The Golf Club DilemmaWhat is the future of private golf and country clubs in the U.S.?

What do you think of when you think of private golf and country clubs; Exclusivity or Caddyshack?

What is the future of private golf and country clubs in the U.S.?

For over a hundred years golf and country clubs have represented exclusivity for upper class people in the United States and elsewhere. To be a member of a “private” golf and country club you must be “invited”. Then, to ensure exclusivity and financial health of the club, an initiation fee became a requirement, along with monthly dues and other fees; not to mention capital assessments. It’s a sizeable investment to belong to a “luxury” market and live the traditional golf and country club lifestyle. For those in certain economic classes it means “you’ve arrived”, you belong to a country club. You are in effect an owner in the club, a “shareholder”.

Now, many professionals in the hospitality industry, as well as board members of these clubs, are asking:

1. What is the future of the private, member-owned, golf and country club?

2. Are membership initiation fees a necessity in today’s market of golf and country clubs, and if so,

What is the future of private clubs?

What is the future of golf and country clubs and can it be tied directly to the costs associated with membership: initiation fees, dues and assessments?” Given some of the data already shown we could state that yes the decline is evident with the overall decrease in clubs throughout the country, but there is also a marked decline of golfers, in general, of private clubs. We can break it down further, with the assistance of firms like Club Benchmarking, which did a report for CMAA, Club Managers Association of America. In their report, as in NFG’s reports, there are four market revenue segments of clubs:

Small Market Segment (operating revenue between $0 and $3.5 million). Lower-Mid Market Segment (revenue between $3.5 and $6.0 million). Upper-Mid Market Segment (revenue between $6.0 and $9.0 million).

Large Market Segment (revenue exceeding $9.0 million).  

Those clubs in the upper, large market segment were less likely to experience fluctuation as compared to those of the small market segment. It seems evident that maintaining a higher value of fees assisted in the survival of clubs versus those who may take short-term measures by lowering initiation fees and other costs associated with private clubs. Club Benchmarking reported in their annual Finance and Operations report to CMAA 2013 that the range of initiation fees is from the 25th percentile being $10,000 to the 75% percentile of $58,525; the median being $25,000. Cronin & Conde, Finance and Operations Report, 2013, p 47.

Recently NFG updated their report in an article of their monthly dashboard, Private Golf in America. In it they stress that since their 2008 study there has been a significant change in the marketplace and those clubs in the higher tier, noted above, are more likely to sustain their clubs and their membership based on value perception and by not lowering their fees. Whereas clubs in the medium to smaller markets are more likely to experience real problems and must make hard decisions to keep the doors open. These particular clubs are more than likely those referred to as “developer clubs” as was mentioned on page 3-4. NGF Dashboard, Feb 2014 Retrieved: http://ngfdashboard.clubnewsmaker.org/newsletter/3nbwxqq9wq51oyslif546n

Strategic Planning-Recognizing When You Need It

Mike Leemhuis, CCM, CCE, CEO/GM of Congressional Country Club, located in Washington D.C., recently undertook this task as part of his strategic planning process. When asked why he simply states, “While we take great satisfaction in our success to date, we need to invest in ideas that will keep us responsive to our members. A well-developed strategic plan will inform our decisions going forward and position us for whatever the future has in store. We want to stay among the leaders in the private club community.” Leemhuis, Club Management Publication, Gauging the Impact of National Trends, 2010, p8.

They selected a large group of General Managers and asked them to identify what key trends they see in the private club industry and rate them accordingly. What they found is that there is a fundamental change going on in the industry, which can explain some of the declining numbers in both golfers and private clubs.

It will be up to the private club owners/members to either recognize these changes within their own clubs and make the necessary adjustments, or go the way many private clubs have either by accepting public play, selling, or closing the doors altogether. As Lefever pointed out in this article, “Fred and I were impressed with the CCC board’s commitment to the planning effort, especially in light of the club’s obvious accomplishments. Although addressing current problems is important, a strategic plan should be driven less by present challenges than by position the club to leverage future opportunities. A club like CCC may be highly successful now, but it is often harder to stay good than to get good.” Lefever, Club Management Publication, Gauging the Impact of National Trends, 2010, p9.

Top Trends noted in Golf and Country Clubs as reported by Lefever and Laughlin

Changing diets and food preferences

Increased interest in fitness

Intergenerational issues

Flat growth of golf Emphasis on being

green Tailoring membership

and fee structures

Impact of Technology Demand for casual

environment Improving management

and governance Popularity of non-golf

activities Emphasis on family

programming Non-traditional services

and amenities

As Mike Leemhuis, CCC, had pointed out, “We have in these survey results both a highly credible list of the national trends affecting the private club community and an even more credible ranking of the trends by their impact on individual clubs. The data has helped us in the planning process, particularly in alerting our board members to the reality of those trends.” Leemhuis, Club Management Publication, Gauging the Impact of National Trends, 2010, p12.

The question will remain; will Mike Leemhuis and his club take heed soon enough to remain a prestigious and viable private golf and country club? They’ve taken the first step, but as we all know if you don’t implement the strategy, what was the point of the exercise?

What’s the Word in the Cloud?Utilizing LinkedIn, where there are many hospitality groups, especially for clubs, three

questions were posed to the general membership of these groups. Do you think there’s a trend to lower initiation fees in order to bring in new “dues paying” members, and are the results a “devalued perception” of a club?Do you see a direct correlation between lower and higher initiation fees and the perception of the quality and classification of a golf and country club?

HFTP with 6128 members

Mike Hoppe, Accounting and Business Management Professional

This is a tricky issue because while clubs definitely need to continue to grow their membership, "down" economic times can provide a significant obstacle. Lowering initiation fees can seem to be an attractive choice, however it's hard not to imagine how it doesn't devalue your membership. Of course it will depend on how much the reduction is, but as many clubs have already found out the hard way, once the initiation fee is reduced, it is awfully difficult to raise it back up. Then too is the impact on your current membership and the backlash from members who don't see a reduction as a "necessary." If at all possible, look at alternatives such as financing it over a couple of years (or a longer period of time if financing is already offered) or trial membership offers. During "down" economic times, like the one we most recently experienced, a big drawback to joining a membership club can be adding another long term commitment. Offering a short term, trial membership may get them in the door and hook them for the long haul.

National Club Association with 1060 members

Harvey Weiner, President, Search America, exec search & best practices consultants to the private club field www.searchamericanow.com

The "trend" to lower fees has been going on for years now. Club leaders, thinking this is a smart way to "circle the wagons", are actually circling the drain. It's the beginning of the end of your club, as you have known it. Slashing entry fees and dues attracts bargain hunters. It may now be cheaper to join your previously fine club than to play a daily fee course several times a month. Slashing fees is a short-sighted abdication of private club leadership's responsibility to drive revenue through enhanced Member value. Clubs that have become the bargain hunters dream will inevitably become municipal golf courses or housing developments. Don't forget to turn out the lights before locking the doors.

Conclusion

The purpose of this paper was twofold. First, to learn more about the club industry as a whole and gather information about initiation fees and their relevance to the private golf and country club. Secondly, to determine what key marketing strategies were best to analyze and develop a plan for private clubs so they could survive the downs and capitalize on the upswings of the industry. In the final analysis, clubs began without a defined strategy; it was just a group of men who wanted to play golf and found a piece of property in which they could develop and form a “club” to play with like-minded individuals. Some would argue that was their strategy, just not in a formal sense, perhaps a “cultural strategy” would best define it.

But, as the years went by and the game became more popular and considered more “elitist” think Caddyshack, developers became involved and one would argue used the “entrepreneurial and positioning strategy” to market golf and country clubs as a lifestyle and not just a sport. Why go to a public course, typically owned by a municipality, when you could buy into your own golf and country club, where you make the decisions who is “invited” to be a member, sometimes by virtue of who could afford to live in the development where the country club is located, as is the case in most private clubs around the U.S.

That was then 1900-2010; this is now 2011-present day. As a result of the economic downturn and the rise of the XYZ generation, golf is not as important and may not fulfill the needs of this generation and their families. They are less loyal to employers and it can be argued, thus less loyal to belonging to a club. They’re not interested in their parents or grandparents lifestyle and choices; they’re definitely more interested in the present and immediate satisfaction.

Recommendations

As a student of Strategic Management for Hospitality it can be argued that there are many schools of strategy that may apply to the golf and country club industry, but perhaps the most effective one is the Configuration School of Strategy.

As the golf and country club industry is ‘transforming’ and the needs and desires of the private club members are also changing, it would seem the most intuitive strategy to pursue. If private golf and country clubs want to survive the next 5-10 years, they must pay attention to the trends and be proactive in meeting those trends; or else become a statistic as many other clubs have and continue to do so as a result of reacting with the old adage, ‘too little, too late’.