Research Assistance by Anthony C. Zecca, Jr. and Alexis Crawford All Graphs Courtesy of McMahon Group, Inc.
Throughout the year, the headlines have rolled in steadily from all over the country, like new precinct reports adding more negative totals to a landslide election defeat.
From Boston: Country Clubs Hunt for Members From the Pittsburgh area: Golf Clubs Scrambling to Improve Bottom Lines From Los Angeles: After Boom, Golf Isn’t Out of the Woods
The halfway point of the millennium’s first decade, it seems, prompted just about every local business and golf writer to write an assessment this year of the state of the club industry in his and her area. And the tone of these articles has always been pretty much the same: A lot of local clubs are hurting. No one has the time to play golf anymore, or the money to join a club. Golf courses have much more potential now as real estate developments, even if the end of the property value boom may be nearing.
If you keep reading far enough into any one of these stories, however, you can usually find something else that they all have in common: An example of a club that’s found innovative ways to buck the trend, or quotes from people who are optimism by either pumping unprecedented dollar amounts into improvement projects for existing clubs, or by funding ambitious and elaborate new properties.
Once again, from Boston (as reported in the Boston Business Journal): A new “transfer membership” program that allows members of other clubs to join at a reduced initiation fee is “working phenomenally for us,” according to Francisco Ventura, General Manager of Blue Hills Country Club in Canton, Mass.
From the Pittsburgh area (as reported in the Greenville, Pa. Tribune-Review): A new Tri- County Golf Association formed among 12 area clubs is helping to provide additional value and boost memberships by allowing members of each club to play the other courses once a month for just $20, which includes the cart fee. “We heard from a lot of members that they didn’t like paying the money and playing only one golf course,” reports Dave Longwell, a member of the Brackenridge Heights Country Club and President of the new association. “We see this as a way for clubs to get more rounds, and it should be a way to increase revenues a little, with what golfers spend on food and drink.”
And from Los Angeles (as reported in the Los Angeles Times): “We see 15 to 20 years of terrific business ahead for our company,” says Henry Dozier,Vice President of Golf for Pulte Homes, which owns the Del Webb retirement communities, as he surveys the prospects for selling homes and club memberships to coming-of-age Baby Boomers. “If you were born in 1964, that makes you 41 right now, so you’ll be hitting the Del Webb sweet spot in 10 years—and then you’ll stay in it for another 10 years.” The Numbers Game
The same half-empty or half-full puzzle also presents itself when trying to use available industry statistics to gauge the health and outlook of the club and resort field. The tracking of golf rounds by the National Golf Foundation (NGF)—the benchmark most commonly used by the general media—continues to convey a picture that’s flat at best. And certainly, level of play is still buried in a bunker when compared to the heady days at the end of the last decade, when the pre-9-11 economy was more robust, and Tiger Woods had burst onto the scene to inspire hordes of new players.
The NGF has also released opinion surveys and forecasts that don’t bode well for any type of strong overall turnaround—at least not the way it has interpreted the data.
At the same time, there are many positive and encouraging signs to be found both in the aggregate— through surveys such as those conducted by the McMahon Group (see the charts and data presented throughout)—as well as in club-specific examples of the significant dollars that are being spent, and the number of members that are being added.
For the remainder of this State of the Industry report, we present some of the evidence that we found after making an effort to go beyond the surface of what is felt to be a flat and empty club landscape. This evidence suggests that there may be a more fulfilling future ahead—but only for those in step with the nine key trends that are emerging to shape a new direction for the club and resort business.
1. The Hunt for New Members: Plenty of Possible Targets, But Your Aim Must Be True
While some people in club management and development, like Del Webb’s Henry Dozier, see coming-of-age Baby Boomers as the easiest targets for future growth, others see younger generations as the key segments. In the same Los Angeles Times article, Dana Garmany, Chairman of Troon Golf, said the industry must learn to find ways to attract younger consumers “who have had consumer screens in front of them since grade school.”
“If golf doesn’t understand how to evolve,” Garmany said, “It’s going to end up being like polo.”
Tim Hurja, a PGA pro who books golfers onto Palm Springs, Calif. area courses, said in the same article that clubs are going to have to be prepared to relax some of their traditions if they want to attract monied members of the newest adult generation.
“These kids are going to bring their laptop, cellphone and Blackberry, and wear their favorite cool shirt,” Hurja said. “What are we going to do— say you can’t have a phone, you have to wear this shirt, and you can’t take a mulligan?”
Some new clubs, like RiverCrest Golf Club & Preserve in Oaks, Pa. (a Philadelphia exurb), have recognized that while there are many new demographic segments that need to be recognized when marketing new memberships, there is still value in shaping facilities and offers to create special appeal for groups that traditionally have been ignored.
In RiverCrest’s case, the club has positioned itself to have special appeal to prospects who will respond well to its efforts to be environmentally friendly (the “Preserve” in its full name is more than a gimmick; the property includes a natural wildlife habitat, and developer Dan Lejeune stated his interest from the beginning in creating a truly “green” golf course community that would also be “a tribute to nature”).
Even more directly from a membership recruitment standpoint, RiverCrest has mapped and followed a successful strategy to capture more women members.
Certainly, McMahon Group survey data show that the makeup of even the most traditional private country clubs is changing dramatically, with the average age of members decreasing across the board (51% of surveyed clubs reported a decreasing trend in the average age of membership over the last three years).
Further, the vast majority of surveyed clubs characterize themselves as now being at least somewhat, if not already completely, family-oriented (for private country clubs, this means they offer programs or facilities such as junior golf or tennis, swim lessons, and a children’s dining menu).
2. Fees and Structures: Stand Up and Be Discounted?
Once a club has focused on what types of new member prospects it wants to fix in its sights, decisions have to be made about how to best go about trying to get them into the fold. Opinions continue to be mixed on the value of development drives that reduce or drop initiation fees. Some feel this is a band-aid technique that eventually has its price in terms of a diminished image and value of a club.At the same time, there are no shortage of examples to be found that indicate it’s been an effective way to get people to sign up who would otherwise stay on the sidelines.
Blue Hills Country Club in Canton, Mass. attracted 22 families this summer through a trial membership period in which the $7,500 down payment toward the $25,000 initiation fee would be refunded if they didn’t like the club. The trial membership made it an easier decision to join the club, General Manager Francisco Ventura told the Boston Business Journal. He added, however, that Blue Hills decided against a program that would offer current members incentives to refer new ones, because it was felt it would cheapen the club. Instead, a “transfer membership” drive was instituted, through which the club allows members of another club to join Blue Hills at a reduced initiation fee ($15,000). That is the program that is working “phenomenally,” Ventura said.
Yet after Renaissance Golf Club in Haverhill, Mass. offered a refundable initiation fee as part of its rollout of nine holes this year (with another nine scheduled to be opened in the spring of 2006), it was still only halfway to its membership goal in September.
And it’s also easy to find evidence that shows if you’re good enough, or in the right competitive position, you can still pretty much ask for—and get—any price you want. Quail Ridge Country Club opened in Acton, Mass. this year, the Boston Business Journal reported, and brought in 50 founding members at a $50,000 initiation fee. Then the entrance fee went to $100,000, but Quail Ridge still had already added close to 150 members at that rate by mid-September. It fully expected to get to 250, at which time it planned to let the market set the initiation fee. So founding members had already doubled their investment in the club.
“There is no other competition in the area,” General Manager Michael Donohue explained. “[And] for some people, it’s important to pay for the right to say you belong to a private club.”
Data from the 2005 McMahon Group Governance, Policies and Financial Issues Survey shows that the average private country club initiation fee is now $31,709, up over $3,000 from the average in the 2004 survey. Initiation fees tend to be higher in the West than any other region.
Nearly three-fourths (72%) of the surveyed clubs said they now allow initiation fees to be paid in installments, with the practice being the least common in the West and at clubs with very high fees.
Over three-fourths (78%) of the surveyed clubs said they implemented a dues increase last year, and 76% said they were planning to increase dues next year, with most (73%) anticipating a hike in the range of 3%-5%. But almost 20% said they expect to put through an increase in the 6%-10% range.
Beyond fee issues, more clubs are finding they can hook up with overlooked prospects simply by stepping up the networking within their own ranks. “We’re doing a lot to recruit members from within,” Larry Johnson, Membership Chairman at Dayton Country Club, Dayton, Ohio, said in a Dayton Daily News report.
“We called our members and asked if they had friends and family who would be interested,” Johnson said. “We’re actively recruiting the young professional. That’s what we need.”
The optimal club structure (public, semi private or private) for today’s world remains a grey area. After a period when high-end, daily-fee clubs accounted for most of the new courses coming on stream, some see the pendulum now swinging back to a return to members-only private courses. Some semi privates, literally caught in the middle, are trying to choose which way they want to go. But some think semi-private status is still the best of both worlds, because it retains the flexibility needed to be able to fill in gaps in member activity with business from the general public.
3. Facilities: The Extreme Pace of Makeovers
To what should be no one’s surprise, given the current frenzied pace of clubhouse renovations, McMahon Group survey data shows a high level of activity of private clubs either studying, or already initiating, facility improvements in the next 12 months (see chart and details).
What may be a source of surprise are some of the new ways being tried to bear the costs of these improvements and overhauls. In Birmingham, Ala., Inverness Country Club has launched a $50 million-plus golf course and clubhouse renovatio— without assessing members. The existing clubhouse is going to be razed and a new clubhouse and luxury condominium project, “One Inverness Place,” will be built in its place. Sales of the 108 high-end condo units will not only fund the club-related capital improvements, says co-owner Bill Ochsenhirt, but will also result in creating a much more active clubhouse and social activity base.
“This is the first time that I know of that a private country club has taken this kind of approach to addressing its needs,” Ochsenhirt says. “There is no doubt in our mind that you will see older clubs like Inverness [that are] in desirable areas use this idea to unlock real estate values from the property, without bulldozing the golf course.”
In fact, Ochsenhirt says dirt from the excavation of the existing clubhouse will be used to help cut costs of a simultaneous golf course renovation. “Why should we just have it hauled away when we can use it?” he asks.
Ochsenhirt reports that over 75% of the condo units were reserved in four weeks. “Most of the buyers are either empty nesters or professionals who have little time, or desire, for the hassles of homeownership, yet they want to live in the suburbs and keep an active lifestyle,” he says.
Sometimes the scope of facilities projects is dictated by what exists—or doesn’t exist—around it. When the developers of RiverCrest Golf Club & Preserve in Oaks, Pa. saw that there were few existing private country club ballrooms in the area that could handle more than 250 guests, it was decided to build up the new clubhouse, which is scheduled to open in February (see artist’s rendering), to 48,000 sq. ft., so it could accommodate events of up to 400.
Meanwhile, the spectacular 43,000- sq. ft. clubhouse (see photo) that was scheduled to come on stream this month at Old Palm Golf Club in Palm Beach Gardens, Fla., will include an office for the club’s Honorary Chairman, Raymond Floyd.
It will be understandable if Floyd becomes a workaholic, because his office will be housed in a structure designed to recreate turn-of the- (20th) Century club elegance while also offering every possible amenity known to the new millennium— including an on-site fitness center and spa with indoor and outdoor massage areas, men’s and women’s locker facilities with spa suites, whirlpools and steam rooms, and a private wine room.
4. Grounds: Tested to the Core
Club course and grounds superintendents around the country have certainly prov
en their mettle and value like never before during the first half of the decade, responding to repeated assaults on their properties from the ravages of extreme droughts, blight, and in some areas the worst natural disasters in several generations. Overall, the level of professionalism and determined resourcefulness displayed by superintendents in the face of all this has been impressive, and it has not gone unnoticed by club management; many superintendents are now being rewarded with upgraded maintenance facilities as part of major club and course renovation projects.
Clubs are also exhibiting stronger interest, stemming from their renewed appreciation for superintendents' talents and critical roles in keeping their battered courses intact, in developing and attracting top talent from the leading horticultural and agronomy programs. As a result, intern programs are gaining favor and expanding at many club properties (the maintenance facility upgrades now often include the addition of permanent housing for interns).
Superintendents are also playing larger roles in shaping and executing club strategies, as part of the trend to restore courses to their original intents and playing characters. As such, they are working closely with golf course architects and golf pros to apply lessons learned from recent disaster responses, so they can better prepare courses to handle future batterings.
For example, the Dayton Daily News reported on new techniques used to protect bunkers from flash flooding as part of a major course overhaul at Sycamore Creek CC in Springboro, Ohio. "Every bunker on the golf course was redone, and we added some," said head golf pro Bob Stephens. "The bunkers were modernized to have flat surface sand and grace lips. Before, you had sand lips. We shouldn't have any problems with washouts now."
This year's McMahon Group survey data on average golf course per-hole maintenance costs did not appear to sound any alarms about soaring costs tied to the extra efforts needed to protect and restore courses in the face of Mother Nature's recent furies. Still, reports exist of some clubs moving to outsource course and grounds maintenance, in an effort to keep a lid on overall operating expenses and make up for revenues lost from other parts of their operations.
For example, after experiencing a 15% drop in membership, Youghiogheny Country Club in the Pittsburgh area decided to outsource grounds maintenance as part of an overall belt tightening. "We pay a monthly fee and [the outsourcing firm] keeps our course in great condition," golf pro Jim McGrath told the Greensburg (Pa.) Tribune-Review. "It has helped lower our operating costs and that's a big thing, since our grounds budget has doubled in the last 15 years."
5. F&B: The Dinner (and Lunch) Bell is Ringing
As the McMahon Group survey data shows (see chart at right), F&B revenues at private country clubs are clearly increasing. But there's still a lot of work to be done on the profitability side, with nearly half of the surveyed clubs reporting departmental losses.
There's good reason to expect continued improvement on both fronts, though. Greater efficiency in club kitchens, from both a cost and service standpoint, stands to be one of the biggest benefits to come out of the clubhouse renovation boom, as in almost all cases a primary objective of the upgrades has been to eliminate wasted steps and procedures not only within the kitchen, but to and from the kitchen and receiving, storage and dining areas.
The upgrading of clubhouse kitchens will also make clubs better equipped to handle bigger (and more profitable) events—and it can only stand to help improve everyday food quality, too, which should provide a further boost to the revenue line. Also helping on that side will be the continued infusion of culinary talent from beyond traditional club circles (more clubs are now recruiting chefs with hospitality and restaurant experience)— as will better networking and informational exchanges among club chefs through clubspecific culinary conferences such as the Greenbrier-sponsored Club Chef 's Institute (C&RB, April and November 2005).
All of these developments should only speed the trend toward the continued emergence of club chefs as featured attractions (the new clubhouse at Old Palm Golf Club in Palm Beach Gardens, Fla., for example, will include a Grill Room with open exhibition kitchen).
Increasingly, in fact, showing off a club’s F&B operations, even on a casual basis that doesn’t have to involve the chef, is becoming as big a part of the sales process for new members—and the effort to generate more activity from existing ones—as golf courses or other features.
“We had a kickoff party on a Saturday in March at the club,” said John Klinchock of Ligonier Country Club in western Pennsylvania. “We invited [members] to bring a friend. It was a wings-and-beer sort of thing, and we had an indoor putting contest.We just felt it was important to get the member used to coming back to the club again.”
6. Golf: Not the Whole Game Anymore
McMahon Group survey data on the trends in golf rounds at private country clubs (see chart, below) reflects the same downward trends as the NGF statistics and other indicators that have led many to knee-jerk conclusions that the industry is still in poor health.When seen in the broader context of the improving trends for other aspects of club operations such as F&B, merchandise sales, and increased demand for fitness and spa services, however, all the declining-round figures may really mean is that golf is just not the go-to player that it used to be in the club business— and may never be again.
Certainly, golf will always be a core activity for clubs, but it is becoming clearer that too many of them may be suffering from declining rounds not because demand has slacked off, but rather because they’ve gotten out of touch with the needs and wants of many players—current and potential. That was the wake-up call that prompted the 12 smaller clubs in the Pittsburgh area, cited at the beginning of this article, to form their association, so they could provide more value to their golf-playing members and broaden what had become the very limited appeal of membership in a single club.
Taking a long, hard look at the many reasons why rounds could be down, beyond the cop-out excuses like no one has the time anymore, has prompted some clubs to make dramatic changes in their courses themselves—even if they’re not in crying need of restoration—in the hopes of creating more exciting and challenging play that can get players’ juices flowing again.
At Sycamore Creek CC (located in the rapidly expanding Springboro area of suburban Dayton), course changes were a big part of the club’s strategy for solidifying its position in the marketplace, the Dayton Daily News reported. In addition to remodeling locker rooms and enlarging the driving range, Sycamore Creek moved the tee at the 10th hole—which had featured a dogleg left beginning just outside the door of the pro shop—a full 75 yards to the right, so golfers could now have a view of the entire fairway.
The club also purchased some property at the left of its second hole and actually moved the green across a creek and onto the new land, to create what head pro Bob Stephens says is now “the number-one handicap hole.” Sycamore Creek
also moved its tee at the par-three third hole to the top of a nearby hill, to create a more exciting shot.
7. Fitness and Spas: Work Those Bodies
McMahon Group surveys found that nearly 30% of surveyed private country clubs wished they had more room for spas, because current allotments fall short of demand. Fitness falls into the same category, as many clubs cut plans for expanded fitness centers out of their renovation projects when costs got too high and something had to go.
Now they're regretting those decisions, as fitness and spas have clearly emerged as the rising stars that can most quickly help clubs become the family- and female-friendly places they say they want to be. In the next five years, look for many clubs to hurry into phase two of renovations and expansions, to be able to fully satisfy demand in these areas. In the meantime, resort properties, with more room and more money to play with, are getting the leg up in these white-hot areas.
8. Retailing: They're Getting the Goods
Another reason to believe that maybe the falloff in golf rounds should be blamed on poor marketing or management, rather than on the excuse that people don't want or don't have the time to play, is that pro shop sales have been on a healthy upward growth trend. Here, too, part of the credit can go to clubhouse renovations that have relocated shops into better locations, given them more space to work with and created better overall selling conditions through upgraded lighting, displays, and the like.
Part of the growth can also be attributed to a boost from online sales, which only promises to accelerate. But it's also clear that there's just good demand for golf-related goods, with apparel and shoes generating particularly strong appeal.
One area of retailing that may prove to be an increasing problem through the rest of the decade, however, is the growing threat from counterfeit and knock-off products, especially of high-ticket golf clubs.
9. Technology: Getting Ready to Throw the Switch
The next big wave of change in the club industry as the decade is completed promises to come from technological advancement. Clubs as a whole still lag many other comparably sized business segments in terms of their current level of systems implementation. But the industry appears to be on the verge of making a quantum leap, as members and managers alike get more comfortable with—and appreciative of—the communications, marketing and management power that Web sites, POS systems and other club-specific technology can help them harness.
This year's McMahon Group data showed that 25% of surveyed private country clubs now allow credit cards to be used for paying club bills, and that 27% allow credit card payment in dining rooms; look for those percentages to increase over the next five years, in step with efforts to make F&B operations more user- and guest-friendly.
The Final Tallies
For the last words on the state of the club and resort industry, we once again turn to McMahon Group data, and specifically the results of the survey questions that asked respondents to assess their club's financial strength and conditions.
Nearly half (47%) of the private country clubs surveyed rated their financial condition to be "strong" this year, compared to 38% that rated it "adequate" and 15% that considered their financial strength to be "less than desirable."
The data showed a direct correlation between the size of country clubs and the likelihood that they would report a strong financial condition, with fully two-thirds (67%) of the surveyed clubs with 500 or more regular/full members putting themselves in the "strong" category. That compares with 44% in the 251-500 member category, and only 22% in the 250-or-fewer member category that rated their financial condition as strong. And the unfortunate flip side for the 250-or fewer category is that 43% reported that their financial condition was less than desirable.
Relating to the initiation fee issue, clubs with entry fees of $10,000 or less were much less likely to report a strong financial condition than clubs with fees over $10,000.
All of which tends to suggest that fears of a persistent malaise in the club industry, as we head into the decade's second half, may indeed be overstated. Rather, there appears to be solidity among established organizations, at the same time a survival- of-the-fittest battle is waged among an overpopulated group of smaller clubs. C&RB
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Creating Genuine Sex Appeal Differentiation is always a key to success in an oversaturated market, and in the club and resort market, that means going beyond lip service to find ways to truly stand out as a club that has real appeal to potential market segments.
When the developers of RiverCrest Golf & Preserve, a new club in Oaks, Pa. (far-suburban Philadelphia), decided that offering a great private club experience for women would be a key component of its market-entry strategy, they brainstormed to come up with a list of tangible features that would go beyond cosmetic attractions and have special and real appeal to women, without excluding other member categories.
The extra effort has paid off: RiverCrest has sold all but 30 of its 350 golf memberships within its first year, with women golfers now totaling 179 across all membership categories. In addition, over 60 girls have already participated in junior girls golfing clinics.
Specific items on RiverCrest’s list of ways to reach out to women included:
• Six sets of tees, three specifically designed for novice to advanced female players.
• Equal membership status across all categories and rules that allow play for ladies all day and everyday, without restriction. Ladies are also included in all tournaments and events.
• Allowing spouses of individual golf members to fully use club facilities, including the range and putting green, and also to attend clinics or enroll in private instruction.
• A Women’s Golf Committee, full ladies play, and a full tournament schedule that includes monthly and weekly events, member-guest and member-member tournaments, and a ladies club championship.
• Ladies’ locker room facilities, lounges and lockers in the 48,000-sq. ft. clubhouse that are fully comparable to the men’s, and ladies locker room amenities that include food and beverage and shoe services.
• An LPGA Director of Instruction and LPGA Assistant Golf Pro on staff, both of whom provide a full teaching schedule in the club’s Golf Learning Center.
• Equipment demo days devoted to ladies’ lines.
• Childcare services
• Dedication of 40% of the golf shop to ladies’ clothing and accessories, and two female buyers who keep on top of the latest trends.
• Special ladies’ social activities, including bunco, card and game nights.
• Open
forums and focus groups that allow women to express their needs and concerns at the beginning and end of the golf season.
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