Like any business, the foundation of a successful club is based on satisfied customers (Members) continuing to purchase products and services. In the case of member-owned private clubs, this means paying dues, using the facilities and spending money at the club for things like cart fees, food & beverage and club related merchandise. A club is somewhat different than the typical enterprise in that (especially at member-owned clubs) the customers are the owners, or at the very least take a sense of ownership and pride in the club. I don’t know many folks who have a sense of ownership in their local supermarket, department store or car dealership. That said, of particular importance to any club is the understanding that each club has its own culture and that in order to keep the consumers (members) happy that culture must be the foundation of all decisions impacting the club.
With so many clubs developing master plans because of the COVID surge in membership and improvement in club finances, we think any master plan requires consideration not only of the simple economics of the club, but also the club’s competitive market, consumer base, and its culture.
In defining a club’s competitive market, one needs to understand not only the competitive clubs and consumer demand, but also its culture. Just because another club is across the street doesn’t necessarily make it a competitor. Culture can be defined as: “a particular form or stage of civilization, as that of a certain nation or period”. In the case of private clubs, the culture could be defined by ethnicity, such as a religious preference or nationality, though most clubs have become more diverse today. A club’s culture could be defined by the level of affluence of the membership or the focus on certain club amenities like sports or social activities or the quality of food & beverage. One question I always like to raise and discuss is whether the culture of a club is one of ownership or if the members act more like customers. One expert on consumer behavior is my friend Jonathan Last of Sports & Leisure Research Group.
We’ve recently forged a strategic alliance with SLRG to provide private clubs with the level of expertise needed to navigate an ever-changing private club marketplace with a unique combination of market, economic, consumer and cultural analysis.
In consulting with private clubs all over the US for more than 35 years, I’m convinced there are two kinds of clubs: those with owners and those with customers. Though many clubs are member owned, even those members often act like customers. Let me give you an example: The golf course at a private, residential club is now 30 years old and needs a major facelift — not just a redesign but better irrigation & drainage, bunkers that drain after a rain event, a proper practice facility, and maybe a new banquet facility. If that club can’t gain majority approval for this renovation project, or it passes but the required assessment results in significant member exodus, that could be a club with too many customers and not enough owners.
Clubs have a variety of procedures for decision-making. Some require member votes; others are done by the board and still others are benevolent dictatorships where one person can make decisions. At some clubs, the process is dictated by the amount to be spent with higher amounts requiring the input of more people.
For long-term success, clubs need to be both populated and led by “owners”, but those without personal agendas. One term I’ve seen used, quite appropriately, in my view, is “stewardship”. Club stewardship is the province of member/owners who are committed to doing what’s in the best interests of the membership at large and passing on a stable, healthy, and viable club to the next generation.
This is more than a mere thought experiment for private clubs today, especially those with real estate components. Proper stewardship means effective planning — addressing the lifespan of club assets in addition to the golf course, such as roofing, HVAC systems, swimming pools, racquet sports facilities and fitness facilities. If these deteriorate, the club deteriorates — followed just as surely by surrounding home values. Proper stewardship and planning protect everyone’s investment and perpetuate the future of the club. This doesn’t simply mean spend, spend, spend. Maintaining a cost of membership considered acceptable by the membership is critical – even at the best clubs.
Prudent planning requires an understanding of the club’s culture. What are the cliques and member factions across the membership and which are most influential?
Planning for the inevitable (and normal) wear and tear is something investor-owners handle as a matter of course. Think of the way you maintain your own home. In the short term, it’s as simple as a club establishing a reserve sinking fund as part of the budget each year. This means setting aside actual cash to fund the replacement of various short-lived items. The problem is that most member-owned clubs with tight budgets often eliminate these sinking fund/reserves to balance the budget. It’s often the easiest way for boards to make ends meet without raising dues, implementing assessments, or increasing usage fees — things that members (customers) hate!
Unfortunately, it’s also the fastest way to dig a hole that a club may never climb out of. That sinking fund is hugely important, and it’s never too late to start one. Though it may not reverse past neglect, establishing a reserve NOW at least cushions the impact when reinvestment in the club is no longer a matter of choice. Maybe it’s the golf course. Maybe the club depends on function revenue and the ballrooms/kitchen facilities need to be updated. There will come a time when that reinvestment must be done — owners plan for such things, while customers often just leave for greener pastures or leave it to the next generation as the club declines.
Good master planning requires a club commitment to find independent, professional assistance in the areas of golf course design, clubhouse design and third-party market/financial/operational consultation. But good master planning requires something else: members who think and act like owners. Members who think and act like customers cannot and will not plan. The concept behind including a cultural audit in club master planning allows the club to rely on objective third party assessment of what dictates that culture and how it will impact the club’s short and longer term direction. Club leadership needs to be selected based on their commitment to the club’s culture free of personal agendas and needs to change at intervals which avoid both instability and stagnation (“same old crowd”).
As an avid golfer, when the first thing someone tells me about a club is how good the food is, I tend to presume that maybe the golf course isn’t that great or maybe not maintained as well. Regardless of the focus of the club, members taking ownership will determine how likely it is that the club is able to go the extra yard in the various areas of focus, such as golf course maintenance, capital improvements or staffing & service levels. All these things help to determine which clubs are potential direct competitors.
As an example, we recently were retained to do a market study for a proposed (golf only) club catering to the serious golfer seeking a second (or more) membership. Obviously, the family country club down the street wasn’t a direct competitor.
When it comes to master plans, all clubs have wish lists. Some want to host a major event. Some seek to add prestige to membership. Some hope to establish financial stability. Some simply want to fix what’s broken. All are different. No quality plan specific to the club in question can be developed without a complete understanding of:
- its market
- its location/demographics
- its facilities
- the club’s culture
- its membership
Once these benchmarks are established, realistic goals for the specific club can be set and a vision for that club’s future developed. The “one size fits all” approach must be avoided at all costs. Economics often dictate that a club should phase in any improvements to first address the elements that either need to be corrected (deferred maintenance) and those that will pay for themselves. Each and every club has a different combination of these characteristics, and each has to consider both the intrinsic and extrinsic factors and respond accordingly in their planning.
A master plan is no small project. It should start with analyses of the items listed above to fully understand the specific needs and potential of the club. Simply developing a wish list that may be the result of what a board member observed on vacation, another club might have or something one may have seen on television is flying blind. Using a wish list that may be nothing more than a compilation of what other clubs are doing is too broad. All too often, I’ve heard the phrase “let’s see what our peer clubs are doing” with respect to rules, policies and club enhancements and while understanding the market is critical, each and every club is different.
There are several critical questions that need answers for a successful plan. These include:
Can an improvement generate additional revenue?
- How will improvements impact operations?
- Will (new & Existing) members be willing to pay for it – and its operation?
- Is the improvement being considered:
- capable of generating additional revenue and;
- does it provide the club with a competitive advantage?
- Can the club’s site and infrastructure physically support the improvement?
- Does the market desire and will it support the improvement being considered?
I’ve often observed that some clubs, especially “top-tier” clubs tend to ask what “peer” clubs have done relative to a specific issue, policy, or improvement. It’s imperative to know what the competition is doing or has done, but equally important for any club to develop its own identity. Being the first club to add things like music or food service to the practice area, more liberal dress codes and fewer rules could enhance a club’s panache simply by the assumption of a leadership role. Diversity in membership and staff is now considered essential by many clubs as the private club industry seeks to not only broaden its appeal but also achieve a higher level of social responsibility. A lack of more family-friendly environments can be a deal breaker for many. These issues should be a part of any master planning as facilities needs evolve.
While this article focuses on the economic factors affecting club planning, it’s also important to realize that there are most certainly instances where clubs should most definitely add or enhance amenities that may not have a direct financial benefit. Such decisions should be identified as such and made with the full knowledge that they have a cost.