Magazine Jul/Aug 2016

AND now...

measures, to enable our staff to be more productive, against a backdrop of declining Foreign Worker ratios and a tightening of the hospitality workforce due to the growth spurt in hotels, restaurants and other entertainment venues. Of course, the competitive employment market has driven up payroll costs considerably. Annual payroll has grown by almost $5M in 10 years. The levies for ‘Work’ and ‘S’ passes for foreign staff have grown to $656K per annum compared to $280K back in FY05-06. Other related expenses such as insurance premiums, dental charges and employee CPF contributions, to name a few, have seen periodic to steady increases. Singapore is now the leader in terms of being the “most expensive city in the world”. While payroll has been keeping in line with inflation, the costs of many of the products used in our extensive menus have aggressively increased too. Even though we do 6-monthly tenders for our fresh food items, the upward price adjustments to some produce is amazing. As an example, Red Snapper cost The Club $18/kg a mere 2 years ago. Today, the same item costs $23/kg, a 22.3% increase. In the same time period, garlic we procure has seen a whopping 102.4% price jump from $3/kg to $6.07/kg. This steady hike has affected almost every food item we source in the past years. As much as some Members feel that our prices are expensive compared to other alternatives, I keep referencing our Classic American Burger at the Eagle’s Nest as a great example of the strong value upheld at The Club. Priced at $14.95 (inclusive of the 7% goods and services tax, and with no 10% service charge), based on market comparison and in consideration of the quality of the product, it represents excellent value. This price has been unchanged for the last 5 years. The breakeven mandate for The Club (+/- $500K) has remained intact throughout this time. You can see that while cost pressures have been immense, prices have little elasticity. Adding to this pressure is the fact that over 30% of our membership, who qualify as niche group members, enjoy privileges and discounts at The Club monthly, shrinking an already tight profit margin. In recent times, I’ve frequently had discussions with long- term Members who reminisce about The Club in the good old days and wish it still offered the same or similar experiences they enjoyed back then. I simply remind them that Singapore has seen massive changes and improvements in a very short period of time, and The Club is no exception. Although there is a real commitment to retain the strength and character of this community, the challenges are increasing. The need for innovation, coupled with that of staying relevant in our Members’ lives, will continue to drive our business model in the years to come. It’s all about looking forward…

goes on. With our discerning membership and time-pressured lifestyles, it’s natural for Members to want to explore new offerings. In April 2016 our Club’s usage rate was 81.6%, compared to 84.8% in April 2006. The slight decrease may appear insignificant, and though overall the usage rate is a very high figure compared to other private social clubs, the decline still represents a considerable loss, thousands in fact, of transactions in The Club each month. Our number one Gross Operating Profit (GOP) contributor 10 years ago was the Jackpot Room, netting over $800K. 10 years later, at present day, this outlet has fallen out of our top 10 contributors, with last year’s contribution being a mere $40K. Our decision to close this service was a very heavy- hearted one as it represents a significant part of The Club’s history, but the decline in usage and revenue is significant – and so is the lost opportunity of this valuable space. Today our top GOP outlet is sên Spa. Again, the spa service was not in our top 5 earners 10 years ago, and wine, retail and dry cleaning have continued to grow to support operations and cover the gap left by the decline in Jackpot profits. In FY05-06 we had over 360 full-time staff delivering an income (excluding Jackpot and Membership) of $17.2M. At the end of the last fiscal year we had reduced staff count almost 20% to just over 300, delivering a total income of $24.1M. There has been a concentrated effort over the years to adopt efficiency

Martin Rudden General Manager

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THE AMERICAN CLUB JUL / AUG 2016