Hitting in hope: Scotland’s golf clubs under the cosh

Research released in September by governing body the R&A reflects the continuing growth of golf globally, with an increase of 3.1 million adult players in R&A affiliated markets outside the US and Mexico between 2022 and 2023. This takes the total of on-course players to 42.7 million. It’s a similar story in the lucrative US market, which is home to more golfers than any other country in the world.

This has fuelled a pipeline of investment into proprietary golf developments in Scotland catering predominantly to international visitors keen to play in the country where the game was invented. However, at the same time concerns are being raised about the ability of many local members’ clubs to balance the books and invest in their facilities.

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Following a surge in demand for club memberships when golf was one of the few activities available, Kevin Fish of CCL Services says resignations have returned to their pre-pandemic average run rate of about 6.5%. This ranges from roughly 3% for larger clubs up to 9% for smaller clubs.

CCL has gathered financial data on more than 250 members’ clubs in the UK, about half of which are in Scotland. Mr Fish said outside the category of those with “trophy” courses there are a growing number of JAMs – those “just about managing”.

“I have been doing this for 25 years now, and for two clubs [in Scotland] to go bust in the last three months – the Hirsel and Torrance Park – and for two others to declare they are in serious trouble, that’s the most open they have ever been about [financial trouble] in my time,” he said.

It is widely accepted within the industry that new course construction led to a 20% increase in the number of golf holes in Scotland between 1980 and 2000, after which club memberships started a downward descent that lasted for 19 years. With the Covid bubble now deflating amid pressure on consumers’ disposable incomes, Mr Fish believes it could be a classic case of supply outstripping demand.

“If you were looking for the tip of the iceberg,” he said, “could this be it? Could we be in a situation where we are in a market correction where in every area everybody in the middle to low tier is just hoping that they survive longer than the club next door?

“Because don’t forget what happens when a club goes bust: you might have 100, 200, 300 or 400 members all looking for a new home, and suddenly all of the clubs in that region no longer look threatened, they suddenly look buoyant, and that’s just demand and supply.

“So could we be looking at a Hirsel and Torrance Park in every region in Scotland? Yes, I think we could.”

The Bust

Hirsel Golf Club in the Scottish Borders town of Coldstream confirmed last month it had filed for bankruptcy after the twin pincers of declining membership and rising costs closed in. Torrance Park in Motherwell, owned by the Murray Estates development firm of former Rangers chairman Sir David Murray, closed for good on October 1 after running at a loss for several years.

Meanwhile, Kirkcaldy Golf Club in Fife is reportedly drawing up survival plans while about 30 miles up the road, Scotscraig, the 13th oldest course in the world, is seeking outside investment to secure its future following losses of nearly £200,000 last year. The latter has been in discussions with Kingsbarns, co-host of the annual Dunhill Links Championship, about a possible tie-up.

Last month also saw the prestigious Musselburgh Golf Club in East Lothian vote in favour of an immediate £100 levy on all members to deal with a “short-term cash flow issue” arising from repairs to the clubhouse. The venue, which staged a final qualifier for The Open when it was last held at Muirfield in 2013, has insisted it is not in debt nor facing financial difficulties other than its repair costs.

Members of Musselburgh Golf Club in East Lothian have voted in favour of a £100 levy to cover clubhouse repairs (Image: Mark Runnacles/Getty)

Christopher Spencer of the Scottish Golf & Club Managers Association (SGCMA) said many members fail to understand that their club is probably more susceptible to cost increases than individual consumers.

This is particularly evident when it comes to items like staff wages which have been driven higher by double-digit increases in the minimum wage and higher National Insurance contributions for employers. Too many also lack the management structure and staffing required to effectively run their operations.

“There’s the classic tale within the industry that you might have some really successful people who are members of your golf club – commercially very successful – but when they then get onto the golf club committee, in a lot of cases they don’t apply the same commercial logic to their golf club as they do to their business,” Mr Spencer said.

“And a golf club is a business at the end of the day. Some of them can be turning over anything from £500,000 up to £3 million or £4m per year. That’s quite a substantial business.”

The Flush

It’s a very different story at the top of the food chain where operations such as Cabot Highlands, home of the Castle Stuart Links, is nearing completion of a second 18-hole course dubbed Old Petty. Owned by Canadian developer Cabot Collection since 2022, the resort is also investing heavily in clubhouse renovations, extra accommodation, and a new Par 3 course.

The new 18-hole MacLeod links course at Trump International in Aberdeenshire is also preparing to welcome its first guests from next year. In Argyll, planning permission for a second course has been granted to Southworth, the privately-held US owner of The Village at Machrihanish Dunes.

Elsewhere, Royal Dornoch is nearing completion of a new £13.5m clubhouse and recently announced a six-figure land acquisition to upgrade its sister course, Struie, and also expand its practice facilities.

Royal Dornoch is currently nearing completion of a new £13.5m clubhouse (Image: Bannerman Media)

Mr Fish at CCL said this illustrates “the stark difference between the haves and the have-nots” but added that success comes with its own set of challenges.

“There are clubs out there that could afford to knock their clubhouse down every 10 years if they wanted to, [and] as long as they’ve gone through a consultation period with their members, then that’s a great mandate and you press ahead,” he said. “The clubs that get into difficulty are those where the board decides where the money is going to be spent without taking their members with them.”

The majority of clubs, however, are facing a different reality.

“I can see a lot of club captains having to have very difficult conversations with their committees and at their annual general meetings where they say that fees are going to have to go up by 12% this year because costs are going through the roof,” said Mr Spencer at the SGCMA.

“If the clubs don’t accept that then they will have to look at chasing visitor income. Also, it has been proved in the past that invariably, if there are a lot of golf clubs in the area, the price [of membership] tends to go down.

“It’s a race to the bottom rather than a race to the top.”

The Business Models

Much of the difference between these two groups lies in the fundamentals of how they operate, as explained by Mr Spencer.

“What you have to bear in mind is that with courses like Machrihanish, Trump and Cabot Highlands, they don’t have members,” he said. “They are commercial operations – what is known in the industry as proprietary courses – and they are there to make a profit for their owners, and they are there primarily for pay and play.

“They market pretty much exclusively to North America, and golf there is very expensive.

“The North American market equates price with the quality of the course, so if they’re looking at spending over $300 on a round of golf, or that equivalent over here, [they believe] the golf course must be absolutely brilliant. But, in fact, there are a number of golf courses in Scotland that are absolutely nowhere near $300 yet provide an excellent experience, but that’s the perception that they have.

Christopher Spencer of the Scottish Golf & Club Managers Association (Image: Contributed)

“It is very different to your private members’ club that invariably is not for profit, so any surpluses that the club does generate through its operations are invested into the facilities. There are no shareholders, and that’s a very different model.”

SGCMA chairman David Addison is also the manager of Barassie Golf Club in Ayrshire, which he says has had good success in picking up trade from overseas visitors who come to Scotland for “trophy” courses such as nearby Royal Troon.

“If somebody is coming to the area and they want to play, then basically it’s the bucket-list courses that they’re coming for,” he said. “They’re maybe coming here for the one time, so they’re going to play Royal Troon, Old Prestwick, Turnberry, and then they’ll go to St Andrews, so we have to accept that.

“For clubs like us it’s about getting into a position of being that extra club that they play when they’re here. We are not a bucket-list course – we are a members’ course, so we’ve got the balance of trying to get the tourists to come here while we are also competing against other clubs [for members]. I can largely say that we’ve been successful with it over the last few years in getting the visitors to come and play our course while at the same time our membership has grown.

“Ten years ago, we didn’t have a full membership and we didn’t have anyone waiting to get in. Now we have a full membership, and we have a full waiting list of people wanting to get in as well.”

Making The Numbers Add Up

There are 1,300 members across various categories at Barassie, plus 120 people on the playing waiting list who want to become full members but until then are allowed to play throughout the weekdays but only after 1pm at the weekends, when tee times are in most demand. A further 60 people are currently signed up in hope of getting on the playing waiting list.

Mr Fish at CCL said this kind of information is a key performance indicator (KPI) as to the strength of a club’s finances, as it shows whether there are enough people available to fill the void left by the inevitable loss of members.

Another meaningful measure is whether there is enough profit to cover expenses while also funding depreciating assets, as this is essential to keep the course and clubhouse attractive to members.

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Consideration must also be given by clubs to whether there is enough cash in the bank at any given time – not just in the weeks immediately after annual subscriptions have been paid – to cover six months’ worth of overheads to cope with events such as a terrorist attack, pandemic, or banking crisis.

“These things are not once in a generation – they are challenging clubs every five years,” Mr Fish said. “What you find is that club captains want to judge their success as to whether they have free coffee refills, or did we fill our Open this year, but that’s not business success.”

Mr Addison attributes much of the progress at Barassie to the decision in 2016 to change the club’s management structure so it is run “like a business for the members”.

“So we [were not really able] to re-invest into the course and the club to improve it as much as we could have, but then we changed our governance so now we have a club council which looks at the strategy of the club and investments, and then we have the captain’s committee that looks at the playing of golf at the club and social aspects,” he said. “Since we have made this change we have grown.”

Mr Addison added: “It’s probably not the sole thing, but that’s been the foundation for us because that’s driven us forward to enable us to run the club like a business, but also keep the members happy.”