What business are golf clubs in : Is it only the Membership business?

When you think of your overall a golf club’s business strategy, broadly speaking there are three main categories a club will fall into that drives revenue.

These three categories are:

1.      The Membership Business

2.     The Green Fee Business

3.     A hybrid of both Membership and Green Fee

Your Board and Management team must be aligned on deciding which business you are in. This will determine what your business and marketing plan prioritise each year. 

A typical scenario is a Board thinking they are only in the membership business and not in a hybrid model.  As a result, their thought process and decision-making discounts the importance of the green fee player’s experience and the subsequent dollars they are spending. These dollars also subsidise membership fees. 

Determining the business benefit of hybrid models for Golf Clubs

For the purposes of the three categories, consider all fee-for-service areas under the green fee banner, eg. Corporate Golf Days, Driving Range buckets, mini-golf fees etc..

The top echelon of Golf Clubs in Australia sit within the membership business and charge the associated membership fees to comfortably pay for all expenses. Additionally, they would have cash left over to renew and refresh assets according to the Club’s strategy. 

For most Clubs, the above is not viable with their current membership rates. As such, many Clubs operate within the hybrid zone and this is the model of focus in this article.

Breaking down the outcomes of a hybrid golf club business model

Let’s start this analysis using an example. 

Club A has 1000 Members, but only 600 x 7-day equivalents as they have various other categories at lower rates (eg. Seniors, Juniors, 5/6-day etc). 

The 7-day membership fee is $3,000 meaning that the annual membership revenue is 3000 x 600 = $1,800,000.  Course maintenance sits at $1,200,000 and other costs such as Management/Golf Shop staff, insurance, utilities etc sit at $1,000,000. 

For the purposes of this exercise I have assumed that Hospitality is cost neutral – all revenue offsets all costs in this space. (Your Board may believe they are in the Hospitality business; I will explore the negative issues behind this belief in a future article.)

The hybrid model therefore looks like this:

Membership                $1,800,000

less Expenses             $2,200,000

equals                         -$400,000

Your green fee category (remember, this includes all fee-for-use activities that you offer) must make $400,000 in revenue in order to breakeven.  NB. Breakeven is not an outcome you should be striving for either, your Club should be making a profit every year.

The Board and Management have some choices to make about how to bridge this $400K gap:

1.      Change the model to a golf membership business and increase annual fees by an average of $667 per 7-day member – (400,000 / 600 = $667).  If this is the long term strategy of the Club.

2.     Let in more Members from your waiting list or go on a recruitment drive to attain 133 more 7-day equivalent members (400,000 / 3,000 = 133).

3.     If your long term strategy is to move the Club into being in the membership business, a combination of options 1 & 2 would be the fastest way to get there.

4.     Create and market more tee times for green fees, guests of members, corporate days etc.  Let’s assume the average green fee is $75, that equates to a further 5,333 green fee players per year.

In reality, most Clubs operating as a membership business are using a little bit of option four to top up their coffers through guest play and corporate golf days. 

How to communicate a hybrid golf business model to Members

One of the keys to operating a hybrid membership/green fee business is to be very clear and consistent with communications to the Members. 

Friction occurs when Members believe they are at a Club that purely operates in the membership business. 

Setting expectations and having transparency of the reasons why the club is a hybrid is very important. 

A $667 increase in fees will be completely OK for a portion of your membership, whereas that sort of rise may lead to a substantial loss of Members which will negatively impact your bottom line.

For this reason, communicating that green fee play subsidises membership costs will more often than not be welcomed by your Membership cohort (or at least understood).