What will happen to private clubs in the next year?

[Jeff Shelman]

Call the an offshoot of the Oakland Hills thread.

What will the economic uncertainties mean for private clubs in the next year?

I'm on the board at my club and, all things considered, we're doing pretty well. We are within 15 memberships of being full, but we are somewhat anxious about what the numbers are going to look like in the spring after the one time in the year when members can opt out of the club. We anticipate more departures than normal, but how many more?

What kinds of things do you see happening across the country?
- significant cuts to initiation fees in order to get dues paying members in the door?
- more potential outings on days other than Mondays?
- a cutback in member services?

What about more drastic measures such as:
- private clubs going semi-private
- clubs closing?
- what about the merging of clubs to take advantage of cost savings from needing one club manager, director of golf, etc?

In the Twin Cities, I know there are a couple of clubs that are really struggling. One will let former members back without penalty if they start paying dues, one I have heard is down to only about 150 members. I would be stunned if there aren't tons of great deals out there, even at some of the top clubs in town.

What kind of things are you seeing in your part of the world and what do you think is going to happen?

[J_ Crisham]

Jeff,  I think all of your statements are definite possibilities. Even the great old clubs will face changes in the difficult 2009 economic climate. One only needs to look at an area like NY or more specifically Long Island and see that some members who were big hitters are on the ropes due to market conditions. The Madoff implosion is sure to cause some to resign from clubs on LI. Chicago is seeing it as is Detroit. The strong will survive but the new clubs being built may take it on the chin. Great opportunity if someone is in a stable situation to join a nice club.   Jack

[Bob_Huntley]

I feel that we will probably see a radical change in the facilties offered.

Some clubs are being run for the benefit of diners rather than golfers.

I look forward to the day when clubs offer golf, a light luncheon and leave it at that. It always amazes me, that restaurants in town are paying $10,000.00 a month rent and eking out a profit, whereas the majority of Food and Beverage operations at Clubs are a drain on the budget, this, with no rent to pay..

Bob

[Mike Benham]

Long before this recession, the simple fact that most clubs have a monthly or quarterly food and beverage minimum is evidence that on their own, grills and dining rooms at clubs are at best break even and most likely a money losing operation.

[Anthony Gray]

 Jeff,

  Very good topic. I belong to a private club and I woulkd love to see public play. It would offset members fees and costs, much like the model at Pasatiempo. We can learn much from the UK when it comes from this topic.

 Anthony

[Kalen Braley]

It is interesting that resturants manage to make it work, even though usually on the slimest of margins.

Is it possible that the food and beverage don't work because due to lack of "competition" per se?

[Mike Sweeney]

http://www.csgalinks.org/2009%20The%20State%20of%20the%20Game.pdf

Post a month ago, but probably a decent review.

in general, if I was running a club and can afford it, I would send out the 2009 dues as late as possible. People just want to get to the other side of this thing, and the psychology of receiving a bill in January may be tough.

[Rick Sides]

Jeff,
Good thread.  I think gone are the days of $100,000 + initiation fees.  The housing market is also doing terribly and a lot of housing developments build golf courses to draw people.  There is a large housing development in Florida which built a private golf course and hoped to sell houses because of the course, however, they have not sold one house and the course is now open for public play.  It doesn't look good for private or public clubs.

[Mike Sweeney]

Jeff,
Good thread.  I think gone are the days of $100,000 + initiation fees.  The housing market is also doing terribly and a lot of housing developments build golf courses to draw people.  There is a large housing development in Florida which built a private golf course and hoped to sell houses because of the course, however, they have not sold one house and the course is now open for public play.  It doesn't look good for private or public clubs.

Rick,

Maybe you are talking about Sugarloaf Mountain which we played last week. Just trying to show the other side of the equation because 25 miles away, all seems normal at Disney:

http://www.google.com/hostednews/ap/article/ALeqM5hRVkNNSuP9jOZBH-y2FQKweQSDSgD959828O1


"In a way, the slumping economy works well for Tokyo Disneyland," said Hiroshi Watanabe, an economist at the Tokyo-based Daiwa Research Institute. "Because of the recession, people have stopped buying cars and houses or going to Hawaii, and Tokyo Disneyland offers an affordable and pleasant alternative."

Around the world, Disney's theme parks have been a bright spot for the brand this year as people seem to look for an escape from bad times.

Consumer confidence is the lowest the company had seen in more than three decades, The Walt Disney Co.'s chief executive told analysts last month. Even so, revenue from parks and resorts worldwide was up 8 percent for the year, to $11.5 billion, according to the company's fourth-quarter earnings report.

----------------------------------------

I type this in the middle of Disneyworld where we come often. If there is a recession, it just doesn't feel like it here. I have no doubt that the numbers are off as Disney has a bunch of promotions in place to keep their numbers up.

Private and public clubs probably need to adjust their models in the coming years same as Disney. Getting past the recession, golf still has to figure out out how to get more people to play more often.

[Rick Sides]

Disney and a handful of other places and companies have an amazing business plan.  Disney is one of those places that is recession proof because families will always want to go there, even if it means saving change in a bucket for years.

[Jim Tang]

I have to think new developments will certainly dry up and we'll see very few new private clubs open up in the next 5 years or so.

[Adrian_Stiff]

I dont think we are going to see many new golf courses built for quite some time, there will be an odd few but so much is linked to housing it simply cant be sustained.
The recent developments of the last 5 years will likely struggle, those trying to charge big $$$$ will see their targets fall short, golf will still be played but golfers will either give up temporarily, play less frequently, play in their same away day groups but numbers will be less. Some golfers with more time will play more but only if they are members and having paid an annual fee you will merely be getting a less *average price per round*.
No golf club will do well, but there will be a price war as clubs struggle to attract the limited business, some will escape but the ones that a run by minority opinoned committees that only look at their situations and not the global picture might do badly.
I suspect there will be many casualtys, they might include some of the bigger chains, bigger names, bigger resorts. The little cheap ones that are already low budget might even see an increase in business.
Golfers will want to play golf cheaper. Private clubs could see their numbers dropping by big %%% as their cliental will almost certainly have been affected or even bankrupted, but guessing numbers at this stage is merely guessing... my guess most clubs will lose 20% in 2009.

I also think many clubs will look to do the following; reduce staffing levels in as many areas as possible, cut greens every other day, reduce other mowing areas by a 50% frequency, reduce fertilser programmes and generally put as much as possible on hold.

[Dan Herrmann]

I think the top-tier clubs will be just fine.   It's the 2nd tier club that'll be in trouble.

[David Stamm]

I think the segment that will get hit the hardest are the more modest/middle tier clubs. These clubs consist mainly of working class members and the monthly dues can make the difference to the bottm line of the family budget. The initaitions have dropped significantly or gone away altogether in alot of places, but I'm not sure it's had the hoped for effect. The bottm line is that alot of them had cheap initiations already, so there hasn't been alot for those members to walk away from when they can no longer afford the monthly costs. I think that's why the muni's in So Cal have seen no drop off at all in traffic. Those ex members will go there and the ones that can't afford to play as much at their local munis are being replaced by them.

[JMEvensky]

I feel that we will probably see a radical change in the facilties offered.

Some clubs are being run for the benefit of diners rather than golfers.

I look forward to the day when clubs offer golf, a light luncheon and leave it at that. It always amazes me, that restaurants in town are paying $10,000.00 a month rent and eking out a profit, whereas the majority of Food and Beverage operations at Clubs are a drain on the budget, this, with no rent to pay..

Bob

Sadly,as far as many existing clubs are concerned,my fear is that the opposite may happen.

Many Boards look at the golf course maintenance budget and see a huge pool of money which MUST have some wasteful expense.Few understand that,frequently,cutting back $X will have some unintended consequence.So,in order to subsidize the non-golf parts of the property,they take from the maintenance budget.The golf course,the reason the club exists in the first place, suffers.

Every club wants the non-golfing social members under the theory that their dues will help pay for the upkeep of the golf course.I believe the reality is that the converse is true at most clubs-the golfers disproportionally support everyone else.

The problem,IMO, is that so few club/Board members take the time to figure out that starving the golf course,for the benefit of dining/tennis/fitness, is the wrong way to go about things.

The above said,most golf course maintenance budgets will have to be cut.I just hope the "savings" aren't used to prop up everything else.

[D_Malley]

just recieved this forcast from Pellucid Corp, which is a company that provides various services for the golf industry.
www.pellucidcorp.com




WHEN PRIVATE GOLFERS GO PUBLIC
As I filled up the family minivan in St. Louis this past weekend at $1.48 a gallon, it reminded me of the sometimes dramatic swings in economics that seem to be happening more frequently these days ranging from gas prices to employment to government. As much as I've complained in the past about the golf industry being slow and somewhat resistant to change, there is some solace in the fact that the golf industry and consumer trends tend to happen in longer, attenuated cycles vs. the increasingly regular boom and bust landscape.

One of these attenuated trends that OTR subscriber Harry Ipema of FORE! Reservations brought to our attention recently is the migration of golfers out of private club memberships and back into the public golf segment. While there have been a number of industry stakeholders discussing the demise of 10-20% of private clubs over the next 5 years, we foresee a less draconian scenario that will be the combination of some number of private clubs failing but a more predominate trend of the more established clubs surviving at roughly 90% of their current membership levels. If this occurs, there will be several meaningful shifts for the industry, public facility operators and equipment manufacturers potentially:

Some number of private facilities will no longer be economically viable in 2009 with the majority converting to public golf facilities as a first line of defense

A meaningful number of current private golfers will convert back into the public golf segment which should produce a customer and rounds windfall for quality public courses in proximity to private clubs

The conversion of private golfers back to the public golf segment may also be accompanied by a significant reduction in equipment spending most likely through deferred durables upgrades

If our crystal ball projection is at least directionally correct, this would suggest that the private golf segment has probably seen its high water mark for the foreseeable future in both total members and number of clubs. For the industry this will mean that yet another layer of economic insulation will be peeled away (that of the relatively guaranteed private club member play frequency and spending level) and we'll have to sharpen our marketing skills to keep them invested and playing in the public arena at their former private-side levels. Like Americans' move from SUVs and trucks amid rising gas prices, we should have a slight time cushion required for a majority of these "defectors" to unwind their memberships and trickle back into the public pipeline. This will give us some buffer to adjust economically on the private club side and gear up on the public facility side to understand and service these former private golfers...

[Dan Herrmann]

JMEvensky,
Well said.  Sometimes I think the best golf clubs have the simplest and least pretentious facilities.  I was once at a club where the GM told the BOD that his goal was "to provide the best dining experience in the county".  Fortunately, the BOD didn't like that comment.  We wanted to provide the best GOLF experience!

[JMEvensky]

JMEvensky,
Well said.  Sometimes I think the best golf clubs have the simplest and least pretentious facilities.  I was once at a club where the GM told the BOD that his goal was "to provide the best dining experience in the county".  Fortunately, the BOD didn't like that comment.  We wanted to provide the best GOLF experience!

Actually,we have a GM who has made the same boast.To his credit,he has the CV to back it up.However,I just don't want to rob Peter...

I think great facilities are an amenity that very few memberships can afford.Personally,I envy those that can.For the rest of us,I think the most prudent course of action is to keep the golf course "on a pedestal" and do the best we can elsewhere with whatever is left.

Of course,the same non-GCA.com mindset that worships at the altar of "resort-type" club facilities is in the majority of most club memberships.This doesn't bode well for putting the golf course first.

[Wayne Freeman]

It will certainly be interesting to see what happens.

       I just played Shady Canyon,  very high end Fazio course in Orange Co., Calif. with an initiation fee or $300,000.  70 memberships are for sale.  They have 400 members and are looking for 450.

       The Retreat,  another private residential project a little south of there has just gone semi- private and the public can play there any time.

        My club, in Seal Beach, has had no new full $30,000 non equity memberships in the last year.  Anyone who has joined has done a yearly $6000 plus the monthlies,  and this can be done until the total initiation is reached,  all without any interest payments.

           I certainly think it's doubtful if Riviera or Bel-Air are going to drop their fees to any extent,  but it sure would be nice if a bunch of the top rated clubs relaxed their policies about outside play to allow more people to have the opportunity to play more great courses without the hassle of playing with a member all the time.
           

[Dan Herrmann]

Wayne - Sounds very Euro to me

I wonder if the guys that do rating can chime in here...   How many times to you visit a club as a rater to find it pretty much wide open?  I really doubt an hour or two of tee times a day will negatively affect much member play.  Especially if those times are non-prime time.  And don't interfere with my post-work loop

[Wayne Freeman]

Dan-  pretty much any club can accommodate several groups if you do it Tues. - Thurs. during any non peak weeks.  When I played The Golf Club, and Double Eagle on a Weds. in Oct. our threesome saw maybe a total of 3 other groups total that whole day.  And I've played The Valley Club on a Sunday no less when all we saw was another twosome before noon.

[Sean_A]

Wayne - Sounds very Euro to me

I wonder if the guys that do rating can chime in here...   How many times to you visit a club as a rater to find it pretty much wide open?  I really doubt an hour or two of tee times a day will negatively affect much member play.  Especially if those times are non-prime time.  And don't interfere with my post-work loop

Dan

The interesting vibe I am picking up from some on this board is not the potential inconvenience of unaccompanied visitors or the fact that many clubs don't really need vistor cash(though I have to believe it is very clubs which wouldn't be happy to have an extra revenue stream), but the idea that members have plonked down a pile of cash to play so it isn't fair if somebody can walk in a few times a year and play without a member, or even presumably with a member, at least at certain times.  Though I don't agree with this sentiment I understand it. 

Ciao

[Chris Kane]

Sean, a major difference between the American clubs and the British (and Australian) clubs is the cost of being a member.  If I was spending the sums we hear about for membership, I wouldn't want the public to be able to walk on for the price of a green fee either!

[Sean_A]

Sean, a major difference between the American clubs and the British (and Australian) clubs is the cost of being a member.  If I was spending the sums we hear about for membership, I wouldn't want the public to be able to walk on for the price of a green fee either!

Chris

Thats fair enough.  Those who spend the money make the rules.  While I don't ever expect to lose a grip on my sanity enough to pay the amounts talked about on this site, I can't imagine caring if X amount of tee times a few days a week were released for visitors.  From my PoV, regardless of how much a membership costs, the idea is to allow folks to play, but not really inconvenience the membership and from this perspective I have always thought Muirfield's policy is excellent.  Though I fully understand if clubs don't believe they have an obligation to open their doors to earnest golfers looking to soak up the traditions and history of the game.  Clubs don't have any such obligation, but I would hope there is a sense of clubs wanting to spread the history and traditions of the game around.  These are the threads which keep the game alive and timeless. 


Ciao

[Tony_Muldoon]

All of the above also applies to clubs in England. 

I know of one 100 year old club in the London suburbs close to meltdown, the Secretary and Catering Manager are gone and they still need to cut costs AND get new members. The writing was on the wall 5 years ago when they dropped their initiation fee. Those few they have attracted in the last few years will be looking elsewhere. Thirty years ago membership was closed and before Drink and Drive became an issue it was the most social place around.

When I left a similar club close to the above one, this past summer, no one called to ask why.  I am 15 years younger than the average member and personally I think they should be asking people like me why I don't want to be in their club.

These clubs are ill suited to survive these times.  The boom times that followed the financial crises of the 1970's created huge numbers of Pay and Play courses, who know have paid back much of their capital costs.  They will be far more flexible in the current market and it's a crazy time to be considering putting down initiation fees. 


Golf will look very different in 10 years time.