What I love about this site is that everyone uses one tiny experience to extrapolate to an entire industry. Some are even using a club that has not failed as an example of why clubs are failing.
Since my uninformed opinion is just as good as anyone's, here’s how I see it:
1. In the 80’s and early 90’s, most clubs had a very comfortable existence. Most clubs were full and it was basically impossible to not be successful. Barriers to entry were high because there was basically no financing available so few new courses got built.
2. In the late 1990's there was a golf boom. You can call it the Tiger Boom, but it really started before that, around the time the Golf Channel launched. Boomers hit peak earning years and wanted to golf and move to golf communities. Lots of new golfers came in, golf was hot and growing, and for the first time developers could build golf courses and they would be worth more than they cost. Yes, Mike Young is correct that Wall Street money drove some of this, but it was the developers who built the courses because financing was now available, golf communities were selling like crazy and because golf was profitable. Lots of golf courses got built thinking that boom would continue.
3. In the early ‘00’s all those new golfers started dropping out and we were left with too many courses competing for too few people. Golf courses and clubs are now generally worth less than the cost to construct them. That’s why few golf courses are now being built.
4. Competition led to lower revenues for all but those at the top of the pyramid. This accelerated rapidly in the great Recession, reducing membership levels in many cases significantly.
5. Clubs that were not in a good financial position starting in the early ‘00s responded by either: 1) assessing members, 2) delaying capital investment, 3) cutting expenses, or 4) taking on debt. The first two are short term fixes but long term trouble, number 3 needs to be done right, and number 4 can be fine but it needs to be the right amount and needs to be structured properly.
6. Instead of being a very easy business, the golf business became very difficult. The structure of being run by inexperienced volunteers who change every two years is not a good one in a difficult business. The clubs that have been failing are those in competitive markets who did not make the correct decisions above, or perhaps there was no correct decision to be made due to location or other factors. Most of the public courses that I look at have cut expenses too much or in the wrong place. Most private clubs that I look at that are failing because they didn’t cut expenses enough (or in many cases, they increased expenses) or because they delayed capital improvements for WAAAY to long. There are some clubs that have taken on too much debt, but I would say it’s the smallest group.
7. I disagree strongly that clubhouses are the problem. Outside of this site, most people do not join only for the golf course. There’s plenty of public golf for people that only want golf. Want the British model? It's called a public course with a membership. People join country clubs because the wife wants tennis, the kids want the pool, and more people than you think want the dining and social aspects. Most of all, people want something of very high quality that fits their needs. You don’t have to listen to me, just look at what ClubCorp is doing. They aren’t for everyone here (this is more of a Dormie crowd), but they have a lot of experience and are pretty smart dudes who have been testing out a variety of reinvestment programs at clubs across the country. And look where they have settled on investing money – Clubhouses, fitness, pools, dining areas. They are not blowing up courses and remodeling. They are not idiots and they are buying up and turning around the member owned clubs that do not reinvest in those amenities that everyone here hates.
8. Millennials are not the problem (or it’s too early to say). The oldest are in their late 30’s, still years short of club-joining age. I own an inexpensive public course and we are filled with millennials – on the weekends there are more millennials than boomers.
9. This entire conversation is a little strange, because most clubs are doing fine, or they should be. Sure, there are exceptions and some recent failures, but generally those were the clubs that should have failed years ago and just managed to limp along to today, which is good because they probably cut a better deal than they could have 7 or 8 years ago. Plus, there are some markets that are still horribly oversupplied. Those markets will continue to shake out.