The upcoming season has all the earmarks of becoming the most challenging seen in a while. Everyone remembers the pressure exerted in 2008 when the financial world put a crimp in businesses around the world.
While we all suffered, the injuries were inflicted by a perfect storm of oversights, manipulations and greed causing millions of people to lose value in their investments. However, with every gut-wrenching story of demise, an opportunity to capitalize came to those in position.
The summer of 2018 and beyond is not going to be the same. Yes, the gut-wrenching stories will be there, but there won’t be any opportunities to capitalize.
Businesses in Ontario and Alberta are dealing with a rise in minimum wage to $15 an hour, even if Ontario’s doesn’t actually begin until the beginning of 2019, but the rise from $11.40 is a faster transition than Alberta’s. More provinces are likely to follow this trend, with British Columbia likely the next one.
There will be a direct impact on all employees earning a minimum wage. Pressure will be felt on staff providing service in the back shop, the driving range, the dining room, bar, locker room and greens department, among other areas.
There will be a ripple effect. Everybody has some idea of how much they earn on a pro-rated, hourly basis, even those on salary. As the lowest wage earners’ compensation increases, it’s expected there will there be a demand for proportionate increases across the board.
How can any business sustain an increase of 30 per cent in any expense line on their financial statement in one year, as it will be in Ontario, particularly when it is your largest expense item?
The wage portion of an average golf club with a $2.5-million budget is approximately plus-minus $1-million, with approximately half to a third of that figure made up of minimum wage earners. This translates into an approximate increase of about $100,000 to $150,000, with no possible avenues to increase revenue.
Membership dues are already maxed out, green fees are going down due to competition and third party bookings and golf cart rentals could probably handle a small increase, but that will affect usage.
Food and beverage sales are what they are and must remain relevant to local competition, so the only choices are become more creative growing the business or cut expenses.
Months ago, I said in this blog, “Any idiot can cut expenses. It takes talent to grow revenue.”
I still stand behind that statement because if the primary management tool chosen is to cut expenses, it can be done by an idiot.
I experienced the results generated by that theory at a club where I was a member. In that case, the president was the idiot who thought he could slash and burn the expense side of every item in the budget as one of his two business theories.
His second brilliant thought was to chastise, belittle and bully the staff, thinking if they feared for their jobs, they would perform better. Neither of these is effective management. I left the club, as did 25 per cent of the membership.
When talent takes over, the club thrives, the membership is full, programs are exciting, revenues grow and people want to spend money. When expenses are cut indiscriminately with no progressive objective other than to save money, programs fail, morale deflates and the future looks grey.
What is coming is different.
Chances are those who are creative are already producing excellent revenue and I doubt there is a lot of fat left in any statement. In the current market, opportunity to increase revenue is limited and an increase in expenses is unavoidable, so what are we to do?
The answer might surprise you.
I have long been an advocate of reducing the high cost of golf. I am also an advocate of reducing the severity of course conditions for the average player.
Personally, I don’t think the average player has the feel or touch to play today’s course conditions. Greens that stimp at more than 12 are beyond their ability level, both for putting and chipping.
Closely cut fairways are so tight, the average player cannot swing the club well enough to get the club head of his/her fairway woods to fit between the ground and the bottom of the club, causing them to top many of their shots.
They have little or no chance to hit a short pitch shot. Bunkers are so fluffy, they cannot manage contact enough to extract the ball and generally, courses are so highly irrigated, distance is reduced by as much 25 to 30 yards on tee shots.
An increase in the minimum wage might just help conditions to return to a level where the average player can actually begin to enjoy the game more.
It might very well come to pass that greens are cut every second day. Holes might be changed every other day, fairways cut two or three times per week, bunkers raked once a week, rough cut every 10 days.
Courses might remove the yardage markers in the fairway with the thought that most players either have GPS or range finders and a staff member would not have to stop the mower to move the marker.
Locker room floors might be cleaned every second day. Shoe cleaning will cease to exist and a cold drink will only be available in the upstairs lounge. The pro shop might close at 6 p.m. and the backshop might close permanently with members taking their clubs home. The dining room could see big cut backs in service, menu items and hours of operation.
When a budget takes on an overall 10 per cent increase in costs, some very difficult subjects are going to be discussed.
Many hourly-paid people are going to lose their jobs, face reduced hours and/or have a change in responsibilities. The process won’t be for the faint of heart. In fact, the above mentioned idiot will be ill-equipped once again.
This time, a manager will have to be creative in a completely different way, having to reduce expenses in areas and ways never before dealt with. Service levels will be scrutinized as never before. Standards in every corner of the club will be analyzed thoroughly and everyone will be forced to compromise.
This time things are different.
Prices might have to go up, but members will get less. The creative managers will be required to pacify everyone, making them understand the situation and how good things really are.
Those who lack the skills will do what they always do – yell at people, blame others, hide in their offices or simply go home. The good GMs will guide their members through what could be very rocky times.
