An
article in Business Week a few weeks ago discussed what many of us who belong
to private golf clubs know: Our
clubs are hurting. Members are
bailing out every week or changing the level of their memberships to save
money. Membership rolls are the
lifeblood of any club, and below a certain level of membership -- whether 200,
250 or 300 -- proper maintenance of the club and services to members cannot be
supported. As membership rolls
erode, funds to keep things shipshape dry up and the club starts to look like
the public course down the street (or worse). Those clubs that can't stem the outflows go into a death
spiral from which there is no escape without the pain of assessments or a
drastic change in the club's status.
The
problems with the private club industry are the same problems with the real
estate industry. Supply and demand
rule
Private club members had to make a choice between security and luxury. Of course they chose luxury.
the equations for each. When
golf was seen as the sport for budding executives and their families, clubs
could set their initiation fees well into the five figures; many had waiting
lists and could be choosy about whom they accepted. In the face of irrational exuberance, more private clubs
formed, especially in planned developments, which created an oversupply even
before Lehman Brothers and the stock market plummet. Suddenly, those budding execs were not so budding anymore,
especially if they worked for financial services companies. Other members who saw their 401Ks hit
hard had to make a choice between security and luxury. Of course, they chose security.
Today we have way more private club
supply than demand, and initiation fees are downward along with home prices, or
vaporizing altogether. One thing
clubs cannot reduce, however, are dues, because below a certain point, you
can't maintain your golf course and services without a steady flow of
cash. If membership rolls and,
therefore, dues drop below a certain critical point, desperate measures are
needed. For clubs with a few
deep-pockets members, that can mean large assessments on top of dues. In other cases, private courses offer
themselves for sale to an investor who pledges to keep things the way they
are...at least for a few years. And
in a few other cases, the once unthinkable occurs; the course opens for public
play. Once club owners taste the
fruit of a steady stream of green fees, it is hard to go private again.
It is in the natural selection of
things that some clubs will go out of business in the next few years. Their members who can
It was unthinkable, but some private clubs have gone public.
afford private
club charges will find another club in the area; other former members will
disperse to the many local daily fee courses, some of which also were opened
during the ‘90s boom times and have current issues of their own. But in a few years, things will settle
down, people will go back to work and start feeling confident again, and the
upwardly mobile will see private country club membership as an affordable way
to provide their families and themselves a means of recreation and
socialization.
I hope folks do a better job of
research this next time around, and identify those private clubs that will be
prepared for any future blips in the economy. In my many years of visiting and researching dozens of
private golf clubs, I know of only two that have engaged in serious,
corporate-style strategic planning.
One is Champion Hills in Hendersonville, NC, and the other is Governor's
Club in Chapel Hill. Governor's
Club's strategic planning session included an offsite session with an outside
facilitator. Club membership,
according to a friend who lives there, "is off only slightly in the past couple
of years." The best news, he wrote, "is that we have not had an operating
assessment in the last few years," and they don't expect one this year.
I'm sure other clubs engaged in
contingency planning, but Champion Hills and Governor's Club were proud and
upfront about their efforts when I spoke with them. If you are considering buying a home in a golf community and
adding club membership, ask about the club's contingency planning efforts. Their plans for the future may tell you
a lot about what kind of club they are today
You can find the Business Week article by clicking here.