Early financial results spell trouble for
Yacht Club ‘open for business’ policy
Commentary by Tom Stauss
There’s no reason to panic or to start axing employees. Even so, Ocean Pines Association Bob Thompson is well aware that he needs to make some adjustments in management at the Yacht Club, if for no better reason than to avoid a surge in OPA directors’ micro-management.
A practice round of board micromanagement occurred during the directors’ July monthly meeting, during which Thompson fessed up to a less than stellar cumulative bottom line at the Yacht Club for May and June, the first two months of Fiscal Year 2012.
Most of the directors did not react well to the disclosures, which is yet another lesson to Thompson of that axiom that no good deed – in this case, full disclosure and transparency – goes unpunished.
Here’s the bad news in a nutshell. A year ago, after the first two months of operation, the Yacht Club had generated a $44,769 net operating surplus. For the same two months this year, there is no operating surplus. It’s an id=mce_marker8,428 loss, representing a $63,197 shift in financial fortunes for two months that in most years are solidly in the black.
Compared to this year’s budget forecast, it’s only half as dire, about $30,000 behind where the board said it should be after May and June. Pick your poison. Compared to last year or compared to budget, the numbers can’t be sugar-coated but nor do they presage the pending collapse of the OPA. In fact, overall, the OPA is operating at an operating surplus for the year.
Thompson, of course, can read a profit-loss statement and no doubt did not require instruction or insights from the directors on the Yacht Club’s finances. And it’s blindingly obvious that some management intervention of some sort by the general manager is required. It’s just a matter of when and of what kind, matters of which are his to determine. Stay tuned. It will become clear enough soon enough.
With the summer now entering the dog days of August, it will be interesting to see if he makes immediate operational changes or waits until the fall. Either is defensible, as making knee-jerk changes to some bad numbers is not always the best way to proceed, just as waiting too long to act is tantamount to digging the hole deeper.
If indeed a continued decline in banquet business is a primary cause of the shortfalls, there’s probably not much that can be done about it short-term. The decline is at least in part a function of a struggling economy. For all the marketing that’s been done for the Java Bay Café, Java Beach, gelato and “open for business,” there’s little evidence that the OPA’s marketing efforts have focused on the banquet business. Weddings, holiday parties, corporate affairs, you name it: More should be done to remind everyone that the Yacht Club is a superb venue for these sorts of affairs.
Some of the banquet decline is related to the board’s decision last year to close the Yacht Club after Labor Day, a decision subsequently rescinded when it became clear that no renovation or tear down/rebuild of the amenity was going to happen. The business lost has not returned in sufficient numbers, and it’s not going to come back simply because the OPA wants it to.
When the OPA back in the 1990s decided it didn’t need outside play at the Ocean Pines golf course by outsiders, the results over time were catastrophic. It’s literally taken a decade and a half to get that business back in respectable numbers, and in the meantime the membership base that had been closing in on 1,000 is now mired in the mid-200s, at least according to the most recently published numbers. Without outside play, golf in Ocean Pines would be in its death throes.
Billy Casper Golf is doing a respectable job of managing both revenues and expenses at the golf course, and contracting out the Yacht Club management to Casper remains a viable option should current trends at the Yacht Club continue. An important element of BCG’s management philosophy seems to be rigorous cost containment. It’s apparent that the Yacht Club could use a dose of that.
But let’s try to be fair to Yacht Club manager Joe Reinhart. Just two years ago he had the operating deficit down to id=mce_marker1,000 under the cost-containment management philosophy of former general manager Tom Olson, who was operating under a policy directive of a previous board of directors. Certain directors were happy enough with the bottom line but not so happy with the fact that the Yacht Club was not a “go-to, happening, community gathering place” that they envisioned as possible and desirable. Board dissatisfaction with Olson’s management style led to his dismissal, even though a previous board had more or less told him to do precisely what he was doing, with Reinhart in full accord.
Under Thompson’s “open for business” philosophy, encouraged by last year’s board and the current one, the Yacht Club has a fresher look, a new menu, and longer hours of operation at both ends. The good vibes seem to have created demand for service that, unfortunately, the staff hasn’t been able to accommodate all the time, every day, consistently. That’s a good problem to have, let’s say, compared to some alternatives.
But even with a staff unable to handle the demand at all times of the day, Yacht Club payroll expense as a percentage of revenue is much higher than it should be. That reflects poorer than expected banquet revenue, generally believed to be much more profitable than typical ala carte dining. But it could also be that food and beverage fare is too economically priced to be able to generate the profit margins needed to support the level of staffing currently employed by the Yacht Club.
But let’s say, as some in Ocean Pines apparently advocate, that Thompson makes some dramatic staff cuts at the Yacht Club to bring wages and benefit expense more in line with industry standards as a percentage of revenue. What would those cuts do the level of service, how quickly patrons can be seated for dinner, for instance? How quickly the kitchen can turn out a meal?
What might to critics seem obvious may not be quite so simple in fact. Thompson’s has to be careful that by solving one problem he doesn’t make another one worse.
– Tom Stauss