The KK&W team contacted top city club managers to gather insights into how city clubs are handling and responding to this challenging time.
In some ways clubs have weathered the events of 2020 like they always have but enduring all of these amid a global pandemic has created a nearly impossible situation for city clubs.
Once vibrant hubs of connection, business events and social activities, many city clubs suffered as people fled crowded cities to quarantine in suburbs and desolate areas. Businesses closed and members worked from home offices.
City clubs experienced high member attrition, shifts in member categories (from full-dues resident members to half-dues non-resident members). Nearly all city clubs experienced a significant decrease in member usage and revenue because of stay-at-home orders and the cancellation of events.
Recognizing that city clubs have been presented with some grave obstacles that may prove insurmountable to some, the KK&W team contacted top city club managers to gather in sights into how city clubs are handling and responding to this challenging time.
Like the rest of the private club industry, city clubs made adjustments to keep members comfortable and safe. They pivoted to virtual programming during stay-at-home orders.
Daniel Perez at the New York Athletic Club implemented numerous out-of-the-box virtual events such as wine tastings, whiskey tastings, virtual happy hours, online cooking classes, virtual fitness challenges and more. City clubs created at-home experiences for members with elaborate to-go foods, online activities and creative virtual events to keep members connected to the club.
The pandemic presented an excellent opportunity to bring the club to members and gain access to members’ lives. It solidified the club’s importance and the value of club membership, but it also provided clubs with a unique glimpse into members’ homes.
During virtual events and meetings with members, one manager shared that he took notes of important items in the background, such as diplomas, favorite sports teams, hobbies, and pets, to understand his members better.
Most city clubs have been and continue to downsize as much as possible to control costs. John Dorman, GM of The University Club in New York City, calls it “right-sizing” for the current climate. City clubs are watching finances and have kept labor tight by laying off staff, including management. Some city clubs cut employee salaries by up to 20 percent and reduced hours to four-day-work-weeks to control costs. Many of the top city club CEOs were also asked or volunteered to take pay cuts.
While certain city clubs have paid partial or full 2020 staff bonuses, it was likely dependent on that club’s fiscal year. Decision-makers continue to be cautious and extremely conservative with employee raises and bonuses. Some have been hesitant to reinstate employees’ full salaries after temporary reductions were issued last April or May.
The New York Athletic Club has taken the challenges of the last year and turned them into opportunities. General Manager Roger Simon and his team re-configured many business practices and evaluated the club’s strengths and weaknesses, which became apparent during COVID-19. “We’ve all learned a lot about our clubs over the last several months,” he said and shared several updated practices the club has implemented:
- Communications not only include safety aspects but a sentiment of community, mutual concern and support among members.
- The club implemented additional storage spaces for members choosing to commute to the club via bicycle because of concerns over the safety of mass transit.
- The club created a relationship with a medical practitioner who can offer expedited COVID-19 testing opportunities for members to avoid long lines at health facilities.
Charles Johnson, GM of Detroit Athletic Club, believes city clubs will be grappling to forecast business models and adjust operating models for the next year or two. The financial impact of 2020 and the reduction of events in 2021 will dramatically impact city clubs’ ability to invest in their facilities, which for many is their greatest asset.
According to Johnson, city clubs have to understand and define their value proposition to evaluate the current business model and assess sustainability for the future. City clubs must diversify services and amenities and analyze strategic direction to evolve and remain relevant.
Overall, city/ athletic clubs are trying to solve three major problems:
- Declining and disengaged memberships because members are learning to live within a mile of their homes.
- Staff challenges include inactive/furloughed employees, employees experiencing financial hardship, low staff morale and the need for retraining.
- Low business activity due to reduced food and beverage revenues, few overnight room sales and minimal private events.
While the past several months have been hard on city clubs, the grim reality is that it could take years to get city clubs back to where they were just one year ago. But with forward thinking and a proactive, strategic approach, city clubs can diversify, evolve and reinvent their way to success.
Now is the time to reimage the club and recognize that members need connectivity to the club and each other, even if it’s virtual. The Union League and the University Club of Milwaukee are great examples of city clubs that had average facilities but used unique creativity to provide vibrant, eclectic offerings and merger opportunities.
Both clubs have dramatically lowered their average age of members and built a financially sustainable future by proactively evolving and diversifying their offerings.
We believe city clubs will be most successful by recognizing that the club environment is dramatically different when members are not walking through the doors. Many city clubs were founded on intellectual stimulation, athletics and community, which should be the foundation for future decisions.
Bringing the club to the members where they want it requires acquiring satellite locations in the suburbs, other parts of the city, or in popular vacation spots. It means establishing merger opportunities and creatively using current spaces to provide membership value and new experiences.
City club leaders must be bold, resourceful and forward thinking. Experimenting with new ideas and creating new programs is the path to the future.
Creating outside restaurants, using food trucks, implementing a “heat and serve” takeout program, converting parking garages to outdoor fitness spaces, and offering numerous online classes such as cooking classes, cheese tastings and exercise competitions takes the club outside the four walls to members’ homes.
Inside the four walls of the club may look different as well. Perhaps city clubs find success in converting overnight guest rooms to private offices for members.
The future is bright for city clubs that adapt to today’s changing demographics. It requires great communication between all stakeholders (boards, management, staff and members) and constant planning and evolution. City clubs that employ strategic thinking have supportive boards and strive to create membership value are the clubs that will thrive, not just survive.
The best chance of prospering stems from a management team that has taken advantage of the time away from “business as usual” and has developed new financial strategies, planned strategic initiatives and is acquiring new assets.
This is the time to plan and prepare for reopening to grow for the future. Management and the board must look to the future together and make hard choices to fulfill the club’s mission and assure long-term sustainability.
Not all crises are bad. The pandemic has presented a transformational time for city clubs. Plans, programs, amenities and activities successful in the past will look different in the future. Mission-driven city clubs will look back on this pivotal time as a ”wake up” call that they need to evolve to ever-changing circumstances constantly.
Contributed by Richard Kopplin, Kurt D. Kuebler, CCM & Thomas B. Wallace Ill, CCM, CCE, ECM
Partners at KOPPLIN KUEBLER & WALLACE
THE BOARDROOM MAGAZINE March/April 2021