_July/doingbusiness.jpg "A Different Way of Doing Business")
By Steve Eubanks
While much of the industry struggles, ClubCorp is expanding its portfolio and reinvesting heavily in its facilities
With 209 facilities ranging from entry-level clubs to some of the world’s most renowned golf properties, along with city, university and alumni clubs like the ones inside McLane Stadium at Baylor and Jones Stadium at Texas Tech thrown in for good measure, ClubCorp is not just the oldest multi-course owner/operator in the business, it’s also one of the largest. But size doesn’t exempt ClubCorp executives from the same problems everyone else in the industry experiences, including a pervasive negative perception about the state of the game.
Now a public company (MYCC on the New York Stock Exchange), ClubCorp’s top brass find themselves explaining the golf industry to analysts and investors more frequently than they would like. In fact, CEO Eric Affeldt has spent “the lion share of my time in the last 15 or 18 months” educating the investment community about what ClubCorp is, and more broadly, what the membership business is all about.
“When Wall Street people read that Dick’s Sporting Goods is having a bad quarter and they’re blaming it on golf, or the National Golf Foundation comes out with a statistic that rounds are down 6 percent, people immediately think that this is a bad business,” says Affeldt, who was a former principal at KSM Capital Partners and vice president of Doral Resort before taking over the reigns at ClubCorp in December 2006. “But our business has grown steadily, hitting all-time record highs in revenues and profits as well as selling more memberships the last three years consecutively than in any year prior. So I have to be the one out there saying, ‘This is a really good business. And if you don’t believe me, look at the numbers or come out and look at our facilities.’”
Founded in the 1950s by Robert Dedman, ClubCorp invented the modern management company model, utilizing regional management experts, economies of scale and tested procedures for sales, agronomy and food-and-beverage operations. Clubs that lost money and members for years brought in ClubCorp to manage the assets. In many cases, those management contracts morphed into outright purchases.
Almost 60 years later, the model has evolved, but the core elements of the business remain unchanged. ClubCorp is in the golf business in only a tangential sense—at its heart, the company is in the dues business.
“Participation rates are not that important to our overall success,” Affeldt explains. “Our round-per-member numbers have stayed in the 53- to 57-rounds-per-member-per-year band for more than a decade. So the fact that daily-fee golf may be declining is not indicative of how our private clubs are performing.”
ClubCorp is growing despite static rounds because of an increase in membership sales, which has come as a result of a concerted effort to make the club the center of every community.
“We spent $450 million putting capital back into our clubs in the last eight years,” Affeldt notes. “And what we’ve done has completely changed the paradigm of the club from something that was golf-centric to something that is multi-generation and multi-dimensional. There’s better dining, better workout facilities, better water features, better golf, better tennis. We’re appealing to the next generation of leisure consumers.”
Affeldt contends ClubCorp’s reinvented clubs are more akin to the newest popular restaurants than to traditional mainline clubs. The company went to great lengths to study its customer base and determine what changes their clubs, and the industry as a whole, needed to make.
“We spent over $1 million in 2008 in the midst of the recession hiring a team of consultants to do a very deep dive and complete some graphic research on our current members, past members and prospective members,” Affeldt says. “We asked the questions: ‘Where do you go? What do you do? What do you want? How can we make the club a place that you really want to go to as opposed to a place that you occasionally want to go to?’ After that, we came away with design characteristics and ideas that are not only changing the way the club looks, but also changing the way the club works.”
For example, many private clubs discourage or downright prohibit cell phone use on property, a notion that flies in the face of many private club members who happen to be successful in business. In response, ClubCorp has built Touchdown Rooms into its facilities. These small spaces feature hookups and connections that enable members to make business presentations if needed.
That sort of functionality—making the club not just a second home but a second office as well—has, for many ClubCorp members, altered what it means to belong to a club. Throw in the fact that ClubCorp members have limited access to other company-owned facilities, and many of the barriers to entry that dissuade people from joining private clubs seem to vanish.
“Not only do we have our own network of 200-plus clubs that you can access,” notes Affeldt, “we have 1,000 affiliate members, which is everything from hotels to cruise lines to restaurants and all kinds of other service providers who give special breaks because you belong to the ClubCorp network.”
Because of these expanded benefits, the company is attracting a different type of member. According to the World Golf Foundation, the average age of an American male golfer who keeps a handicap is just over 50 and just under 46 for women. ClubCorp members skew much younger.
“At one club, we have added 500 members in one year, with 60 percent of those under the age of 40,” Affeldt says. “That’s absolutely attributable to our renovations and the focus on the family.”
To further illustrate his point, Affeldt points to his two millennial daughters, part of a generation that has proven particularly tough for the golf industry to tap. “While they don’t want to be exclusionary, they’re also very predictable in the types of places they like to go,” he says. “If we give them what they want in a club environment, they’re not going to shy away from it.”
Reinventing the club, not just as a physical asset but as an idea, has kept ClubCorp stock performing better than many analysts predicted. The only downside for Affeldt is the amount of time he spends educating the investing public.
“There are a lot more complexities that you have to deal with,” he says. “Investors, analysts and other people who are associated with the company being public, I’d say I spend at least a quarter, maybe a third, of my time on them.”
That’s time that Affeldt can’t spend on the golf course. But that, too, is a problem he shares with everyone else in the business.
Steve Eubanks is an Atlanta-based freelance writer.