Roger - as long as we're not on a plane, hijack away!
We're looking at whether to (a) wrap unlimited cart use in the dues, (b) go to a cost-plus pricing model for carts, (c) allow members to buy blocks of cart rounds at a 20% or 25% discount, or (d) keep them where they are because our fee is already 20% lower than other clubs in our area.
Cart revenue is a profit center. We own the cart revenue so it's really just disguised dues that punish regular players. I think that we'll end up trying option C this year to see how it works.
About 20% to 25% of our rounds are walkers carrying their own bags, 5% to 10% are using trollies or 4-bag attachments on a cart, and the remainder are riding.
Hey Dave,
There really isn’t a “correct” answer to your question. Every member I informally poll about the “free cart fee” solution loves it. But remember, every member I poll is ON CLUB PREMISES. As we all know, 25% or more of every club’s membership uses the facility one a month at most. He or she is not going to like a higher monthly fee and prefers to pay as they go. Especially if they are avid walkers.
I wrote these comments on a thread back in January of 2010. While the “all in” price is a wonderful thing… it also has the capability of dooming your club if something goes wrong (like the 2008 recession).
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I couldn't agree with you more Kevin. As a GM/controller my goal is to make each year as predictable as possible and the less I have to depend on cart revenue and guest fees the greater chance I have of getting my net income to zero. With that in mind, there is nothing that hurts a club more than finding ways to upcharge the members who use the facilities the most. Food service charges... high cart fees... high guest fees... range fees. Their should be a "cost of being a member" and the more static that is... the better.
Hidden charges are another pet peeve. Our dues are all inclusive except for a small food minimum. We have a club near us that advertises their dues as $465. Add a $50 capital fee, $30 dining service fee, $200 quarterly food minimum and a $300 per year range fee and your monthly "cash out of pocket" just became $640.. 37% higher than the "published dues." Why a club would choose to penalize its most supportive members is beyond me.
An important point, however, is to guage just how many members of your club are "light users." If 25% of your membership averages 12 rounds per year... perhaps some level of "pay as you go" is appropriate so you don't drive those people out with a dues structure that includes the traditional "pay as you go" charges. If the regular membership lost the subsidizing dues revenue of light users who leave the club... the resulting dues structure might be to high... thus beginning the "death spiral" mentioned by Mr. Mucci in an earlier post.
As I have often quoted Winston Churchill to various owners and boards... "...[finding the right mix] is a riddle wrapped in a mystery inside an enigma."
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And the all important “death spiral” example…
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I apologize if this remedial to some… but I have used it several times to illustrate the “death spiral” scenario.
This is dumbed down (no F&B)…
Club needs $3,000,000 to break even. $350,000 come from “usage fees:”
Cart fees are $220,000
Range fees generate $100,000
Spousal/dependent fees generate $30,000
500 members pay $2,650,000 in dues so $5,300 per year… $442 per month.
Everyone is pretty happy.
A rogue GM takes over and convinces the board to roll the cart fees and range fees into the dues and make all memberships “family” thus eliminating spousal and dependent fees. The board and the annual meeting attendees... usually heavy users of the club... carry the GM out of the annual meeting on their shoulders and the board gives him a $50,000 bonus.
500 members now pay $3,000,000 so $6,000 per year… $500 per month. All is well.
In September of 2008, Lehman Brothers tanks and begins the great depression of 08-09.
Suddenly, out of the 500 members, 50 members whose families do not play, who do not
subscribe to the range and only play 12 times per year (definition of a light user) decide
that the dues increase of $58 is just too much so they resign from the club.
Now 450 members have to pay $3,000,000 so $6,667 per year… $556 per month.
This additional $56 (on top of the original $58) forces 50 MORE to resign.
Now 400 members have to pay $3,000,000 so $7,500 per year… $625 per month.
You are only losing members who do not play very much so your volume, wear and tear and expenses remain the same. If anything, you would have to recover MORE revenue through the dues since you are losing some F&B and guest revenue as well.
Behold the “Death Spiral”
Is it better to continue to tax the regular user with cart fees and range fees in order to protect the dues structure and hopefully keep the light users we depend on soooo much from leaving the club? There are two answers that depend on the economic environment the club is currently in…
1. In a boom economy when the club has a waiting list and you can replace the 50 who leave when the dues hit $500 per month… it sounds like a great plan, doesn’t it?
2. In a bad economy when the club has no waiting list and cannot replace the 50 who leave… should you take every possible step to keep your dues as low as possible?
As far as I know, noone has come up with the definite "formula for success."