You can called it living wage or minimum wage increases or what ever else you like, but it is a certainty that labour cost increases are going to have an effect on your golf course’s bottom line in 2019. We’ve talked to a number of golf course owners and operators in the past six months about what they are going do about the increased labour costs. There is no doubt from every conversation we have had you are all going to have to do something!
Food and Beverage operations are going to be particularly challenging during this transition.
Australia & New Zealand
Recently during our travels to AU and NZ we discovered that tipping for service is not part of their culture. No tipping in restaurants at all. And you know what, the service, for the most part, was pretty good. Perhaps a fair wage was motivation enough and service just really came down to who was good at their job. One bartender we spoke to at a higher end hotel cocktail bar told us that he made $25/hour. He also told us that he thought this was fair for the job he did. He didn’t need to worry about tips. He was a great bartender too! The better job he did the higher his rate of pay would eventually go, but no fighting over tip pooling. Seems fair?!?
We were recently in San Diego and the experience (similar type of cocktail bar) from the service perspective was similar (good) but the method of payment was different. Tip was expected, no question about it. It was suggested on the bill at 18%, 20% or 22%. These seem to be the new ‘suggested’ gratuity amounts in the States. For the most part, in Canada, we still expect to see 15%, 18% or 20% when paying by credit card as options. But will that change? And is 100% of the tip going to the server? Or is the owner keeping a portion now to offset the wage increases? Interesting questions.
In both cases a beer and a cocktail ended up costing us about the same price. In AU and NZ the posted price was much higher. In the US the posted price is much lower. The AU and NZ price was as is, tax and tip included. The US was not. But in the end they resulted in the same total cost to the customer in a similar type business. Interesting.
Not only has the expected gratuity % risen, at one restaurant there was also a 4% surcharge on the sub-total (see image above). While it “only” amounted to $1 it raises more questions. Are we now going to start to pay a premium surcharge to dine/ drink out in addition to the already expected higher gratuity. The service was very good, but at the same time we paid a premium (++) on top the new prices and the suggested gratuity was higher. What does that do to the customer when a item is posted as $x and 3 different ‘taxes’ are added?
What Are You Going To Do?
We understand why the cost of business is rising from minimum wage increases. But what options do you have as an owner? Based on conversations we have had, there are only really two options, and likely you are going to have to do both:
- Increase your prices (our best estimate is that a 7-10% increase will be needed on all your pricing, rates and fees). This would simply be needed to maintain your current service levels and keep the same golf product that you are currently providing.
- Reduce your service levels. You will have to change the level of services you offer and possibly reduce services that your guests may have come to expect. You may have to reduce your hours of operation to only the most productive, revenue generating periods. You will have to cut your team’s hours and/ or shifts. You are going to have to reduce 8 hour shifts to 6 hours (or less) and have less staff overlap. You are going to have to make hard business decisions that are going to effect both your customers and your staff. But you have a business to run. Does anyone really win in this scenario?
We’d love it for you to leave a comment and let us know how you are going to deal with the increased labour costs?
We, Jeff and Tara Ciecko of CK Golf write two blogs, one is our 19th Hole Blog where we share personal experiences and the other an Industry Blog where we comment on general business and internet marketing best practices, sales strategies and give golf industry related opinions. We have owned CK Golf for 10 years and provide business services to the golf and other industries. As of August 2016 our life and our business is ‘location independent’. Our 19th Hole Blog is about the places we visit and the things we do. If you have any questions or comments, or happen to be in the same location as us please reach out and contact us anytime.