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Witt Mares: 2011 PKF Club Trends


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  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Many more people are without jobs to day than what was the case during the previous three U.S. recessions, and the peak of unemployment in the current cycle – at 10.5% according to Moody’s – will not arrive until the 3rd quarter of this year.
  • Transcript

    • 1.
    • 2. Tax and Financial Trends in Clubs in a Recovering(?) Economy
      Club Managers Association of America
      84th World Conference on Club Management
      February 28, 2011
      Presented by: Kevin F. Reilly, J.D., CPA
      Witt Mares, PLC
      Fairfax, Virginia
    • 3. Trends Overview
      Economic Outlook
      Lifestyle and consumer trends
      Demographic Influences
      Golf and Recreation
    • 4. Consumer Confidence
    • 5. U.S. Unemployment Rate
      9 percent in December
      Source: Moody’s
    • 6. U.S. Unemployment Rate – by State
    • 7. Consumer Behavior Study
      Economy's Impact on Upper Income Consumers
      Income $150K+
      August 2007August 2009
      More practical in purchases 32% 50%
      More budget conscious 25% 44%
      Only buy clothes on sales 14% 15%
      Use coupons more 15% 31%
      Buy store brand/generic more 7% 20%
      Recent surveys on consumer spending behavior indicate thatreductions in discretionary spending may be prolonged. When asked how the recent economic downturn will affect consumer lifestyles over the next 5 years, 52% of survey respondents indicated they will evaluate purchases more carefully.
      Source: BIGresearch, August 2009
    • 8. Trends – Economic
      $17 trillion drop in net wealth between 2007-2009
      Bernanke : 12 of 13 major financial firms faced failure in 2008
      Libya impacts US$ and price of oil
      Club specific
      68% of clubs increase membership marketing
      60% increase member retention emphasis
      50% -special financing offers
      44% waive or discount initiation fees
      23% trial membership
      Plurality expanded facilities
      Fix only if broken policy
    • 9. Housing Outlook
      Housing largely a local market
      Some areas improving, but long road ahead
      New home sales in 09 driven by 1st time homebuyers (tax credits)
      In Jan 10, fell to lowest level in nearly 50 yrs
      Existing home sales continued to fall over summer, 2010, but some
      improvement was expected by year end
      Buyers of second homes:
      Typically 40-60 yrs of age
      Large pool of Baby Boomers now, but purchases affected by downturn in market
      Foreclosures expected to be higher in 2011 than 2010
    • 10. Leisure Spending
      Baby Boomers
      Generation X
      Generation Y
      Note: Data does not take into account future immigrants entering the United States.
      Based on historical trends, an individual’s lifecycle spending typically peaks between ages 46-49 with spending on leisure peaking near age 52.
      Source: DHS, CDC, and Wells Fargo Securities, LLC estimates
    • 11. The Luxury Market
      Generally, the “Luxury Market” is defined as the top 2 to 5% income earners with net investible assets greater than $1M
      U.S. Households by Income
      Annual HH Income
      % of Total Market
      $75 -$100k
      $100 -$150k
      $150 -$200k
      $200 -$250k
      Trading Up – Siverstein & Fiske
    • 12. Luxury Market: 2010
      Jan, 2010 Luxury Study of Affluents
      Top 20% of household income
      Still pessimistic on economy overall
      Feel recession won’t end until 2011
      More optimistic about their own financial position
      Spent 8% more on luxury goods in 4th quarter of 2010
      Appeal to them with consistently high quality and exceptional service
    • 13. Luxury Market Outlook
      Luxury market recovery likely to be driven by:
      • Ultra-affluents (incomes > $250,000)
      • 14. Represent roughly 2.5 million households in U.S.
      • 15. Spend 4.5 times more on luxury than
      other affluents
      • Increased spending by 40% from 3rd
      to 4th quarter
      • Young affluents (Age 40 or younger)
      • 16. Outspent their elders by 2.5 times in 4th quarter
      • 17. Strong appetite for luxury brands and goods
    • Why Members Join
      Private club golfers participating in NGF’s research study indicated different reasons for joining a private club that varied with the type of club…
      • Members of both country clubs and golf-only clubs join for the
      convenience and quality of the golf course and…
      • Country club members also placed a high priority on other amenities
      for themselves and their families
      Source: National Golf Foundation
    • 18. Membership Initiation
      Initiation Fee Income has declined across the country with reports of 25% to 50% reduction at some clubs
      Initiation Fees:
      $5,000 and under – 8.5%
      $5,001-$10,000 – 7.3%
      $10,001-$20,000 – 8.2%
      $20,001-$50,000 – 5.9%
      $50,000+ – 3.7%
      Source: NCA Planning Survey, 2009
    • 19. Change In Country Club Membership
    • 20. Change in City Club Membership
    • 21. Age First Joined Club
      (Current Country Club Members)
      The Gen Y population is reaching the age when, historically, the majority of current members joined a country club (30-39 years old)
      Source: National Golf Foundation
    • 22. Membership Issues – Nonfinancial
      Limited free time
      Increased commuting time
      Homes becoming entertainment centers
      Parents spend more time with children
      People travel more
      50% increase in daily fee courses since 1990
      Same number of golfers
      Private clubs more appealing to men than women
      Exclusivity not so important
      Corporations change way do business
    • 23. Club Membership
      The majority of clubs responding have increased their focus on membership through…
      Improved Retention Efforts – 86%
      Expanded Membership Marketing – 82%
      Other responses to the economy include:
      Trial Memberships – 72%
      Special Financing Offers – 69%
      Discounted Initiation Fees – 69%
      Source: NCA Planning Survey, 2009
    • 24. Dues Issues
      Clubs are in the dues business
      Anecdotal evidence
      No change to services – need approximately 7% increase
      Fewer members to carry overhead costs
      Dues raised approximately 3%
      Many Clubs
      Goal is no dues increase
    • 25. Country Clubs – Dues
    • 26. City Clubs – Dues
    • 27. Country Club Income Per Member
    • 28. Country Club Operating Cost Per Member
    • 29. Country Club Income 2010
    • 30. Country Club Expenses 2010
    • 31. City Club Income Per Member
    • 32. City Club Operating Cost Per Member
    • 33. City Club Income 2010
    • 34. City Club Expenses 2010
    • 35. NRA Stats
      2010 sales increase 2.5%
      Economy remains top challenge facing operations
      2010 unemployment decreasing slowly
      Operators more optimistic and capital spending plans at a 2-year high
      Growth in wholesale food prices expected to slow in 2010 (2.9%)
      Menu Prices – moderate growth (3.8%)
      33% of adults say they do not eat on-premises of restaurants as often as they would like
      Long-term labor issues eventually will return
    • 36. Trends – Food & Beverage
      All types needed
      Controlling of costs critical
      Different ages, different options
      Casual dining a must
      Outside dining increasingly desired
      Clubs must cater to every membership class
    • 37. Trends – Food & Beverage
      Staying on top of dining trends very important
      Food to go issues
      Locally grown produce
      Bite size deserts
      Organic items
      Nutritionally balanced dishes (especially children)
      Michelle Obama’s child obesity thrust
      73% of adults trying to eat healthier
    • 38. Trends – Beverages
      Infused liquor
      Flavored drinks
      Pairings with food (cocktails, as well as wine)
      Organic wine
      Specialty/seasonal beers
      Organic/specialty coffees
      Flavored/enhanced water
      Specialty teas
    • 39. Country Clubs – Food & Beverage
    • 40. Gross Profit Country Clubs
    • 41. City Clubs – Food & Beverage
    • 42. Gross Profit City Clubs
    • 43. Trends – Golf
      1950 – 3.5million golfers
      2002 – 26 million golfers
      National Golf Foundation – 1990
      New Course every day for next ten years
      New players per year – 3 million!
      Players lost per year – 3 million!!
      New course openings 1990 – 224
      New course openings 2000 – 398
      New course openings 2002 – 220
      Openings 2003 – 237
      Openings 2009 – 50
      Openings 2010 – 46
      60 percent public-fee
    • 44. Golf Report
      100 – 200 courses per year will close until supply and demand reach equilibrium
      2009 net loss was 90 clubs (140 closed)
      2010 net loss was 61 clubs (107 closed)
      1/4 of closures in the past decade were private clubs
      10 – 15% of public courses at risk
      Two out of three core golfers remain passionate
      Business of golf faces an economic outlook that is sinking like a downhill putt (WSJ)
    • 45. Golf Trends: Boomer Impact
      • Not what was expected
      • 46. Over next 20 years, Boomers will play more rounds per year than they’re playing now
      • 47. Core golfers (8+ rounds/year)
      • 48. Majority of occasional golfers (1-7 rounds/year) expect to keep playing over next 10 years but see little reason to join a club
    • Family Friendly Golf
      Clubs that provide experiences for the entire family are growing in popularity. Family lessons, “short course” set up, kid friendly vehicles all serve to improve the value of membership in many clubs.
      Kids Car – With Duel Safety Brakes and Foot Activated Turn On and Shut Off Switch
      4-Seat Family Golf Car
      Short Course &
      Par 3 Courses
    • 49. Golf Clubs & Members
      • The number of private golf clubs throughout the U.S. is approximately
      4,400, or about 30% of all golf facilities
      • Currently, there are 2.1million private club adult golfers in the U.S.,
      which represent about 9% of all adult golfers and 6% of the Mass
      • Private golfers are important to the golf industry because they are
      disproportionately avid players and spendersversus public golfers
      • Private club golfers play and spend 3xas much as public golfers and
      • 50. The majority joined their clubs before they turned 50 years old
      Source: National Golf Foundation
    • 51. Golf/Country Club Membership
      Likelihood of remaining a member for 5 years:
      66% very likely to stay
      20% “on the fence”
      10-15% at risk of leaving
      Reasons they might leave (other than relocation):
      Dues too expensive 46%
      Might not be able to afford it 38%
      Opt for high end public courses 36%
      Cost per round hard to justify 33%
      Retention much higher if spouse is a golfer
      Juniors (age 6-17) 10% of total golfers
      Source: National Golf Foundation
    • 52. Golfer Profile & Spend
      Distribution of Golfers by Age and Spending
      Along with the cruise and toy subindustries, golf could potentially be well positioned to benefit from demographic-led spending trends.
      Source: National Golf Foundation and Wells Fargo Securities, LLC
    • 53.
    • 54. Issues for Women Golfers
      Study sponsored by The Little Family Foundation to understand key issues for women golfers
      Key findings:
      For female golfers, a round of golf is as much a social experience as a competitive one. Social aspects carry even more weight for Lapsed Golfers.
      Many women are frustrated by their inability to hit far enough and to complete a round in a reasonable amount of time.
      Data suggests that the deck is stacked against them, with holes that are in fact significantly longer than most women can hit.
      Source: “The Right Invitation: A Comprehensive Research Study to Guide the Golf Industry to Meaningfully
      Increase Women’s Golf Participation and Satisfaction;” Sports & Leisure Research Group
    • 55. Increasing Rounds for Women Golfers
      Women golfers are seeking a pleasant social outing, not a test of their physical and emotional stamina. Thus, lack of basic comforts and amenities are key detractors to their enjoyment of the game.
      Women also care a great deal about, and perceive the following to be problem areas that can be significant stressors:
      Condition and aesthetics of the course
      Ease of booking tee times
      Ample directional signage on the course
      Source: “The Right Invitation: A Comprehensive Research Study to Guide the Golf Industry to
      Meaningfully Increase Women’s Golf Participation and Satisfaction;”Sports & Leisure Research Group
    • 56. 20 Year Cost Per Hole
    • 57. Cost Per Hole
    • 58. Cost Per Round
    • 59. Fitness
      More prevalent at golf/country clubs (55% have them)
      75% of clubs report that usage is growing
      60% of country clubs are expanding facilities
      Reflects more health-conscious society and growing health needs of Boomers
      Key factors for member satisfaction:
      Size of facility
      Condition and availability of equipment
      Hot trends:
      Providing array of program choices (core training, weight loss, spinning)
      Lifestyle and wellness programs
      Functional fitness, to deal with impact of aging
      Source: McMahon Group Survey Database
    • 60. Tennis Outlook
      Participation in 2009 topped 30 million players for 1st time in two decades
      12% growth over 2008
      2010 growth looks similar
      25% growth since 2003
      7.1 million new players
      14.8 million “regular” players
      Strongest growth segment: players 12-17 years (nearly 21% of total in 2009)
    • 61. Changing Demands for Club Services
      Members are looking for family-centered opportunities to learn, connect, have outdoor adventure, enjoy healthy experiences and interaction with diverse groups
      Value Added Considerations
      • Family Friendly Golf
      • 62. Video Game Rooms
      • 63. Online Network Games
      • 64. Exercise and Wellness
      • 65. Life Support – Concierge Services
      • 66. Food For Convenience & Health
    • Spa & Wellness Trends
      Pamper & Health are highly valued by the Mass Affluent
      • Massage Therapy Rooms
      • 67. Mind and Spirit Rooms
      • 68. Manicure and Pedicure Facilities
      • 69. Child Care
      • 70. Reform Pilates
      • 71. Group Exercise Room
      • 72. Fitness Facilities
      • 73. Health Bar and Grill
      “The Women’s Market opportunity is Number One and there’s no close second for the foreseeable future…”
      ~ Tom Peters
      In 2010 Women own 50% of U.S. Stocks & control 60% of the wealth.Women influence 94% of purchases in the U.S.
    • 74. Spas
      4th largest leisure industry in U.S. – $11 billion annual revenue
      18,000 spas in U.S.
      70% of users are women
      Men are a growing market – “not just a shave and haircut”
      Average age of users: 40 yrs
      23% of clubs now have spas
      50% of clubs with spas say demand is increasing
      29% of clubs use independent contractors; 25% have full and part-time staff
    • 75. Key Club Strategies
      Accommodate youth and family to get them more involved in the club
      Youth camps, movie nights, family camp night on the golf course, teen clubhouse or junior lounge
      Expanded pool facilities (water parks)
      Fitness areas for youth
      Expansion of junior sports programs (golf, tennis)
    • 76. Youth & Family
      Other recreational facilities for families: bowling, hockey
      Expanded social programming for youth, including parent/children events
      Parents night out programs
      Junior activities committees
      Child-care services
    • 77. Demographics: Population Trends
      Overall growth in U.S.
      • Reached 300 million in 2007; 400 million by 2040 (doubling every half century)
      • 78. Nearly half of current growth is immigrants (legal and undocumented)
      • 79. 12% of population is foreign-born
      Growth in population > 65 yrs
      • Will more than double between 2010 and 2030, growing from 35 million to 72 million
    • Demographic Overview
      • The American population is changing at a rapid pace.
      • 80. A record number of babies—4,315,000—were born in the U.S. in 2007. The last time the number was that high was in 1957 in the middle of the baby boom.
      • 81. The U.S. population is expected to reach 439 million by 2050, from 296 million in 2005, according to the Pew Research Center.
      82% of that increase will be due to
      immigrants arriving between 2005 and 2050
    • 82. Change in U.S. Population
      Projected Racial Changes Based on Current Rate of Immigration
      The minority population is approximately 12% of the population today…by 2050 it is projected to be 19%.
      Source: National Research Council Study
    • 83. The Boomers: Are We Ready?
      8,000 turning 60 each day – 70 million will retire in next 40 years
      Now 1/3 of U.S. adult population – control 70% of total U.S. net worth (spending $2 trillion/yr)
      Boomers are reinventing how peopleover 60 live (“60 is the new 40”)
      Fitness a priority – likely to remain active
      Working “Retired”: 1/3 of workers over 50 likely to delay retirement
      By 2015, those over 50 will be 1/3 of the entire workforce, many in “encore” careers
    • 84. Boomers Trends to Watch
      Seeking communities with:
      Active lifestyles
      Social interaction
      Recreation, health and fitness
      Motivated to move by home that meets needs of their new life stage
      20% plan to build new home for retirement
      Looking for maintenance-free, efficient design and high quality features
      Communities that contribute to healthy lifestyle
      Source: Future of Master Planned Communities, Robert Charles Lesser & Co.
    • 85. The Changing American Family
      Married couples with children: 50% drop since 1960
      31 million people live alone today (27% of households)
      Large families now rare – average household now 2.5
      72% increase in Americans cohabiting since 1990
      9.7 million with opposite-sex partner
      1.2 million with same-sex partner
      Majority of couples marrying today have cohabited (55% marry in 5 yrs)
      Households with multi-generations
      At highest point in 50 years (recession and job losses)
    • 86. Demographics: Women
      By 2014 will be 47% of the workforce
      More likely to have graduate degrees and/or own small businesses than in past
      More wives now the higher-income spouse
      Larger share of women are married to men with less education and income
      78% of men still earn more than their wives, but the % of wives who earn more has quadrupled since 1970
      51% of women now living without a spouse:
      Younger women marrying later
      Older women outliving spouse or not remarrying after divorce
      5.8 million are golfers (20% of total golfers, but 60% of Get Golf Ready participants)
    • 87. Generations X & Y Profile
      Social Networking and Technology are the Primary Lifestyle Interests
      Generation X:
      • Nearly 70% shop and bank online
      • 21% read a blog once per month
      • 61% send text messages
      Generation Y:
      • 90% own a computer
      • 82% own a mobile phone
      • 72% send or receive SMS messages
      • They spend more time online than watching television
      • 42% watch online videos at least once per month
    • Web 2.0
    • 88. Progression
      • 2009 – 1.5 billion users
      • 89. 2016 – 5.8 billion users
      • 90. 2000 – global internet traffic – 100,000 GBs
      • 91. 2009 – 10.94 billion GBs
      • 92. 2016 – 65.1 billion GBs
      8/9/2010 report
    • 93.
    • 94. Social Media
    • 95. The Problem Is……
      Members communicate in the home, business and the community in one way, but the club cannot make use of all the same methods
      ….or can they?
    • 96. Everybody Is Doing It
    • 97. What Is A Private Club?
      A place where people with a common bond congregate for social and recreational purposes
      Purpose of a private club is to serve its members
      By definition, it is a place not open to the public
      Individuals must be accepted for membership before they can join
    • 98. Tax–Exempt Club
      Organized for pleasure, recreation, or other nonprofitable purpose
      “Substantially all” of the club’s activities must be conducted as above
      No part of club’s net earnings benefit member (inurement)
      No written policy that discriminates on the basis of race, color, or religion
    • 99. Why Is Private Status Important?
      Maintain right to select members and set policies
      Avoid discrimination suits
      Private club exemptions
      Federal laws
      State laws
    • 100. Web Sites
      IRS will visit
      Good stuff
      Promote Quality of Club
      Relevant History
      Member Portal
      Relevant Hyperlinks
      Tax–Exempt Status Notification – Form 990
      Events Calendar
    • 101. Web Sites – Part II
      Bad stuff
      Sale of merchandise
      Nontraditional activities
      Solicit members
      Reciprocal arrangements
      OK on member page
      Bartering issue
      Privacy issues–members know what will appear
      No surprises
    • 102. Web Sites
      Web Site
    • 103. Liability Issues
      Privacy more than tax may be the issue
      However, tax-exempt private clubs may have more exposure
      IRS will review web site before coming out
      Reflects exempt purpose for which it was formed
      Reduce exposure
    • 104. Enforcement Status
      Exempt Organization Division
      “…balance its traditional provision of service and outreach with an increased focus on enforcement”
      Budget increase to 32 percent
      Not out to “get” clubs
      Did revoke tax exempt status of several clubs during 2009 - 2010
      PA, TX, NY, CO, MN, DL, HI, MA, NJ, CT
      Project to trace clubs reporting investment income on Form 990 and not filing Form 990-T
    • 105. Issues
      Organizational test
      Filing requirements
      Employment taxes
      Investment income
      Nonmember income
      Gaming and other fundraising
    • Giving Up Tax Exemption
      Think long and hard before giving up tax status
      Privacy is still important
      Excessive UBI can impact enjoyment by members of a club
      Why join club if anyone can use it?
      Do not make decisions having long-term impact based on short term economic issues
      Form 990 disclosure not enough to give up status
      May not just be able to give it up
    • 113. Questions
      Please Contact:
      Kevin F. Reilly, J.D., CPA
      Witt Mares, PLC
      12150 Monument Drive, Suite 350Fairfax, VA 22033Phone: (703)