s think about that – just that cost. Well, there’s the consolation or back draw. Now we have another group of matches. Ball replacements and third sets with new balls. Well, that’s three cases of balls. Something in the region of $200. Just on balls, there’s a cost. But there are others.
Say, with a club of 8 courts, you hold a doubles tournament with a draw of 16 teams. 8am kick-off. No teaching courts available. And, say, the club keeps 15% of all on-court revenues. 2 courts for a clinic, and 4 privates could easily have taken place that morning – say a revenue of approximately $1000 is average for a Saturday morning. Well now the club is down $150 more in lost revenues from commissions. A hidden cost, but a cost nonetheless. Those weekend mornings are great sources of lesson revenues. But this Saturday tournament negates those earnings to the club and may, in fact, slow momentum in regard to lesson bookings for a couple of weeks afterward.
Oh, and, say, the Head Professional helps out the Director in running this major club event and invoices the club for their hourly teaching rate of $45 across 6 hours. Most professionals try to cover lost revenues in this fashion. Another $270 in additional costs. Even if not on a daily basis, a salary or stipend is a cost and offered in order to compensate for the lost revenues of rain days, or in this case, loss of court access. Remember, momentum for next week’s lessons might be lost as well.
Then there’s the Gatorade on court and food served off-court, say bananas and granola bars. Say we keep that to a minimum and dish out just $150.
Was there extra man-power on hand to sweep courts between matches and keep up with the burgeoning garbage cans from having 32 players on property all morning? Let’s say that costs the club another $100 for just the morning.
Well, what was just a case of balls is now nearly $1000.00 – not too bad for just one Saturday. But at a summer club, it can be every Saturday in June, July and August – and some Sundays too! Say twelve weekend days are take up in this fashion. That’s a line item loss of $12,000 to the club if costs are maintained at bare minimums.
Understand Long Term Membership And Its Costs To The Club
As the country club industry matures into a third generation of American families and a fourth generation here in Britain, there are some variables that come into play as we look at overall costs, club and facility budgets and long-lasting sentiments of members.
The idea of “legacy” is a costly one to clubs. Too often we see off-spring of long-standing member families offered either a “free” membership without initiation or a sharply reduced initiation fee. This is injurious to the long-term financial health of the club – especially if the club is not making ends meet through event charges or adding memberships under the full payment category.
It’s a wonderful sentiment to have three generations of a family as members. Often called “legacy” this institution creates the sense of continuing membership, almost “guaranteeing” membership in the future. But it comes at a very high cost to the club. Disbanding initiation fees for more and more “legacy” children, is like more and more kids dipping into the family trust with each generation. Coupled with losses from running events, a lack of up-front funds can create financial issues quite quickly.
Membership: But My Dues Should Cover All Costs
It’s been proven quite often through data and research that a club not raising annual dues and initiation fees on a regular basis will, in the long-term, have difficulty meeting financial obligations. If added to those losses, events are costing the club as well, it can be a recipe for disaster.
Club initiation fees should really, as tax law implicates, be used for capital improvements to the club and facilities. They should not be held to cover costs for individual events, gatherings, or, tournaments. Dues should be relied upon to cover the general running costs of the club, again, not to subsidize events.
And finally, why should the 98 percent of dues-paying members subsidize a tournament and its costs for 2 percent of the membership? Although we find that sentiment abounds, it financially and philosophically makes absolutely no sense. Especially, if you compare that sentiment to food and beverage events. Should a member’s wedding be free of charge? No. And neither should a tournament or any event at a club. Membership is a privilege, but it comes with costs with dues in January and participation throughout the year.
Maintain A Profit And Loss Report By Event
We find it incredulous that more clubs don’t investigate the costs and profitability (or loss) for each event. Some of the major events, like a three-day member-guest tournament on the golf side, get the full profit and loss treatment. But so should a parent child on the paddle courts or a junior barbeque and round robin on the tennis courts.
With so many events now transcending just one department and involving two, or possibly three, club departments, it’s imperative that a proper record of revenues and costs is maintained. We create a profit and loss report for each event at each club we manage, allowing the club’s governing bodies to better understand the costs of each event, the revenues streams, and those long-term effects that all activity might be having on the club.
Although pricing individual tennis, golf and fitness events might seem a banal exercise, in fact, pricing can affect the long-term health of any club or facility. Taken in connection with other costs, both in terms of lost revenues and hidden costs combined with putting off new-member initiation rises and raising annual dues, a club’s balance sheet can very quickly be heading into the red. Ensure that each event is a profitable one to the club’s coffers and supports the club in a social and financial way.
Dale Petrie is a well-respected UK-based marketer who works with clients ranging from the FMCG industry through to sports marketers. He holds a marketing degree from the Sorbonne in Paris and works with clubs across Europe and the world. Look for his next article in 2021 which will investigate further new member initiation fees and annual dues.