C&RB sat down with Ray McDonald, VP Sales & Marketing for Raleigh, N.C.-based McConnell Golf to talk about the club industry from his perspective.
Q: How has the total number of properties in the McConnell portfolio, and the breakdown by type, changed over the past five years?
We have seven properties in our portfolio and we own them all. They are all high end private golf clubs with championship courses. That’s part of the criteria for a club becoming a McConnell Golf club and that philosophy has not changed. The criteria for becoming a club is that it has to have the foundation of a championship golf course. But our focus is still on pure golf and so the other variables are secondary such as demographics. We are focused on the Carolina’s. Our goal is to have a property that is a short drive from where our members work or play.
Q: In terms of specific properties that have been added or dropped, what would you cite as the most notable and significant changes to your portfolio in the past five years, and why?
Adding Sedgefield was probably the most notable addition because it is a PGA tour stop. Since 2003, we have not dropped any properties.
Q: Why do you own all your properties? Has that always been the case?
We’re an ownership group. We’re creating a network of private high-end facilities for our members. When you’re managing a course, you can’t always control the direction of the club. For us to achieve our goals, we need to be in control.
It can be difficult during the acquisition process. The board or the membership are sometimes split as to weather or not to sell the property. We let it work itself out within the club and if it does and we’re still interested, then we proceed. We try to stay arms length from negotiations within the clubs themselves.
Once a property has been purchased, the immediate goal is to assess any capital projects or needs. We normally lay those out in the letter of intent so the membership knows what we plan on doing from the get-go. That could be course improvements or facility improvements, sometimes both. From a management standpoint, we also begin by trying to save money with efficiencies. We run seven properties with one accounts receivable and one accounts payable. We also own the software company that we use to run our program (ClubSoft).
At the moment, we’re in the process of acquiring Back Nine Links, a private social network company that turns club websites into social networking sites. It’s a departure from the static website mentality. It has a strong reservation system, too. It ties all the reservations into the social network. Everything is tied into a social network. We are installing it in the Sedgefield property and TPC Wakefield will go live with it when that property comes on board.
Q: Did the recession create more opportunities for management companies than they would have otherwise had over the past five years? How did it affect you as an owner?
It hit us harder than it might have hit a pure management company. It’s not necessarily good for an owner, but it does create value in the marketplace if you’re in an acquisition mode. As an owner, we saw a decrease in membership, but we also saw the ability to aquire some really high-end properties at attractive prices. That said, we didn’t—and won’t—buy frivolously. We have our model and if it fits our model, then we’ll proceed. We won’t if it doesn’t fit our model. At one point, we were fielding at least 1 call a week from a troubled property looking for a way out.
Q: Do most of the properties that call you have serious operational or financial issues that they hope you can solve?
Typically, we would not have the opportunity to purchase these clubs if there was not an operational issue. Some clubs were obviously in better shape than others, but some clubs were facing capital needs and improvements that would push the club financially harder than they wanted or were able to go. There was a whole slue of situations as to why the club was looking to be sold, but generally the clubs that we purchase are at a cross road either with membership, capital or cash flow.
Q: What were your major areas of focus for guiding those properties through the downturn?
We leveraged our buying power and we created some membership categories that we were careful would not degrade the value of the membership of the current members, but at the same time, it gives our clubs an offering that is more consistent with the times of today. At one property, we created an a la carte membership which allows members to add the amenities they wanted each year. We also have a corporate membership that allows individuals to join under a corporate membership umbrella, but doesn’t put the corporation responsible. The corporation pays an access fee and then up to 8 individuals have the opportunity to join a high end private club, but they are responsible for dues. The company then pays the access fee each year.
Q: With the industry now appearing to stabilize again, what is your long-term strategy for your portfolio and the properties within it?
I think we’re approaching the end of our expansion era. That’s not to say we won’t add more, but we’re not looking for huge growth. Now our focus is going to be on adding value to the membership.
Q: What can all clubs and courses in the market, including those that will always remain independent, learn from the programs and practices at McConnell Golf?
I think that the biggest thing that a club or course could learn from us is that unwillingness to change, especially when it comes to technology and purchasing, will handicap a club at some point or another. The members of your clubs are changing the way they live their lives and they way they get information. If a club does not stay in tune with the membership, it will lose its ability to be a top priority for discretionary dollars. It can have the finest food, the best course, the best pool, but if it can’t compete in the market, it will fail.
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