Sydney golf clubs profitable but player numbers a concern

The latest Golf Survey from HLB Mann Judd Sydney has shown that total golf club revenue increased during 2015, with almost two-thirds of clubs reporting a surplus during the year.

According to the report, 62 percent of clubs reported a surplus in 2015, up from 46 percent in 2014.

However, golf clubs continue to face the challenge of a decline in the number of playing members (down by 1.8 percent in 2015 and 1.1 percent in 2014) which is a worrying trend, says Simon James, author of the report and partner at HLB Mann Judd Sydney.

“While it is a positive sign that clubs are continuing to maintain and even increase revenue, despite the fall in membership numbers, declining player numbers suggests problems in the future.

“Generally speaking, golf clubs that have a membership base of more than 1000 playing members are more likely to report a profit, compared to those that have a lower number or proportion of playing members.”

In 2015, total club revenue increased marginally by 0.4 percent, while revenue received per playing member increased by just 1.75 percent, compared to 4.5 percent in 2014.

The survey shows the main sources of revenue for golf clubs to be annual membership subscriptions (contributing 46 percent of revenue) and bar and catering sales (24 percent).

However, in the 2015 year, members spent on average $434 behind the bar which is down by 4.2 percent on the previous year.

“It appears that members are keen to play a round of golf with their friends or colleagues, but increasingly prefer to head straight home afterwards rather than staying on for drink.

“If this trend continues, the relative price of a round of golf will need to increase above the inflation rate to maintain profitability.”

The survey also highlighted different approaches to one of the most significant source of revenue for clubs – joining fees.

“Revenue from joining fees continues to segregate clubs, with some experiencing increased revenue inflows from such fees, while others continue to waive joining fees or offer reduced fees in an effort to boost their membership base,” Mr James said.

One of the major costs for golf clubs is salaries and wages, and this increased by 1.36 percent in 2015, in line with the previous year (1.2 percent).

While the majority of wage allocation goes to grounds-keeping staff, 2015 saw an increase in the proportion going to pro shop wages.

“Pro shop wages increased by 9.29 percent in 2015, and now makes up 9 percent of wage allocation.

“While it is still the smallest component of the wages cost (compared to 39 percent for grounds staff, 29 percent for bar/restaurant staff and 23 percent for admin staff) it is the main driver of the overall increase in wage and salary costs.

“One reason for this is that a number of clubs are bringing the pro shop back under the control and management of the club, rather than outsourcing it.

“At the same time, pro shop sales have actually declined very slightly, by 0.02 percent – not a significant decline but one that golf clubs should keep an eye on if their pro shop costs are increasing,” Mr James said.

HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.