Why Is Your Golf Club Offering Refundable Initiation Fees?
Private Clubs have historically usually structured their golf membership offerings to include a provision for the return or refund of all or some portion of the initiation fee/ new members pay to join a golf club.
This initial payment is subject to certain terms and conditions as set forth in the club’s membership plan and by-laws. A frequent scenario provides a refund to a resigning member based on some formula, such as for every 3 or 4 new members who join; one resigning member receives a refund. This formula continues until the club reaches its membership cap after which resigning members are repaid on a one to one basis. Additionally, sometimes the continuation of the payment of membership dues is required in order to receive a refund.
Can you answer this one simple question?
Every single week I speak to private clubs experiencing problems with membership. To gain an understanding of their situation I ask a series of questions that include the initiation fee required to join the golf club. The majority of time, there is a provision for the return of a fraction or in some cases all of the initiation fee that is required. I then question the business reason behind the membership initiation fee structure that is in place and I typically get a response like, “I really don’t know” or “that’s a good question”.
Your club has the wrong kind of waiting list!
The return of an initiation fee can make a lot of sense if there is a sound business reason behind the plan and it works very well if the golf club is in a great market and is enrolling new members at a rapid pace. However, more often than not, membership enrollment speed will begin to slow long before the golf club has reached a full complement of members and members who have decided to resign cannot be repaid at the time they wish to resign.
And membership resignations will occur. Even in the finest of golf clubs, attrition rates are six percent or larger as members in many cases, even if they are totally content with their golf club, resign due to relocation, problems with their health, change of employment, and other interests. And, as noted earlier, they may even be required to continue to pay dues in order to receive their refund.
This leaves the golf club in the unpleasant position of having a waiting list to leave the golf club, which not only poses a huge significant financial hurdle, but also is a deterrent to having new members join.
How can I get my golf resort out of this mess?
Now, there are solutions to getting out of a situation like this including:
- Establishing new categories of membership.
- Providing the refunds to resigning members at a reduced amount. This would usually require member consent.
- Establishing a means for members to rent their membership or designate a beneficial user of the membership.
- Establishing a non-refundable golf club membership.
- Making changes to the golf clubs by-laws.
- Creating a re-callable golf membership.
However, caution must at all times be exercised. Trying any new approach without thoroughly considering the many factors involved including clearly understanding your market and where your club fits in it, your competition, your approach to prospecting for new members, your enrollment and attrition rates, what you are permitted to do legally, and the effects the changes may have on the club’s financial stability, may actually turn a bad situation into a worse one.
Look for professional assistance now!
Does your club currently have a waiting list to leave? Are you just opening a new golf course and structuring your golf membership offer? Does you golf course management firm have a golf membership sales plan in place to preserve your current members as well as bring in new ones? Do not simply believe that the way golf membership plans have been set up for decades is the right approach for you and your golf course. Don’t fall into the trap of short term thinking or advice from well intentioned friends or Board members who are not professionals with experience in the membership or club business. The decisions and plans you make today have a considerable impact on how successful or not your golf club will be in enrolling new members three or four years from now.
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