Why Does Your Golf Club Offer Refundable Membership Initiation Fees?

Private Clubs have historically normally 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 clubs membership plan and by-laws. A common scenario provides a refund to a resigning member based on some formula, such as for every three or four new members who join the golf club, one resigning member receives a refund from the golf club. This formula continues until the golf 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 dues is required in order to receive a refund.

Can you answer the following question?

Every single week I speak to a private club experiencing the same troubles with membership. To gain a complete understanding of their particular situation I ask a series of questions that include the initiation fee obligatory 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 golf membership fee that is required. I then will question the business reason behind the membership initiation fee structure that is in place and I typically get responses like, I am not sure of the reason or that is something I have never really thought about, or they will change the subject because I brought up something that no one has an answer to.

The wrong kind of waiting list!

The return of an Initiation Fee can make sense if there is a sound business reason behind the plan and it works very well if the Club is in a great market and is enrolling new members at a rapid pace. However, more often than not, membership velocity begins to slow long before the 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 Club attrition rates are 6% or greater as Members in many cases, even if they are totally satisfied with their Club, resign due to relocation, health issues, 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 Club in the unenviable position of having a waiting list to leave the Club, which not only poses a significant financial hurdle, but also is a deterrent to having new members join.

How can I get out of this mess?

Now, there are solutions to getting out of a situation like this including:

*Establishing new categories of membership. *Providing refunds to resigning members at a reduced amount. This typically would require Member consent. *Establishing a means for members to lease their membership or designate a beneficial user. *Establishing a non-refundable Membership. *Making changes to the by-laws. *Creating a re-callable membership.

However, caution must always be exercised. Trying any new approach without systematically taking into consideration the many factors involved including undoubtedly understanding your current market and where your golf club fits in it, your competitors, your approach to prospecting for new golf members and leads for outings and other events, your enrollment and attrition rates, what you are permitted to do legally, and the effects the changes may have on the golf courses financial stability, may actually turn a bad situation into a extremely bad one.

Get professional assistance now!

Does your golf club currently have a waiting list to of members wanting leave? Are you just opening a new club and structuring your membership offer? Does you resort management company have a 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 correct approach for you and your golf course. Do not 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 golf club business. The decisions and plans you make and put into place today could have a significant impact on how successful or not your golf club will be in enrolling new members three or four years from now.

Bob Devitz is the President and CEO of Legendary Resort Management and is an expert in the operations and marketing of Private Clubs. Bob has over 25 years of experience in the industry, primarily in senior management roles with ClubCorp and is a member of the PGA of America. Having worked with hundreds of Private Clubs during his career, Bob brings a results driven, bottom line approach to the Club Industry.