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Changing times put squeeze on private golf clubs
Sunday, September 24, 2006

Ah, the good old days: Sneaking out of the office for a few-martini lunch overlooking the 18th green, followed by an afternoon of golf with clients, all of it subsidized by tax deductions. Then back on weekends for more male bonding while the wife and kids spend a leisurely day at the club swimming pool.

Those days have gone the way of the wooden-shafted club, leaving some Western Pennsylvania private golf courses stuck in the rough.

More competition from upscale public courses and the demise of tax deductions that reduced the cost of corporate memberships are only two of the problems. Before those two developments, the decline of the region's steel industry pinched private clubs where steel executives predominated.

More recently, it's been demographic and cultural changes. Many clubs have aging memberships and the likely replacements, young professionals, are spending more time with their families and on the job than the older generation.

As if the fairway wasn't narrow enough, economic worries caused by Sept. 11 and spiking oil prices gave private clubs an even smaller margin of error.

"The business changed a lot on us," said Bob Collins, director of golf at Oak Tree in West Middlesex. Mercer County. "We didn't feel it when the economy was good and people were playing more."

After Oak Tree lost $150,000 as a private club in 2003, a group of members bought it and opened the course to public play. The new approach produced a $16,000 profit the next year, and, Mr. Collins said, things have been looking up since.

"The clubs that are succeeding right now are the clubs that are thinking outside the box and not thinking the way clubs traditionally worked," Greensburg Country Club manager Jeremy Shearer said.

The 106-year-old Greensburg club found the short grass when a group of members ponied up $4.7 million to buy it and bring it out of bankruptcy last year. The club has added 210 members since April, bringing total membership to 520.

"We've definitely come a long way," Mr. Shearer said.

Some clubs are still struggling.

At South Hills Country Club in Whitehall, members are suing to get out after the club's board of directors tried striking a compromise between letting them leave quicker and preserving the club's finances.

Members at Alcoma Golf Club in Penn Hills voted this summer to put the 83-year-old club up for sale at a list price of $3.9 million. The club has 89 active members as opposed to 300 about six years ago, and overall membership has fallen to 300 compared with 500 or 600 in recent years.

"You just have a lot of young professionals not joining clubs. They're very active with kids soccer, baseball, whatever," said Calvin Shipley, president of the Penn Hills club.

While the number of occasional golfers is rising, the ranks of "core golfers" -- adults who play at least eight rounds a year -- declined 2 percent last year to 12.5 million, according to the National Golf Foundation. The Jupiter, Fla., industry group says that's about 1.4 million fewer core golfers than there were in 1998. Meanwhile, the number of golf courses has increased nearly 8 percent since 1998, tilting the supply/demand equation in favor of golfers.

"It's been a nice market for players out there because they've been able to join clubs at great prices and play golf at great prices," Mr. Collins said.

New public courses have attracted members who don't play often enough to justify joining a club, but want to play somewhere nice, whether for business or pleasure.

"People don't mind taking clients out to Cranberry Highlands, which is reasonable cost. If they want to go upscale, they can go to Olde Stonewall," said Jim Cunningham of Alpern, Rosenthal, a Downtown accounting firm.

The imbalance between supply and demand might be shifting. The golf foundation says the equivalent of 124.5 18-hole courses opened last year, the lowest level of openings since the mid-'80s. While openings were off 17 percent from the previous year, the number of courses closing increased 50 percent to 93.5.

Some courses are discounting or eliminating initiation fees to attract members. They're also offering a wider variety of memberships, targeting everyone from the avid golfer to those who don't play as often but want to join a club for social or family reasons.

"A big part of our focus is kids' programs, family programs," Mr. Shearer said.

At Greensburg Country Club, annual membership fees range from $250 to $3,000. Members lost their ownership stake in the club after it filed for bankruptcy, but former members account for about two-thirds of current membership, Mr. Shearer said.

Chartiers Country Club in Rosslyn Farms discounts initiation fees and monthly dues for those in their 20s and 30s, hoping to attract younger people who will remain a long time. Initiation fees for those age 31 to 39 are $2,000 but $15,000 for older golfers, while monthly dues are $241 compared with the $460 older members pay.

"There's no doubt things are very different than they were 20 years ago. It's really forced us to adapt," general manager David Brown said.

Private clubs have been forced to operate more like a business that has to compete not only with public courses, but also with public restaurants, Mr. Brown said. That's a lot tougher than it was 20 years ago, when two-hour lunches at the club lubricated with a few cocktails were more socially acceptable.

"If you didn't have a reservation, you wouldn't have lunch here," Mr. Brown said.

Chartiers still requires most members to spend at least $75 a month at the club's restaurants, a standard provision at most clubs. When Greensburg Country Club emerged from bankruptcy, it eliminated membership initiation fees and abolished food minimums. It also changed to a for-profit operation, allowing it to advertise more and generate revenue from nonmembers. Because they are nonprofit organizations, tax laws limit the amount of outside revenue private clubs can collect to 35 percent of their total. Exceed that and they jeopardize their tax-exempt status.

Mr. Shearer said those changes, plus lowering annual dues, had been the keys to the club's bouncing back so quickly.

Prestigious clubs with a more affluent clientele aren't having problems to the same extent.

"The Oakmonts, the Fox Chapels, the [Pittsburgh] Field Clubs, they're not really experiencing too much of this. They have people waiting to get in," Alcoma's Mr. Shipley said.

He said members hoped whoever buys the Penn Hills club would continue to operate the golf course. The golf foundation reports, however, that residential and commercial development was responsible for 54 percent of last year's course closings.

That's happened recently in the Pittsburgh region. Franklin Park Golf Course, a nine-hole course in Franklin Park, closed two years ago to make way for Scarlett Ridge and Settlers Walk, single-family house developments. In nearby Ohio Township, nine-hole Green Valley Golf Course was closed to make way for the Mount Nebo Pointe retail development.

If it persists, the narrowing gap between course openings and closings should help a business that depends heavily on volume. Given the substantial investment in maintaining and improving the course and clubhouse, the more golfers it attracts, the better the chances of the club succeeding.

Mr. Shearer said Greensburg's members would play nearly 17,000 rounds this year compared with about 10,000 last year.

"We're on plan to get 20,000 rounds next year," he said. "We've got the base in place."

First published on September 24, 2006 at 12:00 am
Len Boselovic can be reached at lboselovic@post-gazette.com or 412-263-1941.