Carmel Country Club in Charlotte, N.C., has an energy and vibrancy that is truly unique in the private club industry. Its membership is on the younger side and they are very active, both physically and socially. Even under COVID-19 limitations, members have turned out in large numbers and the club is averaging more than 300 rounds per day. Until the shutdowns began in mid-March, members went to the club, especially on weekends, and the golf courses, tennis courts, pools, restaurants and common areas buzzed with people enjoying an atmosphere that is refreshingly resort-like.
Once restrictions are lifted, food outlets will once again attract a broad audience; families and foursomes, yoga enthusiasts and those excited for ladies’ tea. Come cocktail hour, the firepits will glow and drinks will flow. If you didn’t know any better, you might think you were at the hottest, hippest new venue in Charlotte. For the last three seasons, until COVID-19 intervened in 2020, Carmel has hosted an annual charity concert with big-name musical talent on stage—In 2019 more than 5,000 people attended the event. Carmel Country Club is a spectacular place, but it didn’t get there overnight. The club’s remarkable culture and commitment to relevance has been building for decades, fueled and driven forward by exceptional leadership backed by significant capital investment.
Carmel’s Vision Statement:
“An ongoing pursuit of excellence in facilities, programs and member service where golf, dining, wellness, swimming and tennis combine to make Carmel a place for fellowship and the club of choice for families in Greater Charlotte.”
The vision for Carmel Country Club began in the summer of 1947 when a group of prominent businessmen set out to create a new golf and social club for Charlotte from the ruins of an 84-acre golf course abandoned during World War II. Half a century later, in 1997, Carmel looked and felt like a lot of other clubs across the country—doing fine financially with membership numbers that were reasonably stable from one year to the next. Fast forward two decades and Carmel Country Club has evolved into a best-in-class country club with a culture that keeps members raving and waiting lists full. Their member engagement levels and financial results are impressive by every standard. So, what is the key to the club’s remarkable transformation and how can other clubs replicate that success?
The Power of Strategic, Data-Driven Leadership
Since 1997, Carmel Country Club has embarked on five carefully planned capital investment projects that have directly impacted the club’s membership numbers and initiation fee income, in turn generating a positive effect on the club’s operating and capital budgets. The leadership’s reliance on data to drive action has created a well-oiled machine in terms of their ability to quantify capital needs and stay on top of maintenance and replacement of physical assets while also creating and adhering to a well-documented strategic plan to drive a continuously evolving vision of enduring relevance in an ever-changing society. They responsibly, but aggressively, invest in capital expenditures that continuously enhance the club’s value proposition and keep the club thriving.
John Schultz, CCM, CCE, Carmel’s general manager since 2003, has seen the club through a deliberate, steady and financially sound transformation to what is now arguably one of the most successful, family-friendly, active clubs in the country. With the members as the constant focus, Schultz attributes the club’s success to three main factors:
- Responsible data-driven financial management
- Strategic governance
- Continuous focus on the value current and future members derive from any given decision
To understand why Carmel is considered one of the top performing clubs in the industry, we will examine five major capital investment milestones over the past 23 years. Before we step through that timeline, it will be beneficial to understand what drives Carmel Country Club’s decision-making.
Every important decision made in the club boardroom—whether to raise dues, to invest, or to assess members—should be based on a sound understanding of the financial data coupled with a quest to consistently strengthen the club’s balance sheet. Here are the key concepts that define Carmel’s financial strategy:
- Net worth reflects the amount of money members have invested over time in the club. It is synonymous with members’ equity.
- Capital income is the source of money to drive the club forward financially. Leadership uses this data to make decisions on reinvestment strategies to upgrade amenities and offer a continually stellar member experience.
- Operating Ledger is understood to be the financial driver of the member experience. At Carmel, properly funding the member experience is central to the club’s vision and to delivering services and amenities that are compelling to both existing and prospective members. The operating ledger funds a broad and diverse set of services and amenities that appeal to a broad array of members and prospective members across all ages. While Carmel offers an incredible golf experience, the club’s value proposition goes well beyond and includes something for everyone in every family.
The first of these concepts, Net Worth Over Time (NWOT), is the most important key performance indicator (KPI) for understanding a club’s financial health. It represents all the decisions made in the past and ultimately reflects the efficacy of a club’s generation and investment of capital over time. Clubs with adequately increasing net worth have invested in services and amenities that are compelling and relevant and able to attract members, clubs with decreasing net worth are suffering from lack of capital and/or poor choices regarding investment (typically too golf or yacht centric) that leads to a lack of relevance and difficulty attracting the next generation of members.
The metric used to measure NWOT is compound annual growth rate (CAGR) of members’ equity. NWOT reflects the strength of a club’s capital engine. Clubs with consistently increasing members’ equity, like Carmel, are the clubs with consistently increasing initiation fees. The ability to increase the initiation fee over time reflects a club’s evolving relevance in its marketplace. The initiation fee is the market’s objective assessment of a club’s value proposition. Initiation fee income, coupled with other sources of capital income such as capital dues and/or assessments (although ideally, not assessments) must be adequate to overcome the depreciation expense. As is the case for Carmel Country Club, capital income in excess of the costs to replace existing assets is available to expand the asset base by adding to the club’s services and amenities (termed aspirational capital) which drives a consistently evolving and relevant member experience.
In 2013, Carmel Country Club commissioned a comprehensive capital reserve study (CRS) to precisely quantify future obligatory capital needs looking forward over 20 years. This living document serves the board and management team as an accurate and comprehensive assessment of the club’s obligatory (repair and replacement) capital needs over time and the resultant data is an integral component of each phase of the club’s capital plan. Generating the capital necessary to meet obligatory capital needs is measured through increasing NWOT, which is ultimately a measure of a club’s ability to meet its future capital needs.
Club Benchmarking recommends clubs must grow their net worth by at least 3.5% annually to meet future obligatory capital needs. Growth beyond the 3.5% will be available for aspirational capital investments. Based on data from 700 clubs between 2006 and 2019, only 37 percent of clubs are meeting the 3.5% threshold. Carmel’s CAGR of greater than 7%, puts them near the top of the industry and in a position to continue meeting both obligatory and aspirational capital needs resulting in in facilities and amenities that ensure an outstanding member experience, which fuels their membership engine and perpetuates the healthy cycle of investment and return.
CHART A: Carmel Country Club Net Worth 1997-2019
Carmel Country Club’s 7.6% CAGR solidifies their status as an industry leader. The club is positioned to continue meeting their capital needs and investing in facilities and amenities that ensure an outstanding member experience, which in turn fuels their membership engine and perpetuates the healthy cycle.
Chart B benchmarks year-over-year changes in net worth for 700 clubs from 2006-2019. The clubs below the X axis are experiencing declining members’ equity. Clubs with less than 2% CAGR are experiencing a decline in inflation adjusted dollars (50% of all clubs). Carmel Country Club (the heavy blue line) is well above the threshold in the upper quartile (CAGR over 5%) and continuing to grow.
CHART B – Net Worth for 700 Clubs 2006-2019 – Carmel Country Club is the heavy blue line.
Measure of Success: Quantifying Return on Investment
Credit for Carmel Country Club’s enviable trajectory goes to a long line of club leaders dedicated to continually appraising and planning for the needs and wants of current and future members and implementing the programming and amenity upgrades necessary to meet those needs. Since the 1997 strategic plan, the club’s leadership has adopted and executed new initiatives based on extensive member outreach and communication, industry best practices, and the financial data in revised strategic plans in 2005, 2013 and 2019. Industry best practices for governance (i.e., board and committee orientations, clearly communicated roles, responsibilities, goals and measures, and consistent and frequent communication at all levels) safeguard the integrity of the club’s structure and keep leadership and members focused on fulfilling the club’s mission and vision. Between 1997 and 2019, the club has made $63.9 million of both obligatory and aspirational capital investments.
Chart C presents Carmel Country Club’s annual capital investment and initiation fee income from 1997 through 2019. The peaks in the capital investment trendline indicate five major investments that have enhanced—and in some cases, transformed—the member experience. At the same time, the member initiation fee income has been trending upward since the early 2000s. In 2004, the initiation fee was $40,000. It was increased over time in increments of $5,000 and today the initiation fee is $80,000. During this period there was a net upward trend in member count culminating in the club establishing a wait list in 2017. The big takeaway is that as the value proposition increased so did the initiation fees, which increased the capital to keep driving the evolving vision forward.
CHART C — Carmel Country Club Capital Investment and Initiation Fee Income
The lettered peaks in the chart correlate to five major capital investment projects:
- 1997 – Renovation of the North golf course, the informal grill room and the fitness center
- 2006-2007 – Investment in a resort-style pool, accompanied by a poolside food service pavilion
- 2009-2011 – Total rebuild of the South golf course and improvements to the tennis facility
- 2015 – Major overhaul of dining facilities to accommodate a more casual, energetic vibe
- 2016 – Extensive renovation of the North course and expansion of the practice facility.
The board’s unwavering commitment to sound governance practices and continuous capital investment has resulted in increased membership, broadened the member demographic, increased member usage and resulted in consistently strong financial results. In business terms, the club has achieved measurable return on their investments over time. In this issue of Club Business, we examine five capital investment milestones at Carmel Country Club cited above in a fact-based approach to documenting the relationship between capital investment, return on that investment and growth.
Each of the five major capital investments directly relates to positive impact on the club’s NWOT. As Carmel Country Club’s NWOT increased so did the value proposition to the members, and the relevance of the club in its market evolved. Attention to the golf courses ensures the club remains relevant in Charlotte’s competitive local golf market.