Courtesy: Thornhill Country Club, Toronto

Think of private golf clubs and you tend to think of parking lots filled with high end automobiles like BMW, Mercedes, Lexus and so on and wealthy members driving past in custom made golf carts.

That can be true. But it doesn't mean that every private golf club is rolling in dough because its members are wealthy.

Certainly, some private courses are fine financially.

But the majority need to watch the bottom line critically. And a downturn in the general economy can be devastating.

Robert Dawes, who's the general manager at Thornhill Golf and Country Club says most private clubs have to be run as tightly as possible.

"Being a member at a private club is not an essential of life", he told me. "It's a luxury. So we have to treat that membership like a luxury product".

The same thinking that goes into selling a BMW, he said, goes into selling the club.

"We're selling lifestyle alternatives". So a recession, for example, can have severe consequences for lots of clubs.

But these days, there are more than just economic considerations for private clubs to worry about.

"Attrition is a big factor for a lot of private clubs", Rob says, "30-somethings don't join private clubs because they have other priorities. And those who have the money, well, we're competing with other luxury items for their money."

Like new retirement golf communities. That's a big one, says Rob.

"My feeling is that private clubs will continue to band together (see yesterday's post for how Thornhill and others are battling the Club Corporations of the world) so we don't lose people through lifestyle attrition, people who sell their property in the city and move to buy into a different lifestyle".

Right now, north of Toronto, Ontario, high end retirement communities are being built as fast as they can get zoning permission. And most of them are being built around brand new, world class golf courses.

That's one of the challenges facing big city private clubs everywhere these days.

I asked Rob if one strategy to attract and keep members might not be to go with equity membership.

He laughed and said he gets asked that all the time.

"Equity is great if you're planning on leaving the club in four or five years. Equity clubs will reimburse you for a major portion of your initiation fee. But they don't tell you that you're a shareholder. So if you get sick or you're transferred or you decide to move, you're at the mercy of the marketplace if you sell."

But at least you get something back, right?

"If selling takes awhile, you're still on the hook for paying your annual fee even if you're not there", Rob said.

Keep in mind, Rob runs a club that doesn't offer equity membership.

Nonetheless, he raises some good points to weigh if you're planning to buy into an equity club.

"If the club needs to raise capital, they go back to their shareholders because they need to fix the roof or put in a new irrigation system. If you're a member for 12 to 15 years, you'll find that with assessments and increased fees to offset deficiencies in financing, you'll be behind versus a straight membership".

He said a member at a non-equity club is far less likely to get hit with additional capital costs over the long haul because the club is getting ongoing revenue from new members who join.

That's if they haven't already left the city for a nice retirement golf community.

It's a fine line the private clubs are walking.

Pressured by demographics, economic uncertainty and the brute strength of the ClubLinks and Club Corps of the world (see yesterday's post), the private club model is in a fight for its very survival.