Editor’s note: Please keep in mind that, although outdated, this article does provide important advice on what to do in the event of a recession like the one that occurred in 2008.
Each day, we read of the erratic performance of the market and the economy in the United States.
A sample: Unemployment is hovering around 5%. The CPI is at 4%. The Federal Reserve keeps cutting interest rates. And news on the sub-prime lending crisis and threats of a recession raise more questions than answers each day.
And although private clubs cater to a clientele most assume are untouched by such economic woes, many of today’s club managers are still worried what effects America’s financial stresses will have on their bottom lines.
For example, for the first time in the 10-year history of our club, The Reserve, in Indian Wells, Calif., we are experiencing a reduction in certain revenue streams, mainly initiation fees and private banquet business. We’re seeing fewer new members joining or potential members looking to join, and those members that already belong are having fewer parties.
We can’t help but wonder: is the economy to blame?
I believe that, while most of our members and/or prospective members are relatively insulated from the normal market trends, they still have a “perception” that they should be a bit more conservative in their behavior until America’s economic instability settles a bit.
This means, as club strategists and operators, our challenge is to adjust to this slight and temporary downturn of revenue while continuing to provide a superior product to our members.
But, how do you do this? How do you best strike the balance between offering excellent service and amenities while also looking to trim costs?
Where Can You Cut?
At The Reserve, we are carefully considering these questions more and more lately.
Department heads are more closely scrutinizing every expense. We are meeting with our vendors to assure the club is getting the very best product for the best possible price. And, since our greatest expense is labor, I challenge the department heads to constantly monitor their schedules and actual hours worked, with particular emphasis on overtime expense.
Salary is certainly an easy—and difficult—area in which clubs can save, and given the state of the economy, I believe many clubs are reassessing bonuses and employee benefits.
I say this because, while attending the Golf Industry Show in early February, I was at a seminar in which the moderator asked how many clubs would not be giving raises this year. And almost 20 percent of the people in the room raised their hands. Although this was merely a straw poll, I found the results surprising.
Assessing the Club’s Mission
Of course assessing budgets and bottom lines is an obvious strategy in trying to figure out ways in which the club can more tightly streamline costs. But, another area in which a club can assess its success is in its mission and purpose.
In other words, are dollars being spent in the areas that match our mission statement and our strategic plans?
According to a newly released McMahon Group study, when the membership is in strong agreement on the club’s direction, then the club’s leadership is better able to diagnose member dissatisfaction. This helps distinguish between those problems related to the quality of activities and services the club delivers and those problems that stem from ‘mission incongruence,’ which means members discover that the club’s actual mission is at variance with its ideal.
Look at it this way: if your membership expects your club to be a fully serviced country club, and they are realizing it’s really only a golf and dining club, then your club won’t be able to achieve the satisfaction level necessary to drive new member growth and foster strong member retention.
As your club leadership team sits down to crunch numbers and data, you might also consider pulling out the club’s governing documents as well. These include short-and long-term strategic plans, new member orientation guides and practices, board orientation packets and procedures, club bylaws, and club communications, ranging from the monthly newsletter to promotions of events fostering community within the club.
In the end, the more agreement there is that the club has what the members want, the more likely it is the club will enjoy long-term success.
The Years Ahead
No matter your club’s financial situation or America’s economy, most clubs will probably continue to experience increased competition for new members and increased pressure to tailor services and amenities more closely to members’ specific wants and needs.
After all, at The Reserve, we are a club, yes, but we are also a business. Sometimes we have to make decisions for the good of the family that do not please all of the members of the family. So we try to make it up in other ways, such as recognition programs for our employees, or sometimes by simply asking a member how they are doing and really listening.
The current instability of the economy is affecting our clubs—there’s no way around that fact. And, it is our responsibility to react immediately and responsibly to this new economical climate to assure the long-term financial stability of our clubs.
Most importantly, though, we must realize that this is part of a cycle, and at the end of the day, our main goal is to continue to offer a high-quality product and service to our members to ensure the successful reputation of our institution.
That is the most important goal of all.
James K. Muldowney, CCM, is an NCA council member and recently accepted the position of executive placement partner with the firm, Master Club Advisors. He was formerly the general manager of The Reserve in Indian Wells, Calif.