Recently, I had the chance to talk with ClubCorp’s Chief Development Officer Tom Bennison about issues firms like theirs acquiring and operating member-owned clubs. With so much transition occurring in the private club world Bennison’s perspective as a deal maker and major industry player for more than 30 years is most insightful. ClubCorp has successfully owned and operated over 200 private clubs for 63 years worldwide. They are the undisputed leader of private club operators and their portfolio includes both high-profile and well-known clubs like Firestone Country Club in Ohio, and three TPC clubs to a wide variety of neighborhood, community and destination country clubs and city clubs.
First, I asked Bennison what he feels the benefits are to members of a firm like ClubCorp acquiring their club. He quickly indicated the transfer of financial risk, which many memberships struggle with and the day-to-day operations responsibilities, which convey to an experienced and well-capitalized owner. In ClubCorp’s case, their many years of experience and proven track record along with their consistent commitment to invest capital soon after acquisition for things like reinvented golf practice facilities, fitness centers, aquatics and many of the non-golf issues sometimes overlooked by member-owned clubs are the big difference makers. He also noted the access ClubCorp members gain to their network of clubs for traveling members.
While emphasizing that the transitions from the member ownership have been smooth, he notes receiving 90% or more affirmative vote in most cases to sell their club. Often, a firm like ClubCorp can also bring a higher level of technology to the operation. With many club members having developed relationships with club staff, maintaining those relationships is always a concern to preserve club culture. In ClubCorp’s case, Bennison reports that 90% of department heads and 100% of hourly employees remain at the club after transition, emphasizing continuity.
Among the biggest challenges in selling the membership on the idea of turning over their club is getting 100% board support which is critical to a positive member vote. Overcoming member emotion and converting skepticism to enthusiasm for the logical and business-like manner ClubCorp succeeds is essential. Bennison stresses that they maintain member-advisory boards to ensure transparency and communication to foster a continued culture of “ownership” among the membership. Their history of membership retention and new member growth has been significant.
One sticky item at many clubs is the existence of a membership refund liability. In these instances, ClubCorp agrees to purchase the assets of the club, typically also agreeing to invest significant capital and while the refund liability stays with the “old club” entity. Since that entity no longer has assets the issue often “fades away and cleanses itself”.
It’s no secret that acquisition opportunities for firms like ClubCorp often come from clubs that are financially distressed. These clubs typically need capital improvements, have deferred maintenance, significant debt and declining membership. ClubCorp, being well-capitalized addresses all such issues in a “whole club” approach, often while “re-inventing” the club by targeting a more diverse market focused on offering activities and amenities for the entire family at most clubs. Financially, while many clubs pay outside fees to develop audited financials, deal with legal issues and handle payroll, ClubCorp maintains that having those services in-house at their Dallas headquarters leads to cost-efficiency and along with excellent buying power more than makes up for the necessary profit as compared to the not-for-profit member-owned clubs. Bennison acknowledges that there are those clubs that would never consider acquisition by a for-profit operator.
Losing control is often a fear members have and if they perceive that they can continue to meet their financial obligations, they’re often unwilling to consider turning over their club to a professional management firm. Even the most seemingly stable clubs are not immune to economic and market fluctuations and can find themselves in situations where some maintenance gets deferred, capital projects are postponed or cancelled and operations create cash shortfalls and turn into assessments. The for-profit model may not be for every club, but I definitely concur with Bennison (and others) that there are many clubs that resist reviewing the concept only to wait too long and wish they had later.