Metrics That Move the Needle: How to Think About KPI's for Pickleball Clubs

Hey team, I'm Ben Borton, co-founder of Podplay Technologies. Super excited to be part of this summit. I'm a big fan of everything that David and Robert are doing to identify what's working and what's not in this hypergrowth market. Hopefully we can play a small part in their project of researching and describing best practices for pickleball businesses with a particular focus on our side on venue operators. Podplay is a tech company whose mission is to increase the quantum of fun that's being had in the world. So naturally, David and Robert asked me to talk about a topic that everybody associates with fun, which is OKRs and KPIs. I'm joking, but only kind of. My co-founder Max Kogler and I are both data junkies. We first met about 20 years ago when we ran a quant hedge fund creating equity derivatives. We refer to that period as our, our period of turning math into money. It was, uh, really fun, but it left both of us feeling a little empty from a purpose standpoint. We found our life's work ultimately in building tech in the service of getting people into physical spaces to do fun, healthy social activities like pickleball. But we're, uh, we're still data nerds at heart, and data is really the lifeblood of good decision-making. So I guess You can say that we're still in the business of turning math into money, which is really the topic of my presentation today. My presentation today is called Metrics That Move the Needle, and we're going to talk today about objectives for, for pickleball clubs and then the key performance indicators that will let you know if you are achieving those objectives and really using data to kind of guide really smart decision-making around how to kind of maximize profitability of a club. We're going to spend most of our time today talking about revenue and the drivers of revenue. So starting point is really what we call the pickleball club revenue equation, and this is the volume-price relationship for pickleball clubs. So it's really about how much utilization do you have, what is the average hourly rate or yield that you're getting during the hours that your courts are utilized, and those two factors determine revenue. So simple enough equation, but there's lots that goes on underneath it. Let's take each one of these factors in turn and take a deeper look at them. So if we look at utilization, what are the factors that go into both the total capacity that's available and how much of it gets utilized. So you have the number of courts in your club, you have the number of hours per day that you're open, number of days that you're open per year. You multiply those three things together and you'll have your total annual available hours. Now some of those are relatively fixed, right? Your number of courts is really relative to the space that you have. Available. And there are some techniques to kind of squeeze more court space, but it's usually a trade-off in terms of quality of courts. Hours per day, that's really a function of how many hours you want to staff the facility. Now, we support a number of facilities that are operating fully autonomously, so without staff, and that's been a way that they've been able to increase the hours per day from, say, 12 to 24, which is a way of kind of increasing your capacity without kind of increasing the number of courts. Days open per year, some people will take holidays off, others will be open up all the time. But those factors determine your total capacity and then within that, you're always going to try to maximize the amount of that time that is utilized. Now, all utilization is not created equally. If you have people playing for free, that counts as utilization. It's always good to have people in your club, but if they're playing for free, it is depressing what we would call your average hourly rate. So your average hourly rate, you can just add up all of the revenue that comes into the club, divide it by the number of hours that are utilized. That gets you to your average hourly rate. I think some people think of this in terms of, you know, what is How much do I charge for kind of an hour of play versus open play versus memberships? The equalizing factor across all of these things is you can look at it in terms of how much revenue comes in divided by the hours that are used. So the types of activities that kind of will increase the hourly rate are those where you're getting more revenue per hour utilized. So just to kind of give a sense, I often have conversations with people. It's a good question to ask people, like, what is the value of a 1% increase in utilization? Now, there is no kind of fixed answer to that, but based on— you can calculate it out based on what your average hourly rate is. And just to give you a sense of kind of how meaningful this can be, on an annual basis, if you're getting $50 an hour for usage, a 1% increase for a 10-quart facility is going to get you more than $20,000 extra in annualized revenue. You know, you get that number up to $80 an hour, we're starting to talk about $35,000. So each 1% increase is often worth tens of thousands of dollars to a club. So some people think, well, 34% utilization versus 35%, no big difference. It actually is a really, really big difference over time. So you want to pay very close attention, and it's good to know what that increase in utilization means to your club. If you have that number in your head, you're going to think a lot harder about the actions that you take and how they impact that utilization. Similarly, we can do the same thing and say, okay, what is the value of a dollar increase in average hourly rate? Again, this is relative to court utilization, but if we have a club that's at, a 10-court club that's at 50% court utilization, getting an extra dollar per hour is going to be worth a little bit more than $20,000 year, 90% utilization, it's worth close to $40,000. That extra squeezing out an extra dollar and all the little things that you can do to kind of get extra yield per hour can have a really meaningful impact on the profitability of a club. If we can step back from those two things, you know, you can look at everything in terms of its impact on utilization, its impact on yield, Ideally, it can kind of impact both of those things positively. But those are, are numbers that you can't just say, hey, I want to move that. You have to take specific actions that are going to impact both utilization and average hourly rate. So this is where we get to the idea of both an objective and a key performance indicator. So what is an objective? An objective is something that tells you where the team needs to go. It's directional, and it's something that you could have an argument against, right? So there's a kind of for and against that, but it isn't something that you're trying to move in and of itself. There's specific actions that you're going to take to try and move towards that objective. Now, key performance indicator is really something that measures progress towards that objective, It should be something that people can have make specific decisions and see them impact that key performance indicator. So those are good measures, and those are ones that you can kind of draw— you can kind of tie incentives to. You can get very clear alignment with your staff and your team about the results that you're trying to drive. So let's look at some examples of kind of drivers of increased utilization, right? So there are some big objectives here that we have in terms of increased utilization. First would be attracting new customers. So how do we get new customers through the door? The second would be new customers get through the door, how do we retain those new customers? So how do we get them coming back to the facility and make them a permanent part of the community. And then the last is increasing the participation rate of your existing customers, existing members. So these are all the factors that will help kind of influence higher utilization for the club. So how do we measure each one of those? So a good performance indicator, KPI, for attracting new customers is new customers per quart. And you can do this on a daily, weekly, monthly, quarterly basis. You want to do it on a per quart basis so it's normalized, right? Particularly if you're a multi-location operator, it's easy to just kind of add up the cumulative numbers, but when you do it on a per quart basis, you're then normalizing for the level of capacity that you would have. You'd like to— like, if we have a club with 10 courts and one with 20 courts, you would expect the 20-court club to attract more new customers just because it simply has more capacity. So the efficiency measure here is new customers per court. In terms of retaining new customers, we are big fans of return rates. So this is, I have a new customer, comes to the door, how many, what percentage of those customers come back within 30 days. And it's very important to kind of get that first visit to the second visit. When you go from second visit to third visit, the return rates shoot up from there, and when you go from third to fourth, they get really high. So we've seen this across a lot of different clubs. So it's really the key move is going from first visit to second visit. So once they come back, they're probably going to come back again. Each time they come back, the higher the probability that they, they retain over time. Lastly, if we talk about increased participation, we like average visits per active customer as a measure of this. So, you know, on average, how many times are your active customers visiting per week, per month, per quarter as a measure over time. And it's important to look at this as both an average but also the distribution because averages can be deceiving. If you have certain customers that are coming 30 times a month and you have another customer who's coming 2 times a month, right, the average between those 2 customers is 16 visits. But very different characteristics between those, those few, the one that comes 30 and the one that comes 2 times. So important averages are very, very useful in kind of driving the business, but it's important to kind of look at the distribution that underlies that as well. We look at examples of average hourly rate. Some objectives that you might want to pursue here are increasing coaching, maximizing open plays, and promoting kids' classes. So if we take each one of these in turn, coaching is something that we found in our business and in others that just can increase average hourly rate at a first order. So if you have a reservation that is just a plain booking and you have one that has a private coaching lesson attached to it, obviously there's going to be incremental revenue associated with the coaching. But we've also found that this has really positive second-order effects. So customers who get coaching see themselves on a path of continuous improvement. They do more of everything. We see them do more open plays, we see them do more tournaments, we see them join leagues. So the lifetime value of customers who get coaching is a multiple of your average customers. So on a first order, great to kind of do everything that you can to increase coaching, both by having capacity, by kind of creating classes that lead to this, by promoting these things. It's a super way to increase average hourly rate. And the measure that we would look to, look to, to see that is What is the percentage of customers who get coaching? And can we have a greater percentage of the customers who come through the door get exposure to coaching? Because the more of them that get that coaching bug, those become your power users. If we talk about maximizing open plays, open plays generally have a certain number of slots. That are open. If we can fill all of those, we're going to maximize our revenue. If we fill only a percentage of those, we're going to use the same amount of hours, but we're going to get less revenue for those hours. Now, there is such thing as getting too much revenue from an open play. Generally, you can have a poor customer experience if you book too many people into a single open play. Open play. The heuristic that we like here is sort of, you know, players being sort of 50% on the courts 50% of the time. So if my expectation is that 4 people are going to be on the court at any given time, I wouldn't want to have too much more than 8 people per court. So if I have an open play that's across 2 courts, I probably don't want that to be more than 16 people. I mean, you can push a little bit higher than that or you can be more generous and take it lower, but really people want to kind of be on the court a fair amount of the time. Lastly, kids' classes is a great way to kind of push average hourly rates higher. If you have kind of a class, obviously the more kids that are involved in that class, the higher the yield you're going to get out of that. It's the same hour, 2-hour, 3-hour slot, but if we're the more kids that we can kind of fill that with, the better. There's also some great kind of second-order effects with, with kids' classes. A lot of them take place in the afternoons, sort of after-school classes, which is nicely offset with peak times for adult players. So we love these ones that have kind of first order. It's going to help you kind of increase average hourly rate but also have positive second order effects. So the measure that we would look for on that side again is kids class fill rates, right? So if we have 10 slots that are available, we can get 10 out of 10, that's awesome. So everything that we can do to kind of impact those fill rates and increase those fill rates is going to drive up the average hourly rate. If we put this all together, I think an interesting framework for thinking about this is think of it as almost like an efficient frontier. If I go back to my time in finance, traditional economics would say that you kind of trade off one against the other. So if I offer cheaper prices, I'll get more utilization. If I offer higher prices, I'll get less utilization. Utilization. And that's what traditional microeconomics would tell you. It's not always the case for pickleball clubs. And we favor the sorts of activities that don't involve kind of trading off utilization with average hourly rate. There are certain types of techniques and decisions that you can make which allow you to jump from one curve to another. Right? So if you're just purely doing tradeoffs, you're moving along one of these curves. If you are doing something that can increase utilization and hourly rate, move those things in the same direction, now we've moved the curve. So you're jumping to another one of these curves where you can get to a higher level of total revenue at any level of utilization or any level of average hourly rate. So what would be an example of something that could push those things in the same direction? So with Podplay, we do algorithmic court assignments. This is a super powerful feature where the algorithm does the court assignments rather than allowing individual customers to pick their courts. We couple that with the ability for those customers to pick their courts if they pay for them. Those courts. So we've seen at Ping Pong, our operating business, over the last 12 months, 7% of customers have paid to pick the table that they play on. And we see sort of similar dynamics at pickleball clubs, anywhere from 5% to 10% of people have strong opinions about which court they want to be on. They're willing to pay for that. So there's a nice yield pickup if you give the customers who want to do that, ability to do it and pay for it versus giving everybody that ability. You're kind of giving that privilege to everyone, even some people who don't really value that. So now the people who value it are going to pay for it. At the same time, if your default setting is algorithmic court assignment, then you're going to get higher utilization. So the way algorithmic court assignment works, I like to use a simplified example, if we had a 2-court facility and we're looking at a 3-hour block, let's say court 1 was booked from 10 to 11 and then again from 12 to 1, court 2 was booked from 10 till 12, and now somebody else comes along, they want to play from 11 to 1. Well, if you're letting people pick their own courts, the only way that that person could do that is to book court 1 from 11 to 12 and then part 2 from 12 to 1, right? So they have to make 2 bookings on the front end, lots of friction there. Then they get to the club and they're gonna have to switch courts in the middle of their reservation. So friction on the front end, friction on the back end. A lot of people will either just make one 1-hour booking or they'll just say, hey, no, not going to work for me. And if you do it algorithmically, we can just kind of shift the blocks around and offer them that single 11-to-1 slot as a 2-hour reservation, lock them in, maximize kind of the utilization during that period. And so we've seen clubs, particularly busy clubs, get sort of marginal increases in utilization on the order of like 5 to 10% during those busy times by using algorithmic court assignment. So that is an example when you combine those two features together, being able to pay for your own court at the same time they use algorithmic court assignment. Now we can kind of increase yield at the same time that we're increasing utilization, and that's an example of jumping the curve. I think I'm going to stop there. I'm around to take questions and would love to hear comments, thoughts, people's own experiences, and go as deep as people want. I just want to say thank you to David and Robert for inviting me to participate in this. I think they're doing great things for the business, going deeper than most. I think there's been some real gaps in terms of what's out there from a best practices standpoint, and they are filling those gaps. And I think that's a noble project that they're working on, and I'm glad to be a little part of it. Thanks for having me.