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| Wanna play golf? |
| Just make your pick and with any luck you'll be on that course you've long coveted. In theory, that's how it goes when you get a membership from the Internet-based companies that have emerged in recent months. |
| These companies claim to have a list of about 1,600 private golf clubs that have indicated they will grant guest privileges to any one who belongs to a private club. Buy an annual membership and someone will work 24 hours a day, seven days a week to get you access to a private club. |
| Ah, ah! Not so fast, what's happening here could have dire consequences for private clubs. Not only is that "guest" not a member of any private club, but the IRS now could take a special interest in your "guests" and review your club's tax-exempt status because this particular program really brings members of the public into private clubs. |
| Surprise! Decades of history, as a private club, could go down the drain because these programs, schemes or companies do not meet the tenets of "private clubs." Unknowingly, it could be happening to you! |
| In July, Jay Karen, director of membership for the National Golf Course Owners Association sent an alert to all NGOCA members, which said in part: "An NGCOA member alerted us to the possibility that several of our member courses may unknowingly be listed as participating in a reciprocal play program at www.privateclubconnections.com. . . After a quick check with some members who have courses listed on this web site - and finding they had not agreed to participate with the reciprocal program - we felt it appropriate to alert the membership about this program. " |
| James Singerling, CEO, Club Managers Association of America issued an even stronger alert in early August in an e-mail to all CMAA members. It said, in part: "CMAA has recently been made aware of several "membership reciprocity" schemes targeting the private club industry. Because the schemes target members of private clubs, CMAA urges you to visit the following Web sites and confirm their accuracy: www.privateclubconnections.com. . . and www.reciprocalgolf.com. These companies may be misrepresenting their relationship with your club. . . The only program that receives CMAA's full support is the International Club Network (ICN), which protects the privacy and integrity of your membership. . ." |
| Two of the companies, located through an Internet search, Private Club Connections and VIP Golf Advantage.com, apparently, at one time, were operating co-operatively. Efforts to interview anyone involved with Private Club Connections have been unsuccessful. |
| A principal for VIP, reached through phone number at the VIP Golf Advantage.com website, says his company is no longer involved with Private Golf Connections, and has not been for some time. This principal, who declined to identify himself, said "we own the website but it will have a different approach." |
| There's a more detailed response from a Palm Springs-based company, Reciprocal Golf, operated by Pete Baumann. "We learned that approximately 1,600 of the private clubs indicated in their 'guest policy' that they welcome members from other private clubs when they have available tee times," Baumann said. |
| "We set up an inbound telemarketing office in southern California that is available 24/7 to our members by a toll-free phone number. Our members simply call that toll-free number, tell the operator where they want to play and when, and we go to work on making the arrangements right away." So, for an annual fee, Baumann is the matchmaker. |
| He says anyone who is a member of a private country club "may apply for our services individually. Any private country club may apply as a private country club member, wherein we serve the needs of their entire membership." |
| Reciprocal Golf, at one time, carried the names of the 1,600 clubs on its website, "but we removed the list when a number of club managers misunderstood the purpose of the list, and recently objected to our listing their club at the website," Baumann asserted. "Although we never claimed to have a written agreement with any of the clubs, those managers seemed to think we were claiming just that, so we removed the list. |
| "We help members coordinate reciprocal play at any of the 4,332 private clubs nationwide, at each club's unaccompanied guest rate, just as each head professional would do if he had nothing but time on his hands to make those arrangements." |
| Does that mean Reciprocal Golf sells a membership in a specific private club to members of Reciprocal Golf to enable them to play at other private clubs? Baumann didn't address the point directly. |
| "Now you're getting into our trade secrets; how we coordinate all communications between Reciprocal Golf and the private clubs. We actually have experimented with a number of procedures in the last 18 months, trying to find the best way to represent ourselves to the clubs," Baumann explained. "If all head professionals and club managers (and boards of directors) had the same open mind about bringing reciprocal play into the 21st Century, our job would be much easier. But many club managers actually object to our providing their services to their members, taking the attitude that 'I take care of anything my members need! They don't need your services!' |
| "If that were true," Baumann added, "our services would not be necessary. However, we have many members of private clubs who do not want their own head pro or club manager to know they are using our services, because their pro and/or club manager have taken just that position. |
| "To better answer your question," Baumann said, "we do have agreements with several private clubs, wherein we have the authorization to represent our members as members of their clubs, simply because we do not have such authorization from each member's home club. Those agreements are confidential, so I cannot give you those names at this time. I hope you understand." |
| Herein lies the rub! |
| The information provided by these companies has not been persuasive to the Club Managers Association of America, some club managers, tax experts and others deeply involved in the private club world. They feel that these "reciprocal service companies" may, in fact, jeopardize the status of private clubs, particularly not-for-profit private clubs, because of legal and tax implications. |
| The reason for their concern is the vagueness of the regulatory environment in which clubs must operate, and the drastic consequences for a club if it loses its private status. From a legal point of view, there are many membership organizations calling themselves clubs and most make their membership available to anyone willing to pay a fee to join. |
| Each state has enacted Public Accommodation statutes defining the responsibilities and obligations of public activities such as hotels, restaurants and golf courses. In doing so, each has recognized that a private social organization may restrict its services to only its members, even if those services are identical to those offered to the public by other organizations, and even if the club is for-profit. |
| The central thrust of private clubs is that a club can provide services only to its members and guests, not to the public-at-large. To the extent that a club provides services to non-members, it enters the gray area between private and public…and it's a line not well defined. However, if a club crosses that line, it may lose its private status and be forced to open its doors to anyone who wishes to enter. |
| This does not mean, however, that clubs must keep their doors closed under all circumstances to non-members. There are often circumstances when it is to a club's and indeed, a member's advantage to have some arrangements with another club. They may want to visit other clubs, their own clubs may be closed because of renovations or fire, or because it may offer a competitive advantage that sets them apart from competitors, including commercial enterprises. |
| Some clubs have entered into formal agreements with other clubs to grant identical access rights for the members of those clubs. Because the terms for each club mirror those for the other club, these are called "reciprocal" agreements. |
| However, a club cannot have formal agreements with every other club, nor can it agree to open its doors automatically to anyone who might want to visit. That's why there's the "informal" system…the "old boys" network among staff of private clubs including general managers, golf pros and course superintendents. One will call a friend at another club "asking for a favor" on behalf of a club member, and they usually agree. The asking club again guarantees its member's charges at the other club. |
| Together, these practices create an extremely valuable benefit of club membership that support the needs of the club members and strengthen the club's viability. |
| The IRS has implicitly recognized that such practices occur. In the very strict standards for tax-exempt private clubs, the IRS caps non-member income at 15 percent. |
| William Wagner, CCM, general manager at the Riviera Country Club in Coral Gables, Florida says clubs want reciprocal agreements because "clubs want to offer an extra service to their members, which in turn increases the value of the membership. Clubs that are for-profit are more apt to desire this perk for their members." |
| He says his club has not entertained the services of companies such as Reciprocal Golf and it doesn't provide services to a club like Riviera. "The number one product of a club is exclusivity. If there is no control of who is sent to a private club as a guest, the club risks credibility with its membership," Wagner stressed. "The one-on-one relationship with manager- to-manager limits the risk of letting a less than desirable person use the club. The manager who allows the reciprocity of a bogus club is being dishonest with his own dues paying members." |
| Kurt Bischofberger, club manager at Forest Lake, Columbia, South Carolina, said he learned of the Internet companies through contact from the CMAA. Bischofberger says he has spoken with Baumann of Reciprocal Golf and expressed his displeasure at the company's action. |
| "But it generally has not affected us and we are not on a 'reciprocal' list. And we don't reciprocate with anyone," he stated matter-of-factly. "This kind of thing, and I don't know if it's done knowingly, is driven by greed. |
| "I called some clubs on the list where I know people, and they were not happy about it." Bischofberger says "it's non-member income and it shows the desperation of some clubs to get funds. They're selling themselves out…it's short term gain for long term pain. Who knows what will happen." |
| Bischofberger agrees there are companies offering a reciprocal service that he's comfortable with…that is reciprocal agreements between specific clubs, which is a major difference in the way Reciprocal Golf says it operates. |
| International Club Network offers a reciprocal program that has the blessing of the CMAA, and which the CMAA feels adds value to a private club and its members while supporting the club's mission. |
| "When we (International Club Network) contact a club on behalf of a member, we always identify that individual's home club. It is the membership in the home club, and not ICN, that allows a club to agreed to grant guest privileges," says ICN's president Michael Driggs. |
| "ICN was created to allow private clubs to meet the desires of their members to visit other clubs, while protecting a club's independence and private status. Because a club is in control of its guest policies at each step, and every ICN member belongs to a legitimate private club, the ICN structure is fully compatible with the stringent section 501(c)(7) provision for tax-exempt clubs," Driggs explained. |
| Singerling says while CMAA works in collaboration with ICN, the CMAA is also quite accepting of another group - Creative Golf Marketing and Private Club Network and company president Steve Graves. |
| "We've taken advantage of the relationships we have established with private country clubs across the country, and basically became a broker of reciprocal access (without the payment of green fees and on a space available basis) for the private clubs that agree to be in our Private Club Network," says Graves. |
| Private clubs, as members of PCN accept requests from other clubs, also PCN members, for individuals to play golf. Access to reciprocating clubs is based on a "space available basis…and clubs agree to waive the green fees for these individuals. |
| Graves regards "reciprocity as a privilege, not an entitlement….Probably the most important point to understand is that the club official receiving the request has the full authority to say 'NO'! To accept the request is simply a courtesy being extended from the club to the member of the requesting club. |
| "And clubs that state they will accept reciprocity are simply stating that they will contemplate a request from a like club and possibly grant access to their club, without any requirement to meet the request," Graves explained. |
| CMAA says the red flag to member clubs was raised because "CMAA became aware of a number of these business models coming together about eight years ago. The premise of many was to gain mailing lists from clubs and then selling them worldwide," said CEO Singerling. |
| "What sets ICN and other…companies such as PCN, apart from the new schemes, is that they (the new schemes) sell memberships in a public organization and call it a private club," Driggs suggested. "Any 'private club' that advertises and sells its membership on-line to anyone who can make a one-time payment violates almost every test of what constitutes a private club," Driggs stated emphatically. "Anyone who joins such an organization is not a private club member, but a member of the public." |
| Publisher's final thoughts |
| So, where does all of this leave us? If legitimate private clubs agree to grant privileges under a mistaken impression they are doing so for another legitimate private club, those clubs are opening themselves to charges they are serving the public, and endangering their own private status. Key people and organizations in the private club industry see a distinction and are concerned about what they see emerging. |
| As volunteer leaders of your club, it is crucial your club be comfortable with all aspects of a company with which it may deal. If club members learn that the club's status has been jeopardized by inattention from a club's management and/or directors, there will be a backlash against those leaders. |
| It's important for these issues to be resolved within the private club industry because if the government steps in to regulate this further, it will almost certainly restrict a practice that is important and growing in importance to private clubs. That's something no one in the private club industry wants to see happen. At least that's the way I see it. |
| What's your opinion. If you wish to respond to the Publisher's Perspective, or other BoardRoom articles, contact Publisher John G. Fornaro by email at johnf@apcd.com. |
| John Fornaro Publisher |