2006: Private predicament
Saturday, August 6, 2011
Tucker Burns, general manager at Engineers Country Club in Roslyn, N.Y., has seen the industry change dramatically in the 23 years since he started working as a busboy at his Long Island club.
Mostly he’s witnessed a proliferation of high-end, daily fee courses in the region that has whittled away at the first-rate service advantage his private facility long enjoyed. Now, keeping members and attracting new ones are daily challenges that mean turning upside down the stereotype of a staid, stuffy club.
Nothing is above consideration: He’s added kiddie pools, water park slides and spa cuisine, relaxed dress codes and permitted kids in the main dining room.
And having recently restored their circa-1917 Herbert Strong-designed courses, Burns and his staff are marketing the history and contemporary relevance of the layout that hosted the 1919 PGA Championship and the 1920 U.S. Amateur.
“We’ve done everything possible to keep up with the times,” Burns says.
The changes at Engineers typify the extraordinary effort private clubs are taking to keep their place in the golf landscape. For many, it has been a difficult period of adjustment.
According to the National Golf Foundation, there are now fewer private clubs in the U.S. than in 1931 – even though the total number of all golf facilities has more than tripled in the past three-quarters of a century. During that period, the market share of the private club has plummeted from a high of 78 percent to a low of 27 percent in 2004.
A host of reasons explains the attrition: In addition to upscale daily fees that have mimicked the luxury of private clubs, changes in tax codes have reduced the deductibility of entertainment-related club expenses. But most of all, the shift in fortunes can be attributed to sweeping changes in consumer behavior underscored by decreased leisure time, less disposable income and an increased emphasis on family-oriented recreational activities not traditionally offered by private clubs.
Of course, there are exceptions to the trend. Prominent clubs, such as Oakland Hills in Bloomfield Hills, Mich., and Oakmont (Pa.) Country Club, are still flourishing. And private clubs in the Sunbelt
and other regions that are experiencing significant real estate growth and population influx still are faring well. That explains a modest rebound during the past eight years, when the private club market actually posted a net gain of 116 facilities.
“There’s no such thing as one golf market,” says golf course appraiser Larry Hirsh of Golf Properties Analysts in Harrisburg, Pa. “It’s all about demographics. The best way to look at it would be to go to the real estate growth numbers.
“Where you see a lot of new, affluent housing, that’s where you’ll see thriving clubs.”
Even as the golf industry as a whole was undergoing a widespread boom throughout the 1990s, the private club was waning as a market force.
Between 1990 and 2004, while the U.S. saw a net gain of 3,211 golf courses, the number of private clubs declined by 447. In other words, the supply of golf courses in that period enjoyed a compound annual growth rate of 1.6 percent, while the supply of private clubs was falling by 0.7 percent annually.
Rustbelt area-courses in the old industrial Northeast and Midwest have had the hardest climb. Waiting lists in Buffalo, Cleveland, St. Louis and Hartford have all but disappeared, with clubs actively recruiting for new members and, in some cases, offering discount programs to members who bring in new ones.
John Crowder, director of business development for ValleyCrest Golf Course Maintenance, based in Calabasas, Calif., says, “The private club market is a scary place these days. We try to be very careful. We have more people to talk to than we have hours in the day to meet with.”
Adds Bill McMahon, founder of the McMahon Group, a St. Louis-based private club consulting firm: “Ten percent of the private clubs in the last decade have gone out of business. They’ve gone public, been sold off for real estate, or just shut their doors. With a few exceptions, you’re not seeing new clubs founded unless they’re part of real estate.”
These days, it’s flat out difficult to make the numbers work at many facilities. Most clubs, McMahon says, lose 30 percent on every a la carte meal but make 30 percent at a banquet. But the latter, a long -standing source of private club income, has been reduced with corporate America increasingly wary of sponsoring lavish parties and entertaining business clients.
“Nothing at a private club makes money,” he says. “That’s why you have dues.”
The nature of the private club market does not lend itself readily to comprehensive data gathering. Reporting on surveys is voluntary and not necessarily representative of the industry as a whole. One measure of the health of the private club market, however, is the waiting list. By definition, it suggests the relative balance of supply and demand, with long waiting lists indicative of a highly coveted membership.
“Waiting lists are a sign of fine management,” says Jim McLoughlin, a veteran industry observer and analyst.
This indicator also confirms the private clubs’ woes. Among facilities surveyed by the National Club Association in Sept. 2005, roughly two-thirds reported having shorter waiting lists than in 2004. Only 13 percent of respondents had longer waiting lists, and the remaining 20 percent experienced no change.
This survey evidence is consistent with McLoughlin’s observation that historically, waiting lists for most clubs “used to be five or six years; now they’re one to two.” He suggests that the shorter waiting time is due to greater membership turnover. “Before 9/11, the annual rate of turnover was 10 to 12 percent,” says McLoughlin. “Now I’d suspect it’s higher.”
Frank Gore, executive vice president for membership sales at Dallas-based ClubCorp, knows for sure that memberships are turning over faster.
At the 185 clubs in his company’s operations portfolio, he says, the “average membership duration
in the last 20 years has gone from eight years to six.” That’s a function, he suggests, of increased housing mobility, job turnover and often career change. A major factor in waiting lists at older, established clubs, he observes, is that the second generation stayed in town and remained affiliated with the parents’ club.
“That’s not the case nearly as much now,” Gore says.
In response to dwindling membership rolls, many facilities, particularly at the lower or entry levels, began discounting entry fees.
“A lot of clubs panicked,” Hirsh says. “They’ve cut deals, canceled initiation fees, offered bonuses to members. It sends out the wrong message.”
Industry analysts suggest that a wiser strategy is to fine-tune membership categories and create what McLoughlin calls “an in-house farm system for membership.” That can include legacy memberships, more attractive junior membership programs and the financing of joining fees. Open marketing of memberships detracts from the stature of a club. The key, he says, is to “intercept incoming clientele” and show them the value of a membership.
Michael Cunningham, a principal in the architecture/design firm of Hart Howerton, has witnessed
the market evolution from the perspective of a clubhouse designer.
In many cases, he says, established clubs find themselves with dated structures, organized around the facts that members (mostly male) were accustomed to stopping by every day for lunch, and that the club was the center of a family’s social life.
Still stuck in that mindset, Cunningham says, “many clubs in the Northeast are limping along.” The best clubs, however, are making a commitment to “master-planned” changes, rather than piecemeal fixes.
“Lots of high-end clubs have been slow to respond to what families, women, kids want,” he says. “Today, (they’re) searching for relevance.”