Private Clubs at a Crossroads

[Rob Marshall]

Private clubs have never been healthier

This seems to be almost universally true.  What do the best run clubs do (or not do) now to ensure they remain healthy for years to come?

Effectively manage debt in a high interest rate environment.

Hopefully they were able to retire the debt during the recent boom years. I would be very concerned if a club I belonged to was taking on debt right now.   

Why would a club ever pay off it's debt? Current members paying off the debt for future members? Manage yes payoff no.

[Tim_Weiman]

The comment section of the actual article is insightful.

Just had a long car ride, so I took a look.


This makes me appreciate what Ran had created. Sure there are few rules here, but most of us post with our real names. I genuinely appreciate that.

Mike,


I think Ran’s decision to eliminate anonymity was good. Maybe there are other topics where protecting anonymity is a good thing, but I don’t think so in the case of golf architecture discussion.

[John Kirk]

On a cranky day in 2019, I predicted 50-75% of country clubs would fail within 25 years.  The golf business has instead thrived and grown.  25 years isn't over yet, but I appear to be on my way to making a bad prediction.  We'll see.


What happened?  I'd say the biggest factor was the coronavirus pandemic beginning in early 2020.  It was a black swan event that favored golf.  People found that playing golf was a safe outdoor form of recreation, while other forms of recreation and social activity were less desirable.  The golf business has thrived since.


I still think there are structural problems in the economy that will ultimately put pressure on the golf business.  In the meantime, let the good times roll.

[John Handley]

I disagree that it was a black swan event that people found it safer to play golf outside versus something indoors.  Maybe more of a shift of people doing what they really want to do instead of putting it off for whatever reason.  People aren't dropping $50, 100K to join a nice club because it's safe.  They do it because they really want to.  The pandemic showed us that life is short so spend your time doing what you want.  That's why many people moved out of cities and into the mountains, people joined expensive golf clubs, etc.

[John Kirk]

I disagree that it was a black swan event that people found it safer to play golf outside versus something indoors.  Maybe more of a shift of people doing what they really want to do instead of putting it off for whatever reason.  People aren't dropping $50, 100K to join a nice club because it's safe.  They do it because they really want to.  The pandemic showed us that life is short so spend your time doing what you want.  That's why many people moved out of cities and into the mountains, people joined expensive golf clubs, etc.

I'll add that many more information type workers are working from home as well.  Technological improvements are expected to accelerate change in society, but that knowledge doesn't prepare you for the speed at which things are happening these days.

[Chris Hughes]

Private clubs have never been healthier

This seems to be almost universally true.  What do the best run clubs do (or not do) now to ensure they remain healthy for years to come?

Effectively manage debt in a high interest rate environment.

Hopefully they were able to retire the debt during the recent boom years. I would be very concerned if a club I belonged to was taking on debt
 now.   

In the optimal capital structure of a well run "golf club" (not country club):


1.  Is there a place for "debt" that is long-term in nature?   


2.  If so, how much is too much?

[Mike_Trenham]

Private clubs have never been healthier

This seems to be almost universally true.  What do the best run clubs do (or not do) now to ensure they remain healthy for years to come?

Effectively manage debt in a high interest rate environment.

Hopefully they were able to retire the debt during the recent boom years. I would be very concerned if a club I belonged to was taking on debt
 now.   

In the optimal capital structure of a well run "golf club" (not country club):


1.  Is there a place for "debt" that is long-term in nature?   


2.  If so, how much is too much?

How much debt is ok - I would say about 1.5x revenue is manageable when things slow down, debt over 2.5x revenue is when things get risky and interest is too big a part of the cash put towards serving the debt each year.

[SB]

"How much debt is ok - I would say about 1.5x revenue is manageable when things slow down, debt over 2.5x revenue is when things get risky and interest is too big a part of the cash put towards serving the debt each year."



For a private club, that seems very high.  If successful clubs are worth around 2.0x revenue or so, you're looking at an LTV of 75% - over 100%.  60% LTV is about the max I would go.  For a member owned club, 1X revenue might be too much.  With interest, that would put your debt service at around 10% of revenue.  Not chump change.


And don't forget about equipment leases!  That is also debt.  Everyone always forgets about equipment leases.

[Matt Schoolfield]

How much debt is ok - I would say about 1.5x revenue is manageable when things slow down, debt over 2.5x revenue is when things get risky and interest is too big a part of the cash put towards serving the debt each year.

This is trivial information for folks in finance, but people interested in this topic should consider picking up a Texas Instruments: BA II Plus (or Plus Professional) calculator. Debt carry/amortization calculations are very complex, but this calculator makes them very easy to deal with. Anyone can quickly calculate the amount of debt they can carry at the repayment levels they are comfortable with. They are fun to play with and are quite useful.

[Craig Sweet]

The inequality built into our economic system is the main cause for failure of many institutions....and it will be the demise of "country clubs".   

[Philip Caccamise]

I had a long conversation with my buddy on this topic last year when we were touring England and discussing the UK model vs. the US.


Both of us are Gen X. He's mid-50's, I'm mid-40's. He has no kids, I have one. We both do pretty well career wise, are quite modest in our housing and don't expect to move soon, so can certainly afford golf as a luxury. We would be the ideal demographic for a private club.


I live in south Orange County, CA and he lives in Nashville, TN. In both locations, the high end public golf offerings surpass the private golf offerings. There is nothing architectural of note in either location, neither of us care about a pool or tennis courts or a fancy clubhouse, so why would we spend $50-100k on initiation and $10k a year of our golf budget on one decent but unremarkable golf course vs. a 'club card' at a high end public course(s)- leaving thousands a year to spend on travel for golf?


Even if could get over the initiation and was happy playing the same course twice a week every week, 100 times in a year, the value proposition still falls short. The golf courses are simply not good enough to justify the expense. Unless there's a price correction (unlikely) that won't change.

[Rob Marshall]

I had a long conversation with my buddy on this topic last year when we were touring England and discussing the UK model vs. the US.


Both of us are Gen X. He's mid-50's, I'm mid-40's. He has no kids, I have one. We both do pretty well career wise, are quite modest in our housing and don't expect to move soon, so can certainly afford golf as a luxury. We would be the ideal demographic for a private club.


I live in south Orange County, CA and he lives in Nashville, TN. In both locations, the high end public golf offerings surpass the private golf offerings. There is nothing architectural of note in either location, neither of us care about a pool or tennis courts or a fancy clubhouse, so why would we spend $50-100k on initiation and $10k a year of our golf budget on one decent but unremarkable golf course vs. a 'club card' at a high end public course(s)- leaving thousands a year to spend on travel for golf?


Even if could get over the initiation and was happy playing the same course twice a week every week, 100 times in a year, the value proposition still falls short. The golf courses are simply not good enough to justify the expense. Unless there's a price correction (unlikely) that won't change.

I don’t think anyone thinks being a member at a private club saves on a per round basis. What you are paying for is convenience more than anything else.

[Daryl David]

I had a long conversation with my buddy on this topic last year when we were touring England and discussing the UK model vs. the US.


Both of us are Gen X. He's mid-50's, I'm mid-40's. He has no kids, I have one. We both do pretty well career wise, are quite modest in our housing and don't expect to move soon, so can certainly afford golf as a luxury. We would be the ideal demographic for a private club.


I live in south Orange County, CA and he lives in Nashville, TN. In both locations, the high end public golf offerings surpass the private golf offerings. There is nothing architectural of note in either location, neither of us care about a pool or tennis courts or a fancy clubhouse, so why would we spend $50-100k on initiation and $10k a year of our golf budget on one decent but unremarkable golf course vs. a 'club card' at a high end public course(s)- leaving thousands a year to spend on travel for golf?


Even if could get over the initiation and was happy playing the same course twice a week every week, 100 times in a year, the value proposition still falls short. The golf courses are simply not good enough to justify the expense. Unless there's a price correction (unlikely) that won't change.

I don’t think anyone thinks being a member at a private club saves on a per round basis. What you are paying for is convenience more than anything else.

Besides convenience there is also a sense of community. Playing in regular games. Speedy rounds. Playing a short loop of holes in the evening. Practicing to your hearts content on days you don’t play. Belonging rather than visiting. You are a member not a customer. Sometimes part of the ownership. There is much more to being the member of a private club than can be calculated in a cost per round analysis.

[Tim_Weiman]

I had a long conversation with my buddy on this topic last year when we were touring England and discussing the UK model vs. the US.


Both of us are Gen X. He's mid-50's, I'm mid-40's. He has no kids, I have one. We both do pretty well career wise, are quite modest in our housing and don't expect to move soon, so can certainly afford golf as a luxury. We would be the ideal demographic for a private club.


I live in south Orange County, CA and he lives in Nashville, TN. In both locations, the high end public golf offerings surpass the private golf offerings. There is nothing architectural of note in either location, neither of us care about a pool or tennis courts or a fancy clubhouse, so why would we spend $50-100k on initiation and $10k a year of our golf budget on one decent but unremarkable golf course vs. a 'club card' at a high end public course(s)- leaving thousands a year to spend on travel for golf?


Even if could get over the initiation and was happy playing the same course twice a week every week, 100 times in a year, the value proposition still falls short. The golf courses are simply not good enough to justify the expense. Unless there's a price correction (unlikely) that won't change.

Phil,


I have lived in both Southern California (Belmont Shore, Long Beach) and Nashville (Franklin) and share your feelings about private golf offerings in both places. Neither had anything I considered appealing.

[Philip Caccamise]

I had a long conversation with my buddy on this topic last year when we were touring England and discussing the UK model vs. the US.


Both of us are Gen X. He's mid-50's, I'm mid-40's. He has no kids, I have one. We both do pretty well career wise, are quite modest in our housing and don't expect to move soon, so can certainly afford golf as a luxury. We would be the ideal demographic for a private club.


I live in south Orange County, CA and he lives in Nashville, TN. In both locations, the high end public golf offerings surpass the private golf offerings. There is nothing architectural of note in either location, neither of us care about a pool or tennis courts or a fancy clubhouse, so why would we spend $50-100k on initiation and $10k a year of our golf budget on one decent but unremarkable golf course vs. a 'club card' at a high end public course(s)- leaving thousands a year to spend on travel for golf?


Even if could get over the initiation and was happy playing the same course twice a week every week, 100 times in a year, the value proposition still falls short. The golf courses are simply not good enough to justify the expense. Unless there's a price correction (unlikely) that won't change.

I don’t think anyone thinks being a member at a private club saves on a per round basis. What you are paying for is convenience more than anything else.

Besides convenience there is also a sense of community. Playing in regular games. Speedy rounds. Playing a short loop of holes in the evening. Practicing to your hearts content on days you don’t play. Belonging rather than visiting. You are a member not a customer. Sometimes part of the ownership. There is much more to being the member of a private club than can be calculated in a cost per round analysis.

I get all of those at my public course (10 minutes away). Pace of play is 4 hours every day and I can play a 12 hole loop in the evening in 2 hours. There's a robust men's club with weekly games as well. The range is giant and always has spots- the closest private course to me (5 minutes away, bad golf course, carts mandatory) doesn't have a range at all. The second closest private course (7 minutes away, good golf course) has a nice practice facility but the range is into a steep hill, so it's sort of limited flight.

Don't get me wrong- I would love to be a member of a club. Just not where I live based on what I'm getting for money or the alternative. If I ever live in the UK I'll join like 9 clubs because the value proposition is obscenely good.

[John Bouffard]

I didn't realize the thread started in 2019. I suppose someone has already mentioned that private clubs have done pretty damn well in the last couple of years. Clubs I know in my area have had huge influxes of younger members, maybe mostly GenX but certainly ALOT of millenials. Still, I think the future of golf probably lies in modified games, probably simulator based, but who knows. The next generation, whatever it's called, is populated by people who spend hours with their eyeballs in screens, and take their leisure in 15 second looped video shorts. Can't imagine 4 hour golf rounds followed by lunch at the club will capture this generation. Again, who knows.

[John Handley]

If you are debating on joining a golf/country club and are trying to make the numbers makes sense as in price per round, etc. then you are better of playing public courses.  Private clubs are like expensive cars/watches, whatever you want to say.  Financially, they probably do not make sense.  But it's more of a passion or lifestyle.  Like others have said, when you are part of a club, you make new friends and make your social circle larger.  That has value to me.  I can go play 3, 6, 9, 12, 18 or 36 holes and not worry about what I am paying.  That to me has value.  I know many guys who have had this dilemma and end up using the club way more than they ever factored into the spreadsheet when they were trying to make the decision.


A Toyota Camry is a nice car and gets you from point A to B.  Does it make sense to buy a Ferrari?  To some it does and to some it doesn't.


Playing a muni allows you to play golf at a pretty low cost.  Does it make sense to join a private club?  To some it does and to some it doesn't.


Everyone has different financial situations and I respect that.  But for others to say it doesn't make sense to join a club, I disagree. It just depends on your situation. 

[Chris Hughes]

I didn't realize the thread started in 2019. I suppose someone has already mentioned that private clubs have done pretty damn well in the last couple of years. Clubs I know in my area have had huge influxes of younger members, maybe mostly GenX but certainly ALOT of millenials. Still, I think the future of golf probably lies in modified games, probably simulator based, but who knows. The next generation, whatever it's called, is populated by people who spend hours with their eyeballs in screens, and take their leisure in 15 second looped video shorts. Can't imagine 4 hour golf rounds followed by lunch at the club will capture this generation. Again, who knows.

Almost feels like a bubble huh?

[Tim Martin]

I didn't realize the thread started in 2019. I suppose someone has already mentioned that private clubs have done pretty damn well in the last couple of years. Clubs I know in my area have had huge influxes of younger members, maybe mostly GenX but certainly ALOT of millenials. Still, I think the future of golf probably lies in modified games, probably simulator based, but who knows. The next generation, whatever it's called, is populated by people who spend hours with their eyeballs in screens, and take their leisure in 15 second looped video shorts. Can't imagine 4 hour golf rounds followed by lunch at the club will capture this generation. Again, who knows.

Almost feels like a bubble huh?

It does and it remains to be seen what the shakeout will be. Those clubs that got the greediest as far as dues and initiation increases will be in the crosshairs. I’m not saying it will happen across the board but those that were on the margins before Covid will get a wake up call.

[Rob Marshall]

With people working from home and fleeing to Southern states I don't see those areas seeing any decreases in the near term.

[Wayne_Kozun]

WFH makes it easier for people to get out to the golf course which means it can make more sense to get out to the club.  WFH on Friday, with a 3pm tee time no one will know that you are skipping out early.

[Matt MacIver]

For most of the golfers I know, playing a well conditioned course (public or private) far outweighs the available golf courses architectural merits.  There are a lot of other things already mentioned that weigh into a golfers decision to play a course or whether or not to join a club. 

[Chris Hughes]

"How much debt is ok - I would say about 1.5x revenue is manageable when things slow down, debt over 2.5x revenue is when things get risky and interest is too big a part of the cash put towards serving the debt each year."



For a private club, that seems very high.  If successful clubs are worth around 2.0x revenue or so, you're looking at an LTV of 75% - over 100%.  60% LTV is about the max I would go.  For a member owned club, 1X revenue might be too much.  With interest, that would put your debt service at around 10% of revenue.  Not chump change.


And don't forget about equipment leases!  That is also debt.  Everyone always forgets about equipment leases.

Good points all.  Agree on 1X being the prudent ceiling. 

[Carl Johnson]

If you are debating on joining a golf/country club and are trying to make the numbers makes sense as in price per round, etc. then you are better of playing public courses.  Private clubs are like expensive cars/watches, whatever you want to say.  Financially, they probably do not make sense.  But it's more of a passion or lifestyle.  Like others have said, when you are part of a club, you make new friends and make your social circle larger.  That has value to me.  I can go play 3, 6, 9, 12, 18 or 36 holes and not worry about what I am paying.  That to me has value.  I know many guys who have had this dilemma and end up using the club way more than they ever factored into the spreadsheet when they were trying to make the decision.


A Toyota Camry is a nice car and gets you from point A to B.  Does it make sense to buy a Ferrari?  To some it does and to some it doesn't.


Playing a muni allows you to play golf at a pretty low cost.  Does it make sense to join a private club?  To some it does and to some it doesn't.


Everyone has different financial situations and I respect that.  But for others to say it doesn't make sense to join a club, I disagree. It just depends on your situation.

Agreed on what you want and what you want to spend your money for.  Some folks are more interested in the golf than the clubhouse, and for others it's the other way around, and then there are the in-betweeners.