The fact that Donald Trump owns more golf courses than any president in United States history should be positive for the industry. If he and the increased number of Republicans in all levels of government act in concert with their limited government values, individual clubs and their members will benefit.
Trump is surrounding himself with decidedly pro-business people who are likely to support key club issues. For example, the nominated Labor Secretary, Andrew Pudzer, is the CEO of CKE Restaurants which counts Hardee’s and Carl’s Jr. among its brands. He is an experienced hospitality professional who opposes the recently stayed overtime rule as well as increasing the minimum wage. In addition, if the president achieves his promise to “repeal and replace” the Affordable Care Act, it could be another win for clubs, depending on what the “replace” model turns out to be.
However, there are several items in Trump’s stated agenda that could cause challenges for clubs, including the impact of general inflation, raised interest rates and labor costs. Trump has branded himself as a “jobs president,” but unemployment is already at historically low levels. If his pro-jobs policies are effective, in combination with his desire for more restrictive immigration, there could be real wage growth in the U.S. for the first time in decades. The labor participation rate suggests there are some folks available to come off the sidelines, but probably not enough. That will be a positive for many of his supporters, but a challenge for employers.
Interest rates have already moved up nearly 100 basis points in the short time since the election and the goal to normalize them means the super-low interest-rate environment could end. A 3 percent yield on the 10-year Treasury bond will mean commercial loans will get back to 5 or 6 percent. This will make it more expensive to borrow money for recapitalization projects, or lead to smaller budgets. If your club were considering making improvements, begin the process in 2017.
The U.S. has not seen sustained GDP growth north of 3 percent for more than a decade, so we forget how powerful that can be. If the economic environment is normalized—which is the case in 3 percent growth—a lot of the challenges on the cost side get taken care of through higher employment, stronger consumers and the velocity of money in society. Real reform of the personal and corporate tax codes is also very high on the new agenda, putting more money in people’s pockets.
Over the past decade or so, pragmatic capitalism has gone missing, contributing in part to the decline in the health of the private club industry. If Trump is successful in reducing regulations, lowering taxes and restoring economic growth, the club world stands to see benefits both in the running of their own businesses and the wealth effect among the segment of society they serve.
Frank Vain is president of McMahon Group, Inc., a premier full-service, private club consulting firm serving more than 1,900 private clubs around the world. He also serves as a director of NCA and chairs the Communications Committee. He can be reached at [email protected]. For more information, visit www.mcmahongroup.com.