How will private clubs survive the next recession?
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When Jeff Warne began looking for land in 2001, he thought he could be a pioneer in Aiken, South Carolina’s now booming golf scene. He now hopes it’s not too late to the party, as private destination clubs are proliferating in the area.
Old Barnwell and Tree Farm are both nationally acclaimed. 21 clubs are scheduled to open. A little further away is Bloom’s Edge, where this year’s Carolina Mid-Amateur will be held. Additionally, there are traditional members clubs such as Chechesee Creek Club and Congaree, as well as resort courses at Kiawah Island and Hilton Head.
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It’s a great time to play golf in South Carolina. Especially in a world where national membership fees are six or seven digits, they can even be four or five digits.
But it’s not strange for some economically depressed golfers to ask, what will happen to these private clubs when the next recession comes? Do we have enough funds to continue operating at the level our members and guests expect? Can we close? Much of this will depend on whether national members, who may only visit a few times a year, want to continue checking in to make these clubs possible.
Mr. Warne, a native of Augusta, Georgia, and longtime golf director at The Bridge, a private club in Sag Harbor, New York, is building New Holland Golf Club, a combination of the 130-year-old Palmetto Golf Club, where he has been a member since the 1980s, and a British golf club open to visiting golfers. He is bullish on this area and hopes to begin member preview play later this year.
“It’s like buying Google 10 years ago because you thought it was too expensive, but Google is still growing,” Warne said. “Palmetto, Tree Farm, Old Barnwell and 21 Club members are sending their friends to us. They’re thinking about going back home.”
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A perfectly solid paper in good times. But what happens if AI takes away more jobs than expected, inflation rises, or disposable income simply shrinks?And many of these courses aren’t easy to get to on commercial airlines. Enjoy the great golf of western Nebraska. Private jets make getting to your destination much easier, but it’s exactly the kind of luxury that is limited in a recession.
“We’re at a price point where for some people it’s going to be the first price drop, but for others it’s going to be the last.”
-Nick Shriver
Old Barnwell founder Nick Schreiber has pondered this scenario. He said he was clearly fortunate to have personal finances and the support of his family, starting the club debt-free, but designed the club with a long-term view and a price point that would attract people who believed in the club’s mission to give back to the game.
“My dad would joke that once a year, why don’t we just get some stupid rich people to come and pay the premiums,” Shriver said. “That’s what we’re trying to avoid.” The fees are reasonable: $5,000 a year for those over 40 and $4,100 a year for those under 40, a far cry from the $1 million-plus initiation fees of clubs like Apogee in South Florida.
“We’re in a good position when the bubble inevitably bursts,” said Schreiber, who has opened a children’s course and is building a third course at OB. “We’re at a price point where for some people it’s going to be the first price drop, but for others it’s going to be the last.”
PGA Tour pro and Tree Farm founder Zach Blair has also been thinking a lot about financial strains. His club has been plagued by rumors of sale and bankruptcy. “We were never put up for sale,” Blair said. “Almost every month there was a new rumor going around that someone was buying the club.”
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The club tried to quash the rumors in a letter to members last year, but that only led to more speculation.
Blair and general manager Eric Dietz said part of the reason for the rumors is its unusual dues structure. The club, like Ohoopee, operates on a fee basis, where members pay $5,000 at the beginning of the season and then replenish that amount as they come, play, stay, eat, etc. on the premises. If you do not plan to come during a certain season, you can skip paying the usage fee and your membership will not be revoked. This can be problematic in a recession.
At Bloom’s Edge, Cody Samberg, who heads the investor group, said the company has not modeled the impact of a future recession. “We’ve been optimistic,” he says. “There’s a supply and demand imbalance in the Carolinas. Everyone is moving here.”
An even bigger problem may be for investors in these private destination clubs.
Ryan Rafter, vice president of golf resorts at brokerage firm Hilco Global, said many new clubs that have accepted private investors are “doing well, but not great.” In other words, most investors are not making any money. That may be fine for your friends and family. But private equity investors expecting returns many times their investment may be forced to change.
Another challenge with these private golf-only clubs is that they are not designed to be family resorts. Selling your family on a trip to Cabot Citrus, where Disney is just a short drive away, may be easier than heading to the Aiken Club, where the winters are cold and gray.
Competition for public resorts is also a reality. Michael Kaiser Jr. plans to open Rodeo Dunes, about 40 minutes from Denver. He built the course with founding members who paid joining fees ranging from $65,000 to $105,000. These members have access to the tee times of their choice, avoiding the years-old scramble to secure tee times at top resorts.
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One strategy for continuing to generate revenue even when members are not visiting is the UK club model. “Those that accept unaccompanied guest rates will do well,” Rafter said.
Warne plans to leave space open for unaccompanied guests. He also wants New Holland to be a club where members can find a game, whether they’re flying in from New York, traveling from Charlotte or driving down the street.
“It’s about golf and relationships and being able to find the game,” Warne said. “It takes effort. I want people to show up as singles, but not play as singles.”
Such an approach can keep people coming back during difficult times.
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