Two additional presentations of particular interest were made by Russ Conde of Club Benchmarking (CBI) and by Tom Bennison of ClubCorp.
CBI is a firm that develops operational benchmarks for clubs to assist in determining a club’s operating efficiency compared to other clubs on a global or stratified basis, with the ability to compare based on size (gross revenues) and geographic location. CBI now has over 550 clubs subscribing and in their database and notes, among other things a clear difference between for-profit and not for profit clubs in the cost of labor.
Bennison also provided some interesting insight into some of ClubCorp’s operating experiences.
CBI, which projects no growth for golf in the near future, says studies show that the one primary difference between for-profit and not for profit clubs is a cost of labor of 54% (of gross revenue) for non-profit versus 48% for clubs in the for profit sector. This is certainly understandable given the profit motive and the emphasis on cost control. CBI helps club leaders, club managers and club consultants like me determine the economic sustainability of a club. Once we understand these issues, we can help a club better determine if the club should continue operation and what changes they should make.
I have always maintained that there are two types of clubs: “Owners” clubs and “customers” clubs. These can be both non-profit and for-profit, as it really comes down to the attitude of the membership, whether there’s pride in the club and if members are willing to pay for what they want. Since, according to CBI, their subscribing clubs are split about evenly between larger clubs (>$6 million) and smaller clubs (<$6 million) the question certainly arises as to how many more smaller clubs, that are struggling are not likely to be in their database, especially those with revenues under $3 million.
Of particular interest were the averages of CBI clubs, which fall in a very tight range showing dues as generating 50% of all revenues, but 78% of available cash for the club. This compares to golf operations, which generate about 15% of the gross revenue and 21% of available cash and Food & Beverage (F & B) which generate little or no available cash (net) on about 20% of the gross revenue.
The lesson: Dues and golf/cart fees are the engine that powers the club. Furthermore, the typical club has debt amounting to a median of approximately $5,000 per member. 25% of all clubs have little or no debt. If dues are the engine, debt is the train wreck.
Bennison made several interesting observations:
With so many clubs often slow to reinvest, the ClubCorp experience has shown that clubs they’ve invested the most in are those performing the best. This is no surprise to someone who saw his childhood club fail because of a shortsighted refusal to reinvest in the club’s facilities. ClubCorp has also reinvented many of its clubs with modern themes, renovated greens, tees and bunkers, expanded pool facilities and amenities like music on the practice range (probably not for everyone).
Bennison defined “clubbable households” as those earning a median income of $250,000, but that could be higher ($300-$325k) in more expensive markets. They look for population of 157,000 within 5 miles of the club and project that 20-25% of clubbable households will join clubs in the market, which they define as a 15 minute drive time.
The moral of the story points to several conclusions:
- Clubs should shift their focus to dues and golf from F & B for economic success
- Reinvestment in the club (if well-conceived and managed) will payoff.
- Debt should be avoided if possible, and improvements should be planned for in budgeting with reserves
- Older members will pursue newer clubs but (without upgrades) younger members will not join older clubs.
- Many older clubs need to reinvent themselves in order to compete in today’s environment.
- The modern member is looking for value.
- With less time, members require locational convenience.