It is encouraging to find others in the business world who see the same things and have the same concerns on certain parts of the world’s economy. Though the attached study was reported a number of years ago, it is interesting how relevant the issues are still today. The article also illustrates how so little has been done since it was written to correct the problems it highlighted. In this case the report is on the state of Country Clubs and the issues they face to survive the economy with the plight of their membership.
Following is an excerpt of the article Mr Fornaro provided.
What Does It Mean For Private Clubs?
“Private clubs are under a lot of pressure right now. Most will be fine over the longer term, but for a number this will be the ‘The Perfect Storm.’ The three big forces lining up against clubs include the economy, the changing golf course marketplace and population demographics.”
So with few words, Frank Vain, president of the McMahon Group Inc. a consulting firm to private clubs, describes the private club industry today.
It’s a viewpoint similarly held by others in the industry…an industry facing issues, many brought on by the “three big forces.” Private clubs are under a lot of pressure. The industry is in a state never experienced before. There’s an alarming trend in overbuilding and clubs as a “commodity” are under siege.
The impact can be significant, especially on memberships, the lifeblood of private clubs. Fewer people are joining private clubs. Others are leaving and still others are dissatisfied because what they’re paying for doesn’t live up to their expectations.
One point is well taken…the private club industry has changed, is changing and will continue to change, for various reasons. Change, of course, affects membership.
Vain says the biggest challenge is the “golf marketplace.”
Going back to the1920’s, about 80 percent of the golf courses were private. Public golf was almost unheard of, and up until the 1990’s, most of the existing public courses were not comparable to private courses. Today, about 75 percent of the 17,000 or so golf courses in the U.S. are public. The mix, Vain figures, will probably level off at about 80 percent public and 20 percent private around 2010.
“This is a total reversal in market composition, and it is having and will continue to have a major impact on why people join and how they use a private club,” Vain stressed.
“Most of the new course construction has been in the high-end arena with the conditions, accessibility and slope rating that can rival the private club experience, except there are no initiation fees, dues or assessments. There is a whole generation of people growing up not having or needing a private club still able to call themselves golfers. This was simply not possible 20 years ago.”
Steve Graves is of the opinion “the most desirable age of a country club member right now is the under age 45 member.” Graves is president of Creative Golf Marketing, a membership-marketing firm based in Manhattan, KS.
“Although many clubs have attempted to reduce the average age of the membership in the past few years, that average age still remains high. Many clubs are attempting to entice younger families into their clubs, however, this is where the ‘over building of golf courses’ phenomenon has put a hit directly on the private club industry,” he declared.
“Private clubs today are in direct competition with up-scale daily fee courses whether they want to admit it or not. These clubs are not your typical municipal courses that we all grew up around. These courses are being built and designed by the best in the industry and offer equal and many times better golf courses than a typical private club.
“The age group of members who frequents these ‘pay as you play’ facilities are the under 45 individuals that private clubs are desperately looking for. Given the competition for one’s time in that age group…the up-scale daily fee courses present an adequate golf experience without the high monthly cost associated with being a member of a private club,” Graves suggested.
The bottom-line? All these trends, gut feelings or however you may wish to express it, are affecting private clubs and their memberships, thus their revenue and ability to survive. Despite the threat, for some this testy period is a time of opportunity.
Private clubs, in the opinion of Heidi Voss, are “doing much better than some of the other industries.” Voss, President of Bauer Voss Consulting, an international membership marketing firm based in Galena, Ohio, suggests “people still desire to socialize with their friends and spend quality time with their families,” and clubs allow them to do so.
It’s also her opinion clubs offering “a 100 per cent refund on the membership deposit at resignation are also being seen as a safer place to put your money, than in the stock market.” She suggests real estate developers are “seeing the value in the club concept…and are seeking to develop the perfect balance of golf and other family amenities to attract buyers.” The concept is to create a lifestyle within a community.
Many of the reasons why people have joined private clubs over the years continue to be reasons for people to join, or stay with their clubs. But it isn’t so for everyone.
“The industry is in a state that it has never experienced before,” says Leesa Mitchell,CMP, who operates a consulting business, Members Solutions. Her group has been involved in marketing high-end daily fee operations, developer owned, corporate-managed and 501(c)7 clubs.
“The influence of technology, ease of travel, and the transient lifestyle that many must live in order to travel up the career ladder has created a different societal need. Members do not join or remain members of a private club for the same reasons they joined say, 15-20 years ago,” she suggested.
“Based upon my experiences, many clubs have failed to change in correlation to the changing needs of our society. Many clubs are looking for the ‘tried and true’ program to recruit and retain members. In my opinion, the fact of the matter is, those programs do not exist,” Mitchell said.
“Every club has a different situation, different demographic and different trend line. In recruiting and retaining members, those are the areas that many clubs have been failing to recognize and utilize in their planning. Turning a deaf ear to demographics and related trending is not the route to go and creates a challenge in recruitment and retention, as well as maintaining a positive satisfaction level of existing members.”
“In our opinion, a majority of clubs are struggling,” Graves added. “From our experience…we are now receiving calls from the $40,000 to $50,000 initiation fee clubs requesting assistance in the recruitment of new members. Five years ago, a majority of our phone calls would not have been from this caliber of club. With that said, we are also receiving many phone calls from the mid- level clubs as well, in the $5,000 to $25,000 initiation fee range.”
However, Graves says “one of the most disturbing trends we are seeing all across the country is that many clubs are resorting to the ‘path of least resistance’ of drastically reducing initiation fees or completely waiving initiation fees in order to compete within a specific market.
“Clubs need to maintain their initiation fees (and their integrity) and recruit new members in order to stabilize their dues position,” Graves said.
Member recruitment, retention and satisfaction are indeed on the front burner for Charles D. Dorn, CCM, general manager of Union Club of New York City, NY and Gregg Patterson, general manager of The Beach Club of Santa Monica, CA.
“Clubs have already moved away from the “stuffed shirt” theory of marketing ‘we will open the doors and they will come’ and have come to accept that member retention and satisfaction are the highest priorities,” Patterson stated.
“Members have options with their leisure time and money, and for that reason they’re (clubs) more aggressive than ever about giving quality and value to their target communities. The key realization in a ‘consumer oriented world’ is that ‘command and control’ marketing ‘that is, this is what we’re offering, take it or leave it’ is dead. All clubs need to find out what their members want and go after it aggressively. Every member has similar wants ‘goods, services, programs, facility and a sense of community’ but the expression of those wants change with time,” Patterson related.
“One other recent trend that fits into this issue is the fact that the average annual dues increase has risen in order for clubs to meet budgetary goals. Although many people can afford to maintain their membership, they simply don’t have a chance to enjoy it, thus it is one of the first discretionary dollar choices that people do away with.
“Given the fact that Americans are busier than ever with children’s athletic events, community functions, alternative entertainment activities, it becomes more difficult to justify paying a high monthly maintenance fee (dues, minimums, assessments, etc.) to belong to the club,” Graves concluded.
Changing needs and the fact people have choices are points emphasized by Vain.
“The demographic picture has a silver lining over the longer term since clubs best serve people ages 45 to 65. The number of people in this age bracket increases every day, but right now it is a challenge because too many clubs have failed to update their product to appeal to the Baby Boomers,” Vain outlined.
“Many younger members and prospective members don’t find clubs suitable to their casual lifestyle, and their family and athletically-oriented focus. Today’s country club product best serves the needs of members over age 55, but that is not the future. Despite this, clubs generally do not lose a lot of people to dissatisfaction. Relocation and death remain the chief reasons someone leaves a club. The problem comes in when you don’t have the product to attract someone to replace the resigning member. That happens more frequently now then it did in the past,” he concluded.
Rick Coyne, president, Club Mark Corporation, Dallas, Texas says “what I see from the trenches is an alarming trend in overbuilding and an even more alarming trend in reactionary response in the form of eradicating the long established value of the private club through discounting of fees.
“The proliferation of daily fee courses provides an adequate option for younger players creating a potential void in the next 10 to 20 years. Equity refundability, in an effort to make memberships easier to sell has created wait-to-sell lists that are longer than even the best club’s wait-to-get-in lists. If this industry does not pay very careful attention to expand its base of participation and curb irresponsible growth, it could be in serious trouble over the next 10 or so years.”
To suggest clubs are in trouble is perhaps too much of a generalization because many are flourishing. So the question becomes, why are some clubs facing dire times? The golf marketplace is one factor. Demographics are another!
“Obviously, demographics play a huge role in success and failure,” Coyne added. “If you have no competition and a high density of wealth with a great club, you are probably doing well. Where you begin to see failures is in highly competitive areas or in situations where a club has artificially raised its fees beyond the market’s ability or willingness to pay. Another factor is failing to make connections with your members, either with other members or with staff. Without this connection, without the club culture, the member is more of a customer simply utilizing a commodity.”
This is supposed to be Baby Boomer time…and a boom time for private clubs when more than 70 million reached the age of more free time and more discretionary income. So what’s happened? Candice Clemenz, Ph.D., Assistant Professor, Hospitality and Tourism Management Department, Virginia Tech has some thoughts.
“Clubs were poised to take advantage of the aging Baby Boomers, but unfortunately our post 9/11 economic situation has left Boomers with deflated stocks and devalued 401K accounts. Many Boomers who had intentions to retire early have been forced to decide that they need to work a few more years. The Baby Boomers don’t have the discretionary income the club industry counted on, and neither do they have a surplus of time to spend at the club,” she suggested.
In fact for some, it means rethinking retirement plans. For others it means working past age 65 is no longer a choice, but a requirement.
“Demographic profiles at many clubs are alarming from the standpoint of the average age of their members. For the sake of rejuvenation and sustainability, I believe the smart clubs are focusing on ways to attract younger members. Examples include legacy memberships, junior memberships, and programming that is attractive to younger people with growing families,” Clemenz added.
Finding new ways to attract and keep members is a shared opinion.
“Population demographics are lining up quite well for clubs. Most people join a club between the ages of 36 and 50. We have more people in this age category today than at any time in history. So the supply is there, but clubs will only succeed in attracting this group if they have a product that is in demand,” said Vain.
“Many clubs are not there yet and it can be a hard transition to make as the satisfied older generation of members often resists making the kinds of changes that are attractive to prospective new members. This means new style social programs, dining menus, dress codes and cell phone policies, just as it often means new facilities like fitness centers, childcare facilities and co-ed 19th holes,” Vain stressed.
“The younger generation is under a lot of economic pressure too, and will not waste their resources on a membership that doesn’t deliver value. This means the whole family gets to use the club. This usage includes everything from casual poolside barbecues to gourmet nights, golf with their foursome and also with their spouse and kids, and health and wellness programs.”
The concern of how to attract a younger generation, while retaining current members is very real. How does the industry and clubs deal with that concern?
“I see a gluten market being pared down somewhat by the natural act of survival of the fittest. The tricky element … is what it takes to become and remain ‘fit’ within the private club industry, and particularly within each club’s market,” Mitchell opined.
“I think generally it will be easier for the ‘old money-well established’ clubs and the ‘low commitment type’ clubs to survive over the next 5-10 years. Those clubs caught in the middle had better take a very proactive stance to their marketing, both internally and externally, and to the demographic trends that should be affecting their planning as well as their daily operations, ” she concluded.
“In order to survive, clubs will need to offer high quality, highly valued membership experience,” Vein declared. “Successful clubs will use the excellence in their core pursuit as a foundation for a pursuit of excellence in all areas. That is where many clubs fail today.” In other words, there’s no room for mediocrity.
“Clubs willing to change, utilize new products, technologies and add services while maintaining the flavor or tradition of the club will survive and prosper,” Dorn added. “The next few years will prove difficult, but as we move back into a more prosperous economic period, we will one again look to outdo the other guy.
“What separates the good clubs now, is the good ones already know this and they have not stopped during the downturn. Capital projects continue, marketing continues, recruitment continues. When all the others start back up in the years to come, they will be a few steps behind. They will never catch up,” he declared.
“Obviously as in the business world, there are no magic pills,” says Graves.
“Clubs have to understand the concept ‘more members paying less dues’ versus ‘fewer members paying more dues’.
“Once a club determines what is wanted, it needs to be aggressive in achieving their goals.” Graves stated bluntly.
Publisher’s final thoughts
Recently CNN interviewed me regarding the state of private clubs. CNN’s research has found clubs full two years ago have memberships for sale to day, with information pointing to the economy or the stock market as the reason.
To blame the economy and the stock market is simplifying the matter. We can also blame over-building and competition from high-end courses as well.
My research shows other reasons, as well. Clubs are facing four major issues.
1) Clubs today may not have the amenities today’s members are seeking.
2) Initiation fees and dues maybe out of line to what the market can bear.
3) The traditional way to recruit doesn’t bring in new members and
4) Older members (the ones you could always count on) are quitting. The average life span of a member is decreasing.
Today’s older members have more options than they did 20 or 30 years ago. More options to vacation; and if they want to play on a nice course, there’s plenty of choice and they can play on courses that may even surpass their own.
They real challenge for seniors is family, visiting their grandkids and children that live across the nation. It’s not like it was 20 years ago when the whole family lived in the same city.
For some seniors giving up the club life for more time visiting their family and vacationing more with fewer commitments back home is a good choice. The fact their children now live in different cities has also put an additional strain on private clubs. Recruiting family was a traditional and successful way of keeping the club full in the past. Today some clubs have lost this continuing family connection and now have to look at new ways to fill the club.
It is important to remember clubs 30 years ago were designed for males with an average of 64. Today, younger members have additional needs, there are more ladies playing or who have a major say in joining a club, There are more families joining also with additional needs.
The challenge for clubs is trying to satisfy the needs of every target group. It may be a surprise but spending millions of dollars on a new clubhouse may not be the answer.
The ONLY thing that really has changed from this report is ..studies are showing Country Clubs will have to build New Clubhouses in most cases to attract new and younger members.
My thanks for Mr Fornaro’s blog and the BoardRoomMagazine.com for taking the energy to highlight what I have been saying for years…