re-investment in facilities on a regular basis .” We appreciate that might be a bit long and isn ’ t very catchy , but that is what we all should be striving to achieve .
To the current numbers we go .
In 2013 Golf Management Australia ( GMA ) via Golf Australia ’ s 2013 National Club Participation Report , first published the financial health outcomes emanating from its club benchmarking tool . It utilised a financial distress table that was originally conceived in 2008 by the NSW Independent Pricing and Regulatory Tribunal ( IPART ) when it performed a detailed analysis of registered clubs in NSW . The structure and table was then referenced in the golf environment in governance studies undertaken by both Golf Victoria and Golf NSW , as both bodies sort to better understand the financial health of their member clubs .
The table structure is based on the measurement of a club ’ s EBITDA % ( calculated as Earnings before interest , tax , depreciation and amortisation / Total Revenue ). With no tax paid the calculation can be also known as Operating Profit – as long as depreciation costs are excluded in the above the line department expenses .
Whilst not a perfect measure ( it is a point-in-time assessment of an annual result and does not take into account recent or future capital expenditure needs that might allow current outcomes to continue to be
Source : GMA Benchmarking Tool
achieved or improved ), by categorising results into this table , the extent of the financial challenges being faced by clubs as they seek to deliver a sound and sustainable business model can be clearly seen .
With four years of data now available for analysis in the GMA Benchmarking platform , we are able assess performance over time and where it is trending . In 2013 it was reported that 54 % of clubs were ‘ Under Distress ’ this being an EBITDA outcome of less than 10 %. The time series summarised below indicates that this outcome has now moved to just above 60 %.
In cutting up the more recent 2015 and 2016 data by club size ( members ) it is evident that the level of financial distress increases as club size decreases . It is therefore readily apparent that sustainability has a tight link to scale , the latter allowing for better amortisation of the largely fixed cost base that clubs incur in providing an asset for daily enjoyment . Some may argue that profit levels under 10 % aren ’ t dire and can allow a club to remain sustainable . I ’ d agree that this might be true if looking through a short-term lens – new paint , new carpet , the odd piece of new machinery . But such profit outcomes won ’ t fund the one in 25 / 30-year big ticket items – new buildings , new irrigation systems , and other projects that help to support the proposition it offers to its market , a proposition that needs to be regularly accepted by the consumer to see long-term sustainability prevail .
As we look toward the upcoming GMA conference in Adelaide I hope the conversation turns to this challenge , this truth . Importantly I hope there is increased commitment to address what , for the industry , really is the elephant in the room .
Some think that the level of supply we have should be protected at all costs , as it helps to ensure that plentiful entry points into the sport are offered . With reference to the data above , we are increasingly of the view that as golf clubs compete with other sports and leisure activities for attention , and battle society perception of being old fashioned ( old looking ?), gaining more strength , visibility , and consumer relevance from scale is a strategy that must be promoted .
Accepting less but more financial sustainable golf ( in some cases better golf ) has to be a better long-term outcome for the industry than having now near two thirds of clubs just surviving and save for a major windfall , being unable to do anything that could materially improve their collective futures .
12 I GOLF MANAGEMENT AUSTRALIA I SPRING EDITION 2017