How many more private clubs will die?

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The private club industry is facing its most acute membership crisis in a generation. Studies show that 40 percent of the nation’s 4,415 private clubs have seen a membership decline, with initiation deposits down by 43 percent. An estimated 10 to 15 percent of clubs are in serious financial trouble, with many turning to third-party management or opening up to public play.

The NGF reports that most clubs are taking action in three primary ways: “(1) offering special membership arrangements; (2) making capital improvements; or (3) introducing new or expanded programming.”

Each solution comes with challenge and risk. Capital improvements and expanded programming require an investment of capital in hopes that membership will rebound. Some clubs that made improvements a few years ago, are now in bankruptcy.

Offering special membership arrangements can be tricky business — you don’t want to alienate existing members.

And so many clubs are opting to convert to public play. In fact, NGF reports that conversions from private to public have out-numbered course closures by a factor of ten to one.

We are witnessing the adage of ‘adapt or die’ in practice. It will be interesting to see what percent of the 500 clubs in peril will adapt versus those that will die. If I were making a guess, I would fall back on the reality that only 20 percent of businesses ever adapt. That would mean 400 private clubs either go bankrupt or convert to public. But in this case, I would guess that another 100 would switch to third-party management before they die.

In any event, a lot more transition is ahead for this industry. 

 

Comments

There's always one thing missing from the remedies to save clubs, and that is 'listening to members'. Why? Because owners and managers 'think' they know their members better than they do, and make business decisions based on assumptions. Clubs that use a service called Golfer Insight get to see their clubs from their members point of view by making it easy for them to comment through a third party, and remain anonymous if they prefer. Owners can stay on top of what's going on at their clubs because they monitor member sentiment in real time.

These are precisely the clubs that Private Club Links can assist! PCL helps bring in additional revenue without having to open up to the public, and adds great value to a club membership so members never want to resign....

Many of these clubs have avoided keeping up and haven't done any upgrading or "evolving". My observation has been that those clubs that have upgraded their facilities and catered to the desires of new and younger members have done well. It is all about value and we're helping clubs with this transition all the time.

Jack: I don't think these clubs need to die. They need to change with the times as Larry said. When you have an asset that is severely underutilized you need to change. This model may have worked in the past for many clubs when they were full of members, could raise dues or assess the membership. When you don't have this luxury anymore you must adapt and change. Over 50% most clubs tee times go unused every day at private clubs. Not many of us today would start an airline or hotel business if 50% of the seats or beds were not used. You can't inventory this. There are plenty of golfers out there that can join clubs. 2.3+ million golfers belong to these 4400+ private clubs....yet their are 16.8 million avid golfers that play 8 or more rounds per year that don't belong to a private club? That is where your next member will come from. The NGCOA has just published a white paper or best practice when looking at 3rd parties.

Jack: I don't think these clubs need to die. They need to change with the times as Larry said. When you have an asset that is severely underutilized you need to change. This model may have worked in the past for many clubs when they were full of members, could raise dues or assess the membership. When you don't have this luxury anymore you must adapt and change. Over 50% most clubs tee times go unused every day at private clubs Not many of us today would start an airline or hotel business if 50% of the seats or beds were not used. You can't inventory this. There are plenty of golfers out there that can join clubs. 2.3+ million golfers belong to these 4400+ private clubs....yet their are 16.8 million avid golfers that play 8 or more rounds per year that don't belong to a private club? That is where your next member will come from. The NGCOA has just published a white paper or best practice when looking at 3rd parties.

Jack notes 3 ways clubs are taking action above; here's how the issue was addressed at Rio Verde in Arizona; what an adult and responsible solution... http://arizonagolfauthority.com/archives/1672

The underlying cause of most of these problems was the housing bubble collapse that pushed the country into recession. The private golf industry got slammed by the recession and the following collapse of many heavily leveraged golf/ real estate developments that were almost exclusively built for speculative purchasers. It would seem safe to assume that the majority of the clubs that will fail in the near term are primarily those who are remain developer or more likely now bank owned. The more mature member owned private clubs may have some problems too, but many, like my own Champion Hills in Hendersonville, NC, are extremely financially healthy and able to weather the storm for years to come because the club has been managed prudently by it's members since being taken over from the developers years ago. I think articles like this need to carefully distinguish between the speculative driven developer owned clubs that sprung up over the last couple of decades and the member owned ones. To do otherwise only serves to scare potential members away from all private clubs and leads to a self fulfilling prophecy.

Enough with the vendor solicitations. Jack is speaking to a very real issue that threatens all who serve and benefit from the private club market - members, managers and vendors alike. Their is no single silver bullet commercial solution, but perhaps there's some wisdom in the thinking that in order to remain viable, clubs need to remain relevant in the minds and lives of the membership. To the extent we can meet this requirement(as a industry group) we can effectively stem the tide of attrition.

The private clubs I deal with are clearly delineated into those that are truly private, understand who they are and are committeed to that vision, and those that have never really been private and always looked to the potential member with the proverbial pulse and a checkbook. The latter clubs are the ones that have been struggling tremendously. The true private club has had to make an adjustment for sure but by and large the ones I work with in the South East are in no danger of going out of business any time soon. Mandatory membership communities offer an interesting slant on the discussion though too. For those communities that aren't mandatory membership, do those non-club member owners yet understand the intrinsic relationship between the value (however low!) of their real estate and the health of the club? Current and future member education about the realties of club economics is a theme that all clubs need to grasp if they are to survive and prosper.

Private clubs looking for a low risk way to attract more business, adapt to new market demands by constructing low cap improvement forward tees and installing play of new limited distance golf ball. Course appeal & play shown to increase by 20% helping offset standard tee membership loss. Simple, Economical & Proven!

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