Country Clubs: Stuck in the Rough

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To plug these shortfalls, troubled clubs are resorting to a variety of measures. At the roughly 500 clubs that told the National Golf Foundation they were suffering serious financial problems, heavy membership losses were a key culprit. As a result, 90% reported they had tried recruiting new members with discounted initiation fees—and some, such as Inwood Country Club, a 108-year-old establishment on Long Island, N.Y., have waived their initiation charges for golf members. Others are merging with neighboring clubs to cut labor costs, which account for about half the expenses at an average club. That allows the clubs to share the cost of a bookkeeper, food-service director, and other staff. In Cleveland, two clubs facing declining memberships—Sand Ridge and Mayfield—merged three years ago, a move that enabled them to slash overhead enough to keep both courses. But with their combined membership down from more than 700 to 550 in the years since, the renamed Mayfield Sand Ridge Club is entertaining approaches from other clubs looking to merge their way in, too. "We're doing fine, but we're still looking for anything that would help our club," says Jon Outcalt, Mayfield's president.

TEED OFF

Despite their best intentions, some of the clubs' efforts to stay afloat have current members grumbling. The offenses include opening the banquet rooms to outsiders and renting the courses for corporate outings and charity events. Not surprisingly, a number of the disputes involve money—and lawyers. At some clubs, members have sued when the clubs dragged their feet on refunding their initiation fees until replacement members are found, a process that can take years at struggling clubs. In Lexington, Ky., seven members of the University Club of Kentucky filed suit in 2003 after club officials slashed the initiation fee from $12,500 to as little as $6,000. That, said members, violated the club's vows that the value of their memberships wouldn't decline. While the club and litigants reached a private settlement, Randolph Addison, a Dallas attorney who specializes in private-club matters, says the courts usually uphold the right of private clubs to alter their fees.

In the end, some industry insiders believe 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. In San Clemente, Calif., the once-bankrupt Bella Collina Towne & Golf Club has sold 120 new memberships in the past six months by adding pilates, karate lessons, and even a vegetable garden (for the restaurant) that members' kids help plant.

On the golf course, Bella Collina now offers a free junior golf program and permits members to take lessons from the club's instructors at no charge. That last move created turnover among the teaching pros, who viewed the cash from paid lessons as a perk of the job. But club officials say the gesture has helped get more mothers and children out on the course with their fathers. "The country club has to evolve and become like piazzas in Italy, the town square where families—and not just the men who are golfing—meet on weekends," says John G. Fornaro, one of the investors who bought Bella Collina last year. That's good advice, but it may be coming late to clubs where the wolf is already at the door.

Foust is chief of BusinessWeek's Atlanta bureau.

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