There seems to be an almost unprecedented number of club facility improvement projects taking place across the country. Many of them are of a size or scope that seemed unimaginable only a few years ago. We’ve monitored the club world for nearly 40 years, and have see few, if any, periods like this. It is exciting and refreshing. While it is reasonable to wonder if this is some sort of unsustainable top in the club industry or general economy, it seems this trend has some staying power. A variety of factors are at work:
- The economy is expanding. There is an incredible amount of liquidity in the economy and the Federal Reserve remains committed to an easy money policy. Economists from both ends of the political spectrum seem to agree this expansion should last into 2023.
- Access to capital. Interest rates are at historically low levels. Importantly, loan terms are equally attractive. In prior low-rate periods, terms were often very short. Many clubs have secured loans at phenomenal rates for 10 or more years. This changes perspectives.
- Clubs are doing well financially. Membership is up and waiting lists are common. Additionally, many clubs received government subsidies through the payroll protection or employee retention credit programs. They have cash flow and reserves, strengthening their financial base.
- Population trends are positive. The aging of millennials is very positive for clubs. There are more people in the prime joining years than there have been since the 1980’s when the Baby Boomers were in their forties. When the MY (middle to young) Ratio is positive, meaning there are more middle-aged people than young adults, more people are in their peak earning years, so they get married, buy houses, have kids, invest in the stock market—and they join clubs.
- Club boards have seen the light. The pandemic spurred many club boards to act They stripped away the bureaucracy that typically holds them back and replaced it with an urgency to act in the face of unprecedented changes in lifestyles and the economy. Those that acted saw the light and realized their job is to be a catalyst for change, not the guardian at the gates. Successful responses to the pandemic gave them confidence that action trumps inaction. They continue to push ahead.
- Lifestyle changes. In the normal course of affairs, the pace of change in lifestyles can feel incremental or not felt at all—until it is too late. COVID-19 accelerated many things, like work from home, relaxed dress, desire for safety, family focus, etc.
Barring exogenous events like war, stock market collapse and the like, if clubs play their cards right, they are on the threshold of a golden age. On the other hand, clubs that have not made a major improvement recently should think carefully about missing this opportunity. With all the projects going on around them, sitting still will mean losing ground to the competition. The next generation of members will be seeking clubs with up-to-date amenities and year-round value, so don’t miss the boat.
Frank Vain is president of McMahon Group, a full-service private club consulting firm that has served over 2,000 private clubs around the world. He can be reached at [email protected].