Club Benchmarking data reveals a tale of “three” cities happening in the club industry, which appears to be a growing divergence. According to our research, one-third of clubs is prospering and growing, one-third is “going sideways” and one-third is falling further behind every year. The metric we use to measure prosperity and growth is the compounded annual growth rate (CAGR) in net worth over time, aka Members’ Equity or Unrestricted Net Assets.
The Club Benchmarking research team has analyzed net worth over time (2006 through 2018) for more than 300 clubs. Thirty-five percent of those clubs have seen their net worth decline in absolute terms (worth less today than in 2006). Currently, the median CAGR for this group of clubs is 2.1 percent, which is below the inflation rate for construction during that same period. Only 37 percent have CAGR at or above 3.5 percent—Club Benchmarking’s recommended target. For contrast, the upper quartile representing the healthiest clubs, has a growth rate of 5 percent or more.
The Best of Times and The Worst of Times
In our club industry version of Dickens’s classic tale, the difference between the “haves and have nots” comes down to mindset. The prosperous clubs are focused on programming and investing to deliver a compelling member experience. They reap the benefits of that focus through increased capital contributions from their existing members and from new members paying healthy, consistently increasing initiation fees. The data proves clubs that have invested consistently over the last 10 years are experiencing a corresponding, quantifiable increase in members equity (net worth) over time, whereas clubs that have restricted their capital investments are seeing the opposite effect.
For those declining clubs, the focus is on operational results, cutting costs and restricting investment rather than on the member experience and the health of the balance sheet. Reversing the downward spiral will require leaders of those clubs to commit to changing the behaviors that are driving their decline.
Ray Cronin is Club Benchmarking’s Founder & Chief Innovator. For a complimentary “Net Worth Over Time” analysis and report, email Mike Morin at [email protected].