THE IMPACT OF DOING NOTHING Stewart Darling Non-Executive Director

THE IMPACT OF DOING NOTHING Stewart Darling Non-Executive Director

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

Membership Decline Full Golf Members - Actual Members 000 s 230 220 210 200 190 180 170 160 150 140 Year Amalgamation 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Despite a boost from the 2014 Ryder Cup - club membership in Scotland has been in decline for 10 years

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 240 220 200 180 160 140 120 100 Full Golf Members - Actual and Projected 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year

Membership Numbers Drop > Fees Increase 2017 2022 2027 Full Members 173,000 147,000 122,000 Average Club Members 302 255 210 % Decline 15% 29% Average Member Fee 478 640 880 % 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 Assumption @ 2.5%

What factors are driving the decline?

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

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 33.07 33,000 25.5 19 4,500 6,000 2.56 3.44 11,300 6.49 17,300 9.94 0-17 18-24 25-34 35-44 45-54 55-64 OVER 65

Club pricing strategies have in many cases also led to a certain club members paying higher fees FULL FEE 57,500 33.07 44,500 DISCOUNTED FEE 33,000 19 25.5 DISCOUNTED FEE 17,300 11,300 9.94 4,500 6,000 6.49 2.56 3.44 0-17 18-24 25-34 35-44 45-54 55-64 OVER 65

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 57,500 33.07 UP & COMING FUTURE 33,000 19 25.5 INSPIRATIONAL STALWARTS 17,300 11,300 9.94 4,500 6,000 6.49 2.56 3.44 0-17 18-24 25-34 35-44 45-54 55-64 OVER 65

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 % 86.65 MALE FEMALE 13.35 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

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

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 1.4 1.2 Price Index 1 0.8 0.6 0.4 0.2 Membership Fee Visitor Round 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 12% of clubs in Scotland receive 82% of visitor revenue!

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 300 60 50 250 40 Subs Cost 200 30 20 Green Fee 150 Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10 - Subs Inflation Subs Actual Green Fee Actual Green Fee Inflation Actual 2007 Inflation 2016 Actual 2016 Subs 210 267 290 Green fees 38 48 30

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

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

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?

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

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

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

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

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

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

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

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

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

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 8.93 8.24 Governance and Management of the club 8.35 7.32 Great customer service 8.26 7.59 A sense of membership satisfaction/value 7.94 7.75 A welcoming Clubhouse 7.92 7.22 Good Food Quality 7.43 6.62 Member Services/belonging to club 6.86 7.09 Beverage 6.78 7.31 Provision of competitions 6.71 6.65 Professional / Retail 6.18 6.26 Social events 4.4 5.31

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.

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

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

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 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?

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

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

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

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

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

What are our options?

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

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

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

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?

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

INTERACTIVE WORKSHOPS Themes for Discussion over Lunch

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?