Are You Thinking Big Enough For The Next Decade?
If you are a leader of a top-tier private country club (or one that wants to be), you’ll likely need at least $10 million of modernizing and transformative capital improvements in the plan for the next decade and at all times. Some will ask why. The answers are many:
- With depreciation often running $1 million or more per year at many top-tier clubs, you’ll need to invest $10 million in the next decade just to keep your capital base from eroding. That’s a key ingredient of success and a primary responsibility of Boards.
- Your competition is upping its game. Breadth and quality of facilities matter more than ever. Playing catch-up is never a good thing.
- That “new” clubhouse, or pool or fitness center or spa (or fill in your own) that your club modernized 6, 8, 10 or more years ago will be showing its age.
- Annual attrition of 4-7% of your membership is normal. That means you’ll need to replace more than 50% of your membership in the next decade. The profiles of the new members will, in the majority of cases, be very different than those departing over the next decade. Tastes and interests are changing.
- You’ve been successful! Members love your club! They use it all the time! The increased volume exposes pinch-points; inadequate kitchen sizes, seating areas, fitness and spa areas, racquet courts, storage areas, etc.
- If you are not thinking about long-term success as a top-tier club, you are planning for the club’s demise.
Private Club Modernization and Capital Improvements
Modernization trends among the successful top-tier clubs include upscale spas and locker rooms, more child-friendly spaces, multiple attractive dining and socialization options, high-end fitness centers, more prepared outdoor areas, more racquet sport options (tennis, squash, platform tennis, pickleball and pop tennis are all in play), yoga and Pilates studios, golf training centers, outdoor lawn games and multiple golf simulators set up for leagues and socialization (not just for training).
Some will ask how to pay for all of the improvements. The funds will come from capital levies - capital fees, initiation fees, assessments - and perhaps the judicious use of debt. Capital funds must be planned separately from operations to run your club effectively. It requires consistent, long-term thinking and careful planning. It’s also critical to think in terms of funding the long-term plan, not just a project. Successful implementation of large-scale capital improvements will almost always increase operating costs as well. Long-term operating budgets must be planned separately and simultaneously.
As we’ve discussed more extensively in other blogs, the funds for investment or to repay debt will not come from operating surpluses or profits in Food & Beverage operations. Industry data show these “sources” are not, and should not be, meaningful if the club leaders are doing their jobs; especially when it comes to F&B. F&B is a primary amenity that touches nearly every member. Your F&B operation is not a stand-alone restaurant. It is expensive and vital to run multiple venues, offer broad menus, operate at off-peak times, accept walk-ins, train and staff for uneven use and do whatever it takes to increase membership satisfaction. That satisfaction must be the primary goal of club leadership. Minimizing F&B “losses” in a country club setting is a fool’s errand when it runs contrary to increasing membership satisfaction. F&B financial contributions are simply not meaningful (a very high percentage of country clubs are 5% plus or minus to breakeven) in the larger scheme with the largest “losses” often registered at the most successful clubs. These clubs truly embrace membership satisfaction and understand its impact on retaining and attracting new members; the lifeblood of any club.
Think big and think long term. Think strategically. Understand the profiles of your next generation of members.
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Club Board Professionals is a strategic financial consulting and training firm. The Principals, Dave Duval and Joe Abely, assist their clients achieve excellence in three areas: membership satisfaction, financial sustainability, and exemplary governance. Contact us for a complimentary initial assessment of your club.