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Variable
Pricing for the Initiation Fee From
Joseph A. Botkin, CCM The Fredericksburg (VA) Country
Club board of directors had made the decision
to move forward on a major golf-course renovation.
The project centered on replacing the club’s push-up greens with
new U. S. Golf Association “spec” greens.
Project cost was estimated at just under $1 million.
The club planned to pay cash for the project in order to avoid any
long-term debt. A date of June
19, 2002, was selected to break drown. The finance committee and board
of directors were concerned about the possibility of member resignations and
requests for inactive status, as well as how construction would affect
membership activities and the revenue from initiation fees.
Joe Botkin, general manager and chief operating officer, estimated
that the club could lose between five and eight percent of its total
membership due to the construction. The
board of directors decided to be proactive and replace these potential lost
members before the golf course construction project got underway.
The board voted to reduce the initiation fee for the top membership
(full family golf) from $6,250 to $4,750 effective February 1, 2002. The board also took a bold step
and put into place a unique variable pricing structure for initiation fees.
Effective February 1, 2002, the initiation fees for the club’s golf
classifications would increase or decrease in increments of $500 with each
net increase or decrease of five members in the combine classifications
(family golf and single golf). The
initiation fee will not fall below $4,750 for the family golf
classification. The fee will
not fall below $3,750 for the single golf classification.
In January, 2002, club membership director Elizabeth Hiltbrand sent
out this membership information, as well as information concerning our golf
course renovation, to potential new members who had been invited to join the
club over the previous four years, but did not join for various reasons. The club board also was
concerned about how the project would affect day-to-day operations revenue
for food and beverage, golf cars and green fees, and monthly dues. The
general manager contacted other clubs that had gone through similar
construction and developed an operations budget that drastically reduced
guest and golf car fees during the construction process and grow-in phase.
These projected shortfalls in daily revenue meant the club’s
operation budget would show a loss for two consecutive years. The board of
directors and finance committee made the decision to cover any shortfalls by
using capital account money subsidize the operations if and when any
cash-flow shortages developed. The board resolved to begin a
variable pricing formula that would allow the initiation fees to go up or
down based on the law of supply and demand.
The resolution reads as follows: Effective
February 1, 2002, the initiation fee for the full family and full single
membership classifications will increase or decrease in increments of $500
with each net increase or decrease of five members in the combined
classifications. The initiation
fee will not fall below $4,750 for the full family golf classification, nor
will the initiation fee for the full single golf classification fall below
$3,750. The board also established a
similar variable pricing formula for the tennis/swim/social classification. The interest in club membership
was phenomenal. As a result,
the club invited 57 new members to join over the next three months.
The new formula provided a sense of urgency to join before the price
increased. During this
tremendous influx of members, the executive committee interpreted the new
variable pricing formula to mean that initiation fee increases or decreases
of $500 must be approved by the full board at its monthly meetings.
This decision resulted in slowing the increases in the initiation
fees during the hectic early months and provided the club a set date for the
next increase (the last Thursday of each month, the monthly board meeting
date). This in turn gave those
persons who were invited to join the club a specific date each month that
they must respond by in order to be considered for membership. The board of directors and
membership committee have taken the position that keeping the membership
levels full will be our number one goal and that the formula does a very
good job of helping the club react to the marketplace.
The club will continue to study the effects of this new pricing
structure, but for now Fredericksburg Country Club is one of the fastest
growing clubs in the mid-Atlantic area. --Joseph
A. Botkin, CCM, General Manager
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