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Friday, November 20, 2009

Strategic planning: One way to choose a private golf club

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         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.

Read 4165 times Last modified on Friday, 20 November 2009 12:29
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Larry Gavrich

This blog was conceived and is published by me, Larry Gavrich, a former corporate communications executive who founded HomeOnTheCourse, LLC, in 2005.  Our firm advises baby boomers and others seeking a lifestyle in which golf is a major component.  My wife Connie and I own a home in Connecticut (not on a golf course) and a condo at Pawleys Plantation in Pawleys Island, SC, on a Jack Nicklaus layout.  We began our search for our home on the course more than 15 years ago, and the challenges of the search inspired me to research golf communities and write objective reviews of them.