Seller Beware

By | May 24th, 2018

The next club I hear of that solved its membership problem solely with a low cost of entry and reduced monthly fees will be the first one I hear of.

Top private country, yacht, or city clubs have a wait list. These clubs are justifiably revered by their members, admired by their peers, and are the standard to which all clubs (should) aspire.

Many other successful clubs have a stable membership that supports the operating and capital needs of the club, with room to spare. These clubs find success in an environment where the member attrition rate is offset over time by new member-recruitment efforts that are supported by smart marketing strategies and a favorable price/value relationship, when compared to the overall cost of membership. These clubs will thrive and endure.

Clubs at risk are losing members and money. This may be a by-product of poor leadership and management, or simply because economic conditions in the surrounding area have changed for the worse and can no longer support the dynamics of a private, member-owned club. It happens.

But private clubs living on the edge “do not go gentle into that good night,” as poet Dylan Thomas once said—they strategize on how to right the ship and survive.

Unfortunately, one of the first moves too many at-risk clubs make to try to improve their fortunes is to lead with price and create a myriad of new, low-cost membership categories—all with the expectation that hordes of new members will rush to join the club. The next club I hear of that solved its membership problem solely with a low cost of entry and reduced monthly fees will be the first one I hear of.

Club membership should be sought after, not enticed. A numbers-driven approach only masks the heart of the problem(s) the club needs to address. What’s more, new members attracted by “the deal” will be the first to bail if/when personal or economic adversity strikes. There is no “stickiness” with these new members, so the club ultimately ends up back at square one, and has likely put whatever is left of its culture at risk in the process.

A private club is a luxury. A high-end car is a luxury. A boat or yacht is a luxury. And luxury does not come without a price. It also holds true that buyers and sellers recognize that luxury can have a variety of price points; however, the price is justified by the commensurate value.

So, variety for the cost of entry and membership does have its place in the club world. Before a club modifies a long-standing fee structure (initiation, monthly dues, annual activity fees, etc.), it is imperative to understand how current and potential members perceive the club. Buyers recognize the difference between an S Class and C Class Mercedes. Sellers know how to price those cars accordingly.

If a club’s original raison d’etre no longer exists, it more likely needs a new model, rather than a new price point. We see and report on clubs all around the country that have successfully transformed their models to reflect changing demographics and member expectations. The evolution of these clubs ranges from an outright sale to a new owner, a move from being a full-service country club to becoming a private, golf-only club, or perhaps a merger with another club that results in combined resources that exceed what either club could accomplish individually.

The at-risk club facing a survival challenge should not go it alone. Odds are good that the Board of Directors does not have the knowledge or expertise to find the right solution. If reduced fees and dues are the best the club can come up with to address financial woes and membership attrition, seller beware.

In that case, run—don’t walk—to find experienced club industry professionals and seek their counsel. More often than not, they will help you find the right solution.

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