Peter Nanula is a longtime golf industry leader who runs Concert Golf Partners, a 22-club boutique owner-operator focusing on the acquisition, or as he calls it, recapitalization of member-owned private clubs.
I posed some questions to Nanula about the golf and club industry and he was kind enough to share some insight on how he envisions golf in the next few years.
Due to social distancing, Nanula projects a 2020 decline in overall gross revenues of 10-15%, despite increases in membership and play (rounds are up 20-30%) due to the lack of food & beverage and other ancillary revenues. He plans to mitigate this loss by reducing labor where possible, developing new and innovative programming to use spaces more effectively and more takeout and outdoor dining where and when able. Concert is projecting EBITDA to be “flat” for 2020 as compared to 2019.
Overall, for the year he projects a 10-20% reduction in labor, which represents a recovery of sorts as many of the furloughed employees have been called back.
Concert, focused on private clubs has seen increases above budget in membership development, however Nanula envisions a looming recession that he predicts will result in attrition of membership at his and other clubs in 2021/2022. He predicts that club membership will return to the days of promotions and discounts with reduced entrance fees. So far in 2020, however, they are “setting membership sales records, with some price discounting due to mid-year timing”.
Plans for capital improvement projects have been delayed in many cases, however some of the areas not in use (banquet areas) have been accelerated due to not interfering with events, which have been postponed or cancelled.
Because of the increased play, maintenance budgets and course projects have been a focus for Concert because for many of their members, golf is their only option for recreation right now. With the added play, Nanula projects an overall 5% to 10% increase in golf course maintenance spending for the year, even after course closures in March and April due to the pandemic.
Nanula observed that he has an overall long term positive outlook for golf since “people appreciate this sport more now.”
Nanula observes that top-tier clubs (those with full membership and wait lists, strong capital plans and community prestige) will continue to succeed in the member-owned space. However Concert’s planning reflects the feeling that COVID will accelerate the concept of member-owned clubs, especially those struggling to find capital for deferred maintenance and club enhancements embracing his concept of recapitalization avoid assessments, member responsibility and limited available capital to fund projects necessary to compete.
Nanula and Concert view the club as the member’s “Second home” now more than ever as people seek safe spaces. Combined with golf’s social distancing advantages over other recreation, they are seeking new ways to “connect with members and engage as the club potentially becomes a bigger part of the members’ lives.” They’ve also installed simulators and established fitness and yoga classes via Zoom or other online vehicles.
Relating to the value of clubs, Nanula interestingly remarked that their (and other’s) benchmarks of paying 1X gross revenue hasn’t changed much in several years. He sees that trend continuing and the member-owned club as an opportunity where Concert is selling the continuation of a lifestyle for the members versus a purchase price and potential capital gain. The clubs he pursues aren’t likely to “market” themselves for sale and signal distress to the outside community or even the need for capital to their own members.
Concert’s market is very much a niche market focusing on member-owned private clubs seeking to continue operation but lacking the capital to move forward in a competitive way. Their program of recapitalization offers members continuation of the club with both freedom from governance and operational issues as well as capital investment without assessments. The members lose control and there most certainly is a profit motive, but for many clubs this is a positive option for moving forward.