SOCIETAL TRENDS AFFECTING CLUBS

1. SOCIETAL TRENDSAFFECTING CLUBS William P. McMahon, AIA Club Consultant March 29, 2007

2. Clubs will exist and prosper if they well serve the needs of members.

3. McMahon has analyzed findings from 20+ years of club survey research to learn what younger and older members want in clubs.

4. Overview of Trends • Why are Private clubs are under so much pressure? • Economy • Increased Competition • Population Demographics • Lifestyle Changes

5. Membership Trends • About 50% of clubs have fewer members now than in 2001. • Market peaked sometime in year 2000. • Split in marketplace: • Higher end clubs are faring well; lower tier clubs are struggling.

6. Average Number of Members Country Club Average Reg/Full Mbrs: 380 Country Club Average Total Mbrs: 636 * Does not include CA and FL

7. Membership Capacity • 72% of country clubs are below their maximum number of allowable members • 83% are seeking additional members • 20% indicate they currently have a wait list for joining

8. Membership Capacity By Initiation Fee

9. Membership Trends • Membership satisfaction runs close to 80%. • Most attrition continues to come from death, illness and relocation. • Challenge is lack of demand from young members to replace prior generation.

10. Reasons? • Too many golf courses, clubs and social/recreational outlets • Dated Club Model - Failure to offer membership value to modern society • “Bowling Alone” - Busy, time constrained society where joining in all organizations has declined • Corporate Restructuring - Changing way in which business is conducted

11. Forces At Work

12. Golf Marketplace

13. General Trend • Number of golfers in year 2000 = 26 million. • Number of rounds have declined each year since 2000. • Only significant growth recently is among juniors; i.e., Tiger Woods effect. • Number of golf holes exceed demand in most communities.

14. Golf Goes Public Private clubs are down by both % and number.

15. Club Marketplace • Many private clubs are no longer the only or best places to play golf in their area. • Clubs that work: • High end/Old money • Really special golf • Full amenity, family club with enhanced programs and facilities • Leadership must work to distinguish their private club from competition and alternatives.

16. Population Trends Population in Millions

17. Up and Comers (under age 45) • Athletic and recreational focus • Casual lifestyle • Family oriented • Dual incomes • Gender equality • Building relationships • Somewhat restricted incomes

18. Up & Comers • Only 15% of younger members are “very satisfied” with their club. • Over 75% cite family activities as important reason to join (#2 after golf). • By a margin of 3 to 1, younger members report dissatisfaction with their club’s family programs.

19. Up & Comers • Rate casual dining as highest in importance. • Over 40% dissatisfied with casual dining options.

20. Up & Comers • Approximately 66% cite golf as important; lowest of three age segments. • Much higher emphasis on other activities: • Fitness • Swimming • Tennis • Junior programs

21. Prime Timers (age 46 – 65) • Golf begins at 50 • Family almost grown • Growing affluence • More free time • Hosting lifetime events • Couple activities

22. Leisure Living (over age 65) • Less strenuous recreational activities • Retirement/fixed income • Abundant free time • Empty nesters • Established patterns (resistant to change) • Play much golf

23. The Generation Gap • Lowest satisfaction exists among members under age 45. • Barriers to satisfaction among young: • Limited access and appeal to family • Level of formality and informality • Lack of entertainment options • Gender issues • Lack of programming

24. Summary of Forces • Survey data and focus groups indicate youngest segment of members is least satisfied. • Approximately 65% of members surveyed joined their club between ages 36 and 45. • Dissatisfaction among young segment is major inhibitor of membership recruitment and growth.

25. What’s Happening at Other Clubs?

26. Country/Golf Club Average: 52% Region Number of Reg/Full Members Initiation Fee Does your club have a strategic plan?

27. If you have a strategic plan, what year was it developed?

28. Does your club have an annual Board retreat? Country/Golf Club Average: 26% Region Number of Reg/Full Members Initiation Fee

29. How much was your club’s most recent dues increase? Country/Golf Club Average: 6.9% Region Number of Reg/Full Members Initiation Fee

30. Does your club have separate capital dues reserved for making capital improvements? Country/Golf Club Average: 45% Region Number of Reg/Full Members Initiation Fee

31. Does your club have separate capital dues reserved for making capital improvements?

32. How much does your club allocate for clubhouse maintenance & repairs in your annual operating budget? Country/Golf Club Average: $153,645 Region Number of Reg/Full Members Initiation Fee

33. Does your club have an annual Board retreat? Country/Golf Club Average: 26% Region Number of Reg/Full Members Initiation Fee

34. How many different membership categories do you have at your club? Country/Golf Club Average: 7.5 Region Number of Reg/Full Members Initiation Fee

35. Country/Golf Club Average: 683 Region Initiation Fee How many members does your club have in all categories combined?

36. Is your full/regular membership category currently at its maximum cap? Country/Golf Club Average: 39% Region Number of Reg/Full Members Initiation Fee

37. Is your club seeking additional full/regular members? Country/Golf Club Average: 78% Region Number of Reg/Full Members Initiation Fee

38. Does your club currently have a waiting list to join in the full/regular membership category?

39. Does your club have a refundable equity component to your initiation fee? Country/Golf Club Average: 35% Region Number of Reg/Full Members Initiation Fee

40. What is your average annual membership attrition? Country/Golf Club Average: 6.4% Region Number of Reg/Full Members Initiation Fee

41. Which of the following best describes your club’s family orientation?

42. Does your club have a paid staff person in charge of membership marketing? Country/Golf Club Average: 44% Region Number of Reg/Full Members Initiation Fee

43. Does your club have some form of trial or temporary membership? Country/Golf Club Average: 20% Region Number of Reg/Full Members Initiation Fee

44. Does your club have a special membership program to encourage children of members (legacies) to join the club? Country/Golf Club Average: 67% Region Number of Reg/Full Members Initiation Fee

45. Where American SocietyHas BeenAnd Where It Is Going.

46. Where American Society Has Been • Male-Oriented World • White, Anglo Saxon, Protestant Founders • Formal Lifestyle • Very Wealthy Few • Unionism to Protect Workers • Primarily European Immigration

47. Where American Society Has Been • Church & Religion Important in Daily Life • Accepted Moral Codes to Live By • Higher Education Primarily for Wealthy and Intelligent • Manufacturing Economy • Energy Consumption Unchecked

48. Where American Society Is Going • International Involvement and Competition • Technology Advancement • Higher Education for All • Service Economy • Third World Immigration (Latin America, Asia, Eastern Europe) • Religion & Morals Decline • Casual Life Style Dominant

49. Where American Society Is Going • Increased Wealth Available to Many • Organized Labor a Burden on Society • Improving Role for Women in Society • White, Anglo Saxons Becoming New Minority • Diversity in Population a Strength • Environmental and Energy Concerns

50. Where Clubs Have Been • Extension of Victorian Clubs from 1800’s • Wealthy Men as Primary Focus • Wealthy Anglo Saxons Primary Members • Social & Business Prestige Associated with Belonging • Golf as Primary Country Club Focus • Business Clubs for Business Elite • Favorable Tax Deduction for Membership