Review of the Registered Clubs Industry in NSW - Clubs NSW

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6 Strengthening the financial viability of the registered clubs industry IPART considers that clubs which do not produce adequate, detailed financial information and benchmark their own performance are ‘flying blind’ in terms of understanding their own financial performance and ongoing viability. Adequate financial and benchmarking information allows a club to monitor its financial performance, and identify early signs of declining financial performance. In turn, this allows it to introduce timely measures to improve its financial performance and maintain financial viability (ie, before it reaches Stage D of the financial distress timeline, discussed above). However, IPART recognises that a club’s management reporting framework will vary according to the size and scope of the clubs. For example, a framework that is suitable for a large club like Panthers Entertainment Group may not be suitable for a small club such as Cowra Bowling Club. A club’s consideration of its long-term sustainability and/or retention of community assets Financially distressed clubs often sell assets to provide a short-term cash injection so they can pay debts when they fall due. However, this is unlikely to assist their longterm financial viability. IPART considers that this lack of consideration for the long-term financial viability of the club when facing financial pressure is a major reason why some clubs are declining. By selling assets, these clubs can effectively defer necessary reforms. This reduces their ability to rectify the problems causing their decline, and thus places their community assets and services at risk. For example, some clubs sell their gaming machines and gaming machine entitlements, which then reduces their income and thus their ability to turn their financial performance around. While IPART does not believe further restrictions should be placed on clubs in relation to the sale of assets, clubs should be provided with greater assistance to ensure that any sale is the best option available to them. Level of competition IPART found that most stakeholders considered that increasing competition from other providers of hospitality and recreation services and products is a major reason why the financial viability of some clubs is declining. In particular, stakeholders considered that hotels are in direct competition with clubs because they offer a similar package of food, beverage and gaming machine options. To a lesser extent, clubs also compete with other recreational and entertainment options, such as cafes, gyms and cinema, for the consumer’s discretionary income or ‘entertainment dollar’. At the first Sydney roundtable, ClubsNSW noted that since the introduction of gaming machines to hotels in 1996/97, there had been 250 closures or amalgamations of clubs. 106 While ClubsNSW did not attribute all those closures or amalgamations to 106 ClubsNSW, Sydney roundtable, 27 August 2007, p 23. 100 IPART Review of the Registered Clubs Industry in NSW
6 Strengthening the financial viability of the registered clubs industry the introduction of gaming machines in hotels, it suggested that this was a major contributing factor. Panthers Entertainment Group identified that, in more recent times, consolidation within the hotel sector (ie, the move away from individual ownership to publiclylisted hotel groups and private equity firms) made them formidable competitors for clubs, which are community-owned and do not have the same capacity for developing group holdings. 107 IPART notes that while clubs are experiencing increasing competitive pressure, clubs also enjoy some benefits over competitors such as hotels – such as gaming tax concessions - and have previously enjoyed access to land at peppercorn rental rates. Demographic and socio-economic changes Local demographic and socio-economic changes can influence a club’s core market (members and guests) and thereby influence the profitability and financial viability of a club. For example: A club located in a population growth area is likely to experience an increase in the local membership and guest base. Conversely, a club located in an area where the population is declining and there are a number of alternative hospitality venues (ie, hotels and other clubs) is likely to have a static or declining membership and guest base. Changes in the socio-economic or demographic profile of the club catchment area, such as the age profile or entertainment and recreation preferences, can also lead to a decline or increase in a club’s membership base (for example, lawn bowling is less popular than it was in the past which has led to a decline in bowling clubs’ membership). Case study clubs confirmed the significance of demographic change to club profitability. One case study club identified that its location in a population growth area was beneficial 108 ; another noted the effect a declining population was having on its profitability 109 . The public roundtables, in particular regional roundtable hearings, also noted the impact of declining populations on club operations. However, IPART notes that, although a stable or increasing population base is a favourable condition for a club, it provides no certainty of improved financial performance or long-term viability. The club also needs to consider the changing preferences and expectations of members and guests (ie, the market) and respond by providing facilities and services to meet these preferences and expectations (ie, maintain its relevance and market appeal). 107 Panthers Entertainment Group submission, 26 July 2007, p 25. 108 Bowlers Club of NSW. 109 Clubmulwala. Review of the Registered Clubs Industry in NSW IPART 101
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Independent Pricing and Regulatory
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© Independent Pricing and Regulato
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Contents 6 Strengthening the financ
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Executive Summary Executive Summary
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Executive Summary estimated the val
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Executive Summary Therefore, IPART
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Executive Summary However, IPART al
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Executive Summary List of Recommend
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Executive Summary 15 Once the stand
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Executive Summary 29 That ClubsNSW
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Executive Summary 46 That ClubsNSW
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Executive Summary 60 That OLGR deve
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1 Introduction 1 Introduction Over
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1 Introduction 1.1.2 Review’s foc
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1 Introduction 1.2 Other reviews an
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1 Introduction 1.3 The structure of
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2 The registered clubs industry in
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3 Understanding the social contribu
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9 Improving corporate governance IP
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10 Helping clubs better understand
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11 Making it easier for clubs to am
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12 Making it easier for new clubs t
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13 Removing unnecessary regulatory
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14 A framework for a management pla
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A Terms of reference A Terms of ref
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A Terms of reference The proc
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B Terms of reference checklist Term
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C List of submitters, roundtable pa
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D Gambling expenditure and problem
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E IPART’s methodology for recordi
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F ACG’s approach to measuring the
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G ClubsNSW - steps to establishing
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G ClubsNSW - steps to establishing
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Glossary and Abbreviations Glossary
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Review of the Registered Clubs Industry in NSW - Clubs NSW

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