Financing Club Improvements How Capital Creates Change HFTP Club Summit New Orleans, Louisiana March 19, 2018
Capital Creates Change Clubs are investing a record amount of capital Driven by both needs and wants Segmentation by those that can raise capital and those that can t
SIZE MATTERS In Memberships Higher Satisfaction Multiple Recreation Matters No Longer Sets Size Bigger Can Support More
Why Is This Happening? Members want updated facilities Fun, family and fitness are in Membership a personal choice Generational shift Money is available at low rates
We are in an industry that has seen monumental shifts over the past decade as country club members are looking for a casual, family friendly, fun and wellness driven experience, in addition to golf. William Bone Co CEO and Founder of Sunrise Company
Your Club Community REASON CLUBS EXIST IS TO BRING MEMBERS TOGETHER
Where Is the Money Going? Dining & Socializing Pool/Aquatics Fitness & Wellness
The Membership Model Return on investment from invested capital in membership entities is more members Increased activity is measure of engagement and perceived value, not a source of capital
Capital Improvements Work From 350 Major Improvement Projects Source: McMahon Group Pulse Survey Database One Year After Project: Equal or Greater Number of Members 93% Average F&B Increase 25% More Members with Average 10% Increase 55% Same Number of Members 38% Fewer Overall Members 7%
Understand Your Market
Know Your Potential 75% live within 7 miles (15 minutes) 10 20 miles minutes end of primary market 15% will travel 30 minutes
Facilities Master Plan Long term roadmap for facilities development. Highest priority improvements that fit within your financial framework are implemented first. Advantages: Continuity of direction Brainstorm a variety of ideas before acting Assures projects fit within overall scheme
If you want advice, ask for money. If you want money, ask for advice Fundraising is a process: Need club strategy Survey for needs and wants Segment by age groups Test ideas with members Collect member feedback on potential plan Adjust to feedback Vote when you know you have the votes
Member Led Process Member Survey Strategy and Concepts Member Review/ Opinion Survey Final Plan & Member Vote Member Approval
Funding and Finance
Capital Spending: 2016 vs. 2015 Country Clubs (157) 2015 2016 Total Spending $192 M $205 M Average $1.2 M $1.3 M City Clubs (30) 2015 2016 Total Spending $69 M $49 M Average $2.2 M $1.6 M Tennis, Beach & Yacht Clubs (37) 2015 2016 Total Spending $33 M $38 M Average $917 K $1.04 M
Country Clubs: Six Year Trend in Membership 500 495 490 497 498 493 485 480 475 470 465 475 474 481 460 2012 2013 2014 2015 2016 2017
Tennis, Beach & Yacht Clubs: Six Year Trend in Membership 550 540 530 520 510 500 490 480 470 460 539 527 531 519 498 490 2012 2013 2014 2015 2016 2017
City Clubs: Six Year Trend in Membership 2.5% 2.0% 2.1% 2.0% 1.5% 1.3% 1.0% 0.5% 0.5% 0.7% 0.0% 0.5% 0.2% 2012 2013 2014 2015 2016 2017
Country Clubs: Ten Year Summary of Dues $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $7,966 $8,491 $8,721 $8,956 $9,225 $9,483 $9,807 $10,091 $10,333 $10,653 $0 2008 (5.7%) 2009 (5.2%) 2010 (6.6%) 2011 (2.7%) 2012 (2.7%) 2013 (3.0%) 2014 (2.8%) 2015 (3.4%) 2016 (2.9%) 2017 (2.4%)
Tennis, Beach & Yacht Clubs: Ten Year Summary of Dues $7,000 $6,000 $5,000 $4,655 $4,956 $5,105 $5,304 $5,442 $5,578 $5,768 $6,022 $6,250 $6,481 $4,000 $3,000 $2,000 $1,000 $0 2008 (5.3%) 2009 (6.5%) 2010 (3.0%) 2011 (3.9%) 2012 (2.6%) 2013 (2.5%) 2014 (3.4%) 2015 (4.4%) 2016 (3.8%) 2017 (3.7%)
City Clubs: Ten Year Summary of Dues $4,000 $3,500 $3,000 $2,500 $2,431 $2,552 $2,631 $2,692 $2,792 $2,909 $3,037 $3,174 $3,323 $3,439 $2,000 $1,500 $1,000 $500 $0 2008 (4.4%) 2009 (5.0%) 2010 (3.1%) 2011 (2.3%) 2012 (3.7%) 2013 (4.2%) 2014 (4.4%) 2015 (4.5%) 2016 (4.7%) 2017 (3.5%)
Country Clubs: Ten Year Summary of Initiation Fees 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6.0% 4.9% 4.0% 2.0% 2.6% 0.0% 2.0% 4.0% 6.0% 4.3% 1.8% 1.8% 2.3% 1.5% 1.8% 0.1% 8.0% 10.0% 12.0% 10.5%
Tennis, Beach & Yacht Clubs: Ten Year Summary of Initiation Fees 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1.0% 2.0% 5.2% 4.2% 4.1% 0.8% 2.3% 0.2% 0.8% 7.1% 4.4% 3.2%
City Clubs: Ten Year Summary of Initiation Fees 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10.0% 8.0% 7.8% 6.0% 4.0% 2.0% 4.8% 4.2% 2.5% 0.7% 4.7% 3.0% 3.1% 1.1% 0.0% 2.0% 1.5%
Country Clubs: Ten Year Summary of Capital Expenditures $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $1,390,680 $1,157,796 $1,413,843 $1,303,300 $1,194,141 $1,195,105 $1,172,802 $955,222 $956,078 $1,028,666 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Tennis, Beach & Yacht Clubs: Ten Year Summary of Capital Expenditures $1,200,000 $1,000,000 $983,002 $945,484 $1,037,440 $800,000 $600,000 $400,000 $444,417 $721,240 $639,345 $495,418 $428,589 $631,508 $717,006 $200,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
City Clubs: Ten Year Summary of Capital Expenditures $3,000,000 $2,500,000 $2,413,002 $2,335,243 $2,000,000 $1,500,000 $1,773,231 $1,918,842 $1,434,636 $1,640,079 $1,960,842 $1,631,237 $1,000,000 $1,024,085 $961,385 $500,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Country Clubs: Ten Year Summary of Long Term Debt $4,000,000 $3,500,000 $3,000,000 $2,500,000 $3,755,527 $3,302,691 $3,255,279 $3,450,383 $3,098,818 $2,713,909 $2,772,044 $2,845,830 $2,921,166 $2,925,396 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2007 (74.3%) 2008 (80.4%) 2009 (79.0%) 2010 (81.3%) 2011 (84.1%) 2012 (85.8%) 2013 (83.0%) 2014 (83.5%) 2015 (85.0%) 2016 (87.5%)
Tennis, Beach & Yacht Clubs: Ten Year Summary of Long Term Debt $1,800,000 $1,600,000 $1,577,863 $1,400,000 $1,200,000 $1,115,884 $1,192,583 $1,000,000 $800,000 $600,000 $605,312 $779,795 $901,962 $850,368 $777,922 $820,964 $899,134 $400,000 $200,000 $0 2007 (45.9%) 2008 (62.2%) 2009 (56.8%) 2010 (59.5%) 2011 (54.1%) 2012 (56.8%) 2013 (59.5%) 2014 (65.8%) 2015 (57.9%) 2016 (64.9%)
City Clubs: Ten Year Summary of Long Term Debt $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 $2,975,037 2007 (40.7%) $4,406,022 $4,363,475 $4,065,083 $3,670,861 $3,557,090 $3,571,495 $3,540,023 $3,694,615 $3,249,478 2008 (40.7%) 2009 (44.4%) 2010 (44.4%) 2011 (40.7%) 2012 (44.8%) 2013 (46.4%) 2014 (50.0%) 2015 (50.0%) 2016 (48.4%)
Capital Projects: Type of Financing Available to Clubs 1. Internal Upfront assessment Monthly assessment Capital bond/certificate Self amortizing bond Initiation fees Sale of assets 2. External Bank debt Other 3. Combination
Capital Projects: Other Things to Consider Communication with members: Before project starts During construction After construction is completed Communication with bank/lender Interim facilities Loss of revenue Certificate of occupancy Grand opening function Booking of events Operational budget for new facility
Case Study #1
Club #1: Facts 100 year old traditional country club Per website: Our club combines the best of both one hundred years of tradition and modern country club life 2016 Operating Budget: $10.3 million 2007 2008 Project: $20 million 2008 Original Debt: $7.5 million 2009 Amended loan $8 million swap 6.7% due in 2016 2012 Borrowed $9 million paid off swap and old loan due 2022 2016: $8.4 million
Club #1: Membership 2010 2017 800 793 780 760 740 745 740 754 771 781 786 720 720 700 680 2010 2011 2012 2013 2014 2015 2016 2017
Club #1: Revenue Trends $7,000 $6,000 $5,000 $4,800 $5,000 $5,200 Dues F&B Initiation Fee $5,400 $5,500 $5,700 $5,900 $6,000 $6,300 $4,000 $3,000 $2,000 $2,000 $2,500 $2,600 $2,800 $2,800 $2,800 $2,900 $3,100 $3,100 $1,000 $1,142 $915 $920 $1,118 $740 $754 $771 $781 $786 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016
Case Study #2
Club #2: Facts Country club 36 holes Full service 2017 Operating Budget: $16.5 million Project: $23 million covering 4 years 3 phases 1. New clubhouse 2. Pool 3. Employee housing First Phase: 2011 2013 Debt acquired: $18 million 2 loans Amortizing 16 and 13 years Outing business increased 40%
Club #2: Membership 2012 2016 700 600 500 400 498 525 550 575 600 300 200 100 0 2012 2013 2014 2015 2016
Club #2: Revenue Trends $9,000,000 $8,000,000 $7,000,000 $6,994,000 $7,106,000 Dues F&B Initiation Fee $7,300,000 $7,800,000 $8,200,000 $6,000,000 $5,000,000 $4,000,000 $3,900,000 $3,000,000 $2,000,000 $1,000,000 $2,800,000 $2,800,000 $2,800,000 $1,286,000 $1,609,000 $1,395,000 $2,500,000 $1,646,000 $1,816,000 $0 2012 2013 2014 2015 2016
Case Study #3
Club #3: Facts New Clubhouse Project: $7.5 million Construction: 2015 2016 2012: Spent $4 to $5 million on golf course projects Debt: $8.5 million $5 million from 2012 consolidated Swap debt due 2023 Other headwinds Competition stiff Property taxes
Club #3: Membership 2013 2017 440 430 420 410 400 390 380 370 360 350 434 425 407 393 383 2013 2014 2015 2016 2017
Club #3: Revenue Trends $3,000,000 Dues F&B Initiation Fee $2,700,000 $2,700,000 $2,700,000 $2,780,000 $2,700,000 $2,500,000 $2,000,000 $1,826,000 $1,500,000 $1,442,000 $1,439,000 $1,374,000 $1,359,000 $1,000,000 $500,000 $336,000 $225,000 $377,000 $0 2013 2014 2015 2016 2017
The Country Club of Detroit
Phased Improvements (2013 2016)
Phase I Ladies Locker Room $1m
Grille Room (Casual Dining) $300k
Grille Room
Phase IIa Summer Village $4.5m
Summer Village Summer Village
Summer Village
Summer Village
Phase IIb $5.5m
Bowling Center
Casual Entrance
Health & Fitness Center
Health & Fitness Center
Results: Gross Revenue +20%
Results: F&B Close to Break Even Sales Increase from $2.2m to $3.9m
Results: LDP* 595 715 (local dues payers) Average Age Decreased from 66 to 58*
Results: Attrition Decreased?
Results: Bank and Members Happy Debt paid by $100 per month capital fee and operational profit. CCD also transferring $100k annually to fund depreciation.
Summing Up
Summing Up All clubs need a strategy and capital plan to grow Critical to relevance and new member attraction Capital improvements have a significant impact on club success
Thank You Questions?