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Golf Canada/RCGA Posts $4.5-million loss — Not as Bad as it Appears Says ExecDirector

Golf CanadaThe RCGA held its annual meeting this past weekend, electing its first female president. Of course what wasn’t mentioned was a $4.58-million loss in 2010, added to the $3.66-million the organization lost in 2009. Yes that’s $8.25-million in the past two years, hacking into the $26.6-million the organization has remaining from the long-ago sale of Glen Abbey.

You can find the financial statements here.

So what’s gone wrong? While the organization isn’t making any money from its two professional tournaments, it isn’t losing anything much either. Professional events — the men’s and women’s Canadian Open — made basically the same amount as last year – $22.3-million this year — and running at a slight loss. Sure Future Links and the high-performance programs lose some money, but that’s to be expected.

The big loss comes in “member programs and services,” which accounted for a $1.8-million loss. Membership dues accounted for $3.3-million last year, about the same as the year previous despite the big promotional push to generate new members under the Golf Canada initiative. Overall, expenses were up $1-million over 2009. Administration and overhead — whatever that means — accounts for almost all of the increase in the loss over 2009 – $836,990.

But Scott Simmons, Golf Canada’s executive director, says the loss isn’t as significant as it first appears. When you remove the one-time costs — including more than $1-million for the Golf Canada membership initiative and $2.8-million for the lawsuit with Town Media and tax losses on investments, as well as $400,000 in amortization — the operating loss is closer to $300,000. And that’s not an unreasonable number, Simmons explains.

“If the board gave us a mandate to break even tomorrow, I could do it,” Simmons says.

The primary issue is more than $3-million set aside over three years for Golf Canada’s membership drive, which falls under the member programs and services area. The money is part of Simmons’ aggressive plan to generate new members. Golf Canada saw 10,000 new members in 2010, up from a loss of approximately 10,000 members a year previous. But the organization only receives $10 per new member, meaning the program would run at about a $900,000 loss in its first year. Simmons said there’s a need to invest now for the future.

“Over time the $3-million should pay out in spades,” he said.

If, for example, Golf Canada could generate 100,000 new members per year, it would more than cover their annual costs for the program. Simmons added there will be a need to spend on an ongoing basis — but that figure (which would start after 2012) is unclear.

The other area where the organization might make money is the RBC Canadian Open. Currently the only secondary sponsor of note is Bell Canada, whose deal ends in 2012. Simmons says additional television costs of $2.2-million annually cut into what the tournament used to make for the RCGA. However, the tournament is far improved from its dark days — and RBC will bring Ernie Els, Matt Kuchar, Jim Furyk, Luke Donald and Anthony Kim to the event this year — a much better field than in past years. That would suggest secondary sponsors might be found who would now be interested in being aligned with an improved Canadian Open — and that could generate additional revenue.

“People will pay for what they perceive to be the value of the event,” Simmons says.

In the end Golf Canada expects a similar size loss in 2011 — but Simmons says that’s necessary as the organization rebuilds around its membership program.

“I think the point I’ve made is that we won’t cost-cut our way out of this,” Simmons says. “Our goal is to grow revenue and the board has given me that mandate.”

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Robert Thompson

A bestselling author and award-winning columnist, Robert Thompson has been writing about business and sports, and particularly golf, for almost two decades. His reporting and commentary on golf has appeared in Golf Magazine, the Globe and Mail, T&L Golf and many other media outlets. Currently Robert is a columnist with Global Golf Post, golf analyst for Global News and Shaw Communications, and Senior Writer to ScoreGolf. The Going for the Green blog was launched in 2004.

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