By Mr. Greg Carley (Former TAC President)
While Tokyo has only one full-service expat club, the Tokyo American Club,
Asia has many with Hong Kong leading the pack with dozens of elite member
clubs. TAC can benefit from its Reciprocal Club network.
TAC with almost 4000 dues paying members holds the area record for revenue
with the 2020 budget set at $50 million, of which almost 50% is dues and
entrance fees, and F&B about 30%. Relatively speaking, it is a big club.
The critical mass for a full-service club is probably 2000 members. TAC has
400 staff.
So how does TAC compare to its Reciprocal Club network in the region and
other clubs? Unsurprisingly, efficiency-wise, not too well. Its Budgeted
payroll is 59% of Operating Revenue (OR), and its F&B Cost of Goods (COGS)
was 29% in 2019. In sweeping terms, large clubs are scalable and Payroll
should be between 40-50% of OR; F&B COGS, 40%.
HOW TO FIX TAC:
TAC’s biggest unmined resource is its expat Reciprocal Club network. Here
it can, on a one-to-one confidential basis, compare metrics, ideas, and
operations for mutual benefit. Clearly, the payoffs are big, if pursued. As
well, a number of expat clubs post their AGMs on the Internet; revelatory
gifts.
In TAC’s network, the Singapore Tanglin Club has 4000 members and an F&B business about half that of TAC with COGS about 45%. Its payroll is 40% of OR. Its dues are miniscule, under $100 while its entrance fee is $75,000. The LRC in HK is half the member size of TAC, 1900 (capped?). Its F&BCOGS at 45% of OR; its Payroll at 53% of OR. Size does matter. Dues are about same as TAC that include a mo. minimum spend of $110. Entrance fee $40,000.
* Hong Kong Football Club was a recip. club (why not reinstate?) and has a
robust F&B business at 45% COGS. F&B sales are $13 million which is
impressive for a 3000? member club.
*I was not able to find details on the HK & Sing. American Clubs that have
memberships of 3000 and 3500? respectively. The HK American Club has a big
entrance fee of $55,000. TAC probably has the highest yearly dues in the
region at just under $5000 for families.
Clearly, TAC has a cost problem. Payroll should be under 50% of OR and F&B
COGS should be about 40% which, ironically, is the % TAC’s 2006 Referendum
Brochure forecast in the event of Impairment (worst case) scenario with
revenue at $50 million. Very prescient 14 years ago.
So where did TAC go wrong? Well, Committees are not the standard for
successful enterprises. They are called an outdated club model that goes
back to when clubs could not afford staff. Supposedly, club committees are
disappearing. Management probably spends 50% of its time in Committee
meetings. And is there a career path for staff where volunteer committee
members, often unqualified, make the decisions. No TAC GM or GM’s staff has
risen through the ranks. By contrast, the current Okura GM started as a
bell-hop at the hotel
New TAC went big on banquet space and this should be scrutinized for the
real costs (payroll, operating and maintenance costs). The budget for the
Repairs and Maintenance Dept. boggles the mind and should be dramatically
cut by millions. It appears that other expat clubs do OK at about
$2500-$3500 F&B per member whereas TAC does not do well at $3500 per dues
paying member. Something(s) is wrong here. The $25 million payroll is
clearly way too high. Reduction in highly paid staff compensation makes
sense. Outsourcing as well. Historically, it was said that the Club is
really run for the employees. Thus the high pay for some. Undoing the
damage is hard.
As TAC is near its perceived member limit, it might make sense to follow
the HK clubs and raise the Entrance Fee. Maybe Y3 and Y6 million.
Establishing close, bi-lateral, one-to-one managerial relations with expat
Reciprocal Clubs in the region can have big payoffs for TAC.