Virtual Country Clubs Are Here – Are You Paying Attention?
Put your thinking cap on as we discuss the phenomenon of Virtual Country Clubs (VCCs). This is a complicated topic with many twists and turns, but it is worth paying attention to because it’s going to have a significant impact on your golf market soon if it hasn’t already done so. That impact could help your business or it could hurt your business… depending on how you play your cards.
Let’s start with the basics…
A Virtual Country Club is a multi-club membership program that allows a golfer to pay a single membership fee and acquire playing privileges at multiple golf courses.
A cynic might say that VCC is just a fancy name for reciprocal membership programs that have been around for decades… and that’s true in a sense. But… IMHO there is some very significant change occurring that savvy operators will be wise to pay attention to.
3rd party VCCs (clubs that do not own courses themselves but contract with course operators for special rates and privileges) are a relatively recent phenomenon, but they are growing very fast and are becoming powerful forces in the markets where they exist.
Today, let’s compare and contrast the current status of 3 VCCs that have been growing rapidly… in our next post you’ll get some of my pithy opinions on the pros and cons of the VCC surge.
All of the information that we present here is publicly available via the clubs’ branded websites or via GroupLooper’s golf course directory… or has been authorized for release by the club owners. We are privy to some additional private information about these operations, but we respect that privacy and therefore have not included that information here.
Forelinx is a California-based membership program with a motto of “111 courses. One membership.” That motto changes frequently because the number of courses participating continues to grow… for example, when we checked 3 weeks ago it was “106 courses. One membership.” ForeLinx currently has participating courses in California, Nevada and Arizona.
GreatLife Golf & Fitness operates a membership program that includes golf and fitness center facilities in the Heartland, with prominent programs in the Kansas City and Sioux City areas. GreatLife is now listed in the Golf Inc. Top 25 Golf Management Companies in the US and it’s the only one that achieved significant growth in the last year, going from 35 to 63 18-hole equivalents.
The Public Country Club – Twin Cities golf entrepreneur Kevin Unterreiner has a tiger by the tail with his newly-created Public Country Club, a $55/month membership program for golfers that started in 2016 with 15 course participants and has already grown to 55+ in its second year of operation.
What does a membership cost? For what privileges?
Forelinx members pay a monthly fee and receive “points” that can be redeemed for rounds of golf at participating courses. The number of points per round varies by course, day of week, time of day, etc. Points do not expire. Membership options are:
$99 per month for 350 points per month
$199 per month for 800 points per month
$399 per month for 1,800 points per month
GreatLife offers a wide variety of different membership packages in the different cities where it operates (Kansas City, Topeka, Salina, Sioux Falls). For example, in Kansas City there are 9 different individual membership levels ranging from $19.99 to upwards of $200/month. Each level offers access to fitness centers, pool and social privileges in addition to access to different bundles of golf courses and different levels of walking vs. ‘with cart’ access. One example of an individual membership program is $59.99 per month for ‘no cart’ membership at 9 KC courses, membership at all KC fitness centers plus full pool and social privileges. Upgrading to a ‘with cart’ membership raises the price to $129.99 per month.
The basic Public Country Club membership requires a $75 initiation fee and then $55/month and covers walking greens fees for unlimited golf at member courses, but with a few caveats… no tee times on Saturdays and Sundays between 7am-11am, no course league times or group outings and no more than 12 rounds per month on any one course. PCC offers a variety of add-on privileges for additional fees… a youth program, access to simulators in the winter, participation in various events, etc. PCC members pay the monthly fee all year round, even when its Minnesota and Wisconsin course participants are closed for winter.
How big are these clubs (# of members)?
The only publicly available information we’ve run across regarding membership numbers is a Club & Resort Business article from 2015 that stated that the Sioux Falls, SD branch of GreatLife had over 11,000 members.
Let that sink in… 11,000 members! in Sioux Falls, SD!
Wow! That’s a powerful indicator of the potential size of these programs.
Who bears the “rate risk”?
Since these programs offer golfers the opportunity to play a variable amount of golf for a fixed fee, the rate per round depends on how many rounds the average member plays.
In Forelinx, the golf course operator is insulated from rate risk because each course has a negotiated rate that Forelinx has agreed to pay for rounds played at that course. Those negotiations are private… the only ones who know the rates are the golf course operator and Forelinx. In effect, the club members bear the rate risk because the number of points that are required to pay for a round can vary based on decisions by Forelinx management.
In GreatLife and Public Country Club, the golf courses bear the rate risk because golfers are allowed to play an unlimited number of rounds for a fixed fee. So, for example, if the average Public Country Club member plays 33 rounds per year and pays $660 per year in fees ($55 per month times 12), then the average rate paid per round is $20… and the golf course receives that rate less the management fee withheld by The Public Country Club. Since GreatLife is both the proprietor of the VCC and the owner of many of the courses that participate in the GreatLife membership program, they bear a substantial portion of the rate risk. Since The Public Country Club doesn’t currently own any of its golf course participants, it is insulated from rate risk.
What level of discount do members receive relative to ‘rack rates’?
Forelinx claims (as of Sep 12, 2017) that members receive savings per round of 30% to 60%, depending on what plan they are on (30% for $99/month, 40% for $199/month and 60% for $399/month). But, the discount for each member will be different based on the courses they play and the only way for a member to verify their “savings” would be to keep track of the public rate and the actual rate that they pay for every round… who’s going to do that? Forelinx has successfully developed an opaque pricing scheme and if golfers are happy with the value they are receiving and course operators are happy with the rate they are receiving no one will be motivated to spend too much time trying to decipher the exact discount percentages.
GreatLife and PCC member discounts are a function of which plan they purchase, how much they play and where they play. Member discounts will vary wildly and those who don’t play much are effectively subsidizing the play of others. For example, a PCC member who plays 10 rounds during the year at courses with an average $33 public green fee rate is paying a 100% premium ($660 fees for $330 of golf) while a member who plays 100 rounds per year at courses with an average $33 public green fee rate is getting a discount of 80% ($660 fees for $3,300 of golf).
It will be interesting to see how the average rates of the ‘all you can eat’ clubs change over time. Presumably, the people who are paying a premium will eventually decide they’re better off just paying regular rates for their limited rounds. But… optimism is eternal and there will probably always be a reasonable number of people who buy into the membership program thinking they are going to get their money’s worth but who then are unable to find the time to play enough rounds to reach break-even. Heck, I once paid almost $10,000 over the course of a year for a private club membership where I played exactly 1 round of golf… it still makes me a little ill to think about it.
Who owns the participating golf courses?
Forelinx and PCC own no courses… they contract with a variety of independent course owner/operators.
GreatLife owns many of the courses that participate in its clubs, but also allows affiliate courses to participate in its programs.
What % of fees are paid to the golf courses vs. retained by the VCC owner?
This information is not publicly available.
Who owns the customer relationship with VCC members?
If you are a course operator and you are participating in a VCC that is owned by an independent organization such as Forelinx or The Public Country Club, it’s CRITICAL that you understand that when members of those club play your course, they are not your customers.
Yes, they may pay you directly for cart fees or food and beverage but their primary loyalty is to their club.
Your customer is Forelinx of the Public Country Club (or GreatLife, if you are an affiliate course). That’s who you negotiate rates/terms with and that’s who pays you. If you and the club can’t agree on terms for another year, members of that club will simply play elsewhere next year.
Courses that participate in these programs need to think very carefully about how dependent they want to become on a single customer.
My personal rule of thumb when operating a service business was that I never wanted a single customer to account for more than 10% of my revenues… otherwise that customer would have more leverage over me than I was comfortable with.
Don’t ignore this issue, course owners/operators… or you may wake up one morning to find that someone else effectively “owns” your golf course.
What price segment are these VCCs operating in?
Here are the average rack rates (peak season weekend 18 holes with cart):
Great Life $44
Public Country Club $49
Forelinx is not only operating in Metro Areas with higher average rates (e.g., Los Angeles, Palm Springs, Las Vegas and Phoenix vs. Kansas City, Sioux Falls and Minneapolis/St. Paul) but they also have course participants that rank higher up in the rate structure within their regions.
How many other VCCs or VCC-like entities are there?
We’ve focused on Forelinx, GreatLife and The Public Country Club for purposes of this analysis.
ClubCorp is a huge owner (200+ courses) of primarily private clubs. We didn’t consider them a VCC because they own virtually all the courses that are in their network… but they do have some affiliate courses that they do business with so like GreatLife they are on the bubble in terms of being a “virtual” country club. GreatLife’s ambitions seem to include a franchising component so we believe they are headed in a direction that will dilute the % of courses that they own.
Large golf course management companies like Troon Golf, KemperSports and OB Sports have some VCC-like offerings in their respective arsenals, but IMHO they currently fall somewhat short of the focused VCC models like Forelinx and PCC.
There are literally hundreds of small, regional reciprocal programs offered both by private country clubs and public courses. Most of these consist of a handful of courses that allow members of one course to play at the other courses for a cart fee only or at significant discounts. An example is the Metro Multi Club in Minneapolis-St. Paul, where Dakota Pines, Loggers Trail, The Links at Northfork and Wild March can each enroll up to 100 season pass holders and members may play the other courses for cart fees only anytime except Sat-Sun-Holidays before 1pm.
What’s coming next in the world of VCCs?
Well, none of us knows for sure, do we? But that doesn’t stop us all from having opinions. Stay tuned for my next blog post in which I’ll give you my prognostication on where the VCC trend is heading. Here are 3 teasers… just a small sample of what you’ll get in the next post:
- VCCs will grow substantially. Golfers like them and many golf courses are interested in any programs that will fill some of their unused capacity.
- The existing 3rd party players will make significant changes to their models. The entrepreneurs running these businesses are not set in their ways… they will quickly evolve their models based on experience.
- Course-owned VCCs will pop up in many regions. The availability of better software technology to manage reciprocal programs and a concern by many course operators that they don’t want to lose control of their customer relationships will result in a surge of course-owned VCCs.
Of course, these predictions come with my Dennis Miller impression… “these are just my opinions and I could be wrong”.