Created to provide clear guidance and expertise to clubs of all sorts, Club Benchmarking believe that prioritising fact over opinion is paramount, and that future planning is crucial for golf clubs all over the world.
If you are the leader of a top-tier private club (or a club that aspires to be top-tier), you understand that relevance is not just a buzzword – it is the key to long-term success. In addition to relevance, the industry’s healthiest clubs share a common characteristic that we call “big picture thinking.”
Their boards and committees are far too busy planning for the future and executing those plans to be distracted by operational issues. Their members recognise themselves as owners, and as such, they willingly and continuously invest in the club’s physical assets throughout their tenure as members.
That notion of willingness to invest is important. The financial reality of keeping your club relevant and competitive in a dynamic market is this: During the next decade, the club’s members will likely need to invest a minimum of €5 million in modernisation and transformative capital improvements. Here’s why:
• With depreciation running at more than €250k per year at many top-tier clubs, you will likely need to invest €5 million over the course of the next decade just to prevent the erosion of your capital base (i.e. deferred maintenance). Protecting and maintaining the club’s physical assets is a primary responsibility of a club’s volunteer board members.
• It’s a safe bet that your competition is actively working to improve their offerings. Like you, they understand that the breadth and quality of club amenities, services, and facilities matter now more than ever. The longer you delay getting started, the further ahead other clubs will be.
• Capital investment must be recognised as a continuous, never-ending process. In 10 years, the “new” clubhouse, swing room, irrigation system or any aspirational project you are building right now will be showing its age.
• Annual member attrition of 2–5% is normal, which means over the next decade you could need to replace up to 50% of your membership. Given the younger average age of new members joining a club, the profiles of those new members will be very different from those of the departing members. Consumer tastes and interests are constantly evolving.
The Top-Tier Mindset
Among successful top-tier clubs, amenity trends include upscale practice facilities, fitness areas and locker rooms, more junior-friendly activities and spaces, more options for casual dining and socialisation, more golf training centres and golf simulators set up for socialisation (not just for training), and many other evolving innovative ideas.
To fund these improvements, top-tier clubs rely on members thinking and acting as owners and willingly contributing capital, ideally through recurring capital levies, to fund obligatory needs (repairing and replacing what is owned) and entrance fees, as well as the judicious use of debt to fund aspirational investments (evolutionary investments to remain relevant). Capital funding must be comprehensively and precisely planned, separately from operational funds. It requires consistent, long-term thinking and careful, proactive planning. It’s also critical to think in terms of funding a cohesive long-term plan rather than a project-by-project approach. And remember that successful implementation of large-scale capital improvements will almost always increase operating costs. Long-term operating budgets must be planned separately and simultaneously.
The club’s long-term strategic vision should be distinct and well-documented, with an unwavering commitment to funding that vision. As new members join the board, a key part of their orientation to club finance should be the understanding that funds for obligatory and aspirational capital investments or debt service will not, and should not, come from operating surpluses. Far too many clubs have seen long-term plans derailed by a failure to grasp that basic tenet of club finance.
Top-tier clubs think big picture and long-term. They keep their eyes on the horizon and think strategically about what it will take to make themselves the club of choice for the next generation of members.
To learn more about Club Benchmarking and the approach to capital planning, strategic governance and board orientation, click here.
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