Raising Membership Dues Annually at a Private Club
Membership dues are primary to funding the operations of a Private Club, specifically the services and amenities used by members and their families. These services and amenities go beyond the golf course and include food and beverage, the administrative staff and, for full-service clubs, encompass racquet sports, pool, fitness, guest rooms and other amenities.
Unfortunately, Private Clubs, as with most enterprises, are faced with cost increases in largely uncontrollable areas. These expenses include (but are not limited to) health insurance costs and real estate taxes. Additionally, Clubs are subject to fluctuations in commodity prices such as food, utilities, fuel and golf course chemicals. Lastly, depending upon the market, payroll increases are needed to keep a Private Club competitive in the marketplace and to serve members at desired levels with staffing continuity. For many Private Clubs, Membership Dues increases in the 2.5% to 5% range are necessary just to keep pace.
For many Private Clubs, there is a resistance to raising dues annually. Common reasons include:
- A perception - valid or not - that the level of service and/or amenities do not justify an increase, especially where members vote on Membership Dues increases;
- A temptation to reduce dues believing, usually incorrectly, it will attract new members or retain existing ones indefinitely;
- Attempts to compete on price, rather than a strong value proposition, with other Private Clubs in the marketplace.
The dilemma is that without an annual increase in Membership Dues there is a tendency to reduce operating expenses to balance the budget. For Private Clubs that struggle with membership satisfaction, the unintended consequence of reducing costs is typically a decline in service levels and the quality of amenities. Such actions often lead to an acceleration of membership dissatisfaction and the risk of both increased attrition and declining admissions. These serve to exacerbate the underlying problem.
For Private Club leaders questioning the ability to raise Membership Dues, you should focus on the underlying issues. If low levels of Membership Satisfaction and/or an inadequate membership census are the reasons, the Private Club should take steps to address the fundamental matters directly. You cannot cut your way to success.
Club leaders need to focus on developing a sustainable business model including achievable membership counts, realistic operating dues and sufficient sources of capital for continuous investment in the physical assets of the Club. It takes a long-term view and consistent execution across multiple administrations.
In the near term, as Private Clubs address the issues causing member dissatisfaction and/or a decline in membership, leadership should think strategically before drastically reducing operating expenses. As difficult as it may be, increasing Membership Dues or implementing an operating assessment should not be ruled out. As part of these deliberations, a Private Club should strongly consider conducting a benchmarking analysis. There is good benchmarking data available. Our friends at Club Benchmarking, Inc. and Condon, O’Meara, McGinty & Donnelly, CPAs have been at the forefront of providing such information for their respective clients. We have also promoted the use of Peer Groups of General Managers and Board members and have seen these work effectively. We are happy to facilitate Peer Group meetings in your area.
As a Private Club decides their course of action, clear and timely communication to the membership is strongly recommended.
Club Board Professionals, LLC 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.
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