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| Forget the magic wand! It isn't going to do the trick. The private club industry continues under pressure, and there's not much to suggest it's going to change any time soon. It's a combination of factors and challenges with a cumulative effect on clubs, amenities and ultimately, membership. |
| In fact, it's been viewed as the private club industry's "Perfect Storm," with the forces of the economy, the changing golf course marketplace and population demographics all lining up against clubs. |
| Some factors are constant, but clubs face many new challenges, particularly with declining memberships because of new competitive forces, economic pressures and perhaps one of the most significant, changes in lifestyles, of both present and prospective members. |
| History tells a tale, much having to do with golf. Going back to the 1920's, about 80 percent of golf courses were private clubs. Public golf was relatively unknown, and what courses were available up until the 1990's did not live up to the standards of private club courses. Much has changed. |
| "Public and semi-private golf courses in the United States, have increased by about 50 percent since 1990, while the number of private clubs has declined by about 10 percent during the same period," says Frank Vain, president, McMahon Group, Incorporated. |
| Where will it end? It's a good question inviting a variety of answers. Not only are golf clubs suffering, but also "numerous high quality restaurant chains have flooded the market with good dining options, and some 70 per cent of private clubs do not have a waiting list for membership," the president of the St. Louis, MI-based consulting firm, opined. |
| The industry is threatened, but challenges can be opportunities and club leaders need to adopt more proactive practices to enhance their clubs and recruit new members- the lifeblood of private clubs. |
| "Clubs experiencing membership recruitment or retention issues are not easily defined. They do however have several things in common," contends Heidi Voss, president of Bauer Voss Consulting of Galena, OH. |
| "They generally do not have a highly skilled membership director that is compensated to increase membership enrollment. Most clubs often cut this job position at the first onset of financial difficulty. This person is also crucial to member retention and making the membership feel that they are getting value for their dues dollar," Voss continued. |
| There are other commonalities. "If the club does have a membership director they are focusing on club newsletters and websites. And board minutes are other clerical tasks that are decreasing their networking potential to secure more sales. |
| Voss, who's company works mainly with new clubs development, says "we encourage the ownership group to place a heavy emphasis on this position and to also realize that it is an on-going job for the life of the club." |
| Steve Graves, president Creative golf Marketing of Manhattan, Kansas says it's unlikely any club is immune to membership issues. "Private clubs that do not offer golf as a core component of memberships seem to be struggling more" than clubs that do offer golf. |
| However "you cannot paint this question and my answer with too broad a brush," suggesting there are additional reasons for failing memberships. |
| "I've seen clubs at many price points and product types experiencing membership issues, just as I've seen all types of clubs having success," comments Brian Gaines of ClubGains, Addison, Texas. |
| The hardest hit seems to be "entry level clubs located in markets where they have an oversupply of daily fee properties. The potential member has access to a lot of inexpensive golf and can also experience a large variety of courses. At this price point, potential members are typically 'doing the math' when deciding on whether to join a club or not anyway, so the amount of cheap golf just makes it easier for them to decide not to join a club," Gaines concludes. |
| Rick Coyne, president, Club Mark Corporation and executive director of the Professional Club Marketing Association, says in his experience "those clubs in locations with less density of wealth and greater competition tend to have the greatest problems, because of the highly competitive nature of that kind of market. However, many clubs with waiting lists have experienced a reduction of the number of potential members on that list over the past couple of years." |
| Vain agrees. "Our research indicates that the lower end of the club marketplace is experiencing the greatest difficulty attracting and retaining members." Lower end meaning, small clubs of fewer than 300 members and low entry fees - under $10,000. |
| "The small, less affluent clubs offer a product that is not competitive with the high quality daily fee golf courses and other recreational outlets that are now available across the country," Vain suggests. "At one time, almost any private club facility was better than the municipal or low quality public facilities. This has changed. There are a lot of quality golf courses, many with nice dining and banquet facilities. So these smaller, undercapitalized clubs have lost their niche." |
| In a survey conducted by the McMahon Group in late 2004, about two-thirds of the clubs with initiation fees under $10,000 had fewer members then than they did in 2001. Other types of clubs having difficulty are those with location issues, which for the most part consist of an eroding member base because of changes in the neighborhood surrounding the club. |
| If a club is experiencing trouble, is there any one way to tell? Are there symptoms the board, management and members are likely to readily recognize? A quick answer is yes! |
| The most obvious is loss of members and obvious because the club "is not replenishing members in pace with those that are lost," Coyne stressed. And like he says, it gets worse. |
| "There are other manifestations as well. Simply put, when a member leaves and is not replenished, somewhere, somehow, something has to give. Either fees go up to cover those lost dues, assessments occur, services are cut, capital sources are tapped to cover operations, or worse, the club ignores the symptoms and craters." Coyne calls it "the death spiral." |
| "Symptoms are usually very obvious from capital funds being depleted, depreciation not being funded, services or hours cut, budget cuts, wage freezes. |
| "We're in the dues business," he proclaimed. "When dues stop coming, bad things start to happen and it gets worse from there." |
| Voss suggests a first symptom "is always cutting back of staff, which in turn directly affects service. This is a downward spiral. As service declines the members become unhappy and if they're not happy, they will not refer friends. And referrals account "50 percent of the new recruits each year." |
| Vain elaborates on the tailspin. |
| "Most clubs will lose about five percent of their membership each year because of uncontrollable reasons like death, relocation and changes in financial circumstances. Clubs that have declining memberships typically find slack demand for replacing this five percent. After a year or two, they find themselves some 10 percent or more members short of their budgetary requirements and things start to get difficult. |
| "Ever-present membership drives are the sign of a club with membership problems," Vain added. "Clubs that have a good product in a good location and a healthy financial backdrop can work through any sort of cyclical change in membership demand. Clubs that don't have these things must act quickly to shore up a lack of members, which typically consists of some sort of drive centered on a discounted initiation fee." Obviously not the best solution! |
| "There is a cyclical phenomenon…that occurs as the number of clubs and golf courses varies in relation to the number of potential members," Gaines feels. "In other words, the supply and demand equation applies in clubs, just as it does in virtually everything else." |
| Graves feels absolutely no clubs are immune from the membership issues today, and that it's "a phenomenon of the industry not remaining focused on the business fundamentals that retain clients and recruit new clients. Actually, some of the so-called 'name' clubs are having many more problems than lesser known clubs because their pride has them feeling that they are 'above' the concept of membership marketing!" |
| Voss maintains clubs historically have had membership issues, as far back at the 1700's when coffee houses that were established as private clubs recorded 'member demands' on the ownership groups. The same demands members have today. |
| "They asked for 1) a limited group of compatible members 2) exceptional service 3) value for their money," cites Voss. "We are not in uncharted waters. We are just beginning to realize that not only is the club manager, director of golf and golf course superintendent important to the livelihood of the club but the membership director is also key and this department needs to be given the tools to succeed and be held accountable for results." |
| Coyne doesn't believe what's happening is cyclical. "Overbuilding and lifestyle changes, combined with an aging population and the rising cost of golf have changed a lot of things. There is still a core group of people in this country that definitively want to enjoy the country club lifestyle, but they represent a smaller market than there is supply. Ten years ago it was all about what club you belonged to, now it's trying to hire the best soccer coach so we can live vicariously in our children's athletic shoes." |
| Ouch! |
| In Vain's mind, the phenomena varies with the level of private club. |
| "While we may think of private clubs as a homogeneous lot, the club world includes organizations of different types, sizes and affluence. The upper end of the market, the sort of stereotypical old line, old money club rarely experiences membership challenges. They are not invincible, but pretty close. The combination of excellent location, social cache, excellent recreational facilities and sound financial structure provides a stable environment where membership growth is an organic process largely unaffected by economic cycles or changing trends," Vain suggests. |
| "The sort of middle class clubs that have popped up over the last 40 years tend to be somewhat more susceptible to membership challenges," he claims. "While they may not get the 'flu like the lower third of the marketplace seems to have, they catch a cold now and then. In large part, these clubs are engaged in a battle for market share. Shifting trend lines, changing residential areas and general economic issues have significant impact on who is winning and who is losing this battle at any one time. |
| "Those clubs that can come closest to the upper end characteristics - that powerful combination of social prestige, quality facilities and location - tend to win over members from the other clubs, while those that fail to assemble the complete package tend to wallow along," he suggests. |
| "The sort of 'working man's' or 'blue collar club' has the hardest road these days," Vain contends. "If all a club offers is a sort of one-dimensional experience that is readily available in the marketplace, the members will defect up to the middle class clubs looking for more members or they will find their needs met by the public providers." And no hefty initiation fees and annual dues. |
| Clubs not understanding themselves and what their members want (and demand), the competition and the lack of membership marketing are primary causes for membership issues. |
| In Gaines' mind, another reason is "the continuing development of golf courses that are part of residential developments. The developer is interested in building the golf course to help sell lots, regardless of whether or not the market needs another golf course. |
| "The courses that find themselves most affected by increased competition are those that are not doing a good job of understanding what their members and potential members really want in a club," Gaines expounds. "If management is not getting, and acting upon, this type of information on a regular basis, they are setting themselves up for problems," something we've seen happen all too often. |
| Clubs "are either improperly positioned for their marketplace or have failed to keep their standards to the level that is expected," Voss claims, with deadly results for those who fail to heed. |
| "Many clubs elevated their membership initiation fees at a very fast pace and did not understand that the market will only go so high. Many hit the glass ceiling and are facing the issue of rolling back prices. This is a difficult position for a club to be in. Dues are the true revenue driver and without a full club it pulls on all members' purse strings," Voss added. |
| Vain agrees and expands with examples of his own: |
| People are less inclined to join or participate in any sort of social, political or athletic organization today because of busy schedules, increased commuting times, dual income households and home entertainment. |
| Today's parents spend much more time engaged in activities with or for their children than prior generations. |
| People travel a lot more. |
| There has been a 50 percent increase in the number of daily fee golf courses in the United States since 1990, yet we have about the same number of golfers. |
| Corporations have changed the way business is conducted. A lot of the client entertainment that was part of the business culture of the past is discouraged today. Business decisions tend to be made more on objective criteria than on relationships. |
| The role of women in business and society has changed dramatically. Private clubs tend to be more appealing to men than to women. |
| Populations are growing in the Sun Belt, but declining in the Upper Midwest and Northeast where many of the private clubs are located. |
| Membership in a private club is no longer seen as a sign of social attainment. The trend toward diversity in today's society is the antithesis of the notion of exclusivity, which is an essential element of clubs. |
| In Coyne's opinion, the problem "is more about overbuilding, and how we handle the situation over the next several years may well spell success or failure for many private clubs and daily fee courses," he opined. |
| Graves has a cliché he uses to describe private, member-owned clubs battling membership issues. "Private clubs are run like nobody's business because they are nobody's business!" |
| "The quality business men and women, making decisions for their constituents would make better and more prudent decisions for their own business than they have…as a board official. Emotion and crisis tend to be the influencing factors of private clubs rather than strategic planning and well thought through actions." And therein lies the problem. |
| Publisher's final thoughts |
So what's our analysis? In a nutshell, there are four major issues.
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| Clubs need actively recruit new members and be creative and initiate additional ways to keep their clubs full. And that's the mandate of the membership marketing director, build and preserve the club's complement of members. |
| Ten years ago, only a handful of clubs operated with membership directors. Today somewhere between 35 and 45 percent of clubs have someone responsible for membership recruitment and that's a number that will rise in future. |
| The membership marketing director must have an understanding of the marketplace, the concept of the private club, professional marketing skills, be able to execute marketing programs and feel comfortable attending meetings of local groups. |
| What else can you and your club do? Attend the Professional Club Marketing Association 10th Annual Membership Marketing Conference Sept. 19 and 20, 2005 at the Hard Rock Hotel in Las Vegas, Nevada. |
| I invite all general managers, membership committee members and membership marketing directors to attend. Membership Marketing in the 21st Century is a showcase offering timely information, panel discussions, the tools to meet today's challenges and the opportunity to meeting with participants from other clubs. |
| At least that's the way I see it. |
| What's your opinion? If you have any questions or comments, John Fornaro can be reached by email at johnf@apcd.com. |
| John G. Fornaro Publisher |