Oakland Hills Drastically Cuts Initiation Fees

[Patrick_Mucci_Jr]

 It's just like golf, nobody ever admits to the good bounces, they just complain about the bad ones.

Tom Doak,

That's true.

Do you think that features that promote pass/fail consequences come under fire more often thereby causing them to be altered or eliminated ?

Are more pronounced features with accentuated pass/fail consequences more readily discernable to the average golfer ?  And, once on his radar screen, are they doomed to disfigurement.

[Chris Kane]

Do you think that features that promote pass/fail consequences come under fire more often thereby causing them to be altered or eliminated ?

Are more pronounced features with accentuated pass/fail consequences more readily discernable to the average golfer ?  And, once on his radar screen, are they doomed to disfigurement.

A very interesting observation, surely worthy of its own thread?

[Buck Wolter]

If someone had $110K in the S&P 500 6 months ago my guess it's worth pretty close to $60K now -- seems reasonable that the initiation would follow (especially in Detroit). There's deflation in the air and what you paid for something has very little to do with what it's worth --going to take a while for people to get used to that, especially when it comes to their homes.

[Andy Ryall]

I like Tom's line concerning the silence of good bounces versus the bad ones that typically get the publicity.  So true.

The membership issue is interesting to me.  I am 37 with a wife and 2 kids and probably play 30-35 rounds per year.   I make decent money but am certainly not wealthy.  I would love to find a place that is golf-centered that would provide a strong foundation for my family, if they choose to pursue golf.  But at what cost?   There's really no opportunity to increase the number of rounds I play due to work (finance/risk) and family, so my per round costs would likely triple or worse.  Tough to justify unless you have cosniderable discretionary income and/or a career (sales) that you could leverage with a membership.  

I just wonder how small the true eligible population that could even consider a membership financially might be and how much smaller that demographic became since last Christmas.  If clubs are losing members that were probably difficult to attract when times were flush, how much more difficult is it now, even on a discounted basis?

The membership environment is similar to the current stock/real estate markets in that it's a buyer's dream and a great value opportunity but still lots of risks to consider before taking the plunge.

[Tom_Doak]

Kelly:

My dad had a doctorate in Ag. Economics, but I don't know much about economics at all and was not trying to pretend I did.

My parents were teenagers in the Depression, so I heard all their stories about growing up and losing the family farm (my mom's side) and people trying to exist on a 5-cent hamburger.  I hope that's not where we are headed, but we are certainly not there yet.

But in regards to golf club memberships -- in the 1970's, golfers in New York could have joined Shinnecock Hills for next to nothing, just like those golfers in Detroit could join Oakland Hills today.  And, sooner or later, it'll be better, though none of us have anything more than a guess about whether it'll be sooner or later.  It just bothers me that there are so many people who seem to think they were entitled to live like kings forevermore.

[Jason Hines]

Andy,
You and I are living in the same world, you nailed my age, wife and two kids plus two 100lb dogs.  I am blessed to be in the food industry, which everyone in the late 90’s never paid any attention too.  Trust me, I am glad today that I missed putting our money elsewhere besides the internet bubble.  Plus, I listened to my father who grew up dirt poor in Nebraska about living below your means. 
I look at this time as the one chance to invest when things are on sale.
Tom,
I only have a Masters in AGECO, but for my business these times are nothing new. 
All,
 So far, I have seen more decisions in my business (food) based on hype than actual numbers.  I do not want to turn this thread into an economic debate.  However, I look at these times to upgrade my existing membership.  I honestly do not feel sorry for most of the clubs here in KC that did not return my call two years ago and are begging for memberships today.  This is not the end of the world.

[Patrick_Mucci_Jr]

Tom Doak & Kelly,

Adjusting the initiation fee to join is easy to do, it's the operations budget that's become the real problem.

Club's tried to get away from having their initiation fee classified as a bond, redeemable at par or a varying amount.

Many clubs no longer issue bonds when the golfer joins.

The initiation fee is of no consequence unless the money was being shifted to the operations budget.

With most clubs putting every capital project on hold, the real area of concern is operations.

Over the past few decades many clubs have tried to be all things to all members, thus, exponentially increasing the operations budgets.

Clubs are going to have to rethink operations and get operating costs under control.

If annual dues are $ 25,000, charging $ 500,000, $ 250,000, $ 100,000,
$ 50,000 or $ 25,000 to get in won't have much of an impact in terms of attracting a substantial cadre of new members.  Potential members will look at total "costs to belong" and not at just the initiation fee.

I know clubs that have gone from $ 200,000+  to $ 50,000 on their initiation fees and to date, there's been no substantive impact.

There's a second ripple to this dilema, the pending assessments due at the end of 2009 which will be the result of operational/membership shortfalls.

[Mike_Young]

Mike Young,

I don't know the particulars, but, committing 3.5 - 6 million to any capital project in these times seems somewhere between irresponsible and reckless.

I'd categorize it as insanity, without the need for the qualifying words, "financial suicide"

I'd rather horde what capital I have, weather the current storm and reassess my needs and ability to raise funds when the storm has passed.

Any Board embarking upon a project of this nature should be questioned and challenged with an alternative slate.

I know a club that recently spent in excess of 1 million to redo the locker room and about 600 K to put paver bricks on top of their concrete cart paths.  The proponents claimed it would attract new members.

Surprise ...... it hasn't, nor will it.

When was the last time that someone joined a club because the cart paths were pretty ?

Sometimes, the problem with a club with a large membership, is that substantive projects are couched in the all too familiar, " it will only cost X per member".   While that's true, it's based upon the large number of members remaining static or increasing.  However, that number can and probably will diminish, leaving a greater financial burden for those who remain, which will also happen on the operations end.

This is how organizations/clubs go into a death spiral

Fight the good fight, this is NOT the time to be cavalier with a voluntary organization's money

Kevin Reilly,

I agree with you.

This only feeds into the media frenzy of undermining consumer confidence, but, don't worry, all that will change on January 21st.

Pat,
Hoard capital???  This club has no capital to hoard...financing this entire project for 20 years and bragging that there will not be a dues increase this year...of course the monthly assessment just began and they will be using it for the next couple of years.....you see they just estimated the cost and told the membership that no specific plans could be drawn until they got approval for the project.....however if one reads the fine print we voted in an assessment of 6 million for them to use as they see fit.  One of the so called leader that is/was on the golf comm told me i should help them promote to get the money and then they would see what they could do.....it's stupid and sad.....

[Tim_Cronin]

I think a thread about the finances or membership rolls of a private club is in bad taste. 

There was a thread earlier in the year questioning the business model of a new club, and that thread was pulled or edited for good reason.

Now here we have a thread (with a sensational title) with specifics about one club's membership information that is certainly considered confidential by the club itself.   If the initiation fee information below is on the club's website or available to the public, then I'll retract this.

This is a thread in very good taste, and informative, to boot. I don't know that the title is sensational as much as it is descriptive.  It would make a good headline in a newspaper, say, the Detroit News or Free Press.  As a golf writer, I can say it's not our job to keep Oakland Hills' secrets.
Oakland Hills, according to Crains' Detroit, has 900 members. That's presumably the max, and probably includes social members. In 2001, the initiaton fee was $100,000 (Crains). In 2008, it was $110,000 (Detroit News). Only 10 percent is said to be equity.

[Kevin_Reilly]

Tim Cronin -- I don't know if you are late to the thread or not, and saw earlier posts with specific information about the initiation fee and the percentage of that fee that constitutes equity.  All information that is by all good reason confidential and proprietary.  The posts above were edited and the information is no longer there - in my mind a good outcome for this thread.

I also don't know if you are a member of a private club.  If you were, you might understand the implications of confidential club financial information being posted on a public internet board to be bantered about by people with no stake in the affairs of a specific club.  Information obtained without license for public discussion.

If you are a golf writer and are looking for subject matter for your next column or blog, call the club mentioned in this thread, or any club of interest to you, and see if you can obtain the information regarding its membership rolls "on the record".  Or you can rely on some source like Crains.  Good luck with your column on that basis. 

As someone who is not a golf writer like you, my opinion might not carry as much weight, but I believe it is not our job to air the "secrets" of a private club.  But, I could be wrong...there might be an appetite among the other 1499 for titillating information or rumors about assessments, waiting lists, initiation fees and dues increases among the country's top 100 golf clubs. 

[HamiltonBHearst]

Perhaps the inner workings and finances of a private club are more important for an investigative journalist than say the inner workings and finances of Bernard Madoff over the years?

[ed_getka]

Mike,
   What do the geniuses think is wrong with the course that make it worth spending $6million on in this economic environment?

Only 3.5 mill goes toward the course......and of course they really don't want to cut many trees but they really like cart path w curb......oh and we need to improve the present range for aorund $500,000 where they can have some more tee space and mainly nice target greens....problem is the range is in the wrong place.....but they also want to copy the original DR green drawings.....that's what Donald wold have wanted

Mike,
   What does the other $2.5 million go towards? I can't imagine anything they can spend that kind of money on that is going to draw members.

[Ronald Montesano]

For my 400th post, consider then answer me this...

many private clubs have all but written off Mondays for outings.  what used to be a day of rest for the course has now been given over to revenue-raising.  Could not Tuesday (for those clubs not in such bad straights) and/or Wednesday (for those clubs in worse straights) be dedicated to restricted public-access?  As in, make tee times 4 or 5 per hour to limit play, put rates at $75 or more per round (that's big change in western New York) and restrict each non-member to twicea year play.  Here's my thinking:

a-you still have 4-5 days of private play per week;
b-you raise a good chunk of change each day (somewhere over $8000 with my $75 and 4 tee times per hour example) for the club;
c-you afford an opportunity to expose players who might not consider joining the club to all the club has to offer.

There might be a d-, e- and f- out there, but my inquiry should be pretty apparent by now.

Mr. 400

[Jeff Goldman]

Ron,

The elephant in that room regarding limited public play is a club's tax exemption.  Most private clubs are tax exempt social clubs, and it's not all that difficult to lose it.  I don't know many that have done the numbers and determined that being a for-profit (private) entity is a better financial deal, basically because of how these entities determine their taxable income.  They have to separate member and non-member income and expenses, and you could easily end up having a lot of taxable income on the non-member side, even though overall you didn't make any money.  Many clubs would also have to ship 35% of initiation fees right off the top to the IRS, and that would include a portion even if the fee was technically a capital contribution.  So, by opening up to some public play, a club could end up in a worse financial position.

Jeff

This is all aside from the US bias in favor of privacy.

[Tommy Williamsen]

For my 400th post, consider then answer me this...

many private clubs have all but written off Mondays for outings.  what used to be a day of rest for the course has now been given over to revenue-raising.  Could not Tuesday (for those clubs not in such bad straights) and/or Wednesday (for those clubs in worse straights) be dedicated to restricted public-access?  As in, make tee times 4 or 5 per hour to limit play, put rates at $75 or more per round (that's big change in western New York) and restrict each non-member to twicea year play.  Here's my thinking:

a-you still have 4-5 days of private play per week;
b-you raise a good chunk of change each day (somewhere over $8000 with my $75 and 4 tee times per hour example) for the club;
c-you afford an opportunity to expose players who might not consider joining the club to all the club has to offer.

There might be a d-, e- and f- out there, but my inquiry should be pretty apparent by now.

Mr. 400

I can't imagine many clubs giving up a Tuesday or Wednesday for outings.  There are too many club events, like Ladies day, and senior events that take place on those day.  And Heaven forbid a male should ventur forth on ladies days.

[Sean_A]

Ron,

The elephant in that room regarding limited public play is a club's tax exemption.  Most private clubs are tax exempt social clubs, and it's not all that difficult to lose it.  I don't know many that have done the numbers and determined that being a for-profit (private) entity is a better financial deal, basically because of how these entities determine their taxable income.  They have to separate member and non-member income and expenses, and you could easily end up having a lot of taxable income on the non-member side, even though overall you didn't make any money.  Many clubs would also have to ship 35% of initiation fees right off the top to the IRS, and that would include a portion even if the fee was technically a capital contribution.  So, by opening up to some public play, a club could end up in a worse financial position.

Jeff

This is all aside from the US bias in favor of privacy.

Jeff

I seem to recall someone running through the numbers of "allowable" outside income for private clubs on here and it was astonishing how much was allowable.  I don't recall the exact numbers but it was something very grossly like

$5,000,000 total club revenues

10% allowable from outside sources is $500,000 (though I think many states allow much more than 10%)

Say the outside income is equally divided between food and beverage, green fees and pro shop purchases. 

That leaves $166,666 for green fees which is £3200 a week. 

Say a club allows 1 hours worth of visitor's slots a week (say 24 players) at $125 a pop - thats $3000.  Of course, many clubs can command a lot more than $125 a pop so they may only offer two tee times a week or whatever

Of course many clubs have outings, but one gets the idea. 

Ciao



 

[Ronald Montesano]

I can't imagine many clubs giving up a Tuesday or Wednesday for outings.  There are too many club events, like Ladies day, and senior events that take place on those day.  And Heaven forbid a male should ventur forth on ladies days.

Tommy, you old peacenick.

If you reread the query, the suggestion was not for and additional day of outings, but for outside play.  I get, however, what you are saying.

Ron M.

[Rick Sides]

I think a major problem private clubs are facing is what to do to earn for revenue.  Mondays are usually closed for maintanance and outings.   It would be tough to have outings on other days because then you interfere with leagues and general tee times.  As a member of a private club, I wouldn't want a lot of outside people coming in to take up tee times because it slows play and limits my tee times and  would an outside person, unaccompanied, really care for the course?  I have no problems with members bringing guests.

[Steve Lang]

  Also, don't forget.. the non-members playing only several times a year  take more divots and are less inclined to fix divots or mend their pitch marks on greens, I've lived through that on a course occaisionally shared with a resort.. a very real impact factor.

[Rick Sides]

Steve, your exactly right.  The reason I joined a private club was to get away from the jean wearing, non-ball mark fixing, rowdy groups at public courses.  If the private clubs allow a lot of outsid play, members will join another club.

[corey miller]

Sean

Your numbers may work for most parts of the country but in the NYC Metro area or at any of the "must play" clubs in the country a spot in an outing goes for more than >$500.  If they are filling these up they surely have no reason to allow any outside play at a reasonable rate.

Even if this were not true, it would seem a one day "event" such as a wedding would raise more income and be less burdonsome on the membership.

[Sean_A]

Sean

Your numbers may work for most parts of the country but in the NYC Metro area or at any of the "must play" clubs in the country a spot in an outing goes for more than >$500.  If they are filling these up they surely have no reason to allow any outside play at a reasonable rate.

Even if this were not true, it would seem a one day "event" such as a wedding would raise more income and be less burdonsome on the membership.

Corey

Must play clubs can surely adjust their green fees accordingly to keep the number of tee times allowable to an acceptable number.  It could be true that a few outings/weddings a year are less hassle for the club, but I wonder why given that members often can't use the facilities during these times or feel like they don't belong.  In any case, with the price of some public courses, don't you think many would be more than willing to pay a competitive rate to play some of the local clubs just as a casual 4 ball?  What hassle is this to organize?  Honestly, its not that much effort and in hard times, the cash to run a place has to come from somehwere.

Ciao

[corey miller]

I can only speak of my area and how the numbers seem to work at similar  clubs but anyone that is a non-club member and wants to play the great clubs can most likely get on through the charity circuit. 

I certainly don't think ~$125 is a "competitive" rate for unescorted play in this area.  In many cases, that is less then the escorted rate.  The fact is that for unescorted play the rate is much higher ~$300.  When you get in that range it does become a realistic trade-off to seek out the many charity outings. And you are benefiting worthy causes.

Please realize, many members only play five or six rounds a year so it is a slippery slope once you start allowing non-members use of the facility.

The other point about the wedding or event use at a club is that oftentimes they do not effect the golf course, pro shop, grill room or other related facilities.  When a wedding can generate $50,000 to $100,000 of revenue your proposal is peanuts in the grand scheme of things.

What liability concerns does a club take on by having unescorted play? We live in a very litigious society, isn't an unescorted guest more likely to sue the rich robber barons?

To a certain extent I have bitten my tongue during the political fights that seem to crop up on here from time to time and the belief by some on this site that everything in our society should be shared by all, and the vitriol directed at some that have done well by totally legitimate means. 

As far as I can tell, those on this site fortunate enough to have means to afford private club golf have been very open in extending invites to others and sharing great experiences so I do think some should perhaps temper their language a little when throwing around this class warfare crap.

The fact is that many clubs don't need the money from unescorted play. 

[Peter Wagner]

It's my opinion that today's economy requires a very different golf club model.

Zero Equity
The 80% equity membership plan won't work as it only creates long sell lists during bad times forcing members to pay for years past their liking.  I like zero equity and a 60 days notice to leave.  Instead of say $50k with an 80% equity why not make the initiation $17,500 with zero equity.  A lot less upfront plus if you lose your job you can just walk away from the club.

Clubs are afraid of the concept of releasing members with little resistance but they shouldn't be.  The trick is pricing the zero equity fee low enough so that you have a list to get in.  If Los Angeles CC offered a $35k zero equity membership how long would the 'let me in' list be?

There are some social implications with this plan.  A lower initiation fee will broaden the range of members income and some would see that as a benefit and others would not.  Depending on the economy you might see higher membership turnover as a result and again some would like that but most probably wouldn't. 

Existing members that paid much more under the old plan are largely unaffected.  The "But I paid $50k and he paid 17.5k" rant is diffused by pointing out the net cost to the old member is $10k (the 20% non-equity part) versus the 17.5k now being paid by the newbie.  It's also worth pointing out that the health of the club is what's at stake and it's very possible that the new deal is better than the old deal - so what?

Hunker down now
Member expectations about the levels of service are out of sync with the coming economy.  Club leadership has to clearly communicate this new, and hopefully temporary, shift in direction.  Club's need to assess every service offered and cut heavily.  Challenge everything.  Last July we were in a planning meeting for our club's New Years Ball.  We pushed the budget around 50 different ways and still it showed a loss of $25-30k for that party.  We deleted the whole thing and instead we are offering a casual free food come as you are party that will be about a breakeven after alcohol.

If the leadership communicates clearly with the members then most will understand that these are necessary changes that will be righted once the economy turns northward.

Club character
Each club has a different character that evolves over time.  In some clubs there a sense that you are part of something bigger and in others it's a less significant feeling.  Those club's that are fortunate to have developed a strong club character are in the best position to survive as there will be a "we're all in this together" spirit amongst the membership.  'All hands on deck' versus 'rats jumping the sinking ship'.

We are facing interesting and challenging times ahead that will require broadminded solutions.

[C. Squier]

I certainly don't think ~$125 is a "competitive" rate for unescorted play in this area.  In many cases, that is less the the escorted rate.  The fact is that for unescorted play the rate is much higher ~$300.  When you get in that range it does become a realistic trade-off to seek out the many charity outings. And you are benefiting worthy causes.

Please realize, many members only play five or six rounds a year so it is a slippery slope once you start allowing non-members use of the facility.

Corey, I totally agree.  Telling the membership that has already laid down initiations fees in the 10's of thousands, or even 100k+ that their neighbors can play a few times a year without escort for next to nothing will cause a riot.  Unescorted play (in my experience) has been a one time shot, which I don't think memberships have a huge problem with.....get a little taste of the club and if you really like it, join.