2005?  What Industry Experts Foresee

You probably have a good idea of the problems facing your club in the coming year.  But are there some unexpected surprises in store?  People serving the club industry in various capacities weigh in on both the challenges and opportunities that await private clubs as 2005 unfolds.

Time To Restore Tradition and Perceived Value—Harold B. Berman

Over the past decade or more, many distinguished private clubs have lowered their standards and changed their methods of operation to compete with other entities, both clubs and places of public accommodation.   Dining, golf, health and fitness facilities, tennis, swimming, and other related activities, which are traditional attributes of private clubs, are available to individuals at costs below those charged to club members generally.  Because of this, many of our old and traditional clubs have become something less than what they have been in the past.

What has been lost is the tradition and the perceived value of club membership.  The challenge to regain that stature has faced many of our fine private clubs throughout the United States.   To regain it, these clubs must review and recognize what made them great in the past and then select those features which are apropos to the future.  They must make membership something of value to the individual.   This means strengthening the privacy and exclusivity factors of the club.  A club should seek to distinguish itself from the pseudo “run of the mill” club which utilizes membership merely as a gimmick to increase its size and activity.  Those clubs, which want to again establish themselves as distinguished private clubs, need to begin a course of enhancement of membership value.  This can be done by enforcing selective membership provisions, building and maintaining facilities which provide the best for the investment that its members make, and promoting pride in membership.

This course of action may have been deemed politically incorrect in recent years, but the trends are shifting.  Clubs which recognize those trends will survive; those that ignore them will eventually disappear.

Harold B. Berman is a Dallas attorney who for years has championed private-club rights and traditions.  He is active in the National Club Association and the Texas Alliance of Recreational Organizations.

--bermanlaw@worldnet.att.net

Convincing Members That Recruitment Is Essential—Rick Coyne

There are several issues that should be cause for concern in the private club industry.  Clearly we all understand that we have overbuilt and saturated the landscape with too many daily fee golf courses.  However, the fallout from this overbuilding may just be beginning to manifest in other issues; among them, the potential for foreclosures, the resultant negative press that could severely damage the future participation in golf, and the availability of a great golfing experience without the encumbrance of an initiation fee, the monthly dues or assessments.

Having great golf available to the general golfing population is proving to be a greater problem in relation to the younger generation of potential members as they find the daily fee experience more than satisfies their needs.

While many agencies and associations struggle to bring more golfers into the game, the greatest issue for the private club is engaging its members in the active replenishment of members who are lost to normal attrition.  The continued un-replenished loss of members, the resultant wholesale discounting of initiation fees, and the eventual loss of credibility and integrity for the private club that engages in this practice may one day relegate it to semi-private status or worse.

Each club must act as its own gatekeeper in attracting new golfers, new members and new converts to the club lifestyle.  To do this we must also be aware of the need to remain competitive and to create the kinds of activities that keep our members happy and willing to refer new people to the club.  Change is a dynamic process and the private club is not immune.

Rick Coyne is president of Club Mark Corporation, a company specializing in membership marketing programs for private clubs.

rick@clubmark.com

Late ’05 Looks Hopeful for Membership Growth—Dr. Raymond Ferreira

Disposable income for individuals is a critical factor in private club membership growth. Over the past three decades, growth in personal disposable income has lagged behind the start of economic recoveries by about a year. Therefore, private clubs will not see significant membership growth until the end of 2005 or later. Clubs will need to use assertive membership recruitment strategies to grow their membership base during this period.

The number of adult single households (both under the age of 65 and over) will continue to increase, with fewer traditional married households. Clubs will provide more services for these single adult members.

Dr. Raymond Ferreira is on the faculty at Georgia State University, Atlanta, and president of the Ferreira Company, club consultants.

ferreira@gsu.edu

Value Sensitive vs. Price Sensitive—Thomas N. Foutch

What I see for the future of private clubs, not only in the coming years but in generations to come, is a difference in “member mentality.”

In working with hundreds of clubs and thousands of members over the past 14 years, I have observed notable differences between men and women, old and young, golfers and social users.  However, the difference I see that has the greatest impact on the ability for clubs to move forward, make necessary capital improvements, and increase levels of service is the difference between the “price-sensitive” member and the “value-sensitive” member.

While older members tend to be price sensitive and younger members tend to be value sensitive, this does not always hold true.

Determining the degree of price or value sensitivity of the club’s overall membership could spell the difference between achieving success (operational and facility enhancements) and remaining stagnant.

Thomas N. Foutch is president of Enhanced Performance Management and provides strategic planning for private clubs.

tfoutch@aol.com

Private Clubs Need To Adapt—Steve Graves

As the president of two companies serving the club industry, I have enjoyed the opportunity to perform membership-marketing consultations for nearly 600 clubs over the last 15 years.  The private club industry enjoyed an extended period of very little competition and basically “the only-game-in-town” mentality for where most of the affluent in a community could spend their time and discretionary dollars.  Without a doubt, we would all agree that those times are gone!

Private clubs must aggressively adapt to the needs of both the traditional private club member (who joined for the prestige of private-club life) and the 21^st century member (who joins for specific usage and value).  Quite frankly, the old ways of marketing memberships are ineffective and barely keep clubs in a “treading-water” position of staying up with attrition.

Clubs must consider new and innovative strategies for both empowering their members to participate in the membership-matriculation process as well as new and innovative initiatives to entice the cautious consumer of the 21^st century to consider private-club life. Perhaps easier said than done, but certainly worth the effort in adapting to the needs of both types of consumers.

Steve Graves is president of Creative Golf Marketing and the Private Club Network.

www.creativegolfmarketing.com

www.privateclubnetwork.com

An Educated Board of Directors is the Key—Jerry N. McCoy

Member-owned clubs have always been affected by two forces:  the management team and the group of unpaid volunteer leaders that govern a club.  The Club Managers Association of America has done a wonderful job educating the club manager/general manager/chief operating officer of today.  The next frontier is educating the board of directors to understand its role in the ultimate success of the club.  Only when a club has a stable foundation, built on a solid governance structure, can it expect to prosper in the long term.

Many clubs have reached this plateau.  Unfortunately, there are many more that continue to flounder.  National survey results suggest that only one in five clubs has an annual retreat for officers and directors to discuss strategic issues.  Only half of club boards concentrate on orienting new board members.  Until these boards listen to management and accept responsibility for developing effective, trained volunteer leaders the industry will continue to struggle.  This is the great challenge of the next decade.

Jerry N. McCoy is president of Clubwise Consulting, a company that 
offers a variety of consulting and facilities planning services to private clubs.

cmaamcm@msn.com

Golf-Course Maintenance:  Pay Now or Pay Later—Steve Mona

For the better part of four years, golf facilities—whether public, private or resort—have felt the double whammy of a struggling economy and a decline in rounds played.  As a result, many course managers have been forced to make financial decisions that have had a direct impact on the quality of course conditions.  Such actions have affected routine activities such as fewer topdressing treatments, mowing fairways every other day or rolling greens less frequently.  Other decisions have resulted in the delay of major projects such as installing new irrigation systems, renovating bunkers or improving fairway drainage.

In the short run, a facility may survive such cuts without consequence.  But as the commercial says, “You can pay me now, or you can pay me later.”  Private golf facilities should be careful not to succumb to those pressures by repeatedly taking shortcuts or continuously postponing major programs that could be even more costly down the road.  The challenge will be for private clubs to make informed decisions that will preserve the quality of the golf course for years to come.

Steve Mona is chief executive officer of the 
Golf Course Superintendents Association of America.

smona@gcsaa.org

Facing Up to the Costs of Labor, Renovation—Robert M. Patasnick

I would like to discuss some very complex dynamic that I predict the club industry will be forced to address…but quite simply I keep coming back to the issue of labor, labor, labor!  What sacrifices might have to be made by members in the future to tolerate the tension between rapidly rising dues increases and securing an appropriate and fully competent labor force?  Will astronomical increases in insurance costs ever become controllable?

The importance of having reserve funds available for a rainy day was once again revealed during these difficult economic times for regional areas challenged by severe weather events.  Fortunately, hurricane season comes and goes before “busy season” in Florida clubs.

One premise holds true:  everybody wants to associate with a winner.  Reinvestment in a club’s facilities, combined with a strong vision and leadership, attract members who embrace, support and appreciate their surroundings, and who in turn motivate the staff to seek excellence in service.  A vibrant and growing membership can yield luxurious economies-to-scale for a club’s dues-and-fees structure.

Robert M. Patasnick is a partner and national director of club services for the financial consulting firm McGladrey & Pullen

bob.patasnick@rsmi.com

Protecting the ‘Private’ Label—Kevin F. Reilly

The most significant issue facing clubs continues to be privacy.  Clubs receive pressure to increase the amount of nonmember business they conduct in order to reduce the charge for members.  Whether a club is taxable or tax-exempt, use of facilities by nonmembers impacts whether a club is truly private.  If a club is deemed to be a public accommodation, numerous other issues arise regarding the ability of the club to retain its exclusivity and ability to decide who is a member.  One place this is coming up is the ability of a club to have a policy regarding significant others, regardless of sex.

Another area of concern is the claim on the time of a club’s potential members.  There are a number of alternatives for an increasingly limited amount of time.  It is much harder to justify belonging to a club if you are only going to use it a few times a month.  It becomes very expensive when there are high-end daily fee courses available as an alternative.  Clubs have to convince potential members of the value.

Finally, tax-exempt clubs will be facing a more aggressive Internal Revenue Service examination program in the future.  While the goal of the IRS is not to pull tax-exempt status, clubs should be aware that the Service will do that if a club does not follow the rules.

Kevin F. Reilly is a club tax and financial consultant with PKF Witt Mares

kreilly@pkfwittmares.com

Beware That Nonmember Income!—Mitchell L. Stump

Nonprofit clubs are in deep trouble, tax wise.  The Internal Revenue Service published four letters in a three-week period recently indicating that 501(c)(7) tax-exempt status is being denied due to the clubs’ having too much nonmember income.  I recently received a call from a fifth club where the IRS is visiting for the same reason, termination of the 501(c)(7) tax-exempt status.

Lack of knowledge about tax law and the requirements for maintaining nonprofit status will get clubs into even greater trouble.

Mitchell L. Stump is an authority on taxation 
and the nonprofit status of private clubs.

mitch@clubtax.com

Keep an Eye on Food, Fitness, Fees—William F. Wernersback

Higher Restaurant Losses?  Looking into the future, it is evident that higher restaurant losses will continue to be the trend. Although there are may differences in the restaurant operations of clubs due to size, menu selection, hours of operation, pricing, number of outside parties, etc., profits will erode and losses will become bigger.  The predominant cost is not the cost of the food and beverages sold, but the cost of delivering such services by way of wait staff, kitchen staff and others.  Salaries, related payroll taxes and employee benefits (health insurance, workers compensation insurance, etc.) will continue to rise faster than menu prices.

In addition, today’s private-club member demands a casual environment for dining after 6 p.m., and a casual menu to match.  Allowing for relaxed dress code during evening hours at the club should not directly increase restaurant losses; however, beware the casual menu.  An eight-ounce filet mignon dinner with full accompaniments adds more to your restaurant’s gross profit than the same 8-ounce filet mignon “tips” on a garden salad.  Can you really charge $22 for a garden salad, even if it has filet mignon on it?  Of course, offering casual menu items at dinner will satisfy members’ request, but can they afford the added restaurant losses?

Clubs Within a Club?  For the first time in our history of performing surveys, fitness outranked golf as the most important amenity in one survey of a country club’s members! While only one percentage point higher, members in the community surveyed value their exercise programs and facility more than golf.  This is fast becoming the trend in community lifestyles.  Ironically, fitness was not on the radar in our membership surveys 10 years ago.  Today, members require more amenities on an a la carte basis than just golf, thus creating a “two clubs within the club” mentality.  While golf is still king, fitness, exercise and spa services are gaining importance. 

Reduced Refundability of Joining Fees?  It remains to be seen if baby boomers will pay the high entry fees their parents paid to join “The Club.”  Seen as trendsetters for decades, perhaps boomers will change the tradition of high joining fees coupled with high refundability upon resignation to a low joining fee and less or no refundability when leaving the club.  Excessively long wait lists for fee refunds to resigning members at some clubs taught today’s new member to re-evaluate the “investment” in club membership.  The generation who created the “pay as you go” concept could well eliminate the tradition of upfront joining fees altogether!

William F. Wernersback is senior managing director of Club Consultants, which provides a variety of consulting services for private clubs.

bill.wernersback@clubconsultants.com