ClubCorp at a Glance
• Founded: 1957
• Total Family Memberships Held in Clubs: 175,000
Bolstered by fresh energy and funds from its new owner (KSL Capital Partners), dramatic change-strategic, physical, and cultural-is sweeping through the 150-plus properties rn by the company that’s credited with creating the model for the private club business.
With a membership of 3,800 spread over three facilities and 760 acres, and with a total of 117 holes of golf, four clubhouses and 10 dining rooms to oversee, the management team at The Clubs of Kingwood, outside Houston, is used to handling a wide range of inquiries and comments on a daily basis. But in recent months, even the managers on this seasoned staff have been struck by the different nature of some of the questions and feedback they’ve been fielding—and especially by who it’s been coming from.
“I had a hard-core golfer wave me down the other day,” reports Director of Golf Darrell Fuston. “He wanted to know: ‘What’s it going to cost me to use that new fitness center?’ It was clear he was interested in using it—but also that he was expecting to hear there would be an upcharge to do so. I told him it would cost him nothing—no assessment to build it, and no extra charge to use it; it was all a new part of his membership here. I think I finally convinced him that was the case.”
Adds Kingwood’s General Manager, Mike Feild: “A member stopped me, too; he reminded me he’d belonged here for 32 years, almost since the club was founded [in 1974]. Then he said, ‘Did you know the other day was the second time I’ve ever used the pool here?’ And he wanted me to know something else: ‘I will be back, to use it again.’ ”
Changing the Stakes
Ten years ago, it would be hard to imagine members would notice or care about fitness centers or pools at The Clubs of Kingwood, let alone go out of their way to discuss them with management. This is the place, after all, that was once such a perfect depiction of the traditional, golf-oriented country club, it was where much of “Tin Cup” was filmed in the mid-’90s (including the famous scene where Kevin Costner wins a bar bet by knocking a pelican off its perch with a seven-iron hit through open patio doors; a commemorative pelican statue now sits permanently on that piling, and Kingwood’s clubhouse includes the Tin Cup lounge).
At the same time, it would have been difficult to imagine a property like Kingwood would undergo the kind of transformation it’s seen in the past two years, with $10 million spent on facility improvements that have ranged well outside the realm of hard-core golf or traditional country club activity.
And it would have been hardest of all to imagine who’d be writing the checks for those improvements—because the infusion of capital hasn’t come from the original family ownership of ClubCorp, which founded Kingwood as part of developing the largest club management company in the world. Instead, the funding has come from a new owner, KSL Capital Partners, which acquired ClubCorp at the end of 2006, for $1.8 billion.
The principals of KSL had actually made entreaties to buy ClubCorp as far back as 1992, only to be told that basically, their money was not good there. But then the world in general, and the golf and club worlds in particular, changed dramatically. And the reasons behind ClubCorp’s original, pioneering success gave way to a new formula for staying in the game.
ClubCorp began when Robert Dedman, a self-made entrepreneur, bought 400 acres in 1957 in a then very-rural town in outlying Dallas County (aptly called Farmers Branch), to create Brookhaven Country Club.
Dedman’s vision was to offer private club membership opportunities with broader amenities (including tennis, swimming, and better food and beverage service). At the same time he wanted the club to be less exclusive, and more affordable, than the more prominent old-line, pure-golf properties. Even more daringly, he would do so with a clear profit motive—famously declaring that while most clubs at that time were run like they were “nobody’s business,” he would succeed by first expanding the market to draw out pent-up demand, and then, through sound management practices, make sure that revenues covered capital and operating expenses.
It was a remarkably clear and sound vision—and by following it, ClubCorp grew to where, at one point, it approached $2 billion in annual revenues and operated well over 200 properties worldwide, including such industry jewels as Pinehurst, The Homestead and Firestone Country Club. Dedman became known as “the Henry Ford of the club management business” (a nod to how he expanded the market, assembly-line style, to a less-elitist audience) and the “King of Clubs” (the title of his autobiographical business self-help book, published in 1999).
Even a man with Robert Dedman’s foresight, though, couldn’t fully anticipate the next developments that would send seismic shocks through the industry. First came the positive waves from Tiger Woods bursting on the scene in the late 1990s, and the ripples of a golf-playing, course-building frenzy. That was followed, however, by 9/11/2001, which not only smothered the boom (and left a glut of supply), but also prompted major lifestyle reassessments among American families.
Suddenly, it became conceivable that ClubCorp properties like The Clubs of Kingwood might not only change hands, but also need to change the very nature of what they offered, if they were to remain viable to their memberships.
“This club had a particularly rough time once 2000 came,” says Mike Feild, a 23-year ClubCorp veteran who became Kingwood’s GM in November 2006. “In addition to [the general challenges of the post-9/11 economy], the oil business was not good, and there were also some major weather-related problems, as a series of hurricanes hit the area. It was literally a perfect storm, and membership dropped, after 10 to 15 years of being well over 4,000, to under 3,400 in 2001/02.” And while Kingwood’s situation was among the most extreme to be seen within the ClubCorp network, it was not an isolated case.
Then, in 2002, Robert Dedman died. The new leadership—Robert Dedman, Jr. and John Beckert, from Bristol Hotel & Resorts—kept ClubCorp profitable by shedding underperforming properties (primarily public courses) from its portfolio. But there were few signs that any financial muscle would be (or could be) put behind those that remained. ClubCorp was generally viewed as being in a maintenance mode, and when the announcement came in May 2006 that it would now officially entertain offers for its sale (minus Pinehurst Resort, which the Dedman family retained), those who had been paying close attention weren’t all that shocked.
Patience Pays Off
Enter—or rather, re-enter—KSL Capital Partners, a Denver-based firm whose principals, since first making inquiries about ClubCorp in 1992, had accumulated valuable experience developing and operating high-end resort properties.
That experience, and what it signaled to KSL about emerging industry trends, had only served to heighten its interest in sealing the deal, despite the new issues now confronting the industry and the ClubCorp properties. When finally given the chance, KSL aggressively outpursued several other bidders to make the acquisition.
“We have always viewed [acquiring ClubCorp] as an opportunity to continue Robert Dedman’s original vision,” says new CEO Eric Affeldt, who previously ran KSL’s former golf division, KSL Fairways, and was also VP/GM of two premium resorts: Doral Golf Resort and Spa in Miami, and the combined PGA West and La Quinta Resort and Club in California.
“The concept of people wanting to become members of a place where they can hang out with other people who share similar interests has as much merit as it always did,” Affeldt explains. “But that’s only half the equation. The other half is making sure the places they join remain relevant.
“Much of that relevance now comes from a wider range of recreation and entertainment options,” he adds. “Over and over in our travels, we hear members say, ‘We’re not our parents, and this is not our parents’ country club.’ There may still be a niche for the traditional country club, but it’s becoming a much smaller one.
“The working concept we use now is the ‘sports resort’,” Affeldt continues. “It’s a term we got from Western Athletic Clubs [an operator of luxury health and wellness clubs in the San Francisco and San Diego areas that was acquired this spring by KSL], and it connotes a completely different lifestyle. We think our success will hinge on how we can turn country clubs into sports resorts.
“We recently acquired Seville Golf & Country Club in Gilbert, Arizona, a Phoenix suburb,” he adds.
“We think it’s the prototypical club, or sports resort, of the future. It has a very nice golf course, but the real drivers are its waterpark with slides, terrific fitness facilities, amenities like a movie-screening room, and very comfortable dining that’s not the least bit stuffy.
“Overall, it’s a place that at the end of the day you want to say, let’s grab the kids and go over.”
Off and Running
After waiting 14 years to acquire ClubCorp, and with its model for where to take the next incarnation of clubs in clear view, KSL immediately put agendas for change in motion.
At The Clubs of Kingwood, this meant reviving—and funding—some ideas that had been percolating for several years, to address the underlying causes of its post-2000 membership malaise.
While golf remained a strong offer for the club, with 162,000 annual rounds being played on Kingwood’s courses, it was clear that would no longer be enough on its own, especially as currently structured, to move the membership needle back towards pre-9/11 levels.
“Eighty-eight percent of our membership lives within five miles of one of our clubs,” Feild says. “We had to reposition ourselves as the hub of the community. Yes, that could include doing more to grow interest in golf—but even that had to be approached in a more family-friendly context. And there were many other areas we needed to pursue beyond golf, to show we were really serious about offering everything that would make everyone in the family want to belong and use the club.”
To KSL, “really serious” meant spending $10 million, with no assessments to members, to put The Clubs of Kingwood on the family-friendly radar. A significant chunk was put into golf—but primarily to create what the club now touts as its new “Family-Friendly” and “Family Short Course” layouts, on which children are allowed (with an adult companion) to drive custom-designed “kid-friendly” golf cars; other specially made four-seaters can be used by a family foursome.
And at the same time, equivalent sums have been spent at Kingwood on a five-pool Water Park complex, and on the Kingwood Fitness and Sports Center that caught the interest of the golfer who flagged down Darrell Fuston.
The Water Park opened this past Memorial Day, attracting over 2,100 for the entire weekend and 1,100 on Monday alone. The new area includes a 500-foot “lazy river” (see photo, pg. 22), two-story waterslide, and “splash pad” with over a dozen water toys. Eventually, the area will be ringed by nine private cabanas, complete with couches, fans and Internet access.
The 17,000-sq. ft. fitness center, set to open around Labor Day, will include a 4,800-sq. ft. central room that will look out onto the new pool complex (see rendering, pg. 22) and be filled with state-of-the-art cardio, strength and flexibility equipment. The new building will also house a group exercise studio, day spa, indoor men’s and women’s locker rooms with dry saunas, a bistro-style cafe with its own kitchen/prep area and indoor/outdoor seating, and a sports retail shop—where some of the biggest-selling items are expected to be swim diapers and Crocs footwear (a rack of the trendy plastic clogs is already prominently displayed in the middle of Kingwood’s golf shop, reflecting demand spurred by the Water Park’s opening).
The fitness center will also include a 1,600-sq. ft. child care area, sectioned off for different age groups. Directed by a dedicated child care specialist, it will include quiet spaces for infants in cribs, a wet crafts area, a large-screen TV with Wii console, and a spot for a desk and computer, so school-age kids can do homework or other projects if needed.
Even before this amenity is available, though, the Kingwood staff has seen—and heard—plenty of evidence that its new amenities are clicking with how membership wants to use the club. “I’ve already had many parents and grandparents tell me the Water Park is the best babysitter they’ve ever had,” says David Mosberg, Director of Operations.
And evidently, many people in the Houston area have a crying need for babysitters. Largely because of the buzz from its family-friendly initiatives, Feild reports Kingwood’s membership began to climb back last year and is now up to 3,800. The improvements are also proving to be a good fit with the “staycation” trend that’s keeping even people in Big Oil country closer to home in the summer of $4 gas.
“We’ve seen big boosts this year—as much as 50%—in attendance for our 4th of July Freedom Fest and member/guest tournaments,” Mosberg reports. “Even in this area, where many people have beach houses in Galveston or other [Gulf Coast] locations, we’ve given them a good reason not to fight the traffic. Plus, our water’s a lot cleaner.”
Reviving the Roots
While The Clubs of Kingwood ranks as perhaps the “splashiest” example of change under KSL ownership, it is by no means an isolated case. Throughout the ClubCorp network, dirt is moving for a number of intriguing projects—including one where it all began.
Like a lot of once-rural areas lying just outside major U.S. cities, Farmers Branch has been overrun by sprawl, with the Dallas-Fort Worth Metroplex long since blowing past it to extend the suburbs over a bloated area that now seems to reach clear to the Oklahoma border. This puts Farmers Branch in good position to capitalize on the “rebound effect,” as people realize that searching for cheaper housing or office space so far away from the city may no longer make a lot of sense. Indeed, as evidence of that comeback trend, ground broke this year on a $1 billion mixed-use community that will result in 5,000 people working and living closer to Farmers Branch—and Brookhaven Country Club.
Which only further convinces Eric Affeldt that KSL is doing the right thing with ClubCorp’s original property.
“Brookhaven’s not a modern club by any stretch, and it suffered from how the population growth bypassed and leapfrogged [Farmers Branch],” Affeldt says. “At one point it had 8,000 members, but then it got as low as under 4,000. We had a choice: Sell it, or try to reinvent it.
“Largely because of its history for the company, and also because of the popularity it has in the area, we decided to do the latter,” he adds. “Besides, we think it’s well-positioned to capitalize on a revival in golf in the North Dallas area—especially for practice facilities.”
So, while Brookhaven will also get a new water park and fitness center (see poster, pg. 22), the real juice from the $5 million in total improvements funded by KSL for the property is expected to come from its new practice complex, which will include a 45-stall driving range, 16,000-sq. ft. putting green, and short-game area that Director of Golf Brad Tyson says has been designed to “distinguish us at the next level.”
A recent visit to Brookhaven provided a snapshot of just how dramatically the world, and the club business, has changed from when ClubCorp, and its first property, got their start.
Brookhaven is now enveloped by the bedroom communities that expanded around it since it opened; there’s even an active public road now separating its sizeable golf (54 holes) and tennis (42 courts, 600 members) operations. The new athletic center will be built on the tennis side, and General Manager Heath Robberson hopes that, along with the water park that will be behind the member clubhouse used by golfers (it houses 1,200 lockers), more “interaction” will be created at a property that has literally become divided.
Leading a tour of the construction site for the new practice area, the club’s current President, David McCool, cites another challenge created by major changes in the game of golf itself.
“Our practice facilities had become very antiquated,” McCool says. “With all the big hitters today, we couldn’t keep them on our range—they actually started to bombard our [course] maintenance staff,” he says, pointing to the grounds shed, a defenseless target less than 300 yards away. “But now, we’ll have something without rival in North Texas.
“Members here always wanted something to happen, and for years we had a lot of focus groups and plans,” says McCool. “But it took the change [in ownership] to push this through. [Eric Affeldt] became a member here himself and got very active in soliciting other members about what should be done.
“We’re starting to fit everything together, and as people see improvements, they’re pleased. We have some traction,” he adds. “Everyone’s excited that we’re trying to do it all the right way—and now anything seems possible.”
Wii in a Business Club?
Similar sentiments are being expressed throughout the wide range and variety of facilities in the ClubCorp portfolio, as staff and membership at many other properties have also been glad to see not only evidence of plans for change, but the means for bringing it about.
On the golf side, as another family-friendly initiative, all properties with courses (except those that host Tour events) were mandated in February to institute the FasTee program (originated in 2005 at The Clubs of Kingwood’s Atascocita course), which puts new tee areas 100 yards ahead of the forward tees on all par 4s and 5s. “We don’t build up [the new tee area], we just mow it,” says Affeldt. “It turns 6,500-yard courses into 4,500, which is a heck of a lot shorter for beginners.”
KSL is also putting money into the city, dining and sports clubs in the ClubCorp portfolio. And John Longstreet, Executive VP of the Business and Sports Club Division, doesn’t feel his facilities have to be left behind in the push for more family-friendly relevance. “Even the [American Airlines] Admirals Club has a kids room now,” he notes.
To that end, Longstreet is directing an intriguing initiative that will try to maximize synergies between videoconferencing—which he views as a underused technology that was “ahead of its time, but with the nature and cost of travel today, could have a rebirth”—and, of all things, Wii games.
“Wii is today’s golf simulator—but even better, because it takes less space and you can do more with it, especially for children,” he says. “So the videoconferencing equipment being put into all business clubs will include 60-inch TVs that can be rolled into other rooms, to be used for Wii-based events.”
That’s just one on a long list of break-the-mold ideas Longstreet seeks to explore; others include developing a standard nutritional menu promoted as flavorful rather than healthful (“the working title would be something like ‘Celebration,’ ” he says. “Calling it ‘heart-healthy’ would be the kiss of death”); kids-under-10-eat-free programs (which has worked very well in one club, he reports); looking for ways to relax dress and wireless-use policies and get more in step with how business is conducted today; and even devoting sections of every club’s Board meeting to brainstorming, where “there’s no bad idea, as we talk about how to make ourselves more relevant.”
“Are any of these the answer to reinventing the business club? ” Longstreet asks. “No, but no one thing is—the ‘answer’ is figuring out 15 or 20 things we need to do.”
Opening the Doors
All told, KSL is putting $170 million toward facility improvements and amenity enhancements throughout the ClubCorp network in its first two years of ownership. And the new ownership has also continued to develop and expand (to now also include other KSL resort properties) the Society and Signature programs that have always been one of ClubCorp’s biggest assets, because of how they add value to individual club memberships through access to other ClubCorp properties and extended benefits that are negotiated on a national basis.
“The appeal of access and discounts—being able to not only get a deal, but get to the front of the line or better yet, get in when no one else can—is one thing that never changes, no matter how affluent the audience,” notes Frank Gore, ClubCorp’s long-time Executive Vice President of Membership who is retiring in September. “And when you can provide these kind of benefits, it takes membership to a whole new level of stickiness.”
Perhaps the most impressive corporate activity of all now being accomplished under ClubCorp’s new ownership has grown out of an event that debuted last year, to commemorate the company’s 50th anniversary. Even though KSL wasn’t around for 49 of those years, it didn’t hesitate to throw its full support behind the ClubCorp Charity Classic, now an annual event that will be held again this September.
And it’s smart business to do so: In addition to being a feel-good event both publicly and internally (one of the benefitting charities is ClubCorp’s Employee Partners Care Foundation, a relief fund for employees in need), the classic also provides a tremendous marketing opportunity, as all properties are opened to the public for the day. Well over 50% of the 10,300 people who came to ClubCorp properties for the Classic last year were non-members, and this year’s goal is to maintain that percentage while boosting overall attendance to 25,000.
The way the new ownership team jumped full-bore into that event typifies its approach to everything it’s taken on, says John Longstreet, who came to ClubCorp from Intercontinental Hotels & Resorts two years before the acquisition.
“Eric [Affeldt] and the others have brought new heart and energy to the business,” he says. “KSL has helped us take what was already a great thing and jump-start it again, so we can explode to the next level and unleash all our potential.”