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Country Clubs in Crisis

Posted Nov 01 2009 10:00pm

Golf The economic downturn has suddenly made a golf club membership seem more extravagance than necessity.

For generations of golfing executives, joining a private club not only provided a venue to entertain clients but also served as a validation of their success.  Now the economic downturn has created an existential crisis for many of the nation's 4,400 country clubs.

Hammered hardest are the thousands of middle and lower tier courses.  Already, dozens are in foreclosure.  And, according to the National Golf Foundation (NGF), as many as 15% of the rest say they're suffering serious financial problems.  Among the troubled are such venerable clubs as the Country Club of Lansing, MI that is in foreclosure.

Gimme The pain isn't over, either.  The number of golfers belonging to clubs now is down to 2.1 million--900,000 below the peak in the early 1990s.  Experts such as consultant Jim Koppenhaver, whose Buffalo Grove, IL firm, Pellucid, monitors the industry, believes at least 400--and worst case, 1,000--private clubs will have to close, convert to public play, or be absorbed into healthier clubs before the carnage is over.  "The whole country club model is at risk," says Koppenhaver.  But "for a lot of golfers, the value proposition of belonging to a club is hard to pencil out."

While it would be easy to ascribe the clubs' woes to the economic crisis, experts say the seeds were planted in the early 1990s, when Congress enacted tax reforms that eliminated or reduced the ability of club members--and, more practically, their corporate employers--to deduct club dues as a business expense.  That raised the effective cost of joining clubs and gave rise to a new breed of upscale public courses some executives view as suitable, and cheaper, places to entertain clients. 

Family Societal changes, had an effect as well.  While earlier generations of men viewed their clubs as weekend sanctuaries from work, if not from the wife and kids, many executives in their 40s and 50s are opting to spend their weekends not on the course but on sports fields coaching their kids' teams.

In the end, some industry insiders believe that the long-term solution is to reinvent the country club, moving beyond golf to a broader array of services that meet the changing needs of younger members.

Source: BUSINESSWEEK, November 9, 2009

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