Review of the Registered Clubs Industry in NSW - Clubs NSW

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10 Helping clubs better understand the risks and benefits of diversifying their operations Where a business’s core operations are in long-term decline for reasons that are beyond its control. This may be because of changes in consumer tastes and demand for its products or services (often seen in the case of technology and consumer electrical manufacturers); supply constraints (oil firms); legislative restrictions (tobacco companies); and/or changes in the competitive environment (such as the expiry of intellectual property rights). Even in these cases, diversification requires specific benefits that would not generally be available to all businesses, such as offsetting risk positions that are not otherwise easily hedged, economies of scope and scale between the activities or access to unique skills or product relationships. 10.1.1 Why do clubs diversify? During the consultation process, stakeholders identified that registered clubs consider diversification as part of their overall business strategy for several reasons: to reduce their reliance on gaming machine revenue (and thus the potential impact of changes in the regulation of gaming machines on their operating margins) to respond to increasing competition from hotels and other businesses as a means of improving their offerings to members, broadening their membership base, and addressing community needs. Some stakeholders noted that while clubs might embark on a diversification strategy with a particular objective in mind, there can be unintended consequences. For example, Wagga RSL stated it developed a motel on surplus land adjacent to the club to reduce its reliance on gaming machine revenue. In fact, the motel generated increased traffic in the club and consequently increased gaming. 181 Many stakeholders suggested that diversification strategies were a natural progression for larger and/or successful clubs that had the financial and management resources at their disposal to consider diversification options. While smaller and/or financially distressed clubs saw merit in diversification, it was not a realistic option for them due to their limited financial capacity and management resources. For example, Leeton Bowls Club stated it was not in a position to diversify because it had limited cash reserves and does not own its land so cannot mortgage it to secure funding. 182 181 Wagga RSL Club, Wagga Wagga roundtable, 14 September 2007, p 25. 182 Leeton Bowls Club, Wagga Wagga roundtable, 14 September 2007, p 24. 166 IPART Review of the Registered Clubs Industry in NSW
10 Helping clubs better understand the risks and benefits of diversifying their operations 10.1.2 What have clubs diversified into? IPART’s consultation identified that clubs have diversified into a range of areas, including (but not limited to): health and fitness centres accommodation training and education bottle shops retail child care aged care travel services. In some instances, the club operates the diversified business or businesses itself, generally where it can do so within existing club operations (eg, new upmarket dining options). Where the diversified business is somewhat removed from the hospitality sector, the club often engages a third party to own and operate the business with the club acting as landlord. ClubsNSW cited Dee Why RSL as an example of a club that has used numerous diversification strategies to reduce its reliance on gaming machine income. 183 It established a car wash, which it operates, and has leased space to a child-care operator and a ten pin bowling centre. Dee Why RSL has also entered into a joint venture arrangement with a property developer to establish a retirement village adjacent to the club. This development is expected to generate a significant cash injection and income from an ongoing management fee for the club. However, ClubsNSW also acknowledged that, even with diversification, the longterm financial viability of clubs is likely to remain closely linked to their alibility to operate gaming machines. 184 10.1.3 Are there any restrictions on diversifying? The Registered Clubs Act places no specific restrictions on what business/sectors clubs can diversify into. At the outset of this review, section 41J(3) of the Registered Clubs Act placed conditions on the disposal of land by a registered club. Essentially, this section meant that clubs could not dispose of land (or grant options to buy) unless: 1. the disposal was approved by a majority of club members 2. the disposal was by public auction or open tender, and 183 ClubsNSW submission, 31 July 2007, p 105. 184 ClubsNSW submission, 31 July 2007, p 100. Review of the Registered Clubs Industry in NSW IPART 167
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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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4 Measuring and reporting on club c
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5 Refining the Community Developmen
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6 Strengthening the financial viabi
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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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