[kconway]

I live on the North Shore of Chicago and I am hearing increasing tales of wow at clubs all over the North Shore...

[Jeff_Mingay]

kconway,

How could anyone know the answer to your question? And, why would anyone even want to speculate?

Frankly, I'd like to see Golf Club Atlas take a different approach than CNN. In other words, this web site is A LOT more inspiring, educational, and simply useful when discussion focuses on positives. 

[Joel_Stewart]

It is pure speculation so nobody knows?  The Chicago area is not the only area where private clubs are in trouble.

Here is a quote from Golfweek which they received from the NGF regarding 2008;

"The “negative net growth” occurred as a result of 72 openings offset by the closing of 106 facilities. Among the course openings, there were 47 daily-fees (including new courses and expansion of existing facilities); 4 municipal layouts and 21 private courses."

So to answer your question, if current trends continue, 19.8% of private clubs will close???  Nobody knows.

[kconway]

also, it seems to be my club and others are holding on unsustainable membership fees (my club is ~$80k, non equity):  how can this be maintained when other asset prices are down 40% to 50%?

[cary lichtenstein]

There will be consolidations and closing just as in other industries, and the strongest will survive.

If 20% of the membership is forced to resign, that is usually 40 out of 200 in Northern Clubs. If there are 5 clubs in the market, there will be 4, simple as that.

[Tom_Doak]

kconway:

The people who run golf and country clubs are the same people who still think their homes are worth a lot.  It will take a couple of years for them to understand the message behind the fact that they aren't selling at those prices.

Hopefully, by then, the bottom will be behind us.

Cary:

Your simple math is mostly correct, but it's not so simple in practice ... none of the five clubs want to be the one that closes, because they don't get to join the other four for free.

[Patrick_Mucci]

A club in Northern NJ placed an ad in Sunday's paper.

The ad stated that for $ 2,000 a year a company could name 8 employess who could play the golf course on weekdays.

Not much in the way of details were provided.

I would guess that green fees would be charged for each round.

Clubs will try to get creative to bolster revenue while trying to curb expenses at the same time.

[Chris Cupit]

kconway:

The people who run golf and country clubs are the same people who still think their homes are worth a lot.  It will take a couple of years for them to understand the message behind the fact that they aren't selling at those prices.

Now, now, not all of us are like that

My club--affordable private golf surrounded by clubs asking $20k-$80k and we are hanging in there.  We have had to tighten our belt but thankfully we never depended on all the bells and whistles of many country clubs so our cuts do not seem as severe.

We saw a net INCREASE in membership in January and February looks good as well.  I believe we are well positioned as a great value and those people at fancier clubs who now won't or can't justify what they were paying but who still want good private golf are coming to me.

You are right that many clubs have priced themselves right out of the market.  I think one thing is fundamentally different now.  In the past clubs that had high IDs hated to lower them as the existing members always want the ID to increase so the newer folks pay more. It helps them rationalize their purchase and let's face it, no one wants the next guy in to get a better deal than them.  But as long as they could, they would be stubborn and refuse to face the fact that the market says their product's value has changed.

I think now many clubs that have spent millions on fancy clubhouses or over the top renovations have so much debt they must have high IDs to make the business model work.   Only when faced with the real possibility of foreclosure are clubs doing whatever it takes to get people in the club. The trouble is this loss of ID in their model means significantly higher dues or assessments.  Bottom line is that for many clubs it is a death spiral.

Having said all that I do sense that some on this site can hardly contain their glee with the fact that many of these private clubs may fail   We need the industry to regain its strength and grow.  We have a terrific game that those of us who profess to love it as much as we do have an obligation to share with others.  What's the term, schadenfreude?  There is a little too much of that on here at times.

Golf will re-group and there will be some tough lessons learned but please remember when the private (or public) course fails it can destroy many lives.  The employees, the surrounding homeowners, the suppliers all have a stake in the success of the club.  It's not just the inconvenience or loss for some rich guys in bad pants--lots of people suffer. 

I hope no clubs go under.  I hope the clubs in trouble can restructure and come out with a more affordable model based more on the game itself and less on the amenities that people seem to always associate with "country clubs".  We need more golf and fewer country clubs!

[Tom_Doak]

Chris:

You are right.  I should have said "some people are still in denial," and not implied that all were.  Those who understand the situation will do their best to come up with creative solutions to addressing their problems, and the vast majority of them will be fine.

Others, not so much.

[kconway]

tom, i agree with the spirit of you post.

my sense is that the governance of high clubs is not well equipped to deal with the crisis that is coming in the next several years

[Ken Moum]

I don't know if my club is going to survive, but I just learned that the projected maintenance budget for 2009 is lower than it was 20 years ago, when the current superintendent was hired.

We are down to 40-some stock members, and a bunch of other categories members who are paying half price. It's an understatement to say that our cash flow is a challenge. (Of course we did just manage to redo the grill room... )

The real bogey in this market is that there's a local management company with seven golf courses and several fitness centers that charges $29 a month for family memberships. They have something like 6,000 members. That has made it pretty tough for a second-level country club to survive.

In case you're interested: http://greatlifegolf.com/index.shtml

[Jeff Shelman]

I don't know what is going to happen in the near future. It is certainly a scary time.

I'm on the board of my club and we're going to be fine. Our one time out for the year is at the end of March, so we don't really know where we are going to be at until after that. We are prepping for a very conservative budget. We also have a very good membership promotion going on in an attempt to keep numbers up.

I do think there are clubs in the Minneapolis-St. Paul area that will likely go this season with less than 200 members. That's when things start to become a catch-22. If you cut so many things that member service declines significantly, what is the motivation for people on the fence to stay? But then how do you afford all of the things that contribute to member satisfaction?

Will there be mergers? Will clubs go to a semi-private format? Will they try to get every outing under the sun?

Very interesting times indeed.

[RJ_Daley]

We have a club here in GB that has been in the financial intensive care ward for years.  It has been the most convoluted series of trading ownership, membership structures, open to public-semi private, unique original dual loop 9 hole-two greens-5/6 sets if tees; then on to an 18 hole addition with prestige parade of homes project, outlandishly overbuilt clubhouse, bankruptcies, municipal takeovers, municipal spin offs of the course only, a bank take back, and now the Oneida Tribe has bought it at a fire sale.  You would be amazed at this clubhouse. 

The latest is that the Tribe has hired Pete Dye, who recognizes the incredible drag that the overbuilt and extremely expensive club house is to operate in any form.  They have tried a sports bar in the enormous ground floor that you'd have to see to believe.  They have two built in place authentic Italian wood fired ovens on ground and main floor that each cost about $50K@.  The main floor is very well designed and appointed. 

But, the rumor is that Dye's group is recommending they bulldoze the clubhouse ($8million when it was built in about '98)

It is a classic case of "what the hell were they thinking" when they went so austentacious.  The way they ran this up and then into the ground, you'd think it was run by Bear Stearns, Merrill Lynch, or AIG... 

[Jim Nugent]

I would guess any courses that carry a lot of debt are in trouble.  Their land is probably worth a whole lot less than they paid for it.  Their revenues are probably falling hard.  Re-financing in today's market is most likely a fantasy.  They seem like prime candidates to go under.   

How many clubs are in that boat? 

[Jonathan Cummings]

You should see the new Congressional clubhouse.  It was huge to begin with and they are in the process of completing a $30M expansion....to just the clubhouse!  In July they start a $12M redo of the Blue Course's green complexes.  Congo seems pretty much immune to financial woes (or should I say wows  ) that other clubs are experiencing.  They still have a healthy waiting list.

JC

[PCCraig]

kconway-

I grew up on the North Shore of Chicago, and now live in downtown Chicago. From speaking with a golf professional friend this past weekend it sounds like clubs in the area are seeing trouble for the first time in a long time. However it doesn't seem likely that some of the high profile clubs in the North Shore are going anywhere.

The issue of clubs going under really has to do with how much debt is on the company books from improvements and such over the past 5-10 years. If members leave, and it is difficult to gain back new memberships, then their monthly due income goes down quickly, which in turn makes the debt service coverage ratio pretty darn low.

[cary lichtenstein]

kconway:

The people who run golf and country clubs are the same people who still think their homes are worth a lot.  It will take a couple of years for them to understand the message behind the fact that they aren't selling at those prices.

Hopefully, by then, the bottom will be behind us.

Cary:

Your simple math is mostly correct, but it's not so simple in practice ... none of the five clubs want to be the one that closes, because they don't get to join the other four for free.

Tom:

Entry fees have either dropped or totally dissappeared in many cases. What the clubs need now is income, 40 members times $25,000 per year in dues makes up $1 million in shortfall. My buddy in NY left one club to join another that had an entry fee of $100,000, but they cut him a deal for $10,000.

[Jeff_Brauer]

I don't have any current data, but in DFW, initiation fees have always swung rapidly by a lot from good times to bad. Somewhere in my files I have a few old Dallas Morning News articles attesting to this fact.  Clubs do need members.  It is surprising how few additional members it takes to juice up cash flow, if they are active.

For some perspective, BTW, read one of the old World Atlas of Golf - the ones with Alister Cooke writing the intro.  The US govt had just taken away tax breaks for businesses using clubs (or reduced them) and he basically predicted it would be the end of golf, and we would all be in secret golfing societies right now, lamenting and telling stories of the good old days when we could play.

I suspect many private clubs will try to sell their courses to the local govts - if the local govt have enough cash to buy....others will loosen their rules on membership, accept more outings, go public, go semi-private, etc.  If they are tied to housing, it will be difficult for the courses to just go away.  If they are core courses the could sell themselves off for development, but even that will be reduced.

Bascially, its every man for himself and the dispositions of redundant private clubs will be handled in a lot of different ways across the country.

[cary lichtenstein]

What % of Private Clubs Go Under in Next 5 Years?

Why are we ignoring the inevitable?

Isn't it obvious?

The correct answer is 100%. 

Does this mean the clubs won't have to pay taxes either?

Washington will own everything by then. 

[Rich Goodale]

I don't know the answer to this, but what I do know is that these interesting times will separate the wheat from the chaff, and the more "interesting"  the times, the more separation.  What I don't know, but do think, is that the chaff will be much larger a proportion of the mix than anybody can now imagine.  Clubs which have character (high end, upper and lower middle end with a clear ethos and strong membership, value for money munis) will make it through.  All others will be fighting for their lives.  It will be a classic Shumpeterian "creative destruction" excercise, and I'm not only talking about golf clubs.....

[kconway]

pat,

i am not so sanguine about the north shore clubs...even the ones with low debt service.

I think we are entering a period of prolonged stress on the country club business model:
     - the decrease in entrance fees that many clubs have relied upon to fund capital/operating/pay down debt
     - increasing operating losses due to declining club memebership, fewer outings,etc

it seems to me that the north shore has too many private clubs, but that consolidation is difficult due to the way clubs works

[Steve_ Shaffer]

I think there may come a time when many second and third tier private clubs sell out to golf management companies and become semi-private non-equity types of clubs with refundable membership deposits. Who wants to pay a non refundable initiation fee?

[Adrian_Stiff]

In the UK I think 5%. I think most will lose a fair % of members but restructure with cost cutting measures and many will provide a golf course that will not be in as good a condition as it used to be and/ or a catering facility that was not as good as it used to be.

[PCCraig]

pat,

i am not so sanguine about the north shore clubs...even the ones with low debt service.

I think we are entering a period of prolonged stress on the country club business model:
     - the decrease in entrance fees that many clubs have relied upon to fund capital/operating/pay down debt
     - increasing operating losses due to declining club memebership, fewer outings,etc

it seems to me that the north shore has too many private clubs, but that consolidation is difficult due to the way clubs works

Is there anything backing your claims? Not to sound rude but I highly doubt any club would go under...each club has their own very wealthy members that won't let their club be owned by a bank.

Just thinking of clubs in my head on the North Shore I can't think of a single one that could be in trouble.

[Phil McDade]

Here here!

I'm still on the cuff for driving 2+ hours to play the famed Reverse Jans! And that was on a crappy January day...

Dave's right; the economy will come around again, as it always does. The larger trend is the bigger worry for golf -- the game is quite expensive to begin and play regularly, and youngsters today have broader options for their recreational time that tend to be less expensive and take less time.

Chris Cupit:

Don't some golf courses deserve to go under, if they are built/run with lousy economic assumptions, or they don't offer good value for the golfer? Why should golf clubs be any more exempt from the marketplace than, say, K-Mart?

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