Skip links

Turning Crisis into Opportunity: A Failsafe Roadmap for Clubs

For too long, the club industry operated without accurate data and without context, flying blind when it came to decision making. Good decisions demand consideration of context. Crises tend to invoke panic and panic can lead to poor decisions, as happened in 2007-2008 in the private club industry. As the industry grapples with the COVID-19 crisis, it’s critical to provide context based on fact.

Obviously, a club’s ability to handle the impact of the shutdown will be directly related to the financial strength of the club as it entered the crisis. When making decisions concerning the shutdown, consider the decisions that put the club wherever it was at the start. As the saying goes, the definition of insanity is doing the same thing over and over and expecting different results. If the club leadership embraced data and fact-based insight, they now have an opportunity to change the club’s future. If they make “knee-jerk” decisions without context and fact, the future will not be bright.

The inability of a club to absorb the impact reflects a weak balance sheet, which is ultimately a result of members inadequately funding the club over time and a reflection of a club culture in which members think like customers and not the owners. Though the situation in which all clubs find themselves is difficult, an opportunity exists for clubs to become stronger and ultimately alter the course of their futures for the better. Ask the following questions as food for thought:

• Can we use data and fact-based insight to change the future of our club by making better decisions during this crisis?

• Can we begin acting as a community of owners who are ready and willing to properly fund the club over time?

• Is there a better way to start than by asking members to rally around and contribute the money necessary to help the staff during the crisis?

In a community where members feel like owners, it doesn’t make sense to offer a “dues holiday” while the club is shut down. Operating dues cover nearly 80% of the club’s fixed operating expenses. Dues revenue is more important than ever during the shutdown and a dues holiday will unnecessarily exacerbate the financial impact. Clearly, members must band together, with the board leading the way, committed to paying dues for the sake of their club. Put another way, when you leave your home in the middle of winter, you don’t turn off the furnace.

There may be certain scenarios where giving members a break from fees does make sense. One example would be relaxing the F&B minimum while the clubhouse is closed. The median club receives about $25,000 per year in unspent F&B minimum, so relaxing that during the shutdown will have minimal impact and it makes sense. Similarly, some city/athletic or country clubs have base dues that cover the clubhouse and F&B privileges with an additional dues charge for athletics. Those clubs may forego the athletics dues during an operational shutdown while all members continue to pay the base dues. Each club will use common sense in navigating their own decisions.

Club Benchmarking’s short-term recommendations regarding decisions are:

• Stay focused on the short-term impact on operational finances. Do not start reducing at the overall 2020 operating and capital budgets. Keep the decisions focused on the short-term shutdown until more information is available.

• Considering the strength of the club entering the shutdown and the historical drivers of that strength or weakness, which is critical context for all decisions moving forward. If the club is strong, don’t depart from what has made it strong (an owner mentality willing to contribute what is necessary to properly fund the club). If the club is weak, try to change what is likely a historical hesitance to ask members to contribute the money necessary to properly fund the club.

• Wait until there is more information to make long-term decisions. 


Club Benchmarking’s ongoing annual analysis of financial and operational data from across North America indicates that in terms of the ability to attract and retain members, clubs fall into one of three buckets:

1. Strong Membership Engine – Clubs that are full and have a wait list. This bucket includes 20% to 25% of the market.

2. Moderate Membership Engine – Clubs that are not full but have enough members to fund operations and capital at a level that is mostly adequate. This bucket includes 50% of the market and is filled with a combination of clubs that are near capacity and clubs that are much less full but still have an acceptable number of members.

3. Weak Membership Engine – Clubs that do not have enough members to adequately fund operations or capital. These clubs have very low initiation fees and very high membership churn. As we will see, the two are related. This group represents 25% to 30% of the market. These clubs will most acutely experience both the short-term and the long-term impact from the virus crisis. Members in these clubs tend to think like customers instead of owners.

It is imperative clubs make decisions within the context of the strength of their membership engine. Each club must recognize that the strength or weakness of their membership engine in the present moment is the outcome of decisions made since the last recession. Since that time, certain clubs have changed the strength of their membership engine. Clubs that came out of the last recession with a moderate strength engine have entered this crisis with strong engines. Some clubs that had strong engines coming out of the last recession have sunk into moderate or weak engines. Those shifts are directly related to decisions that were made in the boardroom over the last decade. Decisions made in the coming months will have an impact on your club’s future.

Use the crisis as an opportunity to change the future— simple as that. Every club should be asking, “How do we make our club stronger?” It is the following best practices that made the clubs with the strong membership engines strong. It is an unwillingness to embrace best practices that made the clubs with the weak membership engines weak. Every club can benefit from studying and embracing the following best practices. Emerging from a crisis seems like a perfect time to do so. The best practices are a failsafe roadmap for clubs with strong membership engines to remain strong and for clubs with weak or moderate membership engines to improve their future. The best practices that should be reaffirmed and embraced as clubs emerge from this crisis are:

1. Recognize the operating ledger as the vehicle for delivering services and amenities to members. It reflects the member experience. Financially, it is consumed every year by members enjoying the club. It is not the financial driver.

2. The financial driver is the capital ledger. Capital income is the source of money a club uses to drive itself forward financially.

3. Every club, like every business and family, must increase net worth. Net worth grows as a result of adequate capital income and decreases as a result of inadequate capital income.

4. The key to sustainable financial success is a comprehensive, forward-looking capital plan.

5. Clubs compete on value, not on price. In 2020 and beyond, clubs must offer a compelling member experience if they are to succeed. On the margin, clubs must lean toward funding the member experience and lean away from a focus on cutting expenses.