During the past 4 years, since COVID provided golf with a much needed shot in the arm, many clubs have thrived and survived as a result. I’ve heard one pro say that “COVID did for golf what Tiger Woods couldn’t do.” I couldn’t disagree more. As we see growth settling or even in some cases receding, my perspective is that COVID did very much what Tiger Woods did for golf and provided a (much needed) temporary surge that we still don’t know how sustainable it can be. The golf universe in our country still has much to do to achieve the broad-based culture necessary for long term growth. There’s been progress, but sustainable growth is still no guarantee.
Recently, we were engaged on an assignment providing advisory services to a buyer (current member) of a club experiencing financial distress who sought to preserve the club he loved so much. The club had been under-performing and was located in an environment with considerable competition. The membership, albeit small, was committed to the club and club spending was at a high level, along with revenues from outside functions. Pricing was higher than the competition, but more amenities were available. Facilities were in generally good condition. What is the best path forward?
Among the things we learned from our analysis was that the club in question was not penetrating the market adequately and didn’t have its “fair share” of members. The subject, according to market statistics should have been able to generate more than 330 golf members, yet only had 150, just 45% of its fair share. The club was at the top of the range for average revenue per member (REVPAM) but at the bottom in overall gross revenues. Clearly, this tell us that the club needs to be repositioned in the market.
Much of the competition was made up of either golf only or golf focused clubs while the subject was more family oriented with a variety of other amenities, including aquatics and racquet sports. The subject clubhouse is large and has extensive seating capacity for dining and banquets. There is some deferred maintenance but not an overwhelming amount.
Considering that the market tells us there is apparently plenty of depth in the golfer market, it suggests that the club restructure memberships to offer a golf-only membership at a lower price than a full-privilege membership to compete more effectively with those clubs offering just golf.
While this example is fairly simple, each and every club needs to find the membership plan and price point which maximizes revenues while preserving the quality of the club experience. Having a keen understanding of the club’s culture is critical to meeting and exceeding expectations. Among the things members seek most is access. If the course is crowded, members will experience disappointment if tee times are unavailable. Does the membership play a lot? If so, the club’s capacity for members is reduced. Pricing is impacted accordingly. If the membership plays less frequently, more members can be accomodated. Knowing the amount of rounds desired and working backward considering the habits of the membership can help to establish the club’s capacity for members and the appropriate level of dues and fees. It’s not “one size fits all”.
We are working at another (very upscale) club where dues were increased 63% from one year to the next to fund capital improvements required as a result of long term deferred maintenance. Reportedly, at this club there has been limited resistance because the dues increase was implemented to avoid debt. As a result, the improvements won’t take place for another 3 years.
Every club’s challenge is different as are their solutions. Some clubs have the highest dues/fees in the market, too many members who can’t get tee times and experience considerable dissatisfaction. This shouldn’t happen, but can through mismanagement, excessive debt and even corruption within the staff, management and leadership. With many clubs having incurred significant debt for capital improvements of late, the cost of membership has risen dramatically in some cases, with many clubs presuming the COVID surge is sustainable. Time will tell, but understanding a club’s culture, facilities and market can provide useful insight to ensure that the club is properly positioned and sustainable for the long term.
