Life Cycles of Golf Communities & Clubs

One of the more interesting dynamics we encounter from time to time is the life cycle of golf communities and clubs.

There is a fundamental difference between primary communities and their clubs and those of second-home, retirement, resort and vacation destinations.  With primary communities and clubs, the life cycle is longer.  In a primary community, often buyers are in their 30’s and 40’s and raising families.  The tend to stay for longer periods of time unless their employment forces a relocation.  Accordingly, the associated club can expect a longer term member.  Conversely, in second home, retirement, resort  and vacation destinations, typically the buyers are in their 50’s and 60’s (or older) and the club in particular may suffer from having that member for a shorter period of time.

In many aging communities, we’ve observed the decline of the club amenity as residents who no longer have the physical capability for golf or other activities either resign or downgrade their membership.  This serves not only to impact the club’s economics but the surrounding homes can also experience decline as the club becomes potentially less desirable.  Accordingly, with the smaller membership window the club needs to tailor their membership development program to counteract this effect.

With the unreliability of membership refunds, many clubs have modified membership programs to implement lower fee, non-refundable programs in order to generate membership development.  Along with this effort, prudent clubs are understanding the trend of shorter life cycles in membership and planning for a continued effort in membership development even as the club becomes fully subscribed and the community sold out.

There are a number of issues to consider.  Last year, we analyzed an age-restricted community where the club was struggling financially.  The percentage of the community that played golf was low, and those that weren’t golfers were unwilling to support the club, even given the consideration of the club’s impact on the value of their homes.  The idea of opening up the club to outside members or even daily-fee play was met with resistance, and while some members from outside the community were permitted, their access was restricted to certain areas and facilities of the club.  They were “second class” members.  The community was somewhat split on how to run the club and the club required some capital improvements, especially in the clubhouse which was inefficiently designed and offered no gathering area for members, such as a grille or informal dining area.  Additionally, there were no locker rooms, so those from outside the community had no place to change, shower or keep stuff at the club.

As one might imagine, the member dynamics weren’t great and membership was declining.  There was little interest in selling the club to a for-profit operator, as the residents were leery of giving up control.  The jury is still out on this club since no decisions have been made as to how to proceed into the future.

Of course, one issue which has been prominent in recent years is the concept of mandatory membership.  This has become quite a hot-button issue and especially in those cases where mandatory membership is implemented after development, there has been considerable resistance and much litigation.

From the perspective of home value and club economics, it’s clear that the success of the club (and its level of maintenance) can impact the value of surrounding residential property.  Thus, it’s not only an investment in the club when a homeowner joins, it’s also an investment in the value of his or her home.  In many cases, if the community has a high percentage of retirees, the homes will be up for resale more quickly than younger communities, resulting in a higher turnover of membership.  The club is often the amenity that supports the community’s home values and those who aren’t golfers or don’t participate in other club activities shouldn’t get a “free ride”.

This is an issue I’m sure we’ll continue to see into the future and there are likely to be numerous solutions moving forward.