[kconway]

as membership goes from 250 to 175, why should I, as one of those wealthy members, pay an increasing amount of the operating assessment.

my rough math says that each lost member will cost $100/year to the remaining members...at some point this will not work.

clubs on the north shore will not go back to the banks, but rather will consoilidate or be sold for resale value

250 acres on the north shore is will $50m to $125m

[Peter Wagner]

There's also two long-term macro issues that exist, whether or not the economy is slow but serve to further inflict further pressure:

1.  baby boom guys getting old and retiring, "replaced" by Gen X.

2.  Gen X having different priorities:   I've mentioned this before, but with both spouses working and their kids' free time filled up by structured activities, people just don't have the time.  When your wife works (especially if she pulls in nice coin, as so many working women do these days), it's a lot tougher these days to say "Honey, it's Saturday and you know what that means....I'm going to be gone all morning and early afternoon playing golf both days....see you at 2 or 3 pm....please make sure to get all the chores done and have dinner ready by the time I come home exhausted and half in the bag...."

And even if you pulled your wife out of some sort of 1950s time-warp machine and could actually get away with that, heaven also forbid you miss little Johnny's pee-wee baseball game or little Susie's kiddie soccer swarm.  You're now a "bad dad".  Miss more than you attend, and the other parents will report you to the Department of Children & Family Services . 

Shivas,

Sorry bro but that's a dead shank.  Your points about 30-somethings having different life priorities are correct but you are forgetting about the typical age patterns of private club members.  My home club has an average age of 49 which is considered very young.  I would guess the national average of private club members is somewhere around 55-58 or so.  A club's prime time sales opportunity is to a 50-something - not a 30-something.

I am 51 years old and that age is the center of the post WWII baby boom.  We have seen the front half of the boom enter the prime time of private club membership but we still have 10-12 years to go as the back half of the boomers continue to enter their 50's.  Also consider that at 51 I'm seeing at least 20 years of membership somewhere with more and more free time as I go along.

Lastly, also consider that people are living longer and in better health.

U.S. demographics favor the private club business and will continue to do so for at least 10 years.

[PCCraig]

as membership goes from 250 to 175, why should I, as one of those wealthy members, pay an increasing amount of the operating assessment.

my rough math says that each lost member will cost $100/year to the remaining members...at some point this will not work.

clubs on the north shore will not go back to the banks, but rather will consoilidate or be sold for resale value

250 acres on the north shore is will $50m to $125m

250 acres isn't worth what it was two years ago, but you are right it is still worth something.

However I don't understand the idea that when members leave there are still high amounts of overhead. If their are less members the club would have less expenses, less bag room guys, locker room guy, caddies, etc...

Over the weekend I heard that Aurora CC let all of their pro staff go a couple weeks ago and hired a guy to work in the proshop for $40,000 a year from 8-5pm every day. No more inventory at all (aka go to Golfsmith for balls and the such). No more lessons. The shop is just there for tee times and the such with a caddymaster/bag drop guy acting as a starter.

[Phil McDade]

There's also two long-term macro issues that exist, whether or not the economy is slow but serve to further inflict further pressure:

1.  baby boom guys getting old and retiring, "replaced" by Gen X.

2.  Gen X having different priorities:   I've mentioned this before, but with both spouses working and their kids' free time filled up by structured activities, people just don't have the time.  When your wife works (especially if she pulls in nice coin, as so many working women do these days), it's a lot tougher these days to say "Honey, it's Saturday and you know what that means....I'm going to be gone all morning and early afternoon playing golf both days....see you at 2 or 3 pm....please make sure to get all the chores done and have dinner ready by the time I come home exhausted and half in the bag...."

And even if you pulled your wife out of some sort of 1950s time-warp machine and could actually get away with that, heaven also forbid you miss little Johnny's pee-wee baseball game or little Susie's kiddie soccer swarm.  You're now a "bad dad".  Miss more than you attend, and the other parents will report you to the Department of Children & Family Services . 

Shivas,

Sorry bro but that's a dead shank.  Your points about 30-somethings having different life priorities are correct but you are forgetting about the typical age patterns of private club members.  My home club has an average age of 49 which is considered very young.  I would guess the national average of private club members is somewhere around 55-58 or so.  A club's prime time sales opportunity is to a 50-something - not a 30-something.

I am 51 years old and that age is the center of the post WWII baby boom.  We have seen the front half of the boom enter the prime time of private club membership but we still have 10-12 years to go as the back half of the boomers continue to enter their 50's.  Also consider that at 51 I'm seeing at least 20 years of membership somewhere with more and more free time as I go along.

Lastly, also consider that people are living longer and in better health.

U.S. demographics favor the private club business and will continue to do so for at least 10 years.

Peter:

Born in 1961, I'm in the late stages of the Baby Boom, and (maybe it's the crowd I run with...) I don't know many of my contemoraries, or folks 10 years younger than me, thinking of joining a club. And there are some decent options with little or no wait lists in the Madison WI area. Folks aren't joining for the reasons Shivas outlined.

In addition, the youngest set -- those 14-30 -- aren't taking up the game in great numbers, from what I can tell (although I'm open to arguments based on some numbers that I haven't dug up). The 45-50 yr old, financially secure enough to afford a club membership 25 years from now, has to have at least some exposure/experience in the game that goes beyond the occasional nine holes at the local muni. And right now, I don't see that happening in the numbers to sustain the number of courses we have right now.

[Bill_McBride]

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!

Chris, I don't sense "glee" from our participants, more that sick feeling you get when you witness a car accident.  A lot of untenable situations are going to be unwound in the present financial crisis.  We may be stronger when all the excess is wrung out but it will be painful in the meantime.

But "gleeful" about seeing this unwinding?  I don't think so.

[Bradley Anderson]

The scariest thing about this thread is we have someone who is privileged to be the member of a north shore private club asking us to talk him in to supporting his club through hard times.  

[Chris Cupit]

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?

I'm not sure I would use the word deserve but of course no business has a "right" to continue on if it can't make money.  My issue at times is that sometimes it seems that this site has a "celebratory" attitude towards these failures and forgets how devastating to a lot of other people and businesses any failure is.  The golf industry is huge and its economic impact is considerabley greater than most realize.  Quick, which industry has the biggest economic impact in the U.S.--the motion picture industry, the music recording industry, the newspaper industry or the golf industry?  Golf.  Which game gives more to charity--the NBA, MLB or the NFL--golf beats all three combined in charitable giving.

Anyway I an unabashed "homer" for the game and the industry and I just wish there was less "satisfaction" shown when a course fails.

[SL_Solow]

Shiv;  The phenomenon you identify is not new.  As you know, I am a little older than you and the same conflicts existed for those of us who raised our children in the 80's and 90's.  The different emphasis began with the women's liberation movement when more women entered the work force and men were expected to play a greater role in child reariing.  Couple that with the new model for the "sensitive male" and the days of "Dad" spending his weekend playing golf and cards all day at the club disappeared for most people.  I am one who thinks that was a good development for the most part.  The real impact has been to change the role of the club.  If Dad was going to be at the club all day as in the model prevalent in the 50's and 60's, then Mom and the kids would come to hang out at  the pool, eat at the snack bar, play tennis etc.  If Dad (or Mom) comes running home after he (or she) plays, there is less need for all of these facilities even though the older members may continue to use some or all of them.  Where the facilities are already in place, fixed maintenance costs continue.  If the club is slow to adjust to changing patterns of use, then additional unnecessary overhead will continue.  It is a difficult balancing act between the competing interests of those who want a full service club and those who are there to play golf and to grab a bite on an irregular basis.  But this is not new.  However the current economic situation exascerbates the problem.  It will be interesting to see if those who wish to stay at their clubs and who are seeking to reduce the costs of social and dining activities begin to use their clubs more than before on the theory that the dues are already a sunk cost so they should take greater advantage of the opportunities they purchased, particularly if pools, tennis courts, card tables and practice ranges are essentially "free" once dues have been paid

[JMEvensky]

It will be interesting to see if those who wish to stay at their clubs and who are seeking to reduce the costs of social and dining activities begin to use their clubs more than before on the theory that the dues are already a sunk cost so they should take greater advantage of the opportunities they purchased, particularly if pools, tennis courts, card tables and practice ranges are essentially "free" once dues have been paid

I think this may be the only "good" unintended consequence of this economic climate.If the initiation/dues already paid can show value relative to restaurants,etc.,maybe clubs can be justified as a worthwhile family expense.

It might work out for some clubs that the 50's/60's style works again.

[Michael Wharton-Palmer]

My guess is that most clubs will lose some mebers leaving behind the true core paying more money on a monthly basis.
My own club speculate this will happen with a drop in membership around 100 people and the remaining core prepared to pick up the slack with a significant dues hike.

You make your choice...close down or commit to the club, somewhat of a loaylty issue rather than just bailing.

[Kalen Braley]

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?

I'm not sure I would use the word deserve but of course no business has a "right" to continue on if it can't make money.  My issue at times is that sometimes it seems that this site has a "celebratory" attitude towards these failures and forgets how devastating to a lot of other people and businesses any failure is.  The golf industry is huge and its economic impact is considerabley greater than most realize.  Quick, which industry has the biggest economic impact in the U.S.--the motion picture industry, the music recording industry, the newspaper industry or the golf industry?  Golf.  Which game gives more to charity--the NBA, MLB or the NFL--golf beats all three combined in charitable giving.

Anyway I an unabashed "homer" for the game and the industry and I just wish there was less "satisfaction" shown when a course fails.

Chris,

I haven't picked up any "celebratory" themes in any of these posts either...its seems to be more of the morbid fascination that Bill McBride describes in his post.

In the end though, this really is just Darwins Theory at play here though.  Everyone is not cut out for the business even though I suspect they have every best intention and thier heart is in the right place.  While its painful, in the long run its good for the economy as the under-performers are sluffed off and hopefully the money and resources are put to better use.

The economy can't expand forever and contraction is a healthy part of every balanced structure....as brutally rough as it is in the short term.

[Greg Chambers]

Kalen,

I'd like to know how you figure courses closing is good for the economy.  I'm not sure that this country really needs longer unemployment lines at this point.

[Bill_McBride]

Kalen,

I'd like to know how you figure courses closing is good for the economy.  I'm not sure that this country really needs longer unemployment lines at this point.

Greg, google "Creative Destruction."  It's sort of like the theory that "whatever doesn't kill you makes you stronger."

[Kalen Braley]

Kalen,

I'd like to know how you figure courses closing is good for the economy.  I'm not sure that this country really needs longer unemployment lines at this point.

Greg,

Its the same reason as any other company that closes.....less competition for those scarce resourses, (customers in this case), for the strongest in the pack who are still left standing.

Its no different fundamentally from what got us into this real estate mess...the notion that everyone should be a home owner and the giant waste of resources in the forms of loans given to them to get them there.

[Sam Maryland]

My guess is that most clubs will lose some mebers leaving behind the true core paying more money on a monthly basis.
My own club speculate this will happen with a drop in membership around 100 people and the remaining core prepared to pick up the slack with a significant dues hike.

You make your choice...close down or commit to the club, somewhat of a loaylty issue rather than just bailing.

how would you feel about waiving the initiation fee and admitting new members that would start paying dues immediately and close the monthly financing gap?  (which theoretically would allow you to keep your monthly commitment level)

[Steve_ Shaffer]

Many member owned clubs are waiving the non-refundable initiation fee or dropping them to a ridulous low amount with extended payment terms. Locally, here in Philly, one private member owned private club had a booth at the big golf show with packages having the initiation fee at $2009.00. It's the old Gillette theory- Give away the razors and sell the blades.




 

[Sam Maryland]

My co-worker's father got into Garden City back in the 70's under these circumstances -- "$0.00 initiation, here's your first dues bill".

Will be interesting to see if any of the prominent NY metropolitan area clubs approach this level of stress (meaning old time clubs like Sleepy, Garden City, Ridgewood, etc...).

[SL_Solow]

Its an interesting dilemma for the clubs who are considering lowering initiation fees.  Obtaining the dues income is extremely important but the clubs must be careful to admit only those individuals who are likely to be the types of long term members they desire.  That is why clubs used to give special deals to younger members but were selective in their admissions policies.  If clubs jettison selection committees or reduce their influence they may be solvent in the short run but they may end up with a membership that has nothing in common. That result may eventually destroy the club.  Alternatively, if the members who came in "on the cheap" have virtually nothing invested in the club, when the time comes to pay for necessary improvements (even in better times) those without the committment evidenced by a financial stake may vote against the improvements, thus weakening the club, and , failing to defeat the assessments, they may have a higher propensity to leave.  In my experience, a well run club doesn't need the initiation fees to fund the club (although they help) but uses them as a measure of committment.

[Sam Maryland]

Its an interesting dilemma for the clubs who are considering lowering initiation fees.  Obtaining the dues income is extremely important but the clubs must be careful to admit only those individuals who are likely to be the types of long term members they desire.  That is why clubs used to give special deals to younger members but were selective in their admissions policies.  If clubs jettison selection committees or reduce their influence they may be solvent in the short run but they may end up with a membership that has nothing in common. That result may eventually destroy the club.  Alternatively, if the members who came in "on the cheap" have virtually nothing invested in the club, when the time comes to pay for necessary improvements (even in better times) those without the committment evidenced by a financial stake may vote against the improvements, thus weakening the club, and , failing to defeat the assessments, they may have a higher propensity to leave.  In my experience, a well run club doesn't need the initiation fees to fund the club (although they help) but uses them as a measure of committment.

That is interesting.  As I think back on the conversation my co-worker did mention that the club approached "known" people in the area with the invitation.  In this case it worked out well because both the son eventually joined when he came of age.

[Steve_ Shaffer]

Shel,

Your comments are an accurate representation of the dilemma that member owned private clubs face in these trying times. That's why I posted above:

"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?"

As I write this, there are dicussions being held here in Philly now with at least 3 or 4 member owned private clubs about being acquired by such a company.

[Bruce Katona]

Sam: You view the some of the "older" clubs in the Northeast will begin to soften their stances on intitiation fees may hold true, as the dues line is much more inmportant to a clubs bottom line than the intitation fee....we just may not hear about it unless someone braggs.

[Bruce Katona]

Steve: I just read what you wrote on maanagement company acquisitions of existing facilities in the Philly market.....makes sense as its easier to buy an existing facility in the correct demographic than it is to build new.....for the life of me I don't know how these deals will close, as most of the lenders in golf are taking a hiatus.

[JMEvensky]

My fear is that so many clubs will go to $0 initiation that the "market price" will be permanently set.Going forward,absent the commitment of an initiation fee,club memberships will become almost transient-join and pay dues when you can,resign when you can't,move to a different club when the mood strikes.

[SL_Solow]

JM;  That is precisely the issue.  The initiation fee evidences commitment and helps tie a person to his club.  Members who come in on "special deals" often exit as soon as the time comes to invest in the club.  I am not talking about massive clubhouse projects.  Even investment in equipment for course maintenance can become a problem.

[Lou_Duran]

"U.S. demographics favor the private club business and will continue to do so for at least 10 years."  P. Wagner

I believed this for a long time but now think that the opposite may be the case.  Various operators and observers have noted that "old folks" tend to become more attached to their money as they progress in their golden years (a primary reason why advertisers neglect this demographic in favor of young people).  Adding to this tendency is the recent $3+ trillion evaporation of wealth and the negative after-tax real return of safe investments (CDs, MMs, govt. bonds) which may have the "if it feels good, do it"/"make love not war" baby boomers looking for gratification (or salvation) elsewhere besides a tony private club.

I want to believe that despite all the grass, acid, and alcohol we've consumed, my generation still has a conscience which requires that we leave something to our kids besides the huge aftermath of the debt-financed consumptive mess we've created.  If I am right, the old bumper sticker "Out spending my children's inheritance" will give way to an era of austerity and, just maybe, a little bit of personal responsibility.

In any event, the CPCs, ANGCs, PVGCs, Shinnys, Merions, and most #1 clubs near major populations are most likely immune from all this.  The rest will need to find new operating models, some which may resemble those of the UK.  The long term demographic trends are not good for golf here and in Europe.  The population groups which are the largest participants in the game are in significant decline, though much more over the pond than here.  And these trends are extremely difficult to reverse.     

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