Under the present fee scheme, revenue is generated from both membership fees and hourly court fees. However, membership fees just accounts for a comparatively small proportion of income of the entity, whilst hourly court fees is main source of its income. Due to the variable rates on different seasons, peak and off-peak seasons, and accordingly different estimated court usage in those times, it will be quite difficult for CRC to predict its future cash receipts. Although the facts that most of current membership will expire on September and the peak season for racquetball normally starts from September indicates that there will be a substantial amount of cash receipts during the early part of the peak season because of the renewal of the annual membership fees and heavy court usage, it still will be hard for CRC to estimate its cash receipts during the summer.
However, in terms of the new membership scheme, membership fees will be the only source of revenue for CRC. Besides, the original three categories of members (individual, student and family) will be reduced to two categories (individual and family). Therefore, it will be easier for CRC to plan its cash receipts since there will be less uncertain factors that have influence on the entity’s cash receipts. To be more precise, as the membership fees will be collected once the membership application is completed and there will not be other fees being charged during the membership, CRC only need to estimate the numbers of individual and family members throughout different seasons to plan its cash receipts. In contrast, when CRC plans its cash receipt under present membership, it also has to estimate the usage of court in different seasons to predict the income from hourly court fees apart from estimating the numbers of members joining in various categories to predict its cash inflows of membership fees. As above, the new membership plan and fee structure improves CRC’s ability to plan its cash receipt because it reduces the factors that required to be estimated for planning its cash receipt.
2. CRC should evaluate the new membership plan and fee structure completely before it decides to adopt or reject it.
a. Key factors that CRC should consider in its evaluation.
It is recommended that CRC should take several factors into consideration.
(1) Relevant additional expense including labour cost, maintenance cost and advertising expense will arise from new membership plan and fee structure. It is obvious that the new membership plan and fee structure enable members to spend more time on court since they do not have to think about the hourly court fee. Labour cost, as part of the variable cost, might grow. More staff and more hours are needed to maintain the court, assist the members and answer questions at the reception desk. In addition, maintenance cost will increase. The frequency of using equipments will go up and give rise to the additional maintenance cost. The two-month advertising campaign, as a crucial way of promotion, will increase the advertising expense.
(2) The following factors should be taken into account when evaluating the estimation of revenue. Customers’ attendance relates to the peak or non-peak time with respect of the new fee structure. The old fee structure eliminate the members from coming at the same time by using different hourly fees from $6 to $10 depending upon the season and the time of day( prime versus nonprime time). However, the new membership fee structure allows members to come and play at any time of the year including the peak season and the peak time of the day. The situation may get worse. Since the old membership already had 90% to 100% usage at prime time, there will be more members crowded in the court simultaneously. Therefore, if the situation actually happens,