Review of the Registered Clubs Industry in NSW - Clubs NSW

6 Strengthening the financial viability of the registered
clubs industry
IPART’s considerations and recommendations on improving corporate governance,
training and development are discussed in detail in Chapter 9.
6.2.4 Helping clubs better understand the risks and benefits of diversifying their
operations
IPART believes clubs should consider diversifying their sources of revenue, not as a
means of reducing their reliance on gaming machine revenue but as a means of
expanding their revenue base and maintaining relevance in their communities. As
outlined in section 6.1.1, most clubs rely on gaming machine revenue to remain
financially viable. This, coupled with the impact of increasing competition and
concern about how regulatory change could affect gaming margins, has meant that
diversification is becoming a common element of clubs’ business strategies.
However, IPART found that, despite the common belief that diversification is an
effective means of reducing reliance on gaming revenue, there is no other business
line that can feasibly replace gaming in a club’s business model. This is largely due
to gaming operations’ inherently high margins. In addition, clubs’ ability to
diversify may be limited by their managements’ capacity to handle diversified
businesses.
Despite these issues, IPART considers that diversification can be an effective means
of expanding a club’s revenue base, broadening its market appeal, and maintaining
its relevance by providing additional services to its members and local community.
IPART’s considerations and recommendations on diversifying clubs’ sources of
revenue are discussed in detail in Chapter 10.
6.2.5 Making it easier for clubs to amalgamate
There are some clubs for which no amount of improved financial management will
ensure their individual survival. In some cases, the impact of demographic changes
has reduced the demand for the goods and services that clubs provide to the point
where the number of clubs servicing a particular community may not be sustainable.
In addition, some clubs may be in a limited position to deal with increased levels of
competition from other providers of hospitality and recreation services, so
consolidating the number of clubs in the area will improve their financial viability.
IPART believes that amalgamations can assist clubs in areas where there may be an
excess number of clubs and where clubs may be struggling to achieve financial
viability. For example, some areas may be serviced by three or more clubs that may
all be experiencing financial difficulty and may face considerable challenges to
become financially viable. In this case, IPART’s view is that the needs of this
community would be better served through the existence of one strong club, that
consolidates the activities and membership of each club, leverages the assets of all
clubs and achieves cost efficiencies through the pooling of resources and greater
purchasing power with suppliers.
106 IPART Review of the Registered Clubs Industry in NSW