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
Geoff, TAC’s Tower of Babelspeak grows ever taller as the committees and BOG seek to revive TAC. Professional, outside, independent advice makes good sense but has not been sought. Will TAC collapse under the weight of the many, self-selected, committee-member experts? Probably not, but road ahead will be very rough.
Would it be too much to ask for committee and BOG minutes to be at least partly coherent and reflective of what goes on at meetings?????
“We paid for” … should read “we will be paying for over the next 100 years”.
When the debt is retired the new club will be paid for.
Sadly none of the current membership or even their children will live to see that day.
One of Dan Thomas’ fellow BOG members has emailed me writing that he found my analysis, “insightful, interesting and useful.”
Dan seems to believe his vision of TAC is correct and representative of the members’ thinking. A fatal flaw that has led TAC to the precipice and should TAC survive, has saddled members to debt service servitude for many years to come.
A few months ago I was invited to the Hong Kong Club (not the HK American Club) for lunch and my host explained that the members of this exclusive club enjoy F&B prices at 40% below market price owning to prudent and conservative governance. TAC is planning to screw the member with a 25% COGs which marks-up the F&B cost 4 times to arrive at menu prices. This is following the RHC model. Years ago the manager of Trader Vics told me the restaurant in the New Otani marked-up 4 times over cost which explained their sky high prices. This is not what TAC members want or deserve. Just look at F&B sales per member which are less that half of those in 1983 when the mark-up was 2.4 times cost. That should be the target, just ask the members or wait and watch the slide continue.
The Roppongi Hills Club is a great venue that I use 2-3 times a month. There are a lot of other TAC members I have seen there as well. The ACCJ also uses the venue extensively. Therefore I think you need to look at that seriously as the committee is.
It’s weakness is that it is food only. It’s strength is that is extremely convenient to the station and to many c level people at many foreign companies.
Further, it is a great model for outsourcing (which many see the TAC needs to do) as the service is excellent, the prices are right, it is busy, and the food is very good.
I expect to see a lot of people while come back to the club when it returns to the place we paid for in Azabudai. There is undoubtedly a “newness factor” that everyone loves that comes in to play as we saw with Mitsukoshi’s new annex opening two weeks ago.
I was eating lunch there at least once a week before the move. I know I will be back with my customers when they return.
Good to see the F&B is active and thinking.