Trends in Private Clubs | by Kevin F. Reilly | PKF Consulting
For more than 50 years PKF has published Clubs in Town and Country. The private club industry has changed during that time particularly during the last 15 years. Members demand more and better services and the competition for the entertainment dollar continues to increase. The demographic mix within the United States continues to change and unless the private club changes some of its membership policies, the pool of eligible applicants will continue to shrink. In the past, the club was the place to go and frequently, the centerpiece of the town. You knew that you had made it when you finally could afford to join the club.
Now, however, exclusivity is not quite as important and may even work against private clubs when going after the younger generation. Private clubs still seem to be more appealing to men than women but women control more of the discretionary funds in a household. With corporations changing the way they do business, the increased time people spend commuting, and the desire to spend more time with family, it becomes more difficult for many to justify the cost of membership.
However, not all the news is bad. Due to increased mobility, people are looking for a place to make connections. Clubs can fulfill that need. The population in the US reached 300 million in 2006 and one-third of these are baby boomers. This group controls 70percent of the net worth of the country. They spend 2 trillion dollars a year. The baby boomers generally are healthier than their parents and are looking for ways to stay active. Surprisingly, the boomers never joined clubs in the numbers expected. However, this is still an area of potential growth as the boomers start to retire. In addition, minorities make up a very small percentage of private club members. However, they are the fastest growing group in total and the economic power they control continues to increase. A club that reaches out to that community will ensure its survivability in the future.
2006 was not a great year for many clubs particularly with the weather issues around the US and Canada. In many ways, 2007 was worse. The economy appears to be headed to a slow down. The housing market has dropped precipitously and the stock market continues its wild swings. Clubs, particularly in the mid-west, are feeling the impact of the changing economy and no area is totally exempt. Clubs may have survived the weather but now rising energy costs continue to impact all clubs. With oil around $100 a barrel, it adds to all aspects of a club’s operations. Unlike the weather which may impact only parts of the country and can change from year to year, it is apparent that the rise in energy costs will continue into the foreseeable future. In addition to increased fuel costs, the increase in energy will impact the kitchen to the golf course.
More important than the specific issues mentioned above is the impact on consumer confidence. Joining a country or city club is still a discretionary expense. The swings in the stock market have left many members and potential members wary. As a result, the universe of individuals from which to draw club members is much smaller. If, due to time constraints, golfers are playing less, it may not make as much sense to join a private club. It makes it much more difficult to justify the initiation fees and yearly dues.
Competition in the club industry continues to increase and sometimes the industry is its own worst enemy. Members are spending more and more time at the clubs in the warmer climates and these are becoming the “home” club. This causes members to question belonging to more than one club. Many areas are overbuilt. The dramatic rise in the number of high-end daily fee courses and those associated with real estate development has further impacted the private club. There has been a more than 50 percent increase in daily fee courses since 1990 with almost the same number cutting costs which will further challenge the amount a private club can charge. The slow down in the housing market also impacts the courses built by developers. Members in these communities seem more unwilling to take on the ownership of the club without the developer’s subsidy.
Our survey of overall club membership for country clubs with years ended October 31, 2006 through September 30, 2007 continues to show a problem with keeping members. The membership in country clubs had been static for a number of years but dropped by approximately four percent this year. Country club membership declined the most in the central region with an eight percent drop. City clubs showed a 1.2 percent loss which added onto last year represents a five percent decline over two years. What is interesting with city clubs however is that the healthiest clubs are in the 500 members and larger clubs. This should not be a surprise as the smaller dining only clubs are finding it harder to continue. Members need a full service club to justify belonging.
Only 14 percent of the clubs had a waiting list in 2007. This is a two percent drop from the prior year and a more than 50 percent drop over the last three years. The East has the greatest number with a waiting list with the Central having the lowest. If a club has a waiting list, it is much shorter than in the past and it generally does not require as long to get off it. Alternatively, if a club has a sellers’ list, it tends to take much longer to get off it. In spite of the difficulty in obtaining members, the cost for joining a club has not dropped substantially. The average cost remained at approximately $46,000 ranging from a high of $61,000 for the large sized clubs to $42,500 for the medium clubs. The cost of joining a club is almost totally dependent on location. The average cost in the West is $65,000 and in the Central is $45,000. However, a number of clubs far exceed the average with several over $100,000 in both the East and the West.
City clubs continue to be impacted by the economy to a greater degree than the country clubs. The average cost to join a city club has remained consistent at approximately $9,500 with the West being the most expensive. Waiting lists have dropped in city clubs, with 12 percent of the responding clubs having one. This is a two percent reduction from last year and a 25 percent reduction from four years ago.
The 2008 Clubs in Town and Country report contains 28 pages of financial performance for private city and country clubs in North America. Statistics include information on membership dues, food and beverage sales, golf operations, and labor costs. To purchase a copy of the report, please visit our webstore at .
