Our National Town Hall held the week of May 18th investigated the workplace, restructuring and reclassifying employees, health care coverage and employment law in connection with reopening against the backdrop of the CoronaVirus Pandemic. With over 50 club managers, governors, directors of tennis and other industry specialists on the call, a fantastic Q&A session followed the initial presentation by BeyondTheBaselines.com team members.
With Human Resources expert Renee McCarthy from Suntree Country Club in Melbourne, Florida and moderated by our President, Ed Shanaphy, this lively Town Hall started with a discussion by Ed demonstrating the need for cash and liquidity in reopening country clubs and tennis facilities.
It quickly moved to restructuring employees. Managing personnel, either as a club manager or department head, will be crucial to reopening. Cross training staff to desk and admin jobs or pushing full-time workers to part-time or even seasonal will be effective methods as the country club industry rebounds post Covid-19.
What levels of play and usage will clubs see over the summer, the next 6 months and the next year to three years? Perceived versus real member usage will be interesting and daily monitoring will be required. How will you separate play and keep juniors from accumulating next to the courts and socializing?
All this and much more on this one hour National Town Hall. Below please find a link to our Power Point Presentation for this Town Hall.
By Ed Shanaphy B.A. Duke University, M.A. The London School of Economics President BeyondTheBaselines.com – SBW Associates, Inc
These are unprecedented times, but they will come to an end. Whether this summer, or in early 2021, Covid-19 will finally subside and we as an industry across the nation must be ready. Club managers, owners, and boards of governors should have a short-term and long-range plan for reopening. Reopening requires liquidity, availability and flexibility.
Prior to opening, as a club manager or owner, you have a single opportunity to restructure the tennis and fitness departments. All bets are off as you return and bring staff back to work. Most clubs and businesses are predicting a revenue drop of approximately 30 percent over the next 18 to 24 months and preparations for the change that Covid-19 will bring to bear on the country club and the tennis and fitness industries must be weighed in appropriately before any plans are finalized.
Liquidity is essential. The access to cash and funding is a necessity, whether you are a facility employing a director or “farm out” your tennis or fitness department to a director running a business within your club structure. Many clubs are unable to apply for Small Business Association funding, whether excluded as a 501(c)7 social club or simply red tape. But if by chance your club or facility was successful in its application for SBA loans or grants, that is a great help to retain staff and cover payroll costs during these weeks and months that clubs are not operational.
If you were not able to get through the paperwork for government funding, there are other avenues to liquidity. There are emergency disaster loans from most states. If your club or facility has a long association with a bank, you can often receive bank funding at a low percentage rate using club assets as collateral. Finally, if your facility or club has an excellent credit rating or Dun & Bradstreet report, it should not prove too difficult to gain some more liquidity if required to restart from industry financiers. What we must take away from this as club managers, governing bodies and advisors is that the term “savings for a rainy day” must be now essential business management as we move forward and budget accordingly.
Most clubs run at a fixed cost, whether they are open or closed. Staying closed longer puts more money in the club’s coffers, but members might become impatient and ask for partial or pro-rated refunds of membership dues. It’s a delicate balancing act for any club manager and board of governors.
Depending on refunds to members or clients, clubs remaining closed longer may and should have access to savings and funding bigger than any contractor working within the framework of the club. We have encountered many clubs guaranteeing the independent contractors running their tennis and fitness departments funding for costs incurred, such as overheads, retail purchases for golf, tennis and fitness shops, and payroll. These loans from the clubs in most cases will be paid back over the next season of full service.
As we move forward through this crisis, there is a possibility of assessing a membership for a planned project which could help instill cash into a club as the revenue streams come recover. This could be a somewhat riskier method in that it relies on timing of the recovery and a strong economy coming back to fore in 2021 and beyond.
However you find cash, it’s imperative that the club or facility has enough to remain a viable concern and to be flexible when reopening, something we will look at below.
One of the top three desires and wants of any membership is availability of staff and management to members. The CoronaVirus era hasn’t changed that. In this era, in-person communication is not truly possible, so communication is left to substitute for availability. Communication should be planned, positive and productive. Communications with staff should be daily, especially with department heads who are planning the minutiae of reopening their departments.
Communication with stakeholders, whether clients or members, should be relevant and frequent. Both the club manager and the department heads should be reaching out often to members or stakeholders. Outlining the plan to reopen, the new regulations that will be in effect at the club, and the overall, continuing finances of the club should be part of weekly updates.
Zoom or Skype meetings with stakeholders should be held at least twice a month, if not more often as the facility moves through the CoronaVirus era and looks to reopen in the coming weeks and months. Newsletters via email, communications via text and letters and cards through the old-fashioned “snail mail” can play a part as people are stuck at home. These communications should focus on how you are looking to safe-guard the facility, the members, players and staff members, along with protecting the stakeholders value.
Both club managers and department heads should be at their home desks with the phone nearby. It’s reassuring for members and staff to know that you are on the other end of the line or email message. And, even though you might not hear from them, they’ll realize and understand that you are there providing a service. It creates value for you, for the club, for the program and club staff.
Positive communication with staff is essential in these times to keep morale high and to lead staff thoughtfully and effectively through a crisis such as Covid-19. Questions to be prepared for are numerous and your plans for restructuring your club’s staff must be solid with a mind to possible future changes given the fluid situation. But we believe in numbers – studying the numbers and reports over the past 12 to 18 months should help you decide how to move forward looking at a possible reduction in revenues up to a possible 30 percentage points in the coming 12 to 18 months.
As a club manager or governor, this is the opportunity you have been waiting for. This is the chance to make that professional who is not at the top of your list a part-time or seasonal employee, saving you 401k matching payments, healthcare and other benefit costs. This is your chance to move up that instructor who has been grinding for you with the 10 and under tennis players on the back courts to a more senior position and to create more club revenues by renegotiating that individual’s contract while at the same time lifting that instructor’s pay scale. Everything can be done and restructured under the “guise” of Covid-19
With all that is said about keeping jobs, we all know what is coming after this unexpected cessation of trade: Restructuring. And for those governing boards, general managers and club managers, this is, however you look at it, your chance to weed the wheat from the chaff.
As we all look forward to a new trading opportunity after being shutdown through lockdowns, the realization that a club could possibly save more money closed than as a going concern came as a surprise to many. With or without member refunds, driving down the costs of personnel, letting those instructors go who are on higher salaries or stipends, and perhaps looking at cross-training some positions, is all something each and every club and facility should not just be planning, but doing.
In the short term, any club or facility must maintain its staff. Do remember, in addition, that there is basically a stoppage of all legal immigration through at least June 23rd, which means that any H-1B visas and foreign temporary workers are not going to be here through the summer season. Summer will be affected for those seasonal clubs, but this too is a chance to restructure looking toward Summer 2021. Being flexible with staff is key.
With those foreign, temporary workers requiring replacement, the PPP loan or EIDL and Small Business Administration grants, can be used as a short-term method to keep the department or facility in line and ready. The upward revenue curve following the height of the crisis will be slow and proportional, and in line with CDC guidelines. This extended, slow rebuild is a club’s opportunity to effectively restructure. This period should give us some clues as to the long term cash flow and revenues over the next 12 to 18 months. We outline below some ideas that should be discussed as reopening starts to occur.
Flow Charts – this is your chance to reset reporting structures. Ensure, for example, that the holdover pro who has remained outside of management and supervision for the last 10 years shall now report to the new Director of Junior Development. And enforce that new structure upon opening.
Reporting structures should be updated and formulated to new needs. Weekly reports should be required from all instructors and directors to club management detailing new membership drives, communication with non-active members, new and possible revenue streams and conflicts between staff and members. These reports should follow the organizational flow chart: i.e. junior instructors report to Junior Director who in turn reports to Director of Tennis who then reports to the General Manager.
Seasonal Positioning and pushing year-round staff members to a seasonal contract could be highly useful. Not sure where and when CoronaVirus will leave us, and where there are seasonal differences in revenue streams, it’s essential we look at those revenue curves weekly in terms of staffing. Shortening the season for the summer might save clubs over-paying for staff when members might not be present due to local rentals being curtailed. It’s also an opportunity to make year-round staff seasonal aimed at the peaks of member usage, saving on 401k and healthcare costs.
Restructuring 1099 Contractors
We have long been advocating a revision in straight hourly rates for 1099 instructors. As we work with clubs, we look to create incentives for your instructors.
Rentals versus Hourly Rates: With fixed income from club departments becoming essential in recovery, why not charge fixed rentals (as do corporate gyms with their personal trainers who are 1099 contractors) and split that rental revenue between the club (75% and the Director 25%). Once the rental is reached, 100% of revenues could go to the 1099 instructor. This model creates massive incentive for instructors to teach both private sessions and groups as well as club-based programs. But more importantly, it guarantees a fixed revenue from all instructors to the club.
Create incentives for directors and instructors favoring group and clinic teaching over private lessons on the courts or sessions on the gym floor. This will help rebuild the group teaching ethos as we are forced to social distance. But more importantly, it will grow revenue for the club immediately upon reopening. Remember, private lessons and sessions conducted by junior staff don’t really add to club or director revenues in a major way.
Cuts to compensation and reduction of staff
We all know that staff will not look exactly the same as we come out of the pandemic work stoppage. This is not a time to worry about personal relationships with staff. Staff are looking to safeguard their career and might make a move before your plan is initiated. A staff member, who may have been at the club for a very long period, might be forced to have a salary reduction in order to retain his or her position. Given that we will see an estimated 30% drop to most, if not all club and facility revenue streams, cutting salaries and related costs are essential. Perhaps set goals for these long-serving staff members in order to regain their salary over a two to three-year period to show that the club values their work. At the same time, communicate that many staff are being forced to accept a pay cut or have fewer scheduled hours as we rebuild slowly.
This is a time to make wise business and economic decisions. Study past revenue streams and pro-rate those streams accordingly as we rebuild. Budget conservatively and study the economic comeback locally and nationally as the virus is not uniformly affecting the nation. Use this opportunity to shed non productive staff while creating incentives for valued staff. No one is expecting staff to look exactly the same after the biggest economic crisis since the Great Depression. Use that belief to bring back your club with better staff, leaner departments, and a higher value to member services.
Ed Shanaphy is President of BeyondTheBaselines.com, a subsidiary of SBW Associates, Inc. He served for 17 years as Managing Director and Chief Executive Officer of Haysbridge (UK) Ltd, a marketing and advertising international conglomerate, operating in 16 countries with offices in Dublin, Ireland and Sydney, Australia with head offices in London, England. BeyondTheBaselines.com is a US-based consultancy which aims to bring additional resources to governing bodies and general managers and has some of the most elite country clubs in the nation as clients.
During our National Town Hall this past week as part of our BeyondTheBaselines.com Podcast Series, we were fortunate enough to have several club managers, club governors, retailers and suppliers on the call. Having such a diverse audience helped us to realize that there could be a difference between equity and corporate clubs during the Corona Virus era. Clubs from university and city eating clubs, to fitness clubs through to elite golf clubs are choosing different avenues of communication with members and methods of retaining staff through the crisis.
Club ownership and its distinctions aren’t always apparent from the outside. Some of the most beautiful and magnificent clubs in our nation are actually for profit organizations, looking to service a paying membership. Augusta National Golf Club is one. On the other hand, some of the oldest and most established country clubs, are member-owned, otherwise known as equity clubs. Usually these clubs are termed “social clubs” and are formed as a 501 (c) not for profit organization under IRS statutes.
The History of Club Ownership
Harking back to the 1800s, emanating from the Northeast, the idea of a club through member ownership followed manifest destiny and moved Westward across our land. The Country Club, located in Boston, Massachusetts, is simply called the The Country Club, as it was one of the first clubs in the nation founded by five gentlemen from Boston in 1882. Clubs of the day were focused on outside activities, of which golf and tennis were two.
There were shooting and equestrian activities at many of the clubs along with swimming at lake and beach clubs, such as the famed Bailey’s Beach operated by the Spouting Rock Association. The move westward followed and, as an example, Tradition Golf Club in La Quinta, CA, became a member-owned club in 2008 after years of development. Equity clubs usually offer a bond in return for initiation fees which under normal economic conditions accrues a profit and are “purchased” back by the Club at the end of the membership at the higher value.
In stark contrast are clubs which are known as non-equity, in which membership is owned by a group or an individual which are not part of the membership. Often now among corporate golf clubs, these clubs do offer a bond upon joining, however any accrued value is usually retained by the Club. Club Corp, which is the largest corporate owner of country clubs in the country, is just one example. Club Corp just acquired from PGA National in Palm Beach Gardens, FL and added it to its list of clubs it manages through its subsidiary Club Life Management. In taking over clubs, usually after a developer finishes a gated community, Club Corp purchases the club and manages the club. Clearly, profits are a motivating factor for such clubs in order to finance their shareholders, who are not usually members.
Modern Day Distinctions In The Covid-19 Crisis
Bringing this historical differential to the present day and looking at the clubs such as New York Sports Clubs, which is corporately owned, and Midtown Athletic Club, which is family owned, both have shuttered up their doors, laid off all but essential corporate staff, and have communicated with employees. What they have not done quite as much is communicate with members. The New York Post writes that it is nearly impossible to get in touch with anyone at NYSC or its parent company, Town Sports International LLC, as the firms are attempting to make refunds harder to process for its members.
Midtown Athletic has, in fact, written a few times to its members, discussing the heartbreak laying off all its full-time and part-time workers and offering pro-rated refunds of monthly dues immediately upon closing its doors under State guidelines. It has set up a Covid-19 webpage stating its policies and with links to letters from the corporate president. That site can be found here and is an example of corporate-owned clubs communicating with their memberships.
Many of the non-equity clubs have stayed open as long as possible to avoid having to refund pro-rated monthly and annual dues. This is counter-productive in regard to social distancing, but it could also, if continued, open clubs up to a liability.
On the other hand, we are finding that clubs in which there is a bond held by the member, communications are almost daily. Clubs that we monitor, in Florida, Texas, the Mid West and the North East, have been constant in daily communications about what is to be expected. These clubs, where members are owners or have a shared bond, have boards and managers that have a shared financial objective. We haven’t seen members of these clubs breaking down the doors like a run on a bank for refunds or asking for pro-rated returns of their memberships.
In fact, one club we monitor, Silver Spring Country Club, in Ridgefield, CT is following the protocols on the golf side with foam in the cups on the green, no caddies and no touching the pin. It also sends out twice weekly newsletters to its members and extra communications about special happenings, such as an Eagle this past Sunday by one of the members on the signature 14th hole. The Golf Shop is offering pickup or direct mail delivery and the kitchen is open for curbside pickup. Communications such as this keep the membership informed, enlightened and familial.
When joining a club, those joining don’t often think about equity versus non-equity scenarios. But in a situation in which Covid-19 puts financial strain on all types of clubs, having a common financial goal with shared expenses throughout the membership creates a stronger foundation. A club which has its members as owners are more cohesive than corporate clubs, especially corporate clubs without a membership bond.
Perhaps the golden age of equity clubs will come back with more and more clubs offering a bond and ownership, which could help clubs through turbulent financial times and give membership a sense of ownership. Perhaps an effect of these tough times will be to enhance the value of membership bonds and perhaps a few new equity clubs.
As the Corona Virus Pandemic intensifies, seasonal clubs are looking at an approaching summer with trepidation.. Club managers, club boards of governors and Directors of Tennis and Fitness are wondering if and when the club may open. Boards of Governors are looking at liability and possible waivers of liability for all members and guests in connection to the virus.
In this age of uncertainty, we believed that most of the national associations and organizations were looking at the year-round clubs and the larger players. But seasonal clubs, largely member-owned with contract labor, are a large part of the industry. Focusing on these clubs, our National Town Hall attracted over 100 industry professionals to ask to join the call.
This call with club managers, club governors, clothing and tennis suppliers, along with Directors of Tennis and Fitness, discusses issues from slow supply chains to schedule changes. Offering ideas from a soft opening event free to members to updating and adding text messaging databases through Google Voice, Ed Shanaphy from beyondthebaselines.com moderates a lively discussion through the issues facing clubs for the 2020 summer.
Communicating with both members and staff in a congenial and regular way is clearly important to these industry leaders. And helping staff and contractors through the maze that is government aid and legislation is another issue covered.
All in all, a thorough conversation from industry leaders discussing how they are dealing with their business, their staff, their members and their clubs through the Covid-19 crisis.
As country clubs, gated communities and facilities close across the country due to the Corona Virus, we have a moment to pause, reflect, and learn. Let’s take this opportunity to do those things that we never have time to do. Although these are dark times, let’s throw light on our own business in the country club industry. Take this truly unfortunate and unpredictable crisis and make the best out of it in terms of using the opportunity and the time given at home to investigate, learn and make better our offerings at our country clubs and in the tennis and fitness departments.
The Corona Virus is hitting us in the country club industry hard – very hard. No part of the economy is truly immune. Coming at a time where we in the industry sometimes see thirty to forty percent of our annual revenue during Spring Break, this year will be marked by a lack of revenue and praying that we “flatten the curve”. The virus has certainly flattened the revenue curve.
Today at Windsor Club, in Vero Beach, we saw the true extent of the finality of the situation, and just how affected are country clubs. Courts were marked “Closed” and the tennis shop and clubhouses were locked tight as the sun shone brightly with no rain in the forecast. It’s not a pretty scene for any country club, tennis club or fitness facility. With fitness facilities under immense pressure to close due to germ transfer, we were hard pressed to find a light at the end of the tunnel. But there is a light in the tunnel.
We have been given an opportunity of time. Time where we are not servicing members and clients on a daily basis. Time where we are at home with our data. Time where we can work on those items that are always pushed to the back burner.
The Big Picture
Look at the big picture. This is your chance to rework that budget for 2020/2021. You’ll never have a better time to work on a new business plan for your department, business, or club. Now is the time as we are forced to hibernate in our homes.
Look at your systems. We are reworking our Intuit Quickbooks Desktop settings to make billing easier this summer at our managed clubs. Can you reword your point of sale system on Jonas, or Northstar, to make billing clinics and lessons faster and simpler? If you’d like some help, let us know. We have specialists on all point of sale systems ready to help.
You have time to create that report in your point of sale system that will break down your revenue streams just the way you have always wanted them. What is the true ratio between personal training and group classes in your fitness facility? Have revenues from the spa grown in comparison to personal training and group classes revenues? If so, how much and why? Did you teach more private tennis lessons in 2019 than in 2018? What was the ratio and revenue breakdown between your junior and adult programs?
These larger questions will bring us a new focus when we are able to resume at our clubs and facilities.