Club Facilities and Planning – A Chat with Frank Vain

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By Larry Hirsh, President, Golf Property Analysts 

 

Recently, I had the opportunity to play golf with Frank Vain, Chairman of McMahon Group. McMahon is a private club planning firm with a background in architecture. Taking advantage of their experience and focus on advising clubs on facilities, planning and design, I had the opportunity to share some thoughts with Frank on the future of clubs and the differences he sees from 20+ years ago along with the challenges clubs have in the current environment.

First, Vain and I agree that clubs have changed (or should) from “your father’s country club”. He says, “20+ years ago the primary club user and member was a male golfer. While they remain an important part of the club, most clubs are now much more inclusive, and women and children play a major role. Additionally, the younger generation seems to have a broader set of expectations of the member experience, most notably in their expectations for more year-round activities and children’s experiences.” He added that, as the culture of many clubs changes; “Where the clubs of the past had a great golf course, a warm up range and a formal dining room in a traditional clubhouse, the modern club has a great golf course, extensive indoor and outdoor golf practice areas, cool bars and grills with outdoor dining and quality supporting facilities in tennis, fitness, pool and pickleball.”

RULES

One of the issues we discussed was the rapidly rising cost of membership at some clubs and Vain shared with me the cost of one clubhouse project that was estimated at $1,500 per square foot! Not lost on me is the constant discussion on the rising cost of a college education. Have you ever noticed how many construction cranes there are on college campuses? I’m all for improvements and enhancements, but when a 20,000 square foot clubhouse can cost $30 million, the economics have to be questioned. Even at half that, a $15 million clubhouse can be devastating to the economics of a club. Vain explains: “Will a soft economy knock off 5% or 10% of the current cost? Maybe, but you should expect to pay top dollar for facilities going forward. And while it’s a lot of money, quality facilities are crucial to club success. Clubs are all about connections and community, and facilities are the vehicles that makes that happen – whether it is a great bar, fitness center or golf course, the promise of club membership is access to a special set of facilities and programs that create opportunities to socialize and recreate with other members. Yes, people join clubs because they are passionate about a sport – usually golf – but they really join a club because they like and want to socialize with other people.”

I guess it comes down to what are people willing to pay, and continue paying, even if there is an economic downturn? Personally, I wonder how sustainable the rapidly increasing costs are at some clubs, given the debt many have undertaken and the potential impact of economic cycles. Vain emphasizes that the concept of a well done master plan is based on phasing improvements over time and if necessary, scaling back the scope of the project(s). He also stresses that if a club passes a plan with a super-majority vote (60%+), attrition is typically 5% or less.

Vain suggested that if we have a “garden variety recession” clubs won’t suffer too much, however, he emphasized that a 2008-like financial meltdown that could be different. While I “debated” the impact on “marginal members” (economically), he suggested that greater wealth levels, an emphasis on privacy, work/lifestyle situations, reduced supply of clubs and age demographics creates a good situation for the private club industry.

One sometimes troubling issue that impacts many (member-owned) private clubs is leadership. Vain says “The biggest challenge clubs have is volunteer leaders who want impose their experience from other industries on the club business. They are smart and successful people, but just because you made money in restaurants or a Fortune 500 company, doesn’t mean you understand the club business.” He encourages club leaders that to be successful means to be curious about how the club business model works and take the time to understand what drives value, and for whom. He shared with me one of my long-time favorite quotes, from Warren Buffet, “cost is what you pay and value is what you get.” Thus, it’s important to understand a club’s culture and plan accordingly.

With some clubs having adopted bylaw changes to avoid member votes, Vain’s advice above can become critical not only economically, but also in preserving the culture and atmosphere of the club in a pleasant way. Club leadership plays a critical role in master planning and sees the most challenges when leaders and board members stay on too long and gain too much power. He suggests small boards (9 members) limited terms that are adhered to and regular rotation of board members.

With so many clubs considering and implementing enhancement projects, Vain suggests the following:

  • Master plan versus “project” plan – don’t do “band-aid” projects.

  • Base a plan on member input – if you have the right plan, it will stand up to a vote of the membership.

As one might imagine, we discussed food and beverage operations at clubs. While Vain, like many is of the opinion that clubs losing money on F&B is acceptable, he says that F&B is the most misunderstood aspect of the club business and observes that often clubs with the largest F&B subsidies are those with higher entrance fees, higher dues and more members than those clubs seeking to profit on F&B. In the interest of balance, there are some who think F&B can and should be at least self-sustaining. That said, a recent study by Club Benchmarking stated that F&B losses at large clubs average about 11% of gross F&B revenue. How does your club compare?

Those familiar with my blog knows of my emphasis on “required versus desired” elements of any master plan. Vain confirmed some of my beliefs with great points on this:

  • Obligatory (required asset replacement) and Aspirational (enhancements) projects should live together in a unified campus master plan.

  • No one joins your club because you have a new roof on the clubhouse or a new irrigation system on the course.

  • People join your club because you have great practice facilities, a golf performance center, resort pool, etc.

  • 93% of clubs that do a major project have an equal or greater number of members one year after completing the work, including 58% that have more members, with an average increase of 10%.

  • What this clearly shows is that a club needs to address BOTH “required” and “desired” elements in order to maintain sound facilities and infrastructure, along with having the necessary appeal to develop and maintain both membership and usage of the club.

Vain offered a “rule-of-thumb” on capital planning, suggesting that clubs spend about 15% of resources on upkeep annually and 1.5 times that on aspirational projects every decade. Having a keen interest in club (and golf) culture, I asked Vain how much hey focus on a club’s culture in developing a facilities master plan for a club. We agree that a culture analysis is the “core of strategic planning”. All of these issues relate to the market, financial and valuation analyses we at Golf Property Analysts do, so understanding the perspective of those involved in the design and planning process and being able to work with them is of great value.

 

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Larry can help you make an informed decision. Larry Hirsh, President of Golf Property Analysts, is a widely published author and frequent lecturer at industry events. He has done assignments on more than 3,000 courses in 45 US states and Canada. His latest book, The Culture of Golf – Isn't it Just a Game?, explores elements of golf that the golf world is reluctant to discuss but that impact the economic health and future of the game we all love.
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** The views and opinions featured in Golf Business WEEKLY are those of the authors and do not necessarily reflect the position of the NGCOA.**