Rites of Initiation:  Country clubs cut their joining fees, but will that stop the bleeding?

      In the new movie 127 Hours, climber Aron Ralston is pinned between rocks, facing starvation and forced to cut off his arm to save his life.  That is an apt metaphor for what many golf clubs face in the current market, offering deep discounts to attract a shrinking universe of new dues-paying members.  These clubs may survive by severing their initiation fees and cutting their dues, but whether that will stop the financial bleeding is a source of some debate in the industry.    
     The traditional business model for country club membership has been done in by a perfect storm of demographics and market dynamics.  We won’t replay here the legacy of credit default swaps, lack of legislative oversight and bogus mortgage loans, but suffice to say that after the Lehman Brothers bankruptcy set off a wave of badness in the stock and credit markets, that giant sucking sound country clubs heard was members leaving in substantial numbers.  Discretionary spending is always the first to go in a recession, and golf club membership is among the most discretionary of personal expenditures.

When the going gets tough, clubs slash prices

      Today, the stock market has returned to pre-Lehman levels, but for many clubs, their members haven’t.  Some of this reticence to rejoin may be reaction to how much money was lost after 2008, angst about the uncertain future or simply that these former club members have found other ways to spend five or six hours on a Saturday or Sunday.  Regardless, membership rolls at country clubs are graying unnaturally, and the path to refreshing the breed is uncertain.  Today’s 30-somethings do not connect socially the way their parents did; I actually liked spending four or five hours face to face with fellow golfers when I was in my 30s and 40s, but my college-age children and their friends seem quite content connecting electronically most of the time, even if their friends are across town (or across the room).  Private golf clubs will need to find a way to overcome these new modes of communication and social interaction in the coming years to entice new, younger members.
     Veteran golf club managers, however, generally don’t understand the new social media, and some younger golf pros and general managers lack the creative temperament necessary to attract the relatively few younger members who actually are interested enough in golf to commit to a club.  Most of today’s golf operators just weren’t trained to invent the new solutions necessary to address the uniquely 21st Century problems they face.  They have reacted to the market crisis in predictable fashion -– by slashing initiation fees to salvage their streams of dues income, the lifeblood of private clubs.  Across the nation, six-figure initiation fees are now five figures, and five figures are now four or lower.  In many cases, initiation fees have been waived altogether.

Give away the razor, cut the price of the blades

      That is what the board of the private Farmington Woods did in 2010, putting in place a kind of Gillette Strategy:  Give away membership (the razor) in order to generate dues (the blades).  Opened in 1970, Farmington Woods, about 20 minutes west of Hartford, CT, was one of the first planned golf and residential communities in the nation, and since then it has been a magnet for retirees and empty nesters who previously lived elsewhere in the area. Yet despite a relatively captive audience, Farmington Woods began to bleed members in the middle of the decade.
     This year it decided to attack the problem head on; the club waived all initiation fees and, by the end of the season, had attracted an impressive 65 new members.  Director of Golf Ed Jarrett says the complimentary initiation fees caused the new members to figure they could have private club privileges for no more than their cumulative green fees at local public courses.
     “We advertise that we are ‘The Best Private Club Value in the [Farmington] Valley,’” says Jarrett.  Designed by Desmond Muirhead, the hilly 18 holes at Farmington Woods thread their way through a community of mostly condominiums.  The average age of the club’s members is 57, which Jarrett says did not change after the current promotion.  
     “We attracted a bunch of junior members,” he says, although plenty of local seniors signed up as well.  Substantially reliant on its older members for ongoing revenue, Farmington Woods’ monthly charges of $317 are discounted for members above the age of 69; there are currently 11 in this category.  Seventy year olds, for example, receive a 5% discount, and the three current members over the age of 85 receive a 20% discount. (Note:  Although dues seem low compared with courses in the southeast, keep in mind that members of northeast clubs continue to pay during the five months or so when their golf courses are closed.)

You're not getting older; you're getting a discount

     At Reynolds Plantation, the lush community abutting Lake Oconee in upstate Georgia, a new “Legacy” program provides seniors age 72 and older with a deep discount on dues, just $140 per month compared with other levels as high as $664.  However, those participating in the Legacy program still are required to pay the regular initiation fee, which ranges from $30,000 to $110,000, depending on how many of Reynolds’ 6 ½ top-designer courses they opt to play without paying green fees.
     Glenmore Country Club near Charlottesville, VA, has one of the lowest-age senior programs we’ve encountered, with eligibility beginning at age 67.  Seniors receive a 25% discount on initiation fees (the regular full-family golf fee is $20,000), with their monthly dues reduced by about 16%.  The only “sacrifice” the seniors must make is that they can’t play on weekend mornings, but that is not an issue for retirees, who generally prefer the less hectic weekdays anyway.
     As popular as the senior discounts appear to be, some golf community developers take as dim a view of the off-pricing as Tea Partyers do of deficits.
     “Senior programs can be the death of a course,” says Ken Kirkman, an industry veteran who is developing Carolina Colours and its newly opened Bill Love course in New Bern, NC.  “I know of one club, when I last looked, with 74% of its members paying senior dues (at about a 60% discount), and the club was dying, its condition deteriorating and, therefore, its ability to attract new and younger members non-existent.”  Kirkman contends that seniors are going to quit anyway once their rounds (and health) decrease, and discounting will not prevent that.  Carolina Colours charges an initiation fee of $10,000 to resident and non-resident members regardless of age, 75% of which is refundable after resignation from the club.  The main attraction for Carolina Colours members is that dues are among the most reasonable in the south, just $170 per month for full-family golf.  (Note:  Carolina Colours does not offer meal service for its members but, therefore, neither does it demand a food minimum.)   

Youth will be served

     Younger members, of course, are the Holy Grail for country clubs, and an ever-increasing number of clubs are courting aggressively that relatively small cluster of potential members.  The upscale Governors Club in Chapel Hill, NC, for example, recently introduced a program to entice young families to the community and the golf club.  If you are under 40, your initiation fee is assessed at $18,000, compared with $33,000 for other members.  The customary dues of $700 per month are lowered for younger members and are a function of age; the younger you are, the less you pay -- until you reach the ripe young age of 40.  By that time, the club hopes you will be thoroughly invested in the life of Governors Club, figuratively and literally speaking.
     Like Carolina Colours and Governors Club, Wilmington, NC’s Country Club of Landfall is resisting the temptation to reduce prices for seniors by, instead, targeting the younger crowd.  The club recently introduced a full membership “junior program” aimed at members between 20 and 39.  New members under 30 pay no initiation fee; when they turn 30, they pay a $30,000 non-refundable fee in equal installments over 10 years, with no interest charges.  Landfall is counting on that pro-rated fee of $3,000 per year for 45 holes of Jack Nicklaus and Pete Dye golf to appeal to Wilmington’s young professionals.
     That $30,000 fee at Landfall represents almost half off the club’s equity membership of $55,000.  Such reductions are typical of what is happening around the country.  This “buyer’s” market is saturated with country clubs, and competition for the smaller population of potential new members is driving initiation fees lower and lower.  That certainly is good news for new members, at least in the short term.  But whether or not the hard-pressed country clubs choose to give away the razors to sell the blades, survival for all but the most creative clubs is bound to be a close shave.