Club finances and the economy

[MiniBlueDragon]

Today I received a letter from my club along with next year's fees. Having read the letter and having seen a few issues on the course lately such as bobbly and what seem like diseased greens on occasion I'm not sure if I'll be renewing my membership or not.

The club itself is nice, the members are friendly and happy, overall the course is in good condition, it's local and costs very little in fuel to get to so it has a lot of positives except for the greens issue and the info below.

If you were faced with:

- Club has debt it's trying to pay off. Not sure how much.

- Last year was "challenging" - they finished 2011 with a deficit of £30k but need £30-40k per year to be able to pay off debt and improve.

- Just taken out a further £100k long term loan from the bank.

- Subscriptions gone up by 2.5%

- Club is still going ahead with course improvements to course and facilities.

Would you start looking elsewhere for a club or ride it out and see what happens for another year?

I realise that the economy in general is in a bad state and it may be "normal" for clubs to be in this predicament but as it's the first club I've joined I can't be sure.

[Stretch]

Sounds like the club is running on fumes. Cash flow is negative and they're borrowing money to keep the lights on. Will need to either attract more members and paying visitors, or get more cash out of the membership they have now. Course improvements may or may not help with the former -- in a tough broader economy and a depressed golf market, it's a roll of the dice. But if you're happy playing there and reasonably confident they're not going to fold suddenly in the middle of this year, you probably might as well stick around and see how things look at the end of 2012.

[MiniBlueDragon]

Around a week ago I made the mental decision to not renew my membership and to move to a cheaper course which is longer to drive to but the extra paid in fuel is offset by the price difference in membership.

Today I decided to interrogate all the friendly managerial/admin type people at my club to pump them for more information on the club's situation and make sure I'd made the right decision. It transpires that the club owns the land on which it's built which is valued at >£3 million GBP. That being the case there's plenty of cash available if the club really needs it. The reason for last year's deficit of 30k was that £50k of an existing higher-interest loan was paid off. They had the option of simply paying off the minimum on the existing debt and continuing to pay out higher interest, publishing a profit for this year but they decided to pay off the debt and get a lower interest loan instead to save the club money long-term.

Of course this extra info would have made the 'cover letter' for our fees extend to more than a single page so it was omitted.

I told them I think they need to re-contact the members to explain why the original cover letter was so negative and quite frankly scary from a member's perspective who's never attended an AGM there before and doesn't have the entire history.

I also saw 4 new memberships today in the 1 hour I was chatting in the pro shop; they signed up as 3 of their mates had joined last week. Good sign!

I've decided to renew my membership there but I'll negotiate the rate and also whether I can do it in  6 month installments to be able to check that I'm still happy in 6 months time.

The reason I'm sharing all this info is so that other people who may find themselves in a similar situation can use my situation as a basis. Go ask questions before you make a final decision!

[Danattherock]

Sounds like the club is investing in their future. On the surface, I see that as a good sign. You have to spend money to make money and they count on members for the making part. If you enjoy the course and the people, why leave? Different ways of looking at it, and I am sympathetic to your considerations. Just pointing out that it is people like you that keep the club viable.

The economy will bounce back and the profit margin for many businesses, and golf clubs, will benefit from it. Simply put, many folks don't currently have the expendable income for fruitless (financially) pursuits. Many are selling their motorcycles, boats, RV's, etc.. Vacations are being cut short or are less exotic.

Money for golf is low on many folks priorities at the moment. Keeping food on the table and the lights on trumps recreation of course. Looking to join a club here in Pinehurst myself. The monthly dues are all generally reasonable, but the initiation fees vary considerably. Starting at $500 and going up to $40,000. That is the big factor for me. In this economy, I am shopping around and wheeling and dealing. A buyer's market whether it be in real estate or golf club membership. Much to think about either way. Good luck with your deliberation.

-Dan

[WUTiger]

From your two postings, I would assume the club has tiered memberships: equity members with investment, and possible multiple layers of yearly-fee memberships.

Originally Posted by MiniBlueDragon

... Of course this extra info would have made the 'cover letter' for our fees extend to more than a single page so it was omitted.

I told them I think they need to re-contact the members to explain why the original cover letter was so negative and quite frankly scary from a member's perspective who's never attended an AGM there before and doesn't have the entire history. ...

Given that the land is worth £3 million, the £100K loan only represents about 3% of the value of the land.

Possibly the club has an "old school" board of directors who don't involve newer members in the inner workings of the situation.

One thing to think about is the long-term relationships which might be forged in such a club. I think your idea to "renegotiate" is sound. Have they talked to you about an equity investment?

What you might want to do is google "country clubs" and "finances." Lots of news stories on what's going on, membership trends, etc.

Also, do a search in a Wall Street Journal database for country clubs. Every six months or so, WSJ's Weekend edition has a solid story on some aspect of golf country clubs. For example, some golf-based country clubs in USA lose more than $100,000 a year on their members-only dining operations.