Measuring and Monitoring the Financial Effects of COVID-19 on Clubs Over Time
Club Benchmarking, a National Club Association Strategic Alliance Partner, has been collecting and analyzing financial data from the club industry for more than a decade. They are actively studying the actual and potential financial effects and will be sharing insights as they develop. Club Benchmarking released new information regarding the financial impact of COVID-19 on private clubs on May 18. Read it here.
Club Benchmarking also developed a whitepaper, The Framework for a Strategic Response to COVID-19 Crisis, for the Coronavirus Resource Center . The whitepaper addresses three specific timeframes: Between March and April 15, April 15 to June 30 and July 1 through the end of 2020.
Club Benchmarking Overview of Financial Effects
The one thing we know is that we don’t know enough. We know things can change overnight. We must make decisions that relate to the information we have in hand and we should be very wary of making snap decisions that have long-term effects. For example, at this juncture, clubs should not be cutting the initiation fee anticipating a decline in prospective members.
Clubs can expect to experience some level of financial impact that will be driven by two events: the near-term effects of the COVID-19 response itself, and the longer-term effect of the stock market decline or recession, which is influenced by a number of factors beyond COVID-19.
The financial impact will evolve in phases, affecting different aspects of the club’s financial model and long-term health over time. The extent of the impact will depend on the club’s existing financial model and most importantly, it will depend on the decisions that are made going forward.
Club revenue models vary based on their sources of revenue and the balance of income from those sources. The two primary sources are dues revenue and non-dues revenue, which comes from things like banquets, golf outings and ancillary fees. The different types of income have different impacts on the club’s financial situation.
A club’s revenue model is evident in its Dues Ratio which is dues revenue (not including capital dues) as a percentage of the club’s total operating revenue. For clubs with golf, the industry median dues ratio is 50% and the middle range (25th to 75th percentile) is 45% to 57%. In clubs without golf, the median is 38% and the middle range is 32% to 47%. Regardless of offerings (golf or no golf), clubs falling below the median are more reliant on non-dues revenue and will have more stress on the operating ledger as a result of this event. The fee-centric club model is higher risk due to situations such as the one the industry faces now and in the long term clubs can reduce their risk by moving toward a dues-centric model. The dues-centric model is lower risk because, as we are seeing now, it is more consistent, reliable and predictable than non-dues revenue.
Thoughts on Private Club Finances and the COVID-19 Pandemic, Club Board Professionals
Executive Dashboard KPI Report (Clubs with Golf)
Executive Dashboard KPI Report (Clubs without Golf)
Finance Items to Consider When Managing Club Cash Flow During COVID-19, Condon, O’Meara, McGinty & Donnelly, LLP
Strategic Monthly Dashboard: Club Benchmarking introduced the Strategic Monthly Dashboard (SMD) as a free service to the industry in early 2019. The SMD allows clubs to measure in near real-time (monthly) changes in membership, cost of belonging and high-level financial metrics such as dues revenue, non-dues revenue, debt and a few more that are clearly pertinent in this crisis. The service was developed in anticipation of an inevitable market downturn to ensure that clubs would have timely, relevant data and insight for decision making that was not available to them during the 2007/2008 economic meltdown. Participating clubs will be able to monitor year-over-year changes every month, for their club, their local region or market and the industry overall – critical insight particularly in the months ahead. Is our club faring better/worse/same? How much so? What is happening in the market in terms of members entering/leaving? These questions demand a data-driven response. The SMD delivers that ability to each club, and it is free.