The Perils of Membership Categories

Medinah Country Club recently initiated a capital improvement project where we targeted the reformatting of interior spaces, upgrading interior aesthetics like fixtures, wall coverings and some redesign. We also paid some attention outside the clubhouse by adding paddle and tennis courts and remodeling one of our three golf courses in addition to expanding our pool and adding a new pool bar. As you can imagine getting the membership to agree on absorbing the cost of these projects was a major task, but we persevered.

So now that we have financial commitment our next obstacle is overcoming the emotional second guessing that comes with spending millions of dollars. Trust me, questions start getting asked with very loud voices: Do we have enough activity and bodies to fill the newly developed amenities? Can we generate enough revenue to comfortably service the debt without assessing the members into oblivion?

You know what knee jerk reaction is coming: “Hey, let’s create some new membership categories to increase our member count!” This sounds like an easy and simple solution, and it is; however, there are some very serious unintended consequences that come with this decision. In this article, I will be explaining what form these consequences will take. But before I expose the pitfalls, let’s talk about the benefits of making the move on more membership categories.

Increased utilization. In the case of our club our project included adding a never before amenity of paddle tennis courts. Most of our members have never played paddle tennis before and some have dabbled within this regional sport. The line of thinking is we need some dedicated paddle tennis players to fill up these courts so let’s start an athletic membership category to cover both our racquet and paddle facilitates. Sound thinking obviously, but beware of the possible consequences that come with expanded activity.

 Multiple price points.While an $85,000 full membership initiation may be out of reach for some, a $65,000 may be appealing and we can limit their golfing to courses #1 and #2. Or, how about a $30,000 sports membership that will cover the racquet and paddle courts along with the gun range? Wait … what if we take our social membership to $15,000 and let them use the paddle courts? The possibilities are endless as the pie gets cut into smaller and smaller pieces. Contained within the infinite wisdom is that with each price point comes more members.

Diverse membership.With more price points we may appeal to more demographics. Most people who golf have a different mindset than those who play racquet sports and these two groups come with different ages and economic conditions. There is no question that with more membership categories you become more diverse and marketable to the masses: “A little something for everyone.”

As a once famous club owner stated, “We are in the dues business.” He is right; dues are the life blood of our industry, but without strategic purpose being applied to the nature of your developing club culture, generating dues dollars may not be the most important thing contributing to your club’s survival. Without question, offering more membership categories will allow you to collect more dues dollars as you become more inclusionary

Perils

I know that the aforementioned facts make this topic look like a no brainer. However, as one of our prized Chicago residents, Paul Harvey, used to say, “And now you know the rest of the story.”

Devaluing the Full Membership and your Brand Equity. Membership categories are akin to different car models. A more affordable model, offering similar quality but fewer options at a lower price, replaces the model that was once desired as the standard bearer for quality and prestige. A good example of this lies with the current classes of Mercedes Benz Cabriolet automobiles. A C-Class at approximately $50k, or an E-Class at approximately $60k, is obviously not quite the same as owning the S-Class at approximately $132k, but they are still part of the Mercedes brand; however, the more attractive prices of the C and E classes makes them nice substitutes, substitutes that are affordable for those who could never hope to own the S-Class.

In country clubs, by offering more segmented membership categories at lower prices, you devalue the Regular membership by inviting current and future members to shop and compare under the same roof, thereby diluting your brand equity. In many cases, you are trading in the full membership for a lesser membership category, and as a result, leaving many membership dollars on the table. Just like my car analogy, Mercedes may not have fallen in quality, but the quest to own the real prestige of the S-Class Mercedes is easily replaced by the more affordable price and attainability of purchasing the lesser C and E-Classes. For the member, whether you are a Regular or a Social member, you’ll have the same club brand associated with your persona; so why pay more if you don’t have to? But for the club, attaining the lesser membership category member comes at a significantly reduced value, since that member adds “equally” to the population, but adds proportionately less to your capital budget, which ultimately strains your resources and service model.

Amenity Utilization. When your team and your Board put together the project, your motivation was to increase and/or maximize utilization in the targeted areas; however, contrary to your initial position, it is common for your Board or membership to begin to question the direction and assume low usage before you even put a shovel in the ground, particularly if you are adding additional dining spaces or completely new amenities, like a gym or racquet center.

The point of contention might sound something like this: “Our dining rooms are not filled now, how is something new going to change that?” Exactly! One of the main reasons why your dining rooms are not full is because they are old and outdated and people do not find them attractive enough to visit frequently. Human nature dictates that one’s utilization only goes as far as how well their expectations and requirements are being met. But, a word of caution – the state of “new” will create an automatic uptick in utilization. Everyone wants to see what is new, and when that time comes around in any country club, you had better have the space needed to accommodate the member demand.

Event/Holiday Guest Capacity. Another issue to consider when enlarging the population base through additional categories is guest usage. In our case, our members enjoy bringing guests to our various member events and holiday gatherings. Last year, we had to change our guest policy to address over-crowding at the pool. The Fourth of July party experienced record crowds. At Halloween, we had to turn people away, and our Christmas Party quickly had a waiting list. To me, this is a strong indication that we do not have a population shortage. Again, your concern should be, if adding additional bodies through category expansion, do you run the risk of overfilling existing spaces and stretching resources during events (such as during holidays) when your existing members most enjoy using the club?

Diminished Club Community. As with any society, the more classes you have, the more likely issues are to rise with who has what status and what privilege. A private club has often been defined as a group of people with common interests. The more membership categories that exist, the less common the interests become. While most clubs do have some cliques, or what I also like to refer to as sub-cultures, I suspect that they mostly were developed naturally over time. When more membership categories are developed, chances are more sub-cultures will develop but instead of this happening naturally, it becomes forced and causes eventual division at a very rapid pace. This may be the most critical detraction for membership category expansion.

Non-Equity Mindset. It is really interesting how social members introduce themselves to other members for the first time. “Hello, my name is Joe, and this is my wife Sue, we’re just social members.” I hear this all the time and what surprises me is that social members hardly ever say that they are “members” without adding on the tag of social. I guess they do this for two reasons: 1) they see themselves as not having ownership in the club by virtue of their non-voting status and thus must announce their diminished capacity; 2) because golf is such a prominent aspect of country clubs and they have very little or no access to golf, they must announce their status as if they are not part of the big picture. 

Financially speaking as a non-voting member, it is naturally difficult for them to take whole-hearted ownership in the club. But the type of ownership I’m referring to is club pride, feeling as an equal part of the club community. I think most of us realize the importance of having these folks feel as though they belong. Usually what drives someone to be a non-voting member is that they have interests in things other than golf (racquet sports, dining-social, etc.) and they only want to pay for what they use.

Having stated the non-voting members’ position, it is also important to understand their interaction with voting members when it comes to their personal club concerns. While the non-voting member does not have the right to vote, they do have a right to voice their opinion. Because they do not have a stake in the totality of the club, it is natural for them to rally together for their cause. It is difficult for them to sign onto the mission of the club as they feel that they are just one segment of the club. Why would they take interest in something that doesn’t interest them, e.g., golf?

This is a very difficult paradigm to manage and it is a topic that is difficult to talk about. As a long time club professional, I have come to realize that a member owned country club is nothing more than a mini-government. And as our U.S. government has a two party system, membership categories can behave in the same fashion as political parties and we all know how this is working out. (Insert laughter here.) My point is that when you add membership categories and expand the population of non-voting members, you may be making one party stronger than the other. Or in other words, when you have more non-voting members than voting, you may take comfort in knowing that they can’t vote, but the social climate of the club becomes strained, contentious and fractured.

Again, this topic is very delicate and complicated and must be broached with the up most caution. Non- voting members are important as they complement the needed revenue stream that is essential for our existence. They are needed for operational balance; however, if the population of non-voting membership is not regulated properly, then the club culture becomes out of balance which defeats the purpose as to why all of us are here in the first place and that is to be one happy family. As more categories are developed, the more unbalanced your club community becomes.

Recommendation.

Once you open the gates to a higher flow (members) and you discover that this act wasn’t needed, it’s difficult to put the genie back into the bottle. And most importantly, we want to provide adequately for our existing members first. What seems like a simple “access to the tee” problem is really a more complex issue that deals with value and equitable rights of a member. In my opinion, this issue needs to be addressed first and foremost before proceeding with other categories.