Gary Horvath is a USPTA master pro, founder and past president of the USA Professional Platform Tennis Association prior to its merger with USPTA, a certified coach with USA Volleyball and a long-standing member of the Wilson Advisory Staff. His experience as a pro has covered the spectrum from grassroots to college tennis. In addition, Gary Horvath has conducted extensive business/economic research that has largely supported Colorado's economic development efforts.
GETTING THE CONSUMER BACK IN THE GAME
The Industry May Be Fighting an Uphill Battle
By Gary Horvath
Tennis players purchase racquets, balls, strings, and clothing and they pay court fees membership dues, and fees for lessons and special events. They drive the tennis economy, just as consumers drive the U.S. economy.
This short analysis uses consumer expenditure data from the Bureau of Labor Statistics (BLS) to illustrate how tennis players allocate their after-tax income to most essential and less essential expenditure categories. It will show how the disruption of their revenue streams, in response to COVID-19 social distancing policies, altered their personal consumption patterns. In many cases, this will be to the detriment of the tennis industry.
Consumer Units – Table I provides income before (line 2) and after taxes (line 3) and basic demographics for three consumer units: overall average (column 1), married with children (column 2), and single persons (column 3). In simplistic terms, consumer units are similar to households (see definition in Table I). The income before and after taxes is greatest for married with children and least for single persons.
Average Expenditures – Table II shows average expenditures by category as well as the percentage of total expenditures. The expenditure categories are classified as most essential (lines 1-7) or less essential (lines 9-15). Greater detail for each category is available on the BLS website.
Approximately 87% of consumer expenditures are for most essential items such as housing, transportation, healthcare, food, clothing, and education. Many of these payments are fixed or recurring.
About 13% of consumer expenditures are for less essential items such as reading and entertainment, personal care products, alcohol and tobacco, cash contributions, and miscellaneous goods. These expenditures are more variable or discretionary in nature.
Most tennis expenditures would be classified as entertainment (line 9). Total entertainment is about 5% of total expenditures (line 17).
Loss of Income - Table III shows what happens when a tennis player’s after-tax income is eliminated for periods of four weeks, eight weeks, and twelve weeks (Lines 8,9, and 10). The following discussion focuses on column 1 - all consumer units.
Loss of income for four weeks (line 8, $5,172)) - This amount exceeds the total amount of entertainment expenditures for the entire year (line 5, $3,226). The shortfall could be covered by unemployment insurance, savings or investment accounts, loans, getting a second job, or money that might be allocated to assets (line 7, $6,016). For some people, the loss of income for four weeks would only be an inconvenience, and tennis would continue to be an affordable sport.
Loss of income for eight weeks (line 9, $10,346) - This amount exceeds the total amount of less essential expenditures for the entire year (line 4, $7,913). The shortfall could be covered by unemployment insurance, savings or investment accounts, loans, getting a second job, or money that might be allocated to assets (line 7, $6,016). For some people, the loss of eight weeks of income would mean that tennis would not be an affordable sport.
Loss of income for twelve weeks (line 10, $15,517). This amount exceeds the total amount of less essential expenditures for the entire year (line 4, $7,913) plus the amount of money that could be converted to assets (line 7, $6,016). The shortfall could be covered by unemployment insurance, savings or investment accounts, reduction in some expenses in the most essential category, loans, or getting a second job. For many people, the loss of twelve weeks of income would mean that tennis would not be an affordable sport.
A similar analysis of the other two consumer units (columns 2 and 3) shows the married with children units to be most capable of withstanding the loss of income for three months. The single person is the most vulnerable.
In the preparation of this analysis, it is recognized that every household is different; however, every household has their unique set of most essential and less essential expenditures that limit the amount of money they choose to spend on the tennis economy.
On April 9th, the Conference Board projected that U.S. real personal consumption for 2020 would show a decline of -8.3%, including a decline of -40.0% in Q2. Tennis consumption will decline significantly because of the shutdown of the economy and a staggered recovery, the loss of players who cannot afford to play tennis or who no longer want to play tennis, and the existing players who will spend less on the sport in 2020.
What is the industry going to do to get consumers back in the game?