When the economy is healthy, there are plenty of opportunities to generate new revenue streams that help carry subsidized programs. When the economy is not so healthy, budgets are slashed in order to protect revenue generating programs. Recreation professionals are left with the decision of limiting programs, cutting hours, or even forgoing equipment improvements and repairs.
Operations include three operating models: subsidy, breakeven, and positive cash flow. Subsidy uses tax dollars to pay operating expenses while the breakeven model is able to pay its own operating expenses. Positive cash flow is the facility that is able to pay its own operating expenses and build revenue. While older facilities are typically subsidized due to higher costs of maintenance and fewer swimmers, a sustainable model is the norm for new facilities, with fiscal operations driven by programming revenue.
If economics are adversely affecting your operations, idle reactions garner a feeling of helplessness when realities of change are taking place. When things are out of control and it becomes necessary to react quickly, something has to be done to regain normality. It becomes necessary to ensure that sustainable and adaptive decisions are made for future changes.
Review your Market to look for Program Opportunities
Warning signs from demographic tracking can help determine when a new look at current programs may need to take place. It’s worth the effort to annually update your population characteristics to understand the growth/decline of age groups, income levels, and housing startups or the slowdown of housing replacement. A valuable tool is to examine the youth numbers in the preschools and schools through 8th grade to determine if significant changes have taken place over time. If the economy caused a shift in your community, examine what new opportunities may exist for new segments of the population. Other ways to predict change in the community is by getting close to the consumer through community mining.
Fee Structure
If income trends have changed, pricing policies for daily admissions and concessions become sensitive. It might be recommended that nonresident fees be applied or adjusted if outer areas have higher incomes. If annual passes are too high for some families, solutions might offer weekday-only passes, weekend-only passes, partial season passes or quantity passes. Discounts may apply to those who register early or as a renewal incentive to established customers. During community presentations, it is important to highlight the fact that competitors are charging initiation/joining fees and you are not.
Attendance
In order to save taxpayers money, gleaning information from your competitors is beneficial in finding gaps, improving policies and fees, and creating opportunities to utilize competitor weaknesses. Find out how many nonresidents your competitors are serving, which may be pulling from your community if your current attendance is down. A data comparison will look to find programming weaknesses in order to out-think your competitors.
Revenue
While it is the responsibility of the municipality to take a leadership role in managing evolving customer expectations, it is also your responsibility to manage the politics. The department’s programs and facilities (parks, beaches, events, festivals, athletic tournaments, historical sites, cultural performances, aquatic centers, etc.) must be prepared to demonstrate the success of programs, showing that they provide more tax revenues that you can either use to maintain the community’s infrastructure, facilities, and services, or to reduce the level of taxes that residents currently pay. This is why it is so important to keep good financial records. Moreover, if a program is cut, you have data indicating the reason(s).
Expenses
Technology is always looking for ways to save money, especially during economic downturns. An assessment of current and past budgets can look to see if operations are impacted by rising costs of utilities, chemicals, and maintenance. There is escalating momentum for environmentally responsible building practices, and aquatic/recreation design teams embrace green technology. By implementing sustainable equipment, money will be saved in the long run. Operating goals should include maximizing sustainable design for efficient operations and being responsible in using natural resources. Advantages include:
- Reduce waste sent to landfills
- Lower operating costs and increased asset value
- Conserve energy and water
- Healthier and safer for occupants
- Reduce harmful greenhouse gas emissions
- Qualify for tax rebates, zoning allowances, and other varying incentives
Conclusion
Whether your financial model is subsidized, break-even, or positive cash flow, taking a critical look at you operations can help identify improvements to increase sustainability. An in-depth review can shine a new light on programs, fee structures, attendance, revenue, and expenses congruent with local reality. Just like a racecar driver, you need to accelerate through the turn to make sure you are in the lead for the straightaway.
