A fundamental of good golf is choosing the proper club for each shot. In today’s competitive environment for clubs, it’s the club that needs to make the right choice for future economic viability.
Many member-owned clubs are struggling. There can be a number of reasons for this. Some clubs suffer from lack of strong leadership, others from inadequate, aging and deteriorating facilities and others from location in a crowded and competitive market. Some of these problems can be resolved while others can be managed. There are some problems that simply cannot be resolved, and it’s those instances where clubs are closed and sold for alternative uses.
The choices available to most clubs include:
- Capital reinvestment
- New management/leadership
- Market repositioning
- Sell the club to an investor-operator
- Lease the club to a management firm
- Retain third party management
How does a club choose the best option?
The best place to start is by taking stock in your club and understanding the club’s assets and its liabilities. While most people think “balance sheet” what I’m referring to here is the club’s market, it’s facilities and its membership. A complete analysis of any club includes an objective assessment of each and an understanding of strengths and weaknesses, and opportunities and threats. It’s a classic SWOT analysis and it’s essential to a club’s sound decision-making.
There are numerous options available to most clubs. Of particular interest is the choice between reinvesting in the club and selling to the several management companies that are seeking private club acquisitions. What do you need to know to decide what’s best for your club?
A sound and thorough market analysis will illustrate the depth of the market and whether there’s actually an opportunity to turn the club around. If such depth exists for the club to thrive, its facilities must be considered and the cost to upgrade to a competitive position realistically estimated. These are the easy ones.
It has been my observation through the years that club membership comes in two forms:
Those clubs with a culture of ownership are more likely to embrace reinvestment in the club (and the likely assessments) to make their club special. Clubs where the membership think more like customers may be more inclined to leave the day to day responsibility of running the club to an investor, who while unlikely to institute assessments, will operate the club for profit and bring the increased potential for conflict that goes with for-profit operation. Evaluating your club’s membership is more difficult than it seems.
A survey of club members will almost always indicate resistance to increased dues or assessments, whether they be large, one time assessments or drawn out over time. Often, members will respond to the prospect of assessments with threats of resigning from the club. A club really never knows until the time comes to pay up, and there are certainly instances of members voting for projects with related assessments and then resigning anyhow. One way to explore whether your club is a culture of owners or customers is to look at spending habits. Is the club’s revenue per member among the higher ones in the competitive market? Do the members use the club for dining? Do the members support the club pro and club events? Do they use the facilities that may have fees attached?
Here are the most important questions:
- Does the depth of market exist to perpetuate the club into the future with ample membership and market price to sustain the club?
- Can facilities be sufficiently and economically upgraded to compete?
- Are the club’s members committed to preserving the future of the club and willing to pay for it? Is the club a culture of “owners” or “customers”?
If the answer to each of these is “YES” and it is determined that the club has an ownership culture, the club should consider how to best move forward as a member-owned club. If the answer to these questions is “NO” and the club is more customer oriented, alternatives such as selling or leasing should be explored.
It’s a tough choice and one that shouldn’t be taken lightly.