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Learn From the Past: Please Do Not Slash Your Initiation Fees

I hate the phrase, but we’re in uncharted waters here, although history provides us with a couple of learning opportunities. In our 30 years working in the private club industry, both 2001 and 2008 helps to give us some perspective on how to move forward after suffering through catastrophic events.

In both 2001 and 2008, private clubs immediately experienced spikes in resignations and leave of absence requests (which we all know is just someone who doesn’t want to tell you they’re quitting). In the weeks and months after both of these events, many clubs panicked. The path of least resistance, was to over correct and drastically slash initiation fees.

While 9/11 took a toll on all facets of our lives (the desire for safety and protecting our financial assets), 2008 was more of a direct financial hit, as many wealthy individuals across the country witnessed their stock and retirement portfolios cut in half, within a couple of weeks. It was not uncommon for Clubs who had previously been selling memberships for $50,000 to struggling to sell memberships at $5,000.

There is no question that there will be a level of elasticity with regard to initiation fees when we come out of this crisis. This is a fact. However, simply reducing initiation fees in half or more, will not be the answer or the solution to getting your Club back on track. Clubs that went the other direction after 2008 by drastically reducing their initiation fees have spent the last 12 years trying to regain their credibility by getting their initiation fees back to previous levels. They discovered it didn’t solve the problem, and it resulted in capital starved clubs that still have a membership problem.

There are other unintended consequences to this as well. When members see such a dramatic decrease in the initiation fee it causes them to panic and can even cause them to re-evaluate their relationship with the club. Fear of lower membership numbers and the possibility of assessments to make up for operating short falls drive this kind of fight or flight response.

Another unintended consequence is that members disengage from the membership process. The rationale being that it’s such a great deal on membership, people will be flooding in the door. Why should I put any effort into introducing the club to friends?

It also sends a message of desperation to the community. “XYZ private club must really be struggling, did you hear what they did with their initiation fee?”

As it was in 2001 and 2008, the key to recovering from this global health pandemic will include messaging centered on regaining our sense of community and connection that has been taken from us during this crisis. Membership engagement and the social interactions and relationships that define the country club industry, will become the new mission statements across the industry.

While none of us know when the world, let alone the private club industry will begin to get back to some sense of normalcy with regard to the COVID-19 crisis, the first instinct will be to drastically cut initiation fees. We strongly caution private clubs against making knee jerk reactions that at the time may seem to be the only answer. There will be resignations, and leave of absence requests, but Clubs must proceed cautiously.


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