Mandatory memberships help courses survive
Some golf communities in the southeastern U.S. try to make membership in their golf clubs as enticing as possible, either through free or discounted initiation fees, or the ability to transfer membership from one homeowner to the next. Still, only an estimated 10 to 20 percent of those who live in a U.S. golf course community are golfing members of the adjacent club(s). That could change in coming years as the financial realities of running a golf club drive some operators toward innovative deals with local developers and builders.Last year the net number of golf courses in the U.S. decreased, as the overheated housing market - remember when? - was in full steam mode. Developers eager to take advantage of real estate demand waved some pretty enticing deals in front of strapped golf course owners. In Myrtle Beach alone, a dozen courses were closed to make way for condos and single-family homes.
It is expensive to operate a golf course unless you are a municipality that can build operating costs into the local tax burden. Operational costs are unpredictable year to year. On top of the costs of routine maintenance, which have been negatively affected by increased energy and labor costs, add the unpredictability of irrigation-stressing droughts, especially in the south, bug infestations, bad winters (in the north) and all the other vagaries of Mother Nature and fickle markets. Private golf course operator is not the most secure profession...
...unless you have enough dues paying members to ensure proper maintenance and financial viability. An article in the current (August) issue of Golf Business magazine, published by the Golf Course Owners Association of America, features a former past president of the PGA of America who now owns a golf course. He has developed a reasonable strategy to generate the kinds of profits that can support his club's facilities.
Will Mann, according the article, is partnering with local builders in the new community adjacent to his course, Cedar Forest Golf Club in Swepsonville, NC (Swepsonville is halfway between Greensboro and Chapel Hill). Home buyers in the community will be required to purchase at least a social membership, for $3,000 initially and $80 per month, which gives them access to the clubhouse, pool, tennis, dining room and other amenities. Those who want access to the club's exercise facilities will have to pay $5,000 and $175 per month. Full golf members, with access to everything, including the 1969 Ellis Maples/Ed Seay course, will pay $10,000 and $300 a month. More than likely, in the now topsy-turvy housing market, the builders will foot at least part of the initiation fees to help unload inventory.
Mann predicts that up to 50 percent of residents will eventually upgrade to full golf membership, enticed by the opportunity to transfer the membership with the eventual sale of their homes. Home prices in the neighborhood range from $450,000 to $1 million. Mann will start a $2 million upgrade to the course and club this fall, a clear indication of confidence in his model to generate ongoing revenue for Cedar Forest. Other golf course operators will be watching closely. For those of us contemplating purchase of a home in a golf course community in the coming years, this type of arrangement could offer extra negotiating power with developers or builders who want to move their stagnant inventory quickly.
