future of private golf and country club memberships

Running Header: Private Golf Membership 1

The Future of Private Golf and Country Club Membership

Sharon Litchfield

University of South Florida Sarasota/Manatee

Private Golf Membership 2

Abstract

For over a hundred years golf and country clubs have represented exclusivity for upper

class people in the United States and elsewhere. (Gordon, 1990). To be a member of a “private”

golf and country club you must be “invited”. (Gordon, 1990). Then, to ensure exclusivity and

financial health of the club, an initiation fee became a requirement, along with monthly dues and

other fees; not to mention capital assessments. It’s a sizable investment to belong to a “luxury”

market and live the traditional golf and country club lifestyle. For those in certain economic

classes it means “you’ve arrived”, you belong to a country club. You are in effect an owner in

the club, a “shareholder”. (Gordon, 1990).

Many professionals in the hospitality industry, as well as board members of these clubs,

are wondering what the future of the private, member owned golf and country club will look like.

As the demographics and trends also change the look of golf and country clubs it bears

discussion as to the future of initiation fees and their necessity in today’s marketplace.

Based on 24 years’ experience within the private golf club industry and research with

colleagues, we will answer some of these questions and show that the “club” industry is

changing with varying viewpoints, but the tradition is difficult to ignore.


Introduction

A Brief History of Golf and Country Clubs

The private golf and country club is considered a part of hospitality inasmuch it is part of

the American culture. Beditz (2008) did an overview of the history of golf in his article, for the

National Golf Foundation (NFG). In it he writes, the first golf course was established in 1888 in

Yonkers, NY by a group of men who had a passion for the game. Within six years the USGA,

United States Golf Association, was formed by the “Apple Tree Gang” with five of the most

prestigious clubs still recognized today: St. Andrew’s Golf Club, Shinnecock Hills Golf Club,

The Country Club (Brookline), Newport Golf Club (now Country Club) and Chicago Golf Club.

(Beditz, Ph.D., 2008).

With the advent of “television” the game of golf was catapulted into the American home as

a cultured, respected, polite, and oftentimes exciting sport. Anyone could take up the game and

enjoy golf as a new “leisurely” way to spend their time, or do business. Most business people

would agree that you can find the true measure of a person on the golf course and you can decide

if it makes good business sense to pursue the partnership. It is a hospitality driven industry

because it encompasses almost every aspect of service from on course service to the golf shop,

food and beverage, tennis and may include lodging with those golf clubs that are part of resorts.

From a Country Club to a Developer Club

When golf and country clubs were first established there weren’t homes surrounding it, it

was typically developed from a parcel of property, perhaps an apple orchard no longer in use to

swampland in Florida. (Gordon, 1990). But, during the real estate booms, developers of large

tracts of housing figured out that if they put in a golf course and certain amenities like a


clubhouse, tennis facility, and food and beverage, it would differentiate themselves from the rest

of the developers and give them an advantage of selling homes. (Goldfield, 2007). It worked,

there were more golf courses built in this manner during from the seventies all the way until the

present day than the previous method. Thus, when the real estate market experiences a bust, so

does the private golf club market, and the decline of golfers. In addition, when the developer was

“built out” meaning he had sold all the homes; he would discontinue financing the expenses of

operating a golf and country club and “turn it over” to the members of the clubs who had

invested in the club when purchasing their home. Oftentimes, this meant that members who had

no experience operating a golf and country club were not prepared for the financial undertaking

involved, which could leave them vulnerable to various consequences, i.e. bankruptcy, closure,

public play, which in many cases would devalue their homes. (Goldfield, 2007).

Context and Content

The Economics of Golf and Country Clubs

Golf and country clubs, like the economy, has had its ups and downs. It is a very cyclical

sport and industry, inasmuch, if there are people who can afford a private membership, golf and

country clubs will exist. But, because of their structure it is very easy for many to fail. For

example, (Beditz, 2008), at the end of the “Roaring Twenties” and before the stock market crash

of the 1930’s there were over 4400 private member owned golf and country clubs. (Beditz,

Ph.D., 2008). Today there are approximately 4000, almost a 10% decrease within the industry,

most of which can be linked directly to the overbuilding of golf and country clubs during the real

estate booms and busts over the past thirty years. (NGF Dashboard Newsletter, February 2014).


Other factors to consider are the costs of membership (initiation fees, dues and

assessments) along with the disengagement of players, especially those with families with young

children. With so many other opportunities demanding their share of the sports and hospitality

dollars, sometimes a country club is the furthest thing from a prospective member’s mind, unless

they grew up in the golf and country club environment.

Recently the National Golf Foundation (NGF) reported statistics showing the decline of the

private golf and country club, stating that 74% of U.S. golf facilities are now open to the public,

which means that only approximately 26% private clubs are left in the United States. In addition,

the number of private member golfers has gone down exponentially, from approximately 2.9

million at its peak in 2008 to just over 1.9 million in 2013. (NGF Dashboard Newsletter

(February 2014).

Service in the Golf and Country Club Industry

On average 80-100 people are employed at a typical private golf club, service is what

separates the good golf and country club from the bad. It can be estimated, based on the average

number of employees based on the number of private clubs, the industry employs approximately

400,000 people, both full time and part time. In most cases, labor costs one of the main expenses,

second only to the expenses on golf course maintenance. Labor costs can make up as much as

60% of the expense line in a private golf club. For example, if they’re grossing $100,000,

$60,000 is taken off the top just for labor and benefits paid to employees, that’s the mark of

“service” in a private golf and country club in the hospitality industry. Membership pays for that

level of service through fees and assessments.


Initiation Fees typically pays for capital improvements of a golf and country club,

i.e. new roof, new greens, new tennis courts, remodeling the clubhouse

Dues are typically billed monthly and pay for all things operational to the daily

needs of the club.

Other fees that can also be part of the operational budget at most clubs would be

locker fees, club storage fees, F&B minimum requirements

Assessments are typically necessary for large projects within the club, i.e. a

complete redesign of a golf course or a clubhouse.

Discussions

The future of private clubs

The question posed at the beginning is, “What is the future of golf and country clubs and can

it be tied directly to the costs associated with membership: initiation fees, dues and

assessments?” Given some of the data already shown we could state that yes the decline is

evident with the overall decrease in clubs throughout the country, but there is also a marked

decline of golfers, in general, of private clubs. Firms like Club Benchmarking, which did a

report for CMAA, Club Managers Association of America, provided more information based on

surveys and other research. In their report, as in NFG’s reports, there are four market revenue

segments of clubs: (Cronin & Conde, Finance and Operations Report, 2013, p 47).

Small Market Segment (operating revenue between $0 and $3.5 million). Lower-Mid Market Segment (revenue between $3.5 and $6.0 million). Upper-Mid Market Segment (revenue between $6.0 and $9.0 million). Large Market Segment (revenue exceeding $9.0 million).

Those clubs in the upper, large market segment were less likely to experience fluctuation as

compared to those of the small market segment. It seems evident that maintaining a higher value


of fees assisted in the survival of clubs versus those who may take short-term measures by

lowering initiation fees and other costs associated with private clubs. Club Benchmarking

reported in their annual Finance and Operations report to CMAA 2013 that the range of initation

fees is from the 25th percentile being $10,000 to the 75% percentile of $58,525; the median being

$25,000. (Cronin & Conde, Finance and Operations Report, 2013, p 47).

Recently NFG updated their report in an article of their monthly dashboard, Private Golf in

America. (NGF Dashboard, Feb 2014). In it they stress that since their 2008 study there has been

a significant change in the marketplace and those clubs in the higher tier, noted above, are more

likely to sustain their clubs and their membership based on value perception and by not lowering

their fees. Whereas clubs in the medium to smaller markets are more likely to experience real

problems and must make hard decisions to keep the doors open. These particular clubs are more

than likely those referred to as “developer clubs” as was mentioned on page 3-4. (NGF

Dashboard, Feb 2014).

Strategic Planning-Recognizing When You Need It

Mike Leemhuis, CCM, CCE, CEO/GM of Congressional Country Club, located in

Washington D.C., recently undertook this task as part of his strategic planning process. When

asked why he simply states, “While we take great satisfaction in our success to date, we need to

invest in ideas that will keep us responsive to our members. A well-developed strategic plan will

inform our decisions going forward and position us for whatever the future has in store. We

want to stay among the leaders in the private club community.” (Leemhuis, Club Management

Publication, Gauging the Impact of National Trends, 2010, p8). Mr. Leemhuis worked with

consultants, Fred Laughlin and Dale Lefever, to conduct the study. They selected a large group


of General Managers and asked them to identify what key trends they see in the private club

industry and rate them accordingly. What they found is that there is a fundamental change going

on in the industry, which can explain some of the declining numbers in both golfers and private

clubs. It will be up to the private club owners/members to either recognize these changes within

their own clubs and make the necessary adjustments, or go the way many private clubs have

either by accepting public play, selling, or closing the doors altogether. As Lefever (2010)

pointed out in this article, “Fred and I were impressed with the CCC board’s commitment to the

planning effort, especially in light of the club’s obvious accomplishments. Although addressing

current problems is important, a strategic plan should be driven less by present challenges than

by position the club to leverage future opportunities. A club like CCC may be highly successful

now, but it is often harder to stay good than to get good.” (Lefever, Club Management

Publication, Gauging the Impact of National Trends, 2010, p9).

Trends noted in 2010 as reported by Lefever and Laughlin, 2010.

1. Changing diets and food preferences

2. Increased interest in fitness

3. Intergenerational issues

4. Flat growth of golf

5. Emphasis on being green

6. Tailoring membership and fee structures

7. Impact of Technology

8. Demand for casual environment

9. Improving management and governance

10. Popularity of non-golf activities


11. Emphasis on family programming

12. Non-traditional services and amenities

Survey of Industry Professionals

Utilizing LinkedIn, where there are many hospitality groups, especially for clubs, three

questions were posed to the general membership of these groups.

1. Do you think there’s a trend to lower initiation fees in order to bring in new “dues

paying” members, and are the results a “devalued perception” of a club?

2. Do you see a direct correlation between lower and higher initiation fees and the

perception of the quality and classification of a golf and country club?

3. What is the average initiation fee for a full golf membership for a private, member

owned club vs a corporated owned club in the U.S.?

The groups that were asked these questions are identified with the following statistics and a

sampling of the responses which are open for discussion.

1. HFTP with 6128 members with (4 responses), (LinkedIn.com, 2014).

Mike Hoppe, Accounting and Business Management Professional

This is a tricky issue because while clubs definitely need to continue to

grow their membership, "down" economic times can provide a significant

obstacle. Lowering initiation fees can seem to be an attractive choice,

however it's hard not to imagine how it doesn't devalue your membership.

Of course it will depend on how much the reduction is, but as many clubs

have already found out the hard way, once the initiation fee is reduced, it

is awfully difficult to raise it back up. Then too is the impact on your

http://www.linkedin.com/groups?viewMemberFeed=&gid=903937&memberID=49832454


current membership and the backlash from members who don't see a

reduction as a "necessary." If at all possible, look at alternatives such as

financing it over a couple of years (or a longer period of time if financing

is already offered) or trial membership offers. During "down" economic

times, like the one we most recently experienced, a big drawback to

joining a membership club can be adding another long term commitment.

Offering a short term, trial membership may get them in the door and hook

them for the long haul.

2. National Club Association with 1060 mbrs (8) responses, (LinkedIn.com, 2014).

Harvey Weiner, President, Search America, exec search & best practices consultants to the private club field www.searchamericanow.com

The "trend" to lower fees has been going on for years now. Club leaders,

thinking this is a smart way to "circle the wagons", are actually circling the

drain. It's the beginning of the end of your club, as you have known it.

Slashing entry fees and dues attracts bargain hunters. It may now be cheaper

to join your previously fine club than to play a daily fee course several times

a month. Slashing fees is a short-sighted abdication of private club

leadership's responsibility to drive revenue through enhanced Member

value. Clubs that have become the bargain hunters dream will inevitably

become municipal golf courses or housing developments.Don't forget to turn

out the lights before locking the doors.

Brian Armstrong, CCM, General Manager/COO at Country Club of Fairfax

http://www.searchamericanow.com/

http://www.linkedin.com/groups?viewMemberFeed=&gid=692077&memberID=30904321&goback=.gmr_692077


I would strongly suggest that any Club that lowers the initiation fee to attract

new members, track those Members diligently. I inherited the Club on

"Sale." I have successfully changed the Board and Membership Cmt's

mindset by showing the overwhelming majority of resignations and

Members on the 60 and 90 day list joined at the "Sale" price. We spend,

disproportionate amount of time (and thus expense) dealing with these

Members. We would be financially better off without them. We just raised

dues AND raised the Initiation. Dues are now appropriate to operations at

current levels and Initiation is set to get the correct type of New Member

through the door. Bold move, but I believe one in the correct direction.

3. Forum for Golf and Country Club General Managers with 2702 members (10)

responses. (LinkedIn.com, 2014).

Justin Meyers, General Manager of Applecross Country Club

A lot of great points and perspectives - I think the one piece that has not

been discussed so far is the simple issue of supply vs demand. In the past 5-

10yrs we have lost millions of golfers - these golfers did not join other

clubs; they simply left to go do other things. The over building of the 90's,

the housing market boom and then bust in late 2000's have left our industry

in a tailspin with too many Clubs in similar markets and similar areas to

maintain the ability to demand IF's at the rate/price of 5-10 yrs ago. Some

markets have seen this more than others; for example we have a second

course 45min away - the market in their area is much more aggressive and it



is a tougher fight to keep Members from year to year because there are 30

courses offering the ability to be a "New" member and to receive the many

different deals that are out there to bring in the bodies. I think the better

question every Club should be asking itself/board/members/owners is How

do WE differentiate ourselves from the rest of the Clubs in our areas?

Depending on your resources some Clubs may find themselves more

successful if they can focus on what they do well and what they can market

instead of what they "used" to be. If you are trying to sell something that

you don't/can't provide you will continue to fight attrition and never find

those long term Members that made our industry so successful in the past.

Sharon Cary, Controller, Santa Rosa Golf & Country Club

Hard to convince prospects that we are the 'preferred choice' when the

neighboring competing clubs are virtually free. Clubs are struggling to build

initiation fees back up after years of decline, but being cheap does nothing

for our prestige and perceived value.

4. Club and Resort Business with 5471 members (6) responses, (LinkedIn.com, 2014).

Kevin Reilly, Partner at PBMares, LLP

There is a clear difference from discounting initiation fees just to bring in

members and revising the fees to reflect the true value in joining. Prior to

the recession, many clubs raised the fee too high and too fast. Adjusting



them now is merely reflecting what the market will support. I agree with the

comments on just increasing the dues line will not be sustainable in the long

run. A side effect of dropping initiation fees, in addition to the hit to capital

budgets, is that you now may have members who cannot afford to belong to

a club. They will complain about each dues increase going forward and

since they have little or any financial investment in the club, they are much

more likely to leave.

James Boll, Hospitality & Real Estate Professional

The discounting only hurts a club in the long run. There are many other

means to encourage new memberships; however the main problem is

usually the clubs that discount have a quality problem first. Many resort &

hotel properties do very similar discounting thinking they will increase

business, however this tends to bring in customers which do not fit the

customer base or market the property is trying to capture.

Michael Padden, President at Three Oaks Hospitality - club membership

professionals

Each club is different - no cookie-cutter solutions. The market determines

price. However, any club discounting Initiation Fees better have a plan for

capital improvements. Also, data clearly proves that no or low Initiation

Fees allow for more transient movement of members. I think everyone

knows that there is no blanket answer here.


Andre Pounds, Membership and Marketing Director at Boca Royale Golf & Country Club

“Perceived value is surely compromised when "discounting" occurs. “

Conclusion

The purpose of this paper was twofold. First, to learn more about the club industry as a

whole and gather information about initiation fees and their relevance to the private golf and

country club. Secondly, to determine what key marketing strategies were best to analyze and

develop a plan for private clubs so they could survive the downs and capitalize on the upswings

of the industry.

In the final analysis, clubs began without a defined strategy; it was just a group of men

who wanted to play golf and found a piece of property in which they could develop and form a

“club” to play with like-minded individuals. Some would argue that was their strategy, just not in

a formal sense, perhaps a “cultural strategy” would best define it.

But, as the years went by and the game became more popular and considered more

“elitist” think Caddyshack, developers became involved and one would argue used the

“entrepreneurial and positioning strategy” to market golf and country clubs as a lifestyle and not

just a sport. Why go to a public course, typically owned by a municipality, when you could buy

into your own golf and country club, where you make the decisions who is “invited” to be a

member, sometimes by virtue of who could afford to live in the development where the country

club is located, as is the case in most private clubs around the U.S.


As a result of the economic downturn and the rise of the XYZ generation, golf is not as

important and may not fulfill the needs of this generation and their families. They are less loyal

to employers and it can be argued, thus less loyal to belonging to a club. They’re not interested in

their parents or grandparents lifestyle and choices; they’re definitely more interested in the

present and immediate satisfaction. Take another look at the trends on page 8-9 and see how

times have changed. As Mike Leemhuis, (2010), had pointed out, “We have in these survey

results both a highly credible list of the national trends affecting the private club community and

an even more credible ranking of the trends by their impact on individual clubs. The data has

helped us in the planning process, particularly in alerting our board members to the reality of

those trends.” (Leemhuis, Club Management Publication, Gauging the Impact of National

Trends, 2010, p12).

The question will remain; will Mike Leemhuis and his club take heed soon enough to

remain a prestigious and viable private golf and country club? They’ve taken the first step, but as

we all know if you don’t implement the strategy, what was the point of the exercise?

Recommendations

Students of Strategic Management for Hospitality can be argue that there are many

schools of strategy that may apply to the golf and country club industry, but perhaps the most

effective one is the Configuration School of Strategy. As the golf and country club industry is

‘transforming’ and the needs and desires of the private club members are also changing, it would

seem the most intuitive strategy to pursue. If private golf and country clubs want to survive the


next 5-10 years, they must pay attention to the trends and be proactive in meeting those trends; or

else become a statistic as many other clubs have and continue to do so as a result of reacting with

the old adage, ‘too little, too late’. The first step is always the hardest, but what Leemhuis did at

CCC should be what most country clubs in America need to do, they just need the fortitude and

willingness to listen and make changes as is oftentimes demanded by their members.

Learning Experience

I selected this topic as it was pertinent to the industry that I’ve been working in over the

past 24 years. It has been a topic of discussion within the industry, but there was little research

material on it, other than from the NGF and CMAA. The intent was to find both factual and

anecdotal information that would give the reader different perspectives of what clubs are

experiencing in today’s economy and start a dialogue within the industry. I’ve learned that there

wasn’t much thought about strategy when golf began, it was a sport that evolved into a business,

clubs. There are many companies that have been capitalizing on the club business, but there are

just as many who are failing every day due to poor management and lack of planning and

strategy. I would like to continue the research and make recommendations that would ensure golf

clubs remain relative within today’s marketplace.


References

Beditz, Ph.D., Kass., 2008

http://media.naplesnews.com/media/static/Private_Club_Report_final.pdf

National Golf Foundation, Retrieved from:


Cronin & Conde. 2013

CMAA Finance and Operations Report, 2013, p47

Leemhuis, 2010

Club Management Publication, Gauging the Impact of National Trends, 2010, p8-12

Laughlin and Lefever. 2010

Club Management Publication, Gauging the Impact of National Trends, 2010, p9

NGF Dashboard Newsletter (February 2014) Retrieved:

http://ngfdashboard.clubnewsmaker.org/Newsletter/3nbwxqq9wq51oys1if546n

Gordon, John Steele, “The Country Club,” American Heritage 41, no.6 (1990): Retrieved from:

http://web.ebscohost.com.ezproxy.library.ubc.ca/ehost/detail?sid=2eebc0a3-cedf-410c-93df-

47b259cb7346%40sessionmgr113&vid=2&hid=119&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d

%3d#db=mth&AN=9010080571

Goldfield, 193-94. Thousand Oaks, CA: SAGE Publications, Inc., 2007. Retrieved from:

doi: 10.4135/9781412952620.n110.

http://ngfdashboard.clubnewsmaker.org/Newsletter/3nbwxqq9wq51oys1if546n



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