Michael A (Mike) Kahn, Golf Business Consulting. Phone: 941.739.3990 Fax: 425.675.6909 Email: mike@golfmak.com
The article was originally published right here in 2004.
GOLF AND COUNTRY CLUB FINANCIAL WOES - WORSE IN 2013? YES! HOW BAD?
2013: A once high-end private club is selling public rounds as low as $25.00 in-season (Florida). Not long ago you had to be invited by a member at $100.00 to play the course. Worse than that, they hired a management company with a 'bargain-basement' style marketing, managing and fee plan. It's embarrassing for the members, so I will not identify the club. As I fully predicted, the management company was subsequently fired.
Be sure to consult me before hiring any management company. Remember, your first consultation is free. Phone: 941-739-3990, or write: mike@golfmak.com
Average age of the membership well up in the 60's - even 70's Strong resistance to fee increases or assessments Cart paths, irrigation, equipment, greens desperate for refurbishment Cash flow cannot keep pace with costs - but refuses outside play Board 'pride' not willing to give up control of the club Membership rosters are shrinking. Average age of the membership well into the 60's. The 30-year members won't 'hear' of allowing guest play - but won't pay higher dues either. Irrigation system needs a $1 million dollar overhaul. Greens are begging for new turf. The fairway unit has up to 12,000 hours on the job. Worse: The bank won't renew the note!
IF YOUR CLUB IS IN A CASH CRUNCH, THIS LINK TO MPS MIGHT HELP
Read on...
IT'S AN EPIDEMIC IN 2011! (I wrote this originally back in early 2003)
I get messages at my Email address, mike@golfmak.com from country club board members from just about everywhere in the USA. They are asking for ways they can escape from a financial mess! I wonder if there aren't thousands of courses in trouble with their bankers! Country club financial disasters seem to be more frequent at older clubs - especially after they built their new $ multi-million clubhouse. The toughest ones to solve are member-owned, board managed private country clubs.
Country clubs are usually managed by an elected board, and like any governing body represented by different interests, their decisions tend to be indecisive, emotionally driven, or based on self-interest. When the bread-and-butter decision is finally realized, it is often too late. Most (not all in 2010) of these financial messes I believe can be cleaned up, but the solution starts with the board giving up control of the club to people who are experienced at operating golf courses and country clubs.
Many of you who have followed www.Golfmak.com know my attitude toward golf courses that try to be 'everything-to-everybody' by adding swimming pools, tennis courts, fitness centers, and 40,000 square foot clubhouses. Many of these please-everybody golf and country clubs are in the deepest financial trouble. It's a shame, because without the amenities the golf course, standing alone, is often quite profitable!
The symptoms for these financial disasters at private country clubs are classic:
1. The membership today is an average ten to twenty years older than they were back in the heydays. Rosters are shrinking and 'young blood' is not attracted to the 'shuffler' crowd (if you think I'm kidding, listen to the Benny Goodman music at the club's New Years party). Don't forget that the game of golf is also competing with many other pastimes and hobbies like bird watching, quilting, fishing, motor cycling, bicycling, traveling, and such. Old guys are playing baseball, basketball and other sports our fathers felt they were too old to play . - giving up golf!
2. Older country clubs ran into trouble by not properly maintaining, or mismanaging their contingency fund. Later, when it came time to repair the irrigation system, replace greens, or repair the clubhouse roof they had to assess the membership, or borrow from the bank. "I believe almost all golf course loans taken out prior to 9/11 are in trouble in 2003." Mike Kahn
3. Country clubs often refinanced the property during good times rather than appropriately raise dues in smaller incremental amounts. Lately, the bankers, who picked up the dinner check a year ago, are calling in or not renewing their notes!
4. For the past three years (maybe five years by 2010), golf club revenues have been trending down with many showing net earning below their banker's DSR threshold (usually 1.2 to 1.25). These challenged cash flows are the result of stagnant growth in the game, too many golf courses, yet costs still rising.
5. Deferred maintenance issues are piling up, machinery is breaking down, and staff levels are down. All these symptoms are the product of falling membership rosters and rising costs. [A recent article in The Golf Course Industry, August 2010 issue, in a survey of superintendents, 73% of them indicated they wanted more staff.]
6. The 40,000 square foot clubhouse is a big dark building costing a fortune to keep warm (or cool). We see dismal efforts to increase outside functions like weddings, and banquets to supplement cash flow (see why weddings make me cry). However, in most cases the cost to host a $10,000 wedding generally works to $10,000+ when the cost of supporting the infrastructure is included in the equation.
7. The superintendent is constantly running to the hardware store to keep machines running. Like item #5 above, old machinery is difficult to keep running when parts like bearings, belts, and bushings are failing due to age.
8. The club's accounts payable are at the 75+ day average causing suppliers like Titleist, Coca-Cola, and Sisco Foods to put the club on C.O.D.
9. The country club board meets those and the horrible words, "Outside play!" keep coming up. Recently, I overheard an older board member saying, "I've been a member here for thirty years and I won't stand for bringing in riffraff!" Meanwhile the club is heavily in debt and nowhere to turn.
10. Members complain their fellow members don't patronize the club enough. I hear that everywhere I go. People simply cannot dine at the country club all the time. Sometimes they (like you) want Italian, Sea Food, Chinese food or menu items not served at the club. In 2010 there are likely 200 excellent restaurants within 30-minutes of the club. "I don't know too many country club dining rooms capable of consistently serving a better steak at a better price than Charlie's. Depending on the membership to patronize the dining room often enough to compete with Ruth's Chris, Outback, or Longhorn ain’t going to happen in 2010!" Mike Kahn
WHAT IS THE SOLUTION?Private country clubs have tried one or even all of three ways to solving their financial woes. One is to raise dues. Another is to assess the membership. The other is to open to public play.
Raising dues or assessing the club membership usually results in resignations - an outright offset. Worse, a smaller membership results in lower normal revenues - placing the club in an even more desperate mess. In the highly competitive 2003 golf market, I believe raising dues or assessing the membership is not likely to work.
Resignations Dues line shrinks - less money than before Fewer members - less collateral spending
Resignations Dues line shrinks - less money than before Fewer members - less collateral spending The argument against allowing public play is based on the loss of sanctuary, which - unless properly presented - will also result in member resignations. However, I believe the public-play strategy (limited play, or totally open), will ultimately be more successful than assessments or raising dues. Later, if fortunes turn around the club may even go back to private status.
Utilize 'empty' tee times members don't frequent Opportunity to promote new memberships Provides needed revenue from fees and collateral spending GIVE IT UP TO GOLF BUSINESS EXPERTS
One of the most difficult strategies for a private country club to adopt is to entrust the club's operations to third-party management. After all, country club board members are usually experienced, successful, and proud people. It's tough for an attorney, school principal, or successful business person to admit there are others out there who know how to manage the club's affairs better than they. Usually it's the bank that hires the third-party - after foreclosure!
YOUR FIRST CONSULTATION IS FREE
If your golf and country club is experiencing any of the symptoms you see above, you need a hard-nosed wake up session by Mike Kahn. If you and your board are willing to hear the truth and implement measures necessary to save the club, call: 941-739-3990, or email: mike@golfmak.com. It will be a 100% free consultation.
Do it before your beautiful fairways are paved over.
Order a site review for your club here.
Mike Kahn
Golfmak, Inc.
941-739-3990