Lure of visitor income poses 'lobster pot' conundrum for Scottish golf
Concerns over risks involved in golf clubs’ reliance on external revenue
You don’t find many golf club members who think the club should put subscriptions up any more than is absolutely necessary, which results in two things: firstly, the club struggles to generate enough profits to reinvest into the business, seeing a gradual decline in assets and the experience. This, secondly, ignites a hunger to cover costs from someone else, and the easy go-to solution is visitor revenue.
Typically, a club will rely on visitor revenue to generate 15 per cent to 20 per cent of gross profit. In our work with club managers and boards, rising costs are their number one concern, followed by a deeply-held belief that members won’t tolerate the hike in subscriptions required to keep pace. So annual price increases hit visitor wallets much harder than members.
Clubs may say they are entitled to charge non-members whatever they want to. But there comes a point at which members need to act like business owners and fund more of their own costs. For clubs in the lower half of the industry, I’m reminded of Theresa May’s phrase ‘JAMs’. For those who are just about managing. I’m not sure that’s a great business strategy to appeal to the next generation of golfers.
In the upper tier there are trophy courses who have the luxury of turning on a tap to accept as much visitor revenue – often from overseas visitors - as they feel comfortable with. In this tier, members are frequently covering less than half of the clubs’ operating costs. Relying on revenue from an external source to fund your model is risky, and whilst the most recent example was Covid when overseas golf travel stopped, we don’t have to look much further back to remember the significant impact of 9/11, the 2008 economic crash, and foot-and-mouth disease.
This high level of visitor revenue is a nicer problem to have than the JAM clubs, but brings its own problems, including friction from members who feel clubs have become too ‘corporate’. Clubs need to decide if they are private members clubs who welcome visitors, or golf destinations that tolerate members. Then prove it.
We work with very smart clubs who’re gradually dialling back their reliance on external revenue, which is the lobster pot problem - the lure of visitor income is easy to get into, but far harder to get out of. Forward thinking clubs have a strategy to manage this prosperity, get the balance right with members’ support, and use visitor green fees for nice-to-have improvements, rather than relying on it to cover monthly payroll.
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In the 20 years before Covid, there was a 20 per cent reduction in people buying a golf club membership. In any other industry, we would have seen a significant market correction, but the willingness of club committees to carry on generating visitor revenue has allowed some to continue that may have otherwise closed.
Will we see more closures this year in Scotland? We’ll have a better idea in two weeks when our annual survey of clubs is complete, but early indications in Scotland are that resignation levels in some tiers are once again running at 6.5 per cent. That mirrors the worrying trajectory clubs we were on for the 20 years leading up to Covid, when golf’s fortunes were thankfully, but it appears, only temporarily transformed. There may be trouble ahead.
Kevin Fish is the director of Contemporary Club Leadership, a leading training and consultancy business that advises golf clubs throughout Scotland and the rest of the UK
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