THE IMPACT OF DOING NOTHING Stewart Darling Non-Executive Director

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1 THE IMPACT OF DOING NOTHING Stewart Darling Non-Executive Director

2 The golfing landscape is a challenging one The golfing landscape is a challenging one

3 Membership Decline Full Golf Members - Actual Members 000 s Year Amalgamation Despite a boost from the 2014 Ryder Cup - club membership in Scotland has been in decline for 10 years

4 If this trend continues the number of club members (full) will fall by 26,000 (15%) in the next 5 years - and by 51,000 (29%) by 2027 Members 000 s Full Golf Members - Actual and Projected Year

5 Membership Numbers Drop > Fees Increase Full Members 173, , ,000 Average Club Members % Decline 15% 29% Average Member Fee % Increase (Inc. Inflation) 34% 84% Fees will need to rise substantially to maintain club revenue at current levels if clubs are unable to recruit new members or establish alternative income streams Includes Inflation 2.5%

6 What factors are driving the decline?

7 Factors 1. An ageing demographic - older generation leaving membership combined with low levels of retention and recruitment of younger members 2. Emergence of a time poor Squeezed Middle questioning the value for money of club membership 3. A market saturated with courses combined with greater course accessibility and the low cost of a visitor round has made membership unnecessary

8 We have an ageing demographic - and as the older generation leave the game they are not being replaced by new younger members Demographic by Age 57,500 44, , ,500 6, , , OVER 65

9 Club pricing strategies have in many cases also led to a certain club members paying higher fees FULL FEE 57, ,500 DISCOUNTED FEE 33, DISCOUNTED FEE 17,300 11, ,500 6, OVER 65

10 Has this pricing created a Squeezed Middle paying the highest fees but with greatest family and time pressures - membership is a value for money judgement SQUEEZED MIDDLE 44,500 57, UP & COMING FUTURE 33, INSPIRATIONAL STALWARTS 17,300 11, ,500 6, OVER 65

11 In a game with many characteristics that should be attractive to women - golf has simply not adapted well enough to what women want Gender Split % MALE FEMALE Our working population by gender is now split 50/50 - but have golf clubs adapted to this shift in working dynamics to attract new women members - e.g. weekend availability

12 To broaden revenue opportunities clubs must consider how best to attract some obvious groups that emerge from these demographics and lifestyles 1. Working parents with young families - seeking more friendly environments where golf is not a guilty pursuit due to time spent away from the family 2. Women - but we have to create the right environment in a game that women perceive as being dominated by older males and not welcoming 3. Young People - the future of our clubs and our game - create the right environment and get them hooked on the game for the long term 4. Older People - to enjoy the health benefits, companionship, fun and social opportunity that makes golf unique

13 Feedback also suggests that over the last 10 years membership fees have increased whilst visitor fees have flatlined or even decreased 1.6 Membership Fees versus Visitor Round Price Index Membership Fee Visitor Round % of clubs in Scotland receive 82% of visitor revenue!

14 Using a real example of a community club that has invested heavily - membership fees have outstripped inflation whereas green fees have lagged inflation Subs v Green Fees - Real Life Example Subs Cost Green Fee 150 Year Subs Inflation Subs Actual Green Fee Actual Green Fee Inflation Actual 2007 Inflation 2016 Actual 2016 Subs Green fees

15 So what does this mean for club membership? In 2007, the cost of a visitor round relative to the membership fee meant that on average a golf club member had to play 20 rounds of golf to justify their membership In 2017, on average a golf club member now needs to play in excess of 40 rounds

16 It is equally difficult to contend that competitive golf is the reason many people maintain a club membership 1. Only 53% of all members played in a formal golf competition this year 2. Only 47% of members submitted cards with 3 or more qualifying scores to gain or retain a handicap 3. If those without a handicap are social golfers (or not formally competitive) it is easy to understand why: i. A combination of this and low round pricing could compel current members to become pay as you go nomadic golfers ii. Value for money becomes an issue if busy club fixture calendars make social golf more difficult to access at peak weekend times

17 Has a combination of all these factors driven an increase in those questioning membership value and the rise of the nomadic golfer? 1. How sustainable is visitor round pricing relative to membership fees if it is driving people out of membership? 2. How can we seek a greater contribution from nomadic golfers to the maintenance of our courses and clubs - and the development of our game? 3. Is club membership or pay as you go the best way forward - is there an optimal future club structure that can accommodate both? 4. Have clubs got the competitive versus social golf balance right particularly at weekends - or are we simply driving social golfers out of membership - what do we mean by social golf? 5. With less than 50% of members having an official handicap - how are the other 50% of members getting value for membership if the cannot play in formal competitions?

18 What do members and non-members want from a golf club?

19 Friends and family are a key source of inspiration and encouragement to get non-golfers playing the game - and there are compelling health reasons

20 Feeling that you need to play to a certain standard before you can join a club is the biggest barrier after cost

21 A great course, conveniently located, with good facilities including opportunities to socialise are key motivators for joining a club

22 Fresh air, fun, friends and fitness are key motivators to play golf in the chaotic world we live in competitive golf is much less of a motivator

23 Recruiting more families and women to the game will be tough as clubs are not generally perceived to be welcoming to women & children

24 Once members, what do golfers want and value from their membership on and off the course

25 Combining all of the research what does the ideal golf club look like and what must it excel at offering

26 In addressing the challenges facing the game there is no time to waste and certainly no room for complacency

27 Brilliantly executing what golf club members value in their membership is absolutely critical for clubs - and they will simply go elsewhere if it isn t Importance Satisfaction Condition of the golf course Governance and Management of the club Great customer service A sense of membership satisfaction/value A welcoming Clubhouse Good Food Quality Member Services/belonging to club Beverage Provision of competitions Professional / Retail Social events

28 Regularly surveying members (customers) is a great habit However this provides little insight into the external factors which are rapidly transforming consumer behaviour and disrupting the landscape in which golf and golf clubs operate. We have no control over these external factors and they will continue to evolve at an unrelenting pace. All of this combined will subject our clubs and our game to increasingly strong headwinds if we cannot successfully adapt.

29 It s not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change - Charles Darwin

30 Our game has struggled to respond successfully to generational, economic, and technological change - more is on the way and it will take no prisoners Complex Legislation Generational Diversity Brexit Uncertainty Rising Input Costs Connectivity - Social Media Big Data and Insight

31 For example new GDPR laws will increase individual privacy and give the authorities greater powers to take action against those that breach the law

This new data standard is very onerous and clubs holding member data have no option but to comply as anyone can report a potential breach to the authorities Key Points for clubs to consider: Does

32 This new data standard is very onerous and clubs holding member data have no option but to comply as anyone can report a potential breach to the authorities Key Points for clubs to consider: Does your club have comprehensive information security policies? What data do you hold, where is it held, what are you doing with it Do you have the necessary permissions? Do you have effective purge and delete policies? Are all staff and contractors trained?

33 Consumers no longer tolerate nor pay for mediocrity and those who fail to respond to consumer demand simply perish - to be replaced by those who do

34 With a few exceptions - many golf clubs have struggled to utilise social media and technology to engage members, non-members, youth and their local communities

35 The experience we demand from products and services has evolved and become more sophisticated - reduced pricing no longer compensates for a poor experience

36 In our connected mobile world feedback is instant and reputations quickly established or undone - this feedback is visible online for the whole world to see

37 And if you stop delivering what customers want the end can be swift and brutal!

38 What are our options?

39 Option 1 Continue as we are - in full knowledge of where the game is heading

40 Option 2 Change direction - help our clubs and our game adapt to a new and changing landscape

41 We are in this together Our game is facing unprecedented challenge. It needs everyone in Scottish golf to work together to meet these head on

42 Food for Thought 1. How do we address the demographic opportunity to ensure our game endures for future generations - and do it quickly enough to have meaningful impact on the current decline? 2. How can we creatively address the dynamic between club membership and nomadic golfers - fees versus per round pricing - competitive versus social golf? 3. Regularly surveying members is important - but how do we recruit a new generation of members through better understanding and engaging their needs as consumers? 4. What do golf clubs need to do differently respond and adapt successfully in a society where consumer choice and behaviour is evolving and mediocrity is no longer tolerated? 5. In our data driven economy how can we utilise club and golfer data to create powerful insight and opportunity that allows us to act as one for the greater good of the game?

43 And finally Some words from someone who was no stranger to difficult times

44 INTERACTIVE WORKSHOPS Themes for Discussion over Lunch

45 Questions 1. How do we increase the value of club membership? 2. How do we generate a greater contribution to the development of the game from the nomadic golfer? 3. How can we attract and retain more women, youngsters, families and new generations of golfers into the game? 4. How can we collectively improve the customer experience in all golf clubs in Scotland?

The Key to survival. Stay out of the rough. Monday, 9 September 2013

The Key to survival. Stay out of the rough. Monday, 9 September 2013 The Key to survival Stay out of the rough Monday, 9 September 2013 Cash, Sinkholes and Sources 69.3% of revenue comes from membership. 41.9% of clubs reported declining revenue. 49.6% of clubs reported