Review of the Registered Clubs Industry in NSW - Clubs NSW

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6 Strengthening the financial viability of the registered clubs industry 6 Strengthening the financial viability of the registered clubs industry As the terms of reference for this review noted, several factors are placing pressure on the financial viability of registered clubs in NSW. These factors include demographic changes, as well as recent changes to the regulatory framework governing club operations, particularly changes in gaming machine tax rates and the introduction of non-smoking legislation. Registered clubs also face increasing competition from the hotel sector. IPART investigated the current financial viability of the clubs industry. Its key findings confirm the common perception that most clubs are highly dependent on gaming revenue. As a result, they are very vulnerable to changes related to the regulation of gaming machines. However, IPART also found that 13 per cent of clubs do not rely on gaming machines at all. These clubs have a different business model to clubs that rely on gaming machines. Where they are financially viable, this is largely a result of their high use of volunteer labour and high level of member involvement. IPART considers that the very nature of these clubs mean they make an important social contribution. They are also often the custodians of significant community assets. IPART’s key findings also indicate that the financial viability of registered clubs varies greatly across NSW. Some clubs are financially strong, while others are struggling for a variety of reasons. These reasons include a lack of understanding of their own financial position, the level of competition from other venues in their communities, and the financial management skills of their boards and managers. IPART considered what can be done to strengthen the clubs industry’s financial performance, and concluded that this can best be achieved through a co-ordinated response that involves action by individual clubs, government agencies (such as OLGR) and peak bodies (such as ClubsNSW). IPART considers that action is needed to help clubs to identify when their financial performance is declining, and then to help them and their management to respond effectively. However, IPART recognises that for some individual clubs, no amount of improved financial management will ensure their financial viability. Action is needed to help these clubs explore options such as amalgamation. IPART also examined several regulatory requirements that ClubsNSW submitted create an unnecessary burden for clubs and concluded that some of these need to be addressed. The sections below discuss IPART’s key findings and conclusions on what can be done to strengthen the clubs industry’s financial viability in more detail. 86 IPART Review of the Registered Clubs Industry in NSW
6 Strengthening the financial viability of the registered clubs industry 6.1 Key findings on clubs’ financial viability In examining clubs’ financial viability, IPART looked at what clubs earn and what they spend. It also considered the indicators of an individual club’s financial viability and signs of financial distress, and examined how clubs’ viability varied by size. In addition, it considered the reasons why some clubs are prospering while others are declining. Its key findings are discussed below. 6.1.1 Most clubs are heavily dependent on gaming machine revenue A typical club generates most of its income by offering gaming machines, food and beverages, and other sporting and entertainment activities to club members and guests. In a submission, ClubsNSW identified gaming machines as the predominant source of revenue for clubs. 89 It indicated that, on average, gaming machines account for 63.2 per cent of a club’s total revenue, while bar and food revenue account for 16.6 per cent and 7 per cent respectively. 90 The extent to which clubs rely on gaming machines differs according to club size. For larger clubs – those with gaming machine revenue greater than $10 million a year –this source of revenue accounts for 76.9 per cent of total revenue. For smaller clubs – those with gaming machine revenue between $0 and $200,000 a year – this source accounts for 10.2 per cent of total revenue. 91 Once the costs of providing club services and activities are met (eg, the costs of goods sold, wages and other employee expenses and taxation), the net profits generated are used to make these services and activities affordable and accessible to club members (ie, many clubs provide services and activities to members for free or at a discounted rate). The net profits are also used to enhance or expand the club’s facilities, provide sponsorships and make donations to related sub-clubs (eg, junior sporting clubs, RSL activities), and to provide community facilities and support. In terms of profit, ClubsNSW highlighted that, on average, gaming machine profit accounted for 174.6 per cent of a club’s profit. That is, for every dollar of profit generated by the club, gaming machines contribute $1.74 and the remaining activities make a negative contribution of $0.74. This demonstrates the extent to which gaming machine revenue subsidises other club activities. 92 Table 6.1 summarises ClubsNSW’s data on the sources of revenue and profit for registered clubs. IPART’s analysis of its case study clubs supports this data. 89 Based on data from ACG, Socio-economic impact study of clubs in NSW (2003), 2003. 90 ClubsNSW submission, 4 April 2008, p 26. 91 ACG, Socio-economic impact study of clubs in NSW (2007), 2008, p 17. 92 ClubsNSW submission, 31 July 2007, pp 98-99. Review of the Registered Clubs Industry in NSW IPART 87
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Independent Pricing and Regulatory
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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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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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Glossary and Abbreviations Glossary
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Review of the Registered Clubs Industry in NSW - Clubs NSW

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