Month: September 2010

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Opinion- F&B August Meeting Notes Observation by Greg Carley

TAC continues to move toward the precipice. How about some real benchmarking and common sense solutions.

“Capping the well” (cutting the $20 million payroll by $5 million+) is necessary as well as delivering value to members with inexpensive, casual dining.

The mind-boggling Aug. F&B committee meeting sets the stage by using the Roppongi Hills Club (RHC) as the benchmark and weaves a strategy for new TAC’s F&B around it with a Cost of Goods target of 26% which is a mark-up of 4 times to reach the member’s price. And more poison for the patient.

This strikes me as an ultra “bunker” strategy, divorced from realiity. The premise is that TAC members want a RHC equivalent dining experience with an American focus (whatever that may mean). I wonder how many members have ever been to (or heard of) the RHC. More likely, the cheap-and-cheerful dining experience of Global Dining (La Boheme, Monsoon, etc.) and the like is the goal of most members. No one seems to have impressed on TAC that fine dining started to decline (replaced by casual dining) in clubs around the world about 20 years ago. New TAC went big on F&B and now the tail is waging the dog.

RHC is in a business hub and a destination for shopping. TAC is not. The belief that “build it and they will come” will go live early next year.

The dramatic decline in TAC’s F&B sales over the past 15 years is directly due to the internationalized, super-competitive marketplace. TAC does not offer value for money and members have voted with their hip pockets and for diversity. It’s that simple.

The F&B centric TAC is sailing against the head-winds and all will be revealed next year. I have attached to this email a two page financial report which appeared in the Sept. issue of the New York Athletic Club’s magazine (NYAC). The NYAC seems to be doing everything right and offers real value to members with low entrance fees, reasonable monthly dues and good F&B value. And no debt. TAC should be benchmarking against the likes of the NYAC and clubs in Asia, not the RHC. The NYAC has a staff to member ratio of 1:24 vs. TAC’s 1:11. The NYAC marks up their F&B about 2.2 times versus TAC’s plan of 4 times (Historically TAC was a about 2.5 times)  Now that’s benchmarking. But that might be just too much common sense to take into the next committee meeting. It is also important to strip room rental (about 10%) out from F&B revenues as this distorts COGs and comparisons, exaggerating mark-ups. “Wastage” may be the culprit in what seems to be a 5 or 6 times mark-up over COGs.

There will be many course corrections next year but the overwhelming $125 million loan at 4% looks like the fatal coup de TAC. TAC has managed to snatch defeat from the jaws of success. A fatal flaw is its “reversal of roles” whereby members serve the interests of a small number of “lottery winners” with a transfer of wealth from member to elite staff. Over the past 25 years most of about $250 million in Entrance Fees which should have gone into reserves for renovation and rebuilding went instead to salaries.

Greg

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Ecstasy and Agony By Terry White

I think it’s fair to say that many of us on TWG2 have found the experience both fascinating and – at the same time- frustrating. While almost everyone — Board, member and management included — individually recognize that we need to change the way the way we operate, there seems to be great difficulty actually doing it. Ironically, transformation is dependent on those dysfunctional mechanisms we seek to reform. It will be important going forward for all members to stay actively involved and to keep up the pressure for reform. The potential for backsliding once the short term financial pain is deferred remains a clear possibility.

We recently spoke to the Board about the twin missions driving TWG2 – the need for short-term measures to address the DSCR concerns, and longer-term actions to address the root causes of the Club’s tightened circumstances.

Short-Term Measures: We explained that we believe that it is possible to remove considerable expense from the Club’s operations without impacting services to members. Working closely with the Finance Committee, we are confident that we can recommend a budget that meets the current situation realistically and head-on. We have also recommended some changes to the management structure that help deliver on the four strategic issues below.
Strategic Issues: At the same time, we’ve pointed out that there are four key issues that need to be addressed to effect the transformation that will ensure our long-term success:

1. First, we believe there is a fundamental problem with the governance of the Club. Mostly, that’s our fault as members … but we have to put in place an effective and active governance structure that determines the strategic objectives of the Club and helps oversee management in the delivery of those objectives. It’s great to see that the BoG agrees with this perspective and has launched a Governance Committee charged with making changes.
2. Second, and a necessary consequence of the first, is the need to develop a strategic plan that gives clear direction on what’s important to the club as a corporate entity and the aspirations and expectations of its members. 3. The third plank follows the second – a need for a clear understanding of the Club’s brandand the mechanisms to market that brand among the existing and prospective membership. The Membership Committee is potentially going to take this challenge on board with pro bono help from members who are professionals in this area.
4. The final element is transparency and accountability mechanisms, reviewed regularly by the board andreported to the members. A performance dashboard comes to mind, and we’ve made some suggestions about what this might look like.

These four challenges make for much more difficult conversations: many people have opinions on each of these issues and the unfortunate result can be that the status quo emerges as a compromise. That’s the frustrating part.

To be sure, measurable progress has been made to date. Not least, management has been given more and tighter guidance by the board in the budgeting process. Budgeting to lose a major portion of our remaining equity and basking in self-satisfaction when we lose a lesser amount is now, hopefully, a thing of the past. Executive compensation is in the cross-hairs and governance per-se is finally attracting a measure of attention.

I’d love to get feedback and comments … all reasonable opinions sought and welcomed!

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New Blog On Tokyo American Club Website

There is a new blog on the Tokyo American Club website.  It has the name of “The Heard”.  Although there is no need to hire a brand consultant, we wonder where they got this name?

Our biggest concern with doing those posts there is that things will filtered and we’re back to the same lack of transparency that got the management of the club and the board of governors into trouble in the first place.

We’ll put up the first post shortly here so you can comment.

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MABT Update Sept 5

It’s certainly been a lively time for the TWG2 team during the summer holidays. We’ve been digging into a wide variety of topics that include root cause analysis, the Club’s revenue and expenditure projections for the next few years, F&B, strategy and governance issues, outsourcing opportunities, and benchmarks for compensation. We’ve also made a pretty significant contribution to the Traders’ Bar balance sheet!

Some of our members have been active participants in discussions with the Club’s committees, including Finance, Compensation, F&B, Membership, House and others. Special thanks to the Committee chairs and BoG for their cooperation in this process. And similarly, thanks to those of you who have taken the trouble to give us your ideas and opinions these last few months. TWG2 sees the membership as its constituency, and we’re focused on delivering outcomes that ensure the Club meets and exceeds your expectations.

We’d also like to recognize the effort put in by the management and staff in backing us up – we’ve been asking some pretty difficult questions and sticking our noses into every aspect of the Club’s operations, and it’s gratifying to see the positive way in which people are responding to the need for change.

It’s interesting to note that we’re not the only private members club facing these sort of challenges right now. That makes our work, and your support, even more important as we deal with a much more competitive environment going forward. Our goal is to make sure that TAC is well-placed to thrive over the next three to five years, by delivering on a unique lifestyle and community proposition that just can’t be beat!

We’d like the chance to report back to members and get feedback before submitting our final report, and are planning a town hall meeting later in the month for that specific purpose. Please support us – and your Club – by coming along and letting us know what you think.

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September Update

Hope you’ve had a good summer.  It has been quiet around the club, but not for the MABT.

Well, the team has been working with the Board of Governors to come up with ideas on how to Make A Better TAC .  You got some ideas from here.  There have been weekly meetings and it has been a bit quiet from us as we wait for to hear results of this work.

There will be a townhall meeting coming up this month.  We’ll keep you posted as to how things are going.  Please come and make your voice be heard.  More on the data and time to come.