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Reply To: Use of East Wing: cost to members of hosting private events at the Club

Forum Home Forums Horizon Project – Have your say! Use of East Wing: cost to members of hosting private events at the Club Reply To: Use of East Wing: cost to members of hosting private events at the Club

#57831

Response posted on behalf of Richard Rawlinson, Chairman of the Finance Committee and also the sponsor of the Horizon Project that is looking at our long-term strategy and use of buildings.

I think your opinion that the configuration and use of the East Wing should be improved is widely shared by members, and addressing those questions is an important part of the Horizon proposals. As you rightly point out, there are many and intriguing possibilities.

Just a few facts, first on the use of the East Wing, and on events, all based on 2019 data, the year before covid so disrupted normal operations:

Of the meals served in the East Wing, considering both the Napier servery etc and events, 58% are paid for by members and 42% by non-members.

The events revenue in the East Wing was as follows:
Club-organized events £360k
Member-organized events £729k
Non-member events £3,330K

Compared to non-members, members are granted a 60% reduction in room hire charges and a 35% reduction in wine and liquor prices (they pay the same prices for food); they also have an early booking member-exclusive period.

The result of these numbers is that the contribution (before admin salaries) of member events was £111k whereas for non-member events it was £673k (club organized events made a significant loss). In percentage terms, the contribution to overheads on member events was 15% of sales vs 20% for non-member events; and the sales to non-members were 4.6 times sales to members.

You are correct in understanding that we have a dedicated team to service the events business: catering for several hundred meals to be served a once is a very different operation from taking orders one by one in a restaurant, even if there are some shared costs and overlaps. The team includes both full time and part time or agency / contractor staff.

You are also correct in thinking that maintaining the flexibility of the East Wing to cope with events has come at the expense of our ability to provide space best adapted for the needs of members. Fewer non-member events is likely to be necessary to improve all or part of the East Wing for member use. Various options will be put to members for reduction in events and repurposing of all or part of the East Wing.

From a purely commercial point of view, we do not see that reducing prices for member events would increase the Club’s income from them. If we reduced prices to members by 5%, for example, we would have to increase the revenue from member events by 49% to get back to the same contribution; I doubt that a mere 5% price reduction would be enough to increase the number and size of member events by 50%.

We could reduce prices if we were more efficient in servicing them. We are aware that some club polices eg to pay London Living Wage and provide a comprehensive benefits package, do raise costs above some other venues, although more and more other venues are themselves increasing wage rates. We do continue to look at cost reduction possibilities and recently have made some changes to that end – though currently the benefit is being swallowed up in higher wage rates (and we are not intending to reduce wage rates, that are the bulk of costs).

Prices to members for events could be reduced if the Club were able to offer services to members at cost price only. That is what we would like to do. Unfortunately, because subscriptions have not increased in line with costs, and are now 12% lower in real terms than they were 10 years ago, the Club has become dependent on income from events in order to cover operating costs and necessary capital investments. To some limited extent, that includes income from member events – as it does income from eg coaching, and other services that the Club does not offer at cost price. Although subscriptions will need to rise above RPI to cover loss of non-member events income and possibly to fund development projects, I doubt they will go up enough to allow us to forgo current sources of income from member events, coaching etc .

On the costs side, member and non-member events are served by the same team, and if non-member events decrease too much, that team will not be economically viable. If the team served only members, at the current level of member events and charges, the team would be loss-making and no doubt there will be pressure to recover the losses through higher, not lower, charges to members for events. Most likely we will continue to maintain a viable sized team covering both member and non-member events and we would hope to keep cost and charges the same, event with lower non-member volume. But the lower the volume of non-member events, the harder this will be.

Alternatively, we might discontinue the events team and ask members to bring in caterers for any event on club premises. We have looked at this: members would select a contractor and deal directly with them while Hurlingham would receive only room rentals and a commission. We concluded that total costs to members for events at the Club would increase, while Club income from events would fall to negligible levels, especially for member events where room rental is already discounted by 60%. I do not think this is attractive; more likely, if we discontinue the events team, we would only offer events to members that our restaurant team could cope with, say for up to 50 guests.

In short, give the improbability that more volume could make up for a reduced margin on member events, the best hope for reducing member event charges would be if the Club ran a healthy surplus, combined with enough non-member events to allow us to run a large and fully cost-efficient events team. While reducing external events may have many merits in terms of allowing us to improve the East Wing for members, it will not improve our events cost position, nor help us with income that could be used to reduce charges to members. At best, if significant non-member events are retained, we will hope to keep member charges much the same.

Thank you for your interest, and I am sorry I cannot be more hopeful about the desirable prospect of reducing charges to members.