Private Country Clubs – Will they exist in the future?
There is a lot of conversation about the future of private clubs. Will they exist in the future or not? Well it depends on who you talk to. Personally, I have no doubt that private clubs will exist, but there will be fewer of them. In a recent article from Club and Resort Business Magazine and verified by additional research, at least five golf courses in the San Francisco Bay Area have closed in this past year, and Kevin Kobayashi, General Manager of Monarch Bay GC in San Leandro, predicts that 10 more golf courses will close over the next two decades before demand exceeds supply. There are currently 115 golf courses in the region.
In accordance with various statistics and having lived it, there were over 400 golf courses coming out of the ground every year back in the 1990’s. Today, there are an average of 125 golf courses closing every year. So what’s up? An easy reply would be that the golf business was over built, so like most businesses there is a correction taking place. While a big part of this is true, there is more to this than what is being discussed. The reality is that there are an aging population of members, being followed by a younger generation of members who have different ideas as to what a private club is all about and what it should offer its members. In addition, there are fee structures in place that have greatly impacted the private club business, creating disinterest to the price/value relationship. Those clubs who have focused on their initiation fees and membership dues, making modifications to them are bringing “new” members to their club at a faster rate. Why join a private country club and pay an initiation fee and monthly dues and possible assessments when you can play one of the high end daily fee public golf courses for a lot less?
The Next Generation of Members are knocking at your door, what will it take to let them in?
We must first assess what the needs of this under 45 year old age group wants and then fill that need. Without a doubt, there is a void in the private club business, as it relates to amenities, beyond golf, tennis, fitness, pool and dining. Today’s private club members desire more. If we don’t listen to them, then they will go elsewhere. If we build it, will they come? Who are these younger members? Where will they come from? In addition to amenities and added programming, what else can we do to attract them? What about keeping our current members happy? This is as critically important as attracting new members.
Aging members, aging facilities, deferred maintenance to our facilities, increased operational costs, increased debt, low interest rates, sagging economy, and uncertainty with the future of private clubs has created caution and hesitancy with new members considering joining a private club. It’s true that those clubs who are bringing in new members find that those members joining our clubs today are younger than the average age of our current members. This is a great thing that is happening. The problem is that we are losing our current members at a rate faster than we can replace them with younger dues paying members. Membership attrition isn’t in alignment with membership growth. The question is in order to survive, how do we close this gap? We all know that our clubs survive on membership dues and membership participation. While initiation fees feed our capital requirements, we cannot exist without membership dues.
The private clubs of the future “must” make a shift away from the traditional business approach, or better yet, build a better business model that is in alignment with today’s member’s needs and expectations. We can accomplish this, while still keeping the traditions of our clubs in order to keep our current members happy, while focusing in on fulfilling the needs of our future younger members and families.
If Private Clubs are going to exist in the future, what are they going to have to do to?
There is no doubt that they will have to change:
If you study most successful business models, (yes despite what some will say, private clubs are a business) they are constantly evolving and reinventing themselves. Whether your club has added a resort style pool, with a swim up to the bar area in your pool, water parks, day care centers, playgrounds, a new state-of-the-art fitness center, pickle ball courts, croquet courts, additional casual “sports bar” style of dining, exhibition kitchens with stone hearth ovens, outdoor fire pits, dog parks, fly fishing parks, hiking trails, and other recreational amenities, (which many clubs are doing by the way), this means that your club is on board with what many members today are wanting and your club is heading in the right track. If you know of any of these clubs who have added these facilities, I guarantee you that they are also adding new members to their clubs. It’s somewhat simple, “Activity Creates Activity.” Those clubs who are bringing in new members are also seeing increased dining covers, guest covers, increased rounds of golf and so forth. It’s the future of your club.
The demand for the game of golf has greatly declined over the past several years. Statistics have shown that in the last five years, rounds of golf have diminished by over five million rounds, which is significant. I don’t believe that the game of golf needs to be reinvented to survive like some are trying to do, it’s just that today’s members have so many other interests that golf is sometimes not their priority. In addition, our members are aging and they cannot play as many rounds of golf as they did in the past. It’s tough to commit four hours or more doing one single sport. While the game of golf will be around for centuries, it too is going through a change. Today’s private clubs who have recognized this fact are learning to deal with this change but they have not given up on the game of golf. It’s all just a part of the adaptation process of accepting change. With the number of clubs that are closing a correction is taking place, which will create a positive impact for those clubs who will remain. The scale of rounds of golf will level out and all will be well once again with the game of golf.
How did we get to where we are?
As I previously stated, if you will recall back in the early 1990’s too many overly aggressive developers thought they found a “gold mine” and that building a community around a “signature” golf course was going to bring in their pay day. Well, as we all know, this worked well for a few, but for the most part, all it did was create problems for those existing clubs. In some cases you could argue that these developers were able to increase attention and growing the game of golf, which did happen to some extent, but like all businesses, some survived and some didn’t. I believe we are still feeling the agony from some of these development decisions made years ago.
When these developers built these opulent private clubs they weren’t really considering their “end game” and how they were going to sustain their overly built clubs. As we all know the cost of maintaining a private club is enormous. It’s a huge financial commitment to open a private club and operating one is even a larger commitment. The thought however behind many developers was that they were going to sell the real estate, make their pay day and then they would turn the club over to the members left standing and the developer would go on down the road exploring their next business venture. In theory, this all sounds good until those developers started to feel the pain of funding the operating deficit to the sum of millions of dollars over a short period of time. The old saying goes, “Only the Strong Survive.” I would say this is also true with the sustainability of private country clubs. Just look around and you will see what clubs are still vibrant. But those clubs haven’t taken anything for granted. They are keeping up with the times and are being more strategic in their approach to their future.
Reaching new markets:
The elucidation to Country Club’s survival stands on meeting the next generation of members wants and needs and these wants and needs are based on their member’s family’s needs, which also includes their children.
With an emphasis on member retention, private club boards need to look to helping their current members recognize their club ownership position to better substantiate the cost of being a member and provide value and a deeper purpose of being a member. In addition, it is critical for us to recognize prospective members of a private country club, reaching new markets in the same manner, especially if we are going to bring new members into our clubs. In addition, status quo has to be stopped and change made to offering today’s private country club members more value.
Once private country clubs realize the need to invest in creating these additional member amenities, thus creating experiences beyond golf to attract another generation of members, it is then that they will see the benefits of change as a part of an evolutionary process that will provide sustainability for private clubs well into the future.