12 hole golf courses

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Private golf clubs face difficult choices

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The Glenmore Country Club, in Keswick, VA, puts strong emphasis on its junior program, knowing that is one path to membership stability.


    A column in today's Wall Street Journal by John Paul Newport reemphasizes a point we have made in this space before about financial issues private golf clubs are facing.  In a recession, many of them do not have much room to maneuver.  Members are leaving faster than new ones are joining.  These country clubs have a number of options to staunch the income flow, some potentially self-defeating.  
    The simplest approach is to deeply discount entrance fees for a period of

The equivalent of $400 a round, even at a private club you like, is tough to justify in these times.

time.  My club in Connecticut has done this routinely in past years, offering a promotional entrance fee from January to May before kicking it back up a few thousand dollars once the season begins.  The lower entrance fees, of course, reduce a club's stream of income and they do not exactly encourage warm feelings among those who paid the regular price just a few months earlier.  But subsidizing the entrance fees of a few new members sure beats a net loss of members since dues, even more than initiation fees, provide the constant stream of income necessary to keep things operational.
    Other actions are equally daunting and chip away at the very nature of a "private" club.  One option is to accept more group outings to generate needed supplemental income, in effect shutting off play to members one or two days a week, typically Monday and Tuesday.  This is always a grousing point at private clubs.  Another, more radical measure, is to turn the private course public Monday through Thursday or Friday, permitting outside play for substantial daily fees but reserving a block of times for members.  Some golf courses in resort areas of the southern U.S. use such an approach, but make no mistake about it, these clubs feel more "semi-" than they do "private."  And those interlopers, some of whom pick up a golf club once a year, at the company outing, tend to chew up the golf course.
    There are some less invasive remedies club membership committees should investigate.  These are built
Some clubs understand that strong support for junior golf programs stabilizes membership.

on the premise that the more people under the umbrella of a "family membership," the better the chance of continuity of membership.  Membership committees, for example, should conduct a professional survey to find out if all marital partners are using the club and, if not, determine what the absent spouses are interested in.  Then, develop programs to engage them.  In nearly 25 years at my own club, my wife and I have been invited to many dinners and dances and wine tastings but never to a lecture by an expert on a topic of interest.  And yet I know from having played golf with them that many of my fellow members have practical expertise on subjects like financial planning, insurance, automobiles (a few are dealers), real estate and, ahem, golf communities.
    My wife does not play golf, but she did pay for and attend a few aerobics classes at our club that were conducted by an outside trainer.  If our club, which does not have a fitness center, sponsored something like that, it might engage more non-golfing spouses.  This becomes especially important when a son or daughter goes off to college or the family buys a vacation home for use during the summer.  If dad is the only one who uses the facilities for a few weeks in spring and fall, then his mental calculator starts to spit out a tough-to-justify number like $400 per round played (that is what I paid last year).  That is always a danger sign for private clubs, especially in the current economy.  (Note:  After 22 years at our Connecticut club, we have made the tough decision to give up our membership.)
    But, perhaps, the best way to keep families from bolting is through junior golf programs.  What parents who can scrape out dues payments are going to deny their sons and daughters the opportunity to continue in an active club program for juniors?  Some clubs recognize this and throw a lot of resources at their junior programs.  The club in the golf community of Glenmore, near Charlottesville, VA, even carves out a separate practice area for its juniors.  Other clubs consider junior programs more or less an afterthought, running the occasional group clinic, arranging a few play dates for the kids but also restricting tee times for the youngest children to an unreasonably few hours a week.  Substantial investments and a focus on well-run junior programs can pay off in the short run by stemming member flight, but also can begin to sow the seeds for intermediate memberships later, after some of those juniors who were cultivated in their teens finish college and return to live and work near where they grew up.

    Most families average four members.  If the carrying costs for club membership are, say, $6,000 per year, and all four members are engaged in activities at the club, then the pro rata is $1,500.  If dad plays golf and no one else is engaged, then that $6,000 looks unjustifiable.  Less is more for private clubs in today's economy.
    Click here for the Wall Street Journal story (it may require a subscription; if so, email me and I will forward it to you.)

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Saturday, 29 November 2008 07:24
 
Lifetime membership at wondrous Scottish golf club

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The views from the town of Crail and its golf course are postcard perfect.


    One of the highlights of my son Tim's and my first trip to Scotland last June was our play on the two-century-old Crail Balcomie Links (redone by Old Tom Morris in 1895), as well as our stay in the charming fishing village of Crail.  The links golf course, one of the oldest in the world, features breathtaking ocean views -- Golf World magazine  ranked it among the best -- and a challenging layout made more so by the ever-constant winds.  Among the outstanding courses Tim and I played during a glorious week of golf, I ranked Crail near the top, just behind the Old Course at St. Andrews, which is a mere 20-minute ride away.
    Now, thanks to Crail members' ambitious project to rebuild their out of date clubhouse atop thebalcomie_links_sign.jpg highest point on the course, as well as a recession that is reaching into every global nook and cranny of commerce and leisure activities, the club is offering citizens outside the UK lifetime memberships for just £2,500, or about $3,750 US at today's improving (for US citizens) exchange rate.  (Note:  The rate was 25% less favorable last June.)  The membership for life includes play on both the Balcomie course and the adjacent 10-year old Craighead Links, a Gil Hanse design that includes many of the classic elements of links golf.
    The overseas membership permits four rounds of play annually on each of Crail's two golf courses and the ability to bring along up to eight "friends" each year to play for nominal fees.   Each new overseas member will be assigned a "buddy" from among Crail's local membership; the buddy can help arrange for playing partners and sign-ups to play at local courses, of which there are many, including the new Castle Course at St. Andrews, Kingsbarns, the Old Course, Lundin Links, and the well-regarded inland course at Ladybank.  Those last two courses, plus the ancient and excellent Scotscraig Golf Club north of St. Andrews, are available at 50% discounts for Crail's overseas members.
    Local membership, by the way, is just £500 with modest annual dues.  And with the exchange rate improvement and the recession, Scottish real estate prices are softening.  One current listing for a new 3 bedroom, 2 bath home in Crail just a mile from the golf courses is listed at $375,000 US.  On a cold and dreary New England day, it kind of makes you think.
    For more information, see the Crail Golfing Society web site.

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 Golf World put Crail Balcomie Links on its list of courses with the best views.

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Friday, 28 November 2008 05:30
 
Reader comments on Charleston area golf community prices
    Dedicated Golf Community Reviews reader Elliot deBear, who also contributes reviews and photos of golf courses he plays, wrote me the following the other day.  I appreciate the kind words and hope I have answered his question thoroughly.  If others want to weigh in on the subject of home prices in Charleston and elsewhere in the southeast, I welcome and will be happy to post your comments.

    "Larry," Elliot wrote, "I've been enjoying your recent and spot-on articles regarding the price shifts, opportunities and pitfalls in second-home purchases throughout the south, in general,
Are these published prices," our reader writes, "accurate or realtors' wet dreams?"

and for golf communities in particular.  I recently picked up a copy of Charleston Magazine where the majority of beach, golf and island homes still are all in the $1-million-plus price range.  This is not different from the prices listed in the same magazine months ago.  Is Charleston that insulated from this financial meltdown?  I can't believe they are holding prices that high and that there is that much demand there. There have to be a ton of retirees or near retirees who are getting slammed right now, not to mention how the credit crisis has to be killing builders who went out on the limb with spec houses.  Are these published prices accurate or realtors' wet dreams?"

My response to Elliot:

    You ask a great question about Charleston.  Overall, Charleston market prices are down about 6% or so year over year, depending on whose charts you are looking at; that is one of the most stable performances in the nation.  So, yes, there is a little insulation market wide.  The top end of the market is typically the last segment to suffer price erosion.  Given all the headlines, we can sometimes lose sight of the fact that many, many people made a lot of money in the equities markets run-up before the crash, and many of those were as smart about conserving their money as they were in making it. They weren't the ones who got caught up in the irrational exuberance thing and bought three or four spec condos in Miami with loans they could not pay back if prices leveled off, let alone dropped.  
    So, one response is that there is still some money out there chasing a few choice properties, some of which are in the Charleston Magazine listings you reference.  I do know that
Tremendous wealth was generated in Atlanta, and much of it was used to buy second homes in the Charleston area.

tremendous wealth has been generated in Atlanta over the last two decades, and Kiawah Island and the higher end golf communities around Charleston have been second-home magnets for the newly rich from Atlanta (magnets for magnates, I suppose we could say).  Many of these are professional people who probably did not see fit to make reckless investments in real estate and probably had a good amount of cash sitting on the sidelines when the spit hit the fan.  They may be inclined to list their second homes now, but they probably don't have the urgent need to dump them that those of more modest circumstances are feeling.  
    That leaves the vacation homeowner a little vulnerable to local real estate agent "puffing," a term of art in the industry.  It means real estate agents tend to paint a better picture of a property than it deserves.  So these agents, who are scrambling for listings more than ever in this ugly market, are pitching over-inflated prices to these potential clients to win them over.  (Note:  I wrote a piece a few months ago about taking the middle of three estimates when it comes time to sell my own house.)  The second homeowners don't understand the local market as well as the local agents do, so they trust the estimates.  I think this may be inflating those listing prices in Charleston Magazine as well, and keeping the properties from selling.
    If my assumptions about the high end of the Charleston market are correct, then the key
Those who paid cash for their second homes are probably in no great rush to unload them.

question is how much debt the second homeowners may have acquired to buy their homes.  Those who paid cash probably will float their vacation homes at the higher prices you see, not caring too much whether someone bites or not.  But most of them probably assumed some debt, and I expect they are starting to get nervous about now (if they hadn't been nervous already).  I will hazard a prediction that if you pick up Charleston Magazine in a few months, you will see anecdotal evidence that prices have begun to drop on the high end.  I have been looking at the Sunday NY Times real estate pages for most of this year, and only a few months ago -- after Lehman -- did I notice prices eroding in the Big Apple.  Like NYC, Charleston has much to recommend it to a wide range of people, but I think the insulation will begin to wear away shortly.
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Wednesday, 26 November 2008 12:07
 
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