2018-19 Florida Trends in Private Clubs events recap
ECLUB NEWS |
We were very excited to see more than 750 club leaders at our most recent annual Trends events at Pipers Landing, Royal Palm and Quail West country clubs. As usual, the host clubs demonstrated the highest levels of hospitality to the many club management and leaders in attendance. Kurt Kuebler of Kopplin, Kuebler and Wallace did another excellent job with the general manager and chief operating officer panel discussions at each location before RSM leadership discussed trends and key industry data.
Key takeaways this year focused on some recurring themes: managing operating costs, continued extensive capital reinvestment, and ongoing debt and treasury management.
Looking at capital spending trends in 2017, these now stand at $4,580 of capital expenditures per full member equivalent (FME), or $19,240 per FME on a cumulative five-year basis; all part of the continuing process of meeting member expectations and remaining competitive. In the aggregate, Florida clubs have invested more than $1.1 billion in capital improvement projects over the last three years and a further $530 million is expected to be invested in 2018. 45 percent of clubs are planning what they consider to be significant projects in the next 12 months, with an average per club spend of $7,820.
The way in which clubs pay for these improvements is a decision to be made by each club; however, the proportion of clubs carrying some form of third-party debt is generally trending upward with 75 percent of clubs carrying debt. Looking at this on a per-member basis, debt per FME has increased from $8,010 in 2016 to $9,150 in 2017, while clubs in the state ended 2017 with an average debt/equity ratio of 0.51. Bear in mind, though, that the debt-per-member number for an individual club will usually correlate with the life cycle of its physical assets. If a club has a higher than average debt-per-member figure, it could be because it has newer facilities. Given this, an increasingly popular capital metric being studied by clubs is net assets per FME. Assuming most clubs intend to break even operationally, this statistic is useful to measure the extent to which clubs have reinvested in their amenities or accumulated the funds to do so, in an effort to hedge against net asset depletion caused by depreciation expense—the wearing out of our capital assets and, to some degree, our brand promise. Average net assets per FME for country clubs was $30,220 with the comparable metric for yacht and beach clubs being $14,050.
While dues comparisons amongst competing clubs is an often-quoted statistic, many differences exist between the advertised dues price and the total cost that a member is required to pay each year before even setting foot in the club. Other fixed charges of membership, such as capital assessments, operating assessments, food and beverage minimums, and mandatory service charges, can lead to a very different conclusion being drawn as to which club offers the best value proposition. At $20,040, the total annual cost of being a full member in 2017 continues to increase over prior years.
Dues, as a percentage of total operating revenues, have remained around the 62 percent mark during 2017. So since almost 62 cents of every dollar of operating revenue received by a club comes from dues, it remains critical to increase dues modestly each and every year. Dues for 2017 are increasing by 2.2 percent on average.
Payroll remains the largest component of the club operating expense at 53 percent of total operating expenses and approximately 52 percent of total operating revenue. In terms of per FME cost, payroll and related expenses averaged $9,300 through 2017, with one employee serving 4.5 memberships. Compare this with the corresponding 2016 levels of $9,000 and 4.2 and it can be seen that clubs are continuing to struggle to find the right balance between compensation levels and membership service levels. As Henry Ford’s timeless words remind us, “The two most important things in any company do not appear in its balance sheet: its reputation and its people.” Given that clubs are in the memory-making and lifestyle-enrichment business, we should be cautious in making all of our decisions solely based on metrics and big data!
The 2018–19 Trends in Private Clubs report will be available summer 2018.