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Interview | Leisure

September 2013

BUSINESS AND PLEASURE
Bold vision has boosted membership and balance sheet at venerable Tokyo American Club

By Geoff Botting, Custom Media
Photos by Taro Irei

The last few years have been a challenging time for the Tokyo American Club (TAC), to put it very mildly. The club’s tribulations were triggered by the global economic crisis of late 2008. Around 700 dues-paying foreign members left, in the wake of the shuttering and drastic restructuring of foreign financial institutions and professional service firms in Tokyo.

What’s more, the timing of the Lehman shock could have hardly been worse for TAC. It had just embarked on an ambitious and costly redevelopment plan.

But the financial fortunes of TAC, a private members’ club boasting high-end recreational, dining, and family-oriented facilities, have seen a remarkable turnaround over the past few months. A new wave of foreign members is entering, filling out the ranks of the departed expatriates, and bolstering TAC’s balance sheet.

The ACCJ Journal spoke with John Durkin, the representative governor and president of TAC, about the club’s recent past and what’s in store for the future.

Please tell us about your membership. What’s the breakdown by nationality?

We’ve got around 3,600 members in total. Just less than half are Japanese, about 30 percent are American and the remainder are various other nationalities. The membership was seriously affected by the Lehman shock. There was a huge decline in the number of foreign assignees in Tokyo, so the expat market here—supermarkets, etc.—was negatively impacted overall, including us. And this isn’t a temporary thing; it’s structural. Some companies are no longer offering expat benefits, like club memberships, and it’s unlikely they’ll be doing so again in the near future, I believe.

How have you adapted to this change?

We have been welcoming new members who are on their own, who are not sponsored [by their employers]. We’ve dropped the entry fee to ¥1.2 million for overseas members, a move aimed at bringing in more people who previously would not have been interested due to cost concerns.

After the new club facilities were built in 2010, we put the entry fee up to ¥3 million, and from then until late last year, we got very few new foreign members who came in at that price.

But, in fact, most who entered during that period did so under alternative entry programs. So the average was around ¥1.3 million. Obviously, what we had wasn’t working, and we had to adjust that to what the market would bear. But the last few months have been some of the best we’ve ever had, financially speaking, as a result of our membership initiatives.

So, you’re attracting fewer “traditional” expats at big multinational corporations and more independent people like entrepreneurs?

Exactly. A lot of those people and their families are joining up. We’ve always known that there are plenty of people in Tokyo who would like to join the club but felt, for whatever reason, that it wasn’t accessible. So in November, we had a promotion to lower the entry fee to ¥800,000 for three months, and on the first day we had an unbelievable number of applications.

We did another promotion in April for ¥900,000 and in total brought in about 325 new members. These numbers have now kick-started our growth cycle. It made us realize what the market is about.

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You and your staff claim to have set the club on a path to financial sustainability. What did you do?

We were in trouble after the Lehman shock, because we had taken on ¥11 billion in debt and members were leaving. There were worries that we might default, which had the potential to cause a vicious circle. People won’t join if they think you’re on the verge of going out of business. However, we managed to source a large amount of cash from an intangible asset in our possession, which we used for a prepayment on the debt. That was the first step. The second involved a loan we had taken out which, as terms and conditions go, was really bad for us. We managed to renegotiate it with much better conditions. At that point, the balance-sheet problems were fixed.

The lowering of the entry fee to ¥1.2 million for the international community means we can attract a sustainable number of new members. The revenue from the entry fees will be used to pay debt, and then we use monthly dues to cover the club’s fixed costs. All the outlets [such as restaurants], meanwhile, generally break even.

Our next step is to ask members to vote on a proposed alignment of their monthly dues. That’s because many of them who came in December 2009 and earlier are paying lower dues than those who came after.

Over the last few decades, the proportion of Americans in your membership has shrunk. Does this mean TAC has in some way become less American than before?

Definitely not. In fact, we’re putting more emphasis on American culture, because this is the American Club—not the International Club—and we were founded on American culture. Many people join because that’s what they’re looking for. For instance, we recently put a lot of emphasis on a Fourth of July celebration.

How do you create a sense of community among your diverse members?

We have a number of different activities for different groups, such as a golf group, which goes out once a month, a squash league, and so on.

We also have social activities that are aimed at making it easy for everyone here to create a sense of community. We have a wine group, and the women’s group is very good at helping spouses acclimatize to Tokyo. The [activities] involve diverse groups of people, not just Americans with Americans, or Japanese with Japanese. The idea is to create a sense of community.

What is TAC’s biggest draw?

I would say recreation. The swimming pool is super popular. The fitness center opens at 6:30 a.m. and people are even showing up at six to prepare for their workouts before work. There aren’t many places in Tokyo where you can do this. In addition to the gym, we’ve got a squash court, a regulation basketball court, a yoga studio and an onsen-type Jacuzzi for both men and women. For fitness and recreation, we’re the best.

TAC has proclaimed itself as being a firm supporter of Tokyo’s bid to host the 2020 Olympic and Paralympic Games. Why are you so enthusiastic about this?

We just think that Tokyo would have a fantastic opportunity. It’s an exciting event, which would bring economic vitality to the city. It would shine the spotlight on Tokyo, including Japan’s organizational abilities and infrastructure, showing it as the best place in the world to be.

We’re really enthusiastic here at the club. We’ve even gathered 2,020 signatures in support of the Games that we recently submitted to Tokyo Governor Naoki Inose. It’s going to be the best Olympics ever.

The club and the ACCJ have a long-standing relationship. How do you foresee that developing?

Our relationship couldn’t be better. ACCJ Chairman Mike Alfant and I talk together regularly. The ACCJ is a great customer for us, as they have meetings and activities here. We’d love every member of the ACCJ to be a member of TAC. We definitely want to do more with the ACCJ in the future. •

What we had wasn’t working, and we had to adjust that to what the market would bear … The last few months have been some of the best we’ve ever had.”