Waiving Initiation Fees and Bonds

[Rick Sides]

I was wondering if a lot of your clubs are waiving initiation fees and or bonds in these tough economic times?  I was recently talking to a GM from an older club and he mentioned although they are having trouble getting younger members, they refuse to waive the bond.  I expressed to him that a lot people in their 20's- 30's do not have a couple thousand dollars to put down on a bond/initiation.  Do you think with the number of private clubs closing, the model for private clubs in the near future will be to waive large sums of money up-front to get new members?

[cary lichtenstein]

Clubs nearly always have junior programs with a much lower bar for entry, but unless a member has some skin in the game, he has no reason

[C. Squier]

I guess at the end of the day, a club needs to decide to either lower/drop initiation fees or attract fewer members.  If you do the first, you have a smaller capital account, do the second and you have less operating revenue.  Both aren't good, but I'd think that operating revenue is much more important in today's economy. 

I don't understand why members get bent out of shape when initiation fees are lowered.  Sure, you may have paid more.....but that happens in almost everything in life.  Things go on sale to move the supply/demand curve.  I'd rather have a surviving club than to fail onto a false sense of principle. 

But as Cary has suggested, the membership base probably does suffer the closer that number falls towards zero. 

[JC Jones]

I guess at the end of the day, a club needs to decide to either lower/drop initiation fees or attract fewer members.  If you do the first, you have a smaller capital account, do the second and you have less operating revenue.  Both aren't good, but I'd think that operating revenue is much more important in today's economy. 

I don't understand why members get bent out of shape when initiation fees are lowered.  Sure, you may have paid more.....but that happens in almost everything in life.  Things go on sale to move the supply/demand curve.  I'd rather have a surviving club than to fail onto a false sense of principle. 

But as Cary has suggested, the membership base probably does suffer the closer that number falls towards zero. 

Clint,

I agree.  I've talked to members who are happy the initiation dropped after they joined because they care about the long term viability of the club and others who are not happy and want money back to make up the difference.

I think your approach is probably the most sound.  In every business I've been a part of or advised, it was always very important in the lean times to keep operating revenue as high as possible.  I'm sure there are examples of the opposite though.

[C. Squier]

I guess at the end of the day, a club needs to decide to either lower/drop initiation fees or attract fewer members.  If you do the first, you have a smaller capital account, do the second and you have less operating revenue.  Both aren't good, but I'd think that operating revenue is much more important in today's economy. 

I don't understand why members get bent out of shape when initiation fees are lowered.  Sure, you may have paid more.....but that happens in almost everything in life.  Things go on sale to move the supply/demand curve.  I'd rather have a surviving club than to fail onto a false sense of principle. 

But as Cary has suggested, the membership base probably does suffer the closer that number falls towards zero. 

Clint,

I agree.  I've talked to members who are happy the initiation dropped after they joined because they care about the long term viability of the club and others who are not happy and want money back to make up the difference.

I think your approach is probably the most sound.  In every business I've been a part of or advised, it was always very important in the lean times to keep operating revenue as high as possible.  I'm sure there are examples of the opposite though.

I wouldn't mind seeing initiations drop.....heck, everything else has dropped in this economy.  I'd rather see a full roster over worrying about who paid how much.  Of course, with lower initiations the higher the chance for assessments with the capital account not getting it's fill. 

[Adrian_Stiff]

Waiving means zero though? The equation is a tough one to solve. In the UK the clubs with no joining fee are the likely first to go, as their members have no reason to stay if the joining fee is zero, ie they can come back later. Its too easy to flit about from one to another at the moment. I think a route could be to introduce an artisan type membership, no initiation fee but the member has restricted rights. That could keep everyone happy. Dropping the join fee is a bad thing long term, but I can see if it gets really tough its a no brainer.

[JC Jones]

I guess at the end of the day, a club needs to decide to either lower/drop initiation fees or attract fewer members.  If you do the first, you have a smaller capital account, do the second and you have less operating revenue.  Both aren't good, but I'd think that operating revenue is much more important in today's economy. 

I don't understand why members get bent out of shape when initiation fees are lowered.  Sure, you may have paid more.....but that happens in almost everything in life.  Things go on sale to move the supply/demand curve.  I'd rather have a surviving club than to fail onto a false sense of principle. 

But as Cary has suggested, the membership base probably does suffer the closer that number falls towards zero. 

Clint,

I agree.  I've talked to members who are happy the initiation dropped after they joined because they care about the long term viability of the club and others who are not happy and want money back to make up the difference.

I think your approach is probably the most sound.  In every business I've been a part of or advised, it was always very important in the lean times to keep operating revenue as high as possible.  I'm sure there are examples of the opposite though.

I wouldn't mind seeing initiations drop.....heck, everything else has dropped in this economy.  I'd rather see a full roster over worrying about who paid how much.  Of course, with lower initiations the higher the chance for assessments with the capital account not getting it's fill. 

While I agree with you, generally.  I would say that this isn't the best time for a club to be making any changes that would require an assessment or a draw from the capital account.  Barring some major problems (i.e. losing greens, etc.), this is not the time to renovate the men's grille.

[Sean Leary]

For some people they look at their initiation as some
 sort of investment. So when it goes down or away, they feel like they have "lost" money.

[Rick Sides]

I do think waiving or dramatically lowering initiation fees help the potential growth of clubs.  I know sometimes members, who initially had to lump a large sum of money, might be a bit resentful, but in the long run, more members hopefully keep fees down.  My friends and I are in our mid 30's and speaking with them, the thousands of dollars some clubs want up front is just not doable in these economic times.  However, if this population of golfers( the 30-40 age range), can pay dues monthly without having to throw thousands of dollars on the table to join, memberships will grow.

[Yancey_Beamer]

In California a number of clubs have greatly decreased their initiation fees recently.They welcome the monthly dues.

[Rick Sides]

Maybe clubs should  allow a one time waiver, but if you drop the club, you must pay an initiation if you wish to re join.  This might stop people from playing "musical clubs."  I just feel in these difficult times, clubs have to re think ways to attract new members. I believe that the days of charging people  buku bucks to join a club are gone.  Even some the more stable, affluent clubs are losing members.

[Steve_ Shaffer]

Rick,

It depends on your geographic area and each individual club's situation. Are these clubs hurting because of resignations? Do they have "junior" memberships for those under 40 or 35? Do they have a "try us you'll like us" one or two year annual dues membership? Are there any clubs in your area that have an annual dues,non-voting membership?

[Lou_Duran]

I am told by a member of an old, pedigreed CC in the south part of Texas that they've greatly dropped the initiation fee to $2,500, which is then suspended for one year.  If the new member wishes to remain at the club after that time, he has to pony up the $2,500.  Reportedly, the program has been moderately successful.

[Tim Martin]

I do think waiving or dramatically lowering initiation fees help the potential growth of clubs.  I know sometimes members, who initially had to lump a large sum of money, might be a bit resentful, but in the long run, more members hopefully keep fees down.  My friends and I are in our mid 30's and speaking with them, the thousands of dollars some clubs want up front is just not doable in these economic times.  However, if this population of golfers( the 30-40 age range), can pay dues monthly without having to throw thousands of dollars on the table to join, memberships will grow.

Rick-Well said. If you have a bustling economy and a waiting list you can set a membership policy with higher initiation fees. If you are 40 or 50 members light and want to get back to capacity you better be creative because the club around the corner may be trying to attract those same potential members. Is it necessary that someone needs to go on the hook for $10,000, $25,000 or $50,000 in the form of a non-refundable initiation fee to be identified as a worthy member? The market place should dictate and existing members who may have paid far more up front have to realize that as membership rolls increase the more cash flow there is for operating expenses.

[Rick Sides]

Steve,
There are some clubs here in NJ that have no initiation or offer young professional memberships (under 35).  However, I have noticed some clubs that are struggling to stay afloat, yet refuse to waive any initiation and or bond and I think that might hinder their growth. I hate to see good private courses closing, but I guess people need to cut extra expenses out and golf is a luxury.

[J_ Crisham]

Here in Chicago my understanding is that Bob O Link was very proactive earlier this year in an effort to fill 25 open spots and improve their operating budget with more monthly dues. They reduced the initiation fee from roughly 80K to 40K and filled up the 25 spots very quickly. Bob O is a very nice all male club and a great place to spend a day.
                                                                                Jack 

[Brian Marion]

I just read a fairly comprehensive history of my club toady. in it was described, to some detail at times, the good and bad times the club has gone through since the 1930's.

One such description was from the 50's whereby two members took out personal notes to secure enough money to meet payroll and operating expenses for the week.

Also, there are mentions of new membership drives at various times of economic stress....and mentions of full memberships rosters.

Here in my neck of the woods, the premium "name" courses are ok, it's really the middle tier that are hurting the most. Asking 10K and up for initiation fees is a tough task for them.

[Randy St John]

The key for long term health is balance.  A strong junior program that does not waive fees, but allows a longer amortization schedule for entrance fees with full dues along the way works for us.  Many clubs go for the "as many new members as quickly as possible" plan and then wonder why the cultural changes that ensue create more havoc than tightening their "capital" belts for a few years would have in the short and long run.

[Ted Cahill]

Yancy- I am a east bay (northern california) resident and am intersted in joining a club on a dues only basis.  Please email me if you know of clubs in this area that have this arrangement. 

[Rob_Waldron]

In the DC area we have seen trends among the private clubs positioned below the premium clubs (Congressional, Columbia, Chevy Chase, etc) lowering or deferring initiation fees in an effort to generate dues to cover operating costs. Often these memberships are "recallable" meaning that the program is intact for a limited period until initiation fees can be demanded again. THe clubs are hoping that these dues only members wil pay the initiation down the road and upgrade to full members.

[Yancey_Beamer]

Ted,
I live in Southern Ca.No knowlege of Northern Ca.

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