December 2009

Value Proposition: 
Will Survival Instinct of Private Clubs
Deal Death Blow to Exclusivity?

     If necessity is the mother of invention, count on golf industry entrepreneurs and a few Internet-savvy Johnny-Come-Latelys to utterly reinvent the notion of golf club membership in the next few years.  The process has already begun, forced by an over-supply of private clubs and the onrushing train popularly known as “social networking.”

     The fundamental reasons why people join private clubs won’t change drastically.  They will still want a place to play with people they know, where their children can take part in junior golf programs (and tennis and swimming) or, if they are empty nesters, where they can enjoy the privacy and quiet of a clubhouse not overrun with rugrats.  However, given the growing need of private clubs to supplement their revenues in the face of declining membership rolls, club GMs will increasingly look to a combination of “deals” and Internet golf sites to fill out both their tee sheets and balance sheets. 

     They are also likely to borrow a page from public golf courses in Alabama, Myrtle Beach and elsewhere to form “golf trails” with other private clubs in their areas.  Well-financed entrepreneurs, like John McConnell in North Carolina, are beginning to buy up high-quality private courses to form trails of their own that provide their members with maximum value, following a model that has helped The Cliffs Communities and its six courses attract high-level members.  In McConnell’s case, though, membership, at around $25,000, is $125,000 less than at The Cliffs.  And you are not required to own a home adjacent to one of the McConnell courses (some of his courses don’t even have adjoining communities).  That said, even The Cliffs is embellishing its own model to try to attract the value-oriented golfer (see below).

     In the face of an over-supply of courses, declining memberships, higher operations costs and an economy that may be years in recovery mode, private clubs must adapt or die.  The traditional club won’t quite become irrelevant -– some people will always have the money and desire to go exclusive –- but more emphasis will be put on balance sheets than ever before.  And clubs will tap into new ways to market themselves and produce additional revenue.  These new ways of doing business may compromise the traditional notion of private golf club membership -- the exchange of initiation fee, monthly dues and the occasional assessment for unlimited, no-hassle access to the course and, in many cases, a vote on the club’s board.   In the future, strict exclusivity is likely to become just a quaint memory for many courses struggling to survive as they accept some outside play.

     Clubs like Pine Valley and Augusta National will not have to change, but such examples are far and few between.  The rest are already investigating revised models of private club membership.  Lucky for them, a number of interesting avenues already exist.  Here are a few that could help shape the future of private club membership:

The McConnell Group

      We have written at GolfCommunityReviews.com about John McConnell and his innovative approach to private club value.  The former business executive sold his medical software company a few years ago and started to acquire a few choice, but previously under-managed, private and semi-private clubs in the north and central areas of North Carolina, among them the Donald Ross designed Raleigh Country Club and the Old North State Club at Uwharrie Point (Fazio), a well-regarded lake-oriented golf community about an hour from Pinehurst.  Members of one of McConnell’s courses retain privileges at the others.  When McConnell buys a course, he pours in lots of money to upgrade it quickly, tearing up and reseeding imperfect greens and assuring that other flaws are smoothed out.  His brand is to provide a high-quality golf experience and variety of choices for his members.  He is selective about the courses he adds to his portfolio, but count on him to add one at the Carolina coast in the near future.   Last year, Reserve at Litchfield Beach (SC) members welcomed McConnell’s offer to purchase the private club for $1 and put in $1 million in upgrades.  But renegade former members insisted on a return of their equity membership fees and filed a lawsuit to block the sale.  McConnell walked away, but look for him to continue to search for a club at the beach that will add value for his members and attract future members.

Boxgroove.com

     We will soon write more extensively about Boxgroove at GolfCommunityReviews.com, but this unique concept is growing rapidly in popularity with both golfers and private clubs alike (at least those private clubs ready to abandon the traditional notion of strict exclusivity).  At Boxgroove, named for the “box grooves” on a golf club that will be outlawed this year on the PGA and, for the rest of us in the year 2024, members sign up at the current introductory rate of $49.  That gives them online access to dozens of private golf clubs willing to open up available tee times to Boxgroove’s members.  Private clubs that worry about opening the floodgates to outsiders can restrict their tee sheets to certain times and even to certain types of golfers (e.g. only members of other private clubs, or just golfers who live within 10 miles as a way to attract potential members).  According to Boxgroove founder McRedmond Morelli, “Pine Valley and Augusta could sign up and restrict play only to members of the other club.”

     Morelli says the number of private clubs that have signed on is approaching 100, and more are signing up daily.  Boxgroove’s membership roster has reached nearly 700 since the site launched in June.  Opening up their tee sheets might be tough medicine for members at some private clubs, but given the choice between hefty assessments to keep the lawn mowers going or opening up the tee sheets to limited outside play, hosting a few interlopers may not seem so bad.

Private Club Network

      Private Club Network claims a roster of 170 clubs in 40 states that offers their members reciprocal privileges on all the courses.  As with Boxgroove, clubs that sign up for the network have total control of their tee sheets.  Unlike Boxgroove, golfers cannot play any of the clubs in the network unless they are members of another network club; and they are not permitted to play a club within 100 miles of their home club.  PCN player members, however, pay nothing except a modest fee to play at a member club; their home clubs pay an initiation fee to join PCN and then monthly dues that make all golfing members of the home club eligible to use the service.  All arrangements for tee times go through PCN, which frees the club pro or GM from having to parry requests directly.  PCN membership works best for private club members traveling far from home.

     ClubCorp, which invented the private golf club management business in 1957, operates in much the same way as does Private Club Network but includes some semi-private courses and urban social clubs.  Although figuring out which sites are accessible to which level of ClubCorp's membership is a little bit confusing, members of such private clubs as Firestone in Akron, OH, and Mission Hills in Rancho Mirage, CA, as well as dozens of other less notables, will find enough on the list to lessen the pain of monthly dues.

Cliffs Communities Residence Club

      We also wrote at GolfCommunityReviews about this surprising invention by the upscale Cliffs Communities.  Those of us who study the golf community industry are not used to the Cliffs trying to appeal to a group that might also be considering, say, a timeshare at Disney World.  The Cliffs’ always lush marketing materials are careful not to imply any attempt to appeal to the masses, but considering a modest base price of $195,000 for deeded ownership that includes lodging and golf membership at the Tom Fazio designed Keowee Springs; access to the other five Cliffs golf courses; a huge Wellness Center and spa; and concierge service, we are tempted to ask:  “Who are you, and what have you done with The Cliffs?”

     This readjustment in The Cliffs will be a welcome turn of events for those Samuel Adams beer-budget golfers who lust for access to Dom Perignon-quality golf.  Now they can.  The program, designed like a destination club and offering the opportunity to exchange a couple of weeks with other international properties in The Elite Alliance, does not restrict the owner to one week in each of four seasons.   According to research The Cliffs conducted, they predict each owner -- their are an average of only eight per unit -- should be able to visit almost as often as they would like for their $1,895 in annual dues.  The Cliffs Residence Club also charges a housekeeping fee during owner stays.

     What is perhaps most surprising about the Residence Club offering is that it includes access to all Cliffs courses for the incredible price of just $50 per round, cart included (golf on the Keowee Springs course is free and just $22 for the cart).   It would take nearly a lifetime of $50 rounds to add up to the customary Cllffs membership of $150,000.