Further to a recent communication from the President, the Treasurer and the General Manager (copy below), 2022-2023 Subscriptions have now been raised on your account and emailed to you from Sue. Click here to view the 2022-23 Subs Schedule.
You may wish to read the communication below once again as it includes important information on the conclusion of the Senior’s Discount, Benchmarking against other Clubs, Reasons for Cost Increases, etc.
23rd August 2022
From the President
The financial year for the Club commences on the 1st September and the Annual Subscriptions notice for the period 1st September 2022 to 31st August 2023, will follow soon via post or email.
It is important for all members to appreciate how fortunate we are to have such hard working, experienced and talented members of the Finance Committee to assist our General Manager, Gavin, and our Financial Controller, Georgette, in reviewing our financial data with a forensic lens, line-by-line, before reaching their conclusions.
Combined with the financial experience of our GM, the General Committee has complete faith in the process and their conclusions.
We believe the General Manager’s rationale for subscription increases, following the detailed work of the Finance Committee, is appropriate to achieve our objectives.
Geoff Anderson -President.
From the General Manager
Given the current inflationary environment the Club has made the difficult but necessary decision to pass on these costs with Full Playing & Provisional Members incurring approximately a $500 increase to their annual subscription fee. For full details of the Schedule of fees please click on the following … Click here to view the 2022-23 Subs Schedule.
In setting these fees a thorough and detailed review of our costs and revenue base has been undertaken to ensure Members continue to receive value for money for the whole of the membership experience at Lake Karrinyup Country Club.
The below provides further details that influenced this decision.
Business Model
Our Club vision is to provide a pre-eminent member experience.
Membership subscriptions are our single biggest revenue line equating to 43% of total turnover. This is comparatively low to other golf Clubs that have subscriptions greater than $4,000 per annum which average 54% of turnover.
Although the Club is ‘not for profit’, it must generate a profit to reinvest into the member amenity and infrastructure.
Significant capital purchases of equipment have already been delayed and continue to be deferred until such time as we can afford to purchase these items from operating cash flows. The deferment of these purchases ultimately becomes inefficient and more costly to the Club.
For the Club to reinvest into our amenity and provide essential equipment, the Club needs to budget for a net profit. It is the intention of budget 22/23 to address this issue and subscriptions are an important revenue lever for the Club.
Benchmarking
Research and benchmarking have been undertaken to review the subscription models of like Club’s in Australia.
Other Clubs in Western Australia do not necessarily have the same model as LKCC and therefore can charge less for subscriptions. The key reasons they can do this are:
- smaller facilities to maintain and quality of both Clubhouse and Course
- greater access to public or corporates generating more green fee revenue
- charging higher rates for ancillary services such as lockers and storage
- charging higher prices and generating profits from food and beverage.
Women’s increases this year, whilst broadly aligned in dollar terms, are a higher percentage increase than the Ordinary membership category. The membership model currently reflects female members paying approximately 66% of full playing Ordinary members with arguably similar access to the golf course. At other Clubs around Australia, this ratio is usually between 80-85% and it is the Club’s intention to address this fee model over time, although several clubs have only one membership category, whilst maintaining differing playing days. It is the Club’s intention that this ratio reaches 80% within the next 3-4 years.
Cost Increases
The Club continues to absorb significant inflationary pressures with the latest Australian Bureau of Statistics (ABS) figures for the July quarter in Perth reaching 7.4%.
Major cost increases include fuel up 35%, fertiliser 30%, insurance 20%.
The minimum wage is legislated to increase by 5.2% with award rates rising similarly. Most of our staff are employed in line with the award.
Wages are a significant expense for our Club, in line with service industry expectations. Whilst it is acknowledged that rostering efficiencies can always be identified and managed these are ultimately minor influences. What may be surprising to members is that most of our staff are casual or part time that encompasses all areas of the Club, including the office. Overall, our wages can be benchmarked to other like Clubs and industries with wages as a % of revenue being one such useful metric and we measure favourably to others in hospitality, golf, course preparation, and administration.
Cutting costs further is not in line with our strategic plan for the Club and meeting member’s expectations. Growing our Club sustainably, both in patronage and the quality of amenity are our goals to enrich the member experience at our Club.
Food & Beverage
Food and Beverage at Lake Karrinyup is unique to the golf industry. Our turnover exceeds other known Clubs by $1 million to $2 million and its turnover is comparable to many leading hospitality businesses in Perth. Food and Beverage at the Club is modelled to budget for a 2.5% return after cost of sales and labour. This would be compared to 20-25% outside of a Club environment. This is however an agreed operating model that reflects a service to members with reduced pricing, extended operating hours and very few non-member functions. It is recognised as a key value proposition for Members.
Course (machinery)
Our recurring capital expenditure has averaged $836,000 per annum over a 10 year period. 85% is attributable to the machinery that’s required to present our 54 reticulated hectares to the standard we are accustomed.
Through our forensic cost review exercise, it is evident that prudent management and replacement practices exist with most machinery fully depreciated and high-end precision equipment rotated in an appropriate timeframe.
LKCC Maintenance Shed
Capital Fund
The Capital Fund is a wonderful asset of our Club and has generated some $9 million in returns that have been invested in significant strategic projects for the Club. They include, the redevelopment of the Grill restaurant and Members Lounge, the Golf Shop, and the recent roof replacement. It also includes previous green replacement programs and improvements to the course. Looking forward our immediate need is to fund a reticulation replacement given our current system is beyond its recommended useful life.
The Capital Fund will not produce a dividend for the Club this financial year and is unlikely to next year, given the value of the fund has decreased year on year due to a volatile investment market. It must be noted that this capital fund is a diversified fund with a balanced growth/defensive weighting that is a long-term investment for the Club which will continue to fund major development around the Club in the years to come. However, with a higher interest rate and inflationary environment, the likelihood of the continuing high returns from the Fund is diminished, according to our advisor.
General Manager – Gavin Burt, and Treasurer – Ian Francis.