When the chance finally came for KSL Capital Markets to buy ClubCorp, the economic climate in general, and club industry picture in particular, was much different in 2006 than it would have been when KSL’s principals first expressed interest in acquiring the club management company, in 1992.
But after a 14-year wait, the Denver-based private-equity firm wasn’t about to back off because conditions had become less ideal.
“Even in a down economy, people are not likely to kick their kids off the swim team,” says Steven Siegel, Partner and Chief Operating Officer. “While club membership is certainly a discretionary item, if you can remain relevant and family-friendly day-to-day, [the membership] will still have value.
“In fact,” Siegel adds, “being in the membership business in this particular economy can be even more relevant, because it’s more local. Some members [who live in club communities or cities] can even get to their clubs without a car; others may be more inclined to shorten vacations and look instead to make the most of what their clubs can offer.”
The “frothy” economic conditions that existed when it finally acquired ClubCorp did temper KSL’s overall investment approach during the first year of ownership, Siegel says—but this was probably an advantage for the properties that started to get the first shots of capital infusions that will total $170 million over the first two years of KSL’s ownership.
“We were more cautious about other acquisitions or investments in 2007, which allowed us to focus on the performance of the [ClubCorp] properties and start to position them for the future,” Siegel says. “Because we have always been very operationally focused, this was not a departure for us, where it might have been for other investors who are just primarily financial players.”
Thus far, ClubCorp’s people and properties have “responded extremely well” to the new ownership and change in management, Siegel reports.
“We’re very excited about the investment and very pleased with the progress to date,” he says. “We think we’ve already been quite successful in helping to make the clubs more relevant, by giving them amenities that make sense. Now we have to make [those amenities] work harder and reach a broader audience, as we also focus on things like technology and systems that will be less visible to guests. But we certainly won’t be resting on our laurels.”
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