ocrenter and clearfund raise some interesting points about the Santaluz golf club membership that prompt ruminations about how things have changed so radically in the past decade. Golf/membership clubs are reportedly in trouble nationwide, as baby-boomers age and golf less, expensive sports are shunned with our nation’s newfound austerity, and land and water rates rise.
Consider also the particular economics of a golf course: heavy up-front fixed costs, low marginal or variable costs (the cost of each additional user). This means the enterprise cannot thrive without volume, and in fact may have a breakeven point of perhaps 70% or 80% of capacity. Usage of both clubs is way below their potential, as we have observed.
Since Santaluz was conceived and planned in the heady post-stock market peak of 1999, and executed in the real estate bubble of 2000-2005, they assumed their expensive memberships would always have high and increasing demand, thus their lofty initial asking price. Now the gloom of our post-bubble economy is becoming permanent, some 10% + building pads of Santaluz sit vacant (and are selling for less than their initial 2003 or so price), and the membership prices have been cut, much to the chagrin, I suppose, of the original buyers. I imagine a lot of internal debate and gnashing of teeth preceeded this decision.
I suggest this is the new normal and a slew of other enterprises must rethink their business model in view of a permanent slow growth economy.
