Improving Member Experiences and Membership...

THE PAUMA VALLEY COUNTRY CLUBest. 1961

Improving Member Experiences and

Membership Growth

Annual Meeting Agenda

–Board of Directors Election

–President’s Remarks

–Financial Report

–Membership Report

–Strategic Plan Update

Board of Directors

ELECTION

President’s Remarks

Improving

Member Experiences

and

Membership Growth

Accomplishments of 2015-2016

• Completed sale of land - reduced Club’s debt from 3.8 mil to less than 1.5 mil

• Loan repayment fee – repays loan in its entirety early

Less than 8 years

Eliminates operational cash flow pressure

Critical for stability of our Club operations

Accomplishments of 2015-2016 (continued)

• Strategic Plan

• Rolled Out and Began Implementation

• $900,000 Investment Program

Greenside Bunker Restoration

#1 Green Expansion

Cottage Windows

Kitchen AC and Exhaust System

Golf Maintenance Breakroom and Bathroom

Other Significant & Needed Improvements

Accomplishments of 2015-2016 (continued)

• Replaced 2 Key Positions

Membership

Food and Beverage

oHead Golf Professional – search in process

• Membership Equivalents declined 13%

Accomplishments of 2015-2016 (continued)

Member Participation is high…and growing!

• 12 Standing Committees w/ 80+ Members

• Special Project Committees

• Gifting from 25+ Members and Member

Groups

Over 300k in $s and Services

THANK YOUSteve Borden and the Borden Family

CSD, RPMWC, and Roadway – land sale, front gate

742-Art, WA, Garden Group – kitchen, front gate

PVCC Estates Committee – led by Bill Winn

Master Plans – 3 being developed

1. Golf Course – Cartwright and Mingay

2.Cottage Interiors – Johnson

3.Cottage Landscape – Herbert

Donald and Darlene Shiley

“Foster the sense of Community that

engenders a welcoming atmosphere

of unexcelled camaraderie and

friendship”

THANK YOU & CONGRATULATIONS

• Eric Stear

GM at Bernardo Heights Country Club

• Terry Abeyta

Dream home on the Oregon Coast

• Jerry Hixson

Director of Golf at Traditions Golf Club

WELCOME

• Scott ShinnerNew AGM-Membership

• Brian GreenFood & Beverage Director

• Head Professional PositionInterim Head Professional – Mike Mendoza

Search in-process

Thank You Leadership Team

• Doug Rudolph, Peggy Delano, Colleen

Starr, Kathryn Custer, Joe Powers, Arturo

Alvarez

• Notable Key Players: Joyce Thatcher, Joan

Borden, Gary Bley, James Bradley, Susie

Delaney, Mike Mendoza

2015-2016 Financial Summary

EBITDA: Net Loss of 70k (estimated)

Attributable to Member Attrition and summer

construction

Membership – 244 Equivalents

Net Loss of 36 Equivalents (-13%)

Cash: 170k on hand

+300k for Capital Projects (from

Contributions and Assessment)

2015-2016 Fiscal Year Summary (continued)

Club Debt

Current Loan Balance $1,458,000

– down from 3.8 mil

Land Sale – Significant and Valuable

Operating Cash no longer required

Debt fully repaid before note is due

Strategic Plan Capital Projects

Funding of Initial Projects

900k Raised

615k from Assessment

285k from Member Contributions

• $s

• Services

Strategic Plan Capital Projects (continued)

Where did the $ go?

Where we planned and communicated it would

Total Contributions Assessment $s

Golf Course 63% 67%

Clubhouse Facilities 13% 15%

Cottages 22% 18%

Reserves 2%

March 17, 2012 Annual Meeting

Strategic Plan Projects & Funding SummaryPROJECT LIST FUNDING SOURCES

Golf Course Ops $s Assessment $s Angel Gifting $s

New Maintenance Equipment $ 30,000

Greenside Bunker Restoration $ 368,000 $ 15,000

Golf Course Master Restoration Plan $ 15,000 $ 5,000

Re-Claim Greens (#1-DONE, #11 in Spring) $ 15,000

Tree Removal/Trimming $ 60,000

Greens Top Dressing Program $ 15,000 Golf Course

GC Maint. Staff Breakroom & Bathrooms $ 40,000 63%

Sub-Total $ 15,000 $ 413,000 $ 135,000 $ 563,000

Clubhouse Facilities

Kitchen AC & Exhaust System $ 35,000 $ 20,000

Clubhouse Carpeting $ 25,000 Clubhouse Facilities

Lighting for Parking, Walkways, & Cottage

Exterior$ 30,000

Employee Kitchen Bathrooms $ 10,000 13%

Sub-Total $ - $ 90,000 $ 30,000 $ 120,000

Cottages

Cottage Windows & Sliders $ 85,000

Cottage Design Fee $ 15,500 Cottages

Cottage Landscaping Design Fee $ 10,000

Replace Necessities $ 27,000 $ 58,000 22%

Sub-Total $ - $ 112,000 $ 83,500 $ 195,500

Reserves

Reserves $ 22,000 2%

TOTAL $ 15,000 $ 615,000 $ 270,500 $ 900,500

Road Maps……in development

• Golf Course Master Restoration Plan

– Origins Golf Designs

• Cottage Refresh Plan

– California Ranch Style

– Exterior Landscape Plan

• Capital Reserve Study

– Existing Assets

• Facilities Plan

– Club Lifestyle of Future

Road Maps (continued)

• Environmental Sustainability– Nature– Water – Energy – Supply Chain, Pollution Control, Etc

• Community Integration– Property Values– Quality of Life– Generations

“We are All in this Together”

2016-2017 Annual Budget

EBITDA of +14k

Membership Growth of 13 Equivalents

2016-2017 Annual Budget (continued)

Key Factors and Assumptions:

• Annual Dues Increase of 2%-5%

• Water Expense

– Increased water budget 32k

– Working with RPM, CSD, and Roadway

• Labor Expense – all have increased

– Minimum Wage, Taxes, Insurance, and Workers

Comp=37k

2016-2017 Annual Budget (continued)

Key Factors and Assumptions (continued):

• Additional Revenue Streams – Some price increases–Charity Golf Tournaments –Vetted Small Groups –Weddings

• Net Growth in Membership–+13 Equivalents –Nov/Dec forecast shows equivalent growth

Improving

Membership Experience

and

Membership Growth

• THE GOLF INDUSTRY AND ITS IMPACT ON PVCC

• HOW PVCC HAS FARED

• WHAT WE NEED TO ACCOMPLISH

• WHAT WE ARE DOING TO GET THERE

Golf is a

consolidating industry

Golf is a consolidating industry

• It peaked in 2000. The U.S.

population was 282 million and

there were 24 million people

playing golf. That represented a

penetration rate of 8.5%

Golf is a consolidating industry.

• It peaked in 2000. The U.S. population was 282 million and there were 24 million people playing golf. That represented a penetration rate of 8.5%

• Today, we still have 24 million players, but our population is now 324 million. We’ve added 40 million people, but the number playing golf has remained the same and the penetration rate has declined to 7.4%. That’s a drop of 13% over the last 16 years.

Since 1990, we’ve gone from

about 5,000 private clubs

to about 4,000 ---

a decline of 20% in 25 years

• Since 1990, we’ve gone from about 5,000 private clubs to about 4,000, a decline of 20% in 25 years

• The industry built those courses, mostly in the form of master-planned communities where the golf course was nothing more than an amenity, just like swimming pools, meeting rooms, tennis courts, etc. As penetration dropped, demand slowed and we now have an over-supply of golf courses in the U.S.

There has been a decline in the

number of golf facilities every year

for the past nine years

• There has been a decline in the

number of golf facilities every

year for the past nine years

• Projections are that 20% of

private clubs in existence today

will not be here in ten years

Of the 4,000 private clubs that exist

today, only 6.5% are full with a

waiting list

• Of the 4,000 private clubs that exist today, only 6.5% are full with a waiting list

• That means 93.5% (or 3,740 clubs) find themselves in a position similar to PVCC: they are actively and aggressively looking for members –and if they’re not, they won’t be here within a few years

There will be winners and

there will be losers

Our decisions and

commitment will

determine which camp we

fall within

It used to be that all you needed was a great golf course

to succeed as a

private club…

Today, clubs need to create an entire

lifestyle —

surrounded by a

great golf course

Clubs are becoming

more family friendly

Clubs are becoming more family friendly

• They are focusing on health and wellness, complete with facilities and programming

Clubs are becoming more family friendly

• They are focusing on health and wellness, complete with facilities and programming

• They are creating greater opportunities for drop-in dining in casual environments and for greater social interaction through food & beverage

Clubs are becoming more family friendly

• They are focusing on health and wellness, complete with facilities and programming

• They are creating greater opportunities for drop-in dining in casual environments and for greater social interaction through food & beverage

• They are developing life long learning and travel opportunities for their members

THAT’S WHAT MEMBERS JOINING

PRIVATE CLUBS TODAY WANT AND

EXPECT

They want a safe haven that

delivers privacy, social

interaction, solid health and

wellness, all surrounded by a

great golf course that is

managed in an environmentally

sustainable manner

Flight

to

Quality

•Regular

•Non-Resident

•Social

•National/International

2005 2010 2015 2016

Regular 274 196 175 143

Social 85 56 48 53

Non-Resident 60 75 103 92

National/

International0 0 55 53

Other 13 8 46 41

Total 432 335 427 382

Member

Equivalents

356 206 285 244

• We lost 23% of our membership

between 2005 and 2010

• We gained back 27% between 2010

and 2015. About half of those

members are no longer here

• We lost 13% last year

The drop in total membership

from 2005 to 2016,

from 432 to 382, is 12.6%,

almost exactly the 13% decline

in overall penetration

referenced earlier

Improving

Membership Experience

and

Membership Growth

Attract 150 members over

the next 3-4 years

Attract 150 members over the next 3-4 years

• We know that we’ll likely lose 50 members over that timeframe to the natural attrition that takes place at private clubs

Attract 150 members over the next 3-4 years

• We know that we’ll likely lose 50 members over that timeframe to the natural attrition that takes place at private clubs

• But we’ll net 100 additional members which will get us back to 350 member equivalents

A good closing rate at private golf clubs is

about 10%.

That means that we need to host 1500 visits over the next three years in order

to have a chance at reaching 350 equivalents

Create Awareness

and

Stimulate Visitation

Digital Outreach

and

Fulfillment

• Digital Outreach and Fulfillment

• Internal Restructuring

–Membership Growth Committee

–Membership Retention Committee

–AGM with focus on membership

sales

•Digital Outreach and Fulfillment

•Internal Restructuring

•Proactive Public and Media Relations

• Digital Outreach and Fulfillment

• Internal Restructuring

• Proactive Public and Media Relations

• Promotions–Discover Pauma Invitational–Regular Member Benefits–Pauma Preview

We have 338 dwelling units

inside the gates

Of those, 236 are members,

or about 70%

Fact: The property of

everyone who owns a home

here is worth 20% more

when the club is healthy

All of us need to help get people here so we can demonstrate what an

outstanding lifestyle and Club this is

So…. Where From Here on the

Strategic Plan?The Board, many members and our consultants firmly believe that

fulfilling our Plan to upgrade the Club to nationally competitive standards

is the most likely way forward to preserve Pauma as a traditional private

club.

Where we’ve been, and what we’ve learned:

• There was a strong reception of the Plan by the membership earlier this

year

• However, the member losses (post a very modest assessment) were

significant, and sobering

While our operational stability isn’t immediately threatened, we believe thatattempting to further fund the Strategic Plan through assessments alonemay result in significant additional member losses that we cannot afford

Pauma Valley: An Analogy

1964 Aston Martin DB5

Continuing….

#

We’re not this… this is

Augusta, Cypress Point,

etc….

But we’re not this, either… this is

many other private clubs in SD and

elsewhere

1961 Ferrari 250 GT SWB

1964½ Mustang

How we’ve taken care of our terrific asset…

We all love our classic Aston Martin…

It remains highly desirable, a nice prize…

There have been many drivers over the years,

and we’ve generally taken care of it

Wash/wax, gas and oil e.g., daily course maintenance

New tires and brakes punching the greens

Rebuilt starters, water pumps leveling tees, fixing the irrigation

Repaired the interior replaced clubhouse and cottage items

It still looks good, and runs well… but it’s not a show winner any longer

What about investing in it for the long term?

At some point, all cars need restoration to keep

them looking and running fresh, and

to maintain/improve their value

Owners need to plan for this all along…

and we haven’t done that…

Engine rebuilds Replace the irrigation system

Transmission overhauls New maintenance equipment

Repair the interior Refurbish and modernize the cottages

And... add new features/equipment

A/C, sound system, phone, GPS Modern exercise facilities, new/increased

member services

Unlike many other classics, our DB5 (Pauma) is worth the investment

In the meantime, what has happened?

There is increasing competition for members nationally, and we must have a top

quality product to compete and thrive as we are. It’s that simple.

The top quality cars are always restored… or change hands in the process

Unlike many of the 93.5% of private clubs scrambling for members, we have great

potential… and we are confident that investment will be rewarded

Pauma Valley can survive longer in “break/fix” form… this isn’t an emergency…

but at some point our DB5/Club will break down and no longer run as we

currently know it unless we fund necessary investments

Pauma Valley will never look like this…

….. but if we continue to ignore the realities of owning a club in the currentprivate club environment, it will “morph” to a different form

Our Go-Forward Options

Our Goal: Preserve Pauma as a private club for our Members

What’s at stake?: According to industry consultants…Everything

….from our private club experience at the place we all love,

to the value of local real estate

We know we must pursue two things:• An investment/improvement program… a significant one

• A highly robust member recruitment program

For investment capital:• Likely a mix of modest assessments, and

• Voluntary investment of various sizes by members, to include

associated benefits

What this could mean? Change: A little, or a lot• Changes in club governance

• Different classes of memberships, with various benefits

• More outside activities for revenue, etc.

#

Next Steps?

We know we must be assertive and act

A group of board members and others are exploring our options• To raise capital

• Allocate it appropriately

• Ensure we adhere to our previous agreements

We’ll continue to utilize outside guidance as well as internal

feedback

We’ll be reporting back to our membership about progress in the

coming months

But…what if we can?

What if we can’t get the job done?

We continue to drift along… the club won’t die… but will likely eventually

morph into something else.

Pauma Valley could even morph

from this...

To This….

Aston Martin DB10

If We’re Successful

QUESTIONS…