RYAN MCANDREW Ryan McAndrew is audit senior manager with RSM US LLP. He can be contacted via email: ryan.mcandrew@rsmus.com
FINANCE COMMITTEE
Non-traditional Data Can Give Club Budgeting an Edge Developing a private club’s operating budget can be a complicated affair. Myriad stakeholders, including management, the board of directors, internal subcommittees and other interested parties must reach consensus. Traditionally they’ve done this by relying on historical data. But there is now a clear opportunity to tap forward-looking data sources to give budgets a competitive edge. Private clubs across the country have slowly adopted their reliance on data analytics. The use of available inputs, like food and beverage covers and golf rounds, and traditional key performance indicators have become common influencers in budget meetings. Customer resource management platforms, known as CRM, are used to assist with membership and marketing and have provided a significant upgrade to archaic club systems. The ability to promote events, evaluate prospective members and connect their applications to geographic tracking and real-time feedback data has helped clubs monitor their performance and adjust staffing levels. While CRM tools have iteratively improved performance, predictive alternative data offers the ability to better target goals based on internal and external factors. So-called alt data is already widely embraced in the investment community as a means to predict changes in financial markets rather than react to them. In the postCOVID world, spending by buy-side investment companies on alternative data has accelerated to a projected $1.7 billion in 2020 versus $1.1 billion in 2019, according to YipitData, representing a considerable uptick from $232 million in 2016. Companies around the world have been drawn to the allure of alternative data — which ranges from commodities futures to weather patterns and public transportation use — due to the competitive advantage it offers when making strategic decisions. Businesses reluctant to embrace alternative data carry strategic risk that may affect the delivery of their mission, financial performance or reputation. MAKING THE CASE
Before alt data is integrated into an organization’s planning, buy-in must be obtained from its management and directors. 48
BOARDROOM | MARCH / APRIL 2021
But making the case at a private club shouldn’t be hard. Many external factors impact a club’s operations. The pandemic has shaken global supply chains which have trickled into cost analysis for general contractors and subcontractors, directly impacting clubs’ construction plans. Lumber futures, for instance, are down from an all-time high of $1,000 in September and are now up 120 percent since 2019. These costs are passed down to the consumer and can wreak havoc on long-term capital plans. So, what are the best use cases of alt data for private club budgeting? Membership offers many potential examples. One would call for cross-referencing prospective member profiling from the CRM data against population shifts revealed by the US Census. Additionally, Google Trends or Redfin migration data can be used to track the potential origin and destination of housing searches throughout the country. Analysis of these trends can be used to create marketing plans that effectively target potential members before they relocate to the area. Further, market confidence indices, such as the Consumer Confidence Index, measure the degree of optimism about the US economy that consumers demonstrate through their saving and spending habits, particularly useful for clubs, whose members typically have high levels of disposable income. The use of geo-tracking via GPS within proprietary club applications can extend well beyond customer service. Mobility data, combined with artificial intelligence, can model predictive behavior from club members, allowing club management to glean recommendations for amenities and reservations. Google, Facebook and Amazon have used predictive analytics for more than a decade with great success, but the club world is just entering the introductory stage. Alternative data sources are plentiful, and clubs should make an investment of time and money to deploy them for more successful strategic planning. B R