Fall 2009 issue of Horizons

INDUSTRY u HOSPITALITY & GAMING

Recruiting and Retaining Club Members in a Tough Economy The economy’s slide last fall had a substantial impact on the private club industry, which caused many of the clubs’ executives and boards to revisit their budgets and strategies for the upcoming fiscal years ending in 2009 and 2010. The unprecedented economic conditions (at least to many of us) caused membership levels to take a nose dive. Fortunately for some clubs, they had completed successful recruitment initiatives that helped to minimize the loss in net membership levels over the previous fiscal year. Many clubs experienced the loss of senior members who no longer utilized all the services of the club and did not experience the full value of the monthly dues… so they resigned. Clubs also lost many of the “marginal members” who joined when perfect economic conditions allowed their entry but the downturn forced them to resign or reduce their membership status. By Jim Mather, CPA

Below is a summary of an informal survey of St. Louis area clubs’ experiences from September 2008 through June 2009: • Regular membership levels decreased by an average of 4 percent. • Junior and intermediate levels decreased by an average of 6.3 percent. • Senior levels decreased by an average of almost 7 percent. • Total membership (all categories) decreased an average of almost 4.5 percent. What do these changes mean to the basic revenue stream of a typical club? Assume a club has approximately 525 club members and loses 4.5 percent of them during any given year, amounting to approximately 23 members. If we assume the 23 members’ dues and other recurring charges average at least $500 each per month ($6,000 per year), then a typical club lost revenues and cash flow of approximately $138,000. This conservative example does not factor in the lost food and beverage, golf and other revenues provided by these former members. If we also assume that these members actually used the club’s facilities like a typical or average member, then we could very conservatively double the estimated lost revenue number! This situation has required many clubs to evaluate cost-cutting measures throughout the club by reducing headcount, eliminating certain nonessential services and challenging some long-time business practices. Boards and general managers continue to monitor costs and expenses very closely and wait optimistically for some signs of economic recovery to allow them to loosen their belts. In addition to reducing costs, while trying to maintain membership services at an acceptable level, many clubs continued efforts to aggressively recruit new members. According to potential new members, some of the reservations that have dampened their willingness to join a club include:

33 u fall 2009 issue