Similar to other industries, the golf business sector is no stranger to ebb-and-flow economic charts.
The U.S. recession in 2008 caused more hand-wringing than a CEO helplessly watching a stock downgraded. On the flip side, who knew the COVID-19 pandemic would see such a boon? Both examples correlate to private club memberships.
In the case of the recession — a pivotal moment for golf courses — at-risk private clubs in the U.S. saw memberships fall by 30 percent, according to the National Golf Club Foundation. At-risk clubs, about 15 percent of the 4,400 open in 2009, were those categorized as having serious financial challenges.
Since then, private clubs have dwindled to roughly 4,050. Yet another anomaly, the COVID pandemic, actually provided a boost to memberships. According to a McMahon Group pulse survey, 66 percent of 498 respondents said they gained memberships between March 2020 and into 2021.
So, the question looms: Is this an indication that happy days are here again, or could it be more in line with the all-too-famous Peanuts cartoon in which Lucy yanks back the football as Charlie Brown is about to kick it?
“You have really good eras of golf,” says Brian Friederichs, CEO of Florida-based Capstone Hospitality, whose company helps clubs bolster memberships and revenue by implementing sales processes. “COVID is one of them, where interest is up and inquiries are like order taking. Then you have normalization, down trends, and they're not knocking on the door.”
Dating to January 2021, Friederichs' company tracked membership leads through proprietary data-gathering software. Between March and June of this year, organic inbound leads dropped by 29 percent. Friederichs was quick to caution that memberships spiked so much during COVID, that it really isn't a falloff. Not compared to the 2008 recession anyway.
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“The numbers are what we call 'normalizing,’” Friederichs says. “We have clients thinking this is the new norm. It's not. We're seeing a return-to-normal type numbers. I would say if you thought about making a big capital spend to attract members, hold off for now. Let's see where the market takes us.”
For some, rich history and brand recognition can be enough to attract members. That would describe the iconic Firestone Country Club in Akron, Ohio, which, pardon the pun, keeps rolling along. Ever since rubber and tire magnate Harvey Firestone commissioned the club in 1929, it gained status as a former PGA Tour stop and PGA Championship host. Among it's three 18-hole courses, the South Course no doubt receives a king's attention. In 1981, the Firestone family sold the club to ClubCorp, which changed its name to Invited in April and manages more than 200 courses.
From a retention standpoint through the pandemic, says general manager Jay Walkinshaw, Firestone suffered little attrition among its 1,100 members. The club utilizes learning and algorithmic software to identify at-risk members, in addition to having membership and member experience directors performing outreach.
“Retention is the lifeblood of all private clubs,” Walkinshaw says.
In order to bring a potential member into the fold, amenities and purpose serve as catalysts. Besides golf, exceptional hospitality, food, beverage, and, in some cases, on-site stays are attractive lures in the same way a trophy fish latches onto bait. The Akron area boasts corporations and companies that entertain guests, with the club at “about 50-50 between guest and member play,” Walkinshaw says.
CHANGING TIMES
In today's digital age, word of mouth still has its place. Yet with some clubs aging along with its members, private entities have had to become more resourceful to reach millennials and younger generations. Course upkeep and remarkable service will always be selling hallmarks, but the pandemic ushered in more advanced technology that has been embraced by a younger crowd. From contactless solutions to intuitive apps, private clubs have integrated lead generation tactics that go hand-in-hand with data capturing.
In a June market research report, IBISWorld found that member dues make up roughly 62 percent of clubs' operating revenue. As a club's lifeblood, the bigger and better mouse traps have to become more sophisticated.
This is Capstone's bread and butter. In creating sales processes to attract members, Friederichs says clubs struggle in three areas: they overcomplicate categories; they're not doing any outbound efforts, meaning no open houses, social media or geofencing ads (tied to mobile phones); or they're ignoring strategical community business partnerships.
That's a no-brainer even for a club like Firestone.
“We do actively engage with marketing efforts though all channels — whether it's digital or word of mouth, or member referral,” Walkinshaw says, “and we actively engage with a broader base to various parts of the country. We do choose to market across all channels and all fronts because it's important to keep a pulse on membership.”
Says Friederichs: “In one club we saw, they were offering more than 40 membership categories. Forty. We've worked with enough clubs that we're able to track different data points and trends. We can say in your market, ‘This typically works the best.’ Many think their club is ‘unique' and, really, it's not. Yes, every club is unique in certain ways, but you're still marketing to people who want a lifestyle enhancement product that a club is.”
That's how Cutalong at Lake Anna in Mineral, Virginia, decided to approach adding members. The club, which opened in 2020, knew immediately it was relegated to being the section-best attraction in the area. Located rurally about 45 minutes outside of Washington, D.C., Lake Anna has a plethora of second homes along its waters.
“People didn't move here because they wanted to play our golf course,” says Brady Noland, Cutalong’s director of golf. “They moved here because they want to go on the lake, and they happened to get a great golf course alongside of it.”
Noland was one of the club's first employees and, as a strategy to drive membership, he first reached out to businesses in the community. Cutalong became friendly with the Lake Anna Civic Association and Chamber of Commerce. In a stroke of unknowing residual effects at the time, the club held a cornhole tournament that entertained about 100 guests. Some business leaders who attended immediately signed on as members.
Then the pandemic hit.
That turned into a blessing actually, because remote working allowed people to spend more time in their second homes.
With only seven holes built, no clubhouse or restaurant, Cutalong opened its membership drive in the summer of 2020 and started initiation fees at $6,000. All holes were constructed by November.
Heading into spring 2021, Cutalong then raised initiation fees to $10,000. After hitting the 100-member mark, initiation increased to $12,500 and reached $17,500 by summer's end. The club had more than 170 members because of a twist.
“We said to them, ‘This is our promissory to you,’” Noland says. “We're going to have world-class amenities, so we'll only collect 50 percent until the performance center is complete, then the rest is due.”
Ultimately, Cutalong plans the performance center to include hitting bays with TrackMan simulation and a workout center, a clubhouse and a resort activity center with stay-and-play units.
Cognizant of retention and growth, Cutalong sweetened the deal even more.
“We offer a resell option to our members,” Noland says. “If they paid an initiation fee greater than $10,000, they do have the ability to sell the membership at their leisure. They would owe the club half the initiation fee due at the time if they decided to sell or exercise it.”
To this point, no one has exercised the option.
Cutalong continues to fine-tune its membership package based on amenities. Asked what success would look like in five years, Noland said the balance between the course maturing and service offerings.
With membership sale success, especially to non-resident members, the club plan increased initiation fees to $50,000 as of October 1.
“Amenities and services correlate,” Noland says. “If I don't want to have 250 members by this time next year, I can raise the initiation fee because I know it could price some people out.”
Friederichs points to the recession as a lesson on what not to do. Clubs got in trouble because they loosened sales processes. In turn, capital fell because programs were introduced to cut or drop initiation fees altogether. The clubs that survived did so because they were engaged in the community and membership, while focusing on lead generation lifecycle and sales processes.
“If you do those things, you will be fine,” Friederichs says. “If you continue to think the past two years is how it will continue is the norm and you're not proactive and you've spent a lot of capital on improvements, you'll probably see a lot of clubs in difficult spots.
“Because those are the ones being bought by big purchasing groups, like Concert Golf [Partners]. Heritage Golf [Group] and ClubCorp.”
