Article

By Jim Kass*

Alternative Membership Structures for Private Golf Clubs

In 2008, the National Golf Foundation conducted a research study of private club operators that resulted in a report, The Future of Private Golf Clubs in America. As part of the questionnaire that formed the basis of the study, we asked about what operators had done, or were thinking of doing, in order to boost flagging membership rosters.

The study revealed that about 15% of private golf clubs were “at risk,” meaning that operators rated the financial health of their club as extremely poor. The majority of these at-risk operators had tried a number of alternative financial structures for their membership, including discounting initiation fees, adding trial memberships, etc.

The purpose of this article is to outline several of these alternative financial structures commonly being tried by private golf club operators.

Alternative Structures

Waived initiation fees (dues only) – This option may cause some discontent among current members who previously paid initiation fees (regardless of whether the club is equity or non-equity). But, they should be more amenable when they realize that the club’s financial future may depend on such alternative structures.

Discounted initiation fees – This option is less drastic than waiving fees entirely. A variation on discounted initiation fees is to offer non-equity memberships at a lower cost than equity memberships (at an equity club). This structure reduces the discontent felt by equity members. The new non-equity members save money up front even though they can’t sell their membership on the back end.

Another variation is for multiple new members entering together as a group (e.g., 30% discount on initiation fee for two applicants applying simultaneously, 40% for three applicants, and 50% for four or more).

Refundable initiation deposits – Under this scenario, all or part of the initiation fee is refundable after a certain period of time. It is an incentive to get members in the door and provides a temporary capital infusion for the operator. However, if the member quits the club, there could be a financial penalty, at the discretion of the operator.

Payment plans on initiation fees – Rather than requiring a large fee up front, the fee is paid over time. If an equity memberships, there may be penalties for leaving the club without paying the full amount.

Variable initiation fees – Under this scenario, the initiation fee for one group (e.g., residents) would be higher and the fee for another group (e.g., socials) would be lower.

Trial memberships – These are typically one-year dues-only memberships, perhaps with some playing restrictions. At the end of the trial, full membership is available to those paying the required initiation fee. Two advantages for the operator: (1) more dues-paying members utilizing the club, and (2) a good chance to impress and acquire new members.

Junior Memberships – Younger members (e.g., under age 30 or 35) may not have the income level of older ones, so they are eased in with a reduced (and/or financed) initiation fee, lower food and beverage minimums and possibly some playing restrictions.

Legacy memberships – Similar to junior memberships, there would be a special rate for adult children or other family members of current or past full members.

Summer memberships – A way to increase utilization during the off-peak season in places like Florida. Summer memberships are typically dues-only with low or no dining minimum and restricted play.

Weekday-only memberships – As the name implies, these members only play Tuesday through Friday (most clubs are closed Mondays). This is not the same as opening the club up to public play because these members would still pay dues and, possibly, a reduced initiation fee.

Corporate memberships – These memberships have been in existence for many years but have been cut recently. One scenario is for the company to pay the initiation fee and designate a certain number of employees to use the facility. Employees pay an annual maintenance fee plus pay for all services as they use the club.

Sports membership – At a country club with full amenities, a sports membership would include swim, social and tennis with unlimited golf access, however the member pays a guest fee for each round played.

Other ideas to grow membership:

Referral incentives for members – Members are paid, for example, $1,000-$2,000 for every member they bring in.

Other member incentives – For example, six free rounds of golf for paying annual dues in full up front.

Reciprocal memberships – That is, the ability to play at other clubs.


Credits

Originally posted by JimKass on 27 Jul 2009.
All contributors: JimKass,
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