The company’s President and CEO, Eric Affeldt, was highlighted in this week’s edition, amid news of the company’s continued international expansion and positive second quarter results.
Eric Affeldt, President and CEO of ClubCorp Holdings Inc., was featured in this week’s Dallas Morning News, amid news of the company’s continued international expansion and positive second quarter results.
ClubCorp has spent more than $400 million updating the company’s golf, sports, business, alumni and country clubs, hoping to appeal to families and a younger generation of consumers, the News reported.
“That’s the fun part: taking a business that some consider to be old school and teaching it new tricks,” the 56-year-old said at ClubCorp’s Gleneagles Country Club in Plano, Texas.
“Robert Dedman Sr. literally created an industry. How many people can say that?” Affeldt says. “Now we have the privilege of reinventing an industry. You look around Gleneagles and you say, ‘This isn’t my grandfather’s club.’ We spent $3 million to redo this space.”
After completing about a third of its $1.2 billion reinvention strategy, ClubCorp has now gone into an aggressive expansion and acquisition mode. In the last 15 months, ClubCorp has added nine clubs to its portfolio, including Prestonwood Country Club properties in Dallas and Plano, a second business club in China and a Baylor University alumni club that will open this fall in the new McLane Stadium in Waco, the News reported.
KSL Capital Partners LLC, the Denver private equity firm that bought ClubCorp from the Dedman family, sold part of its holdings in the IPO and the secondary stock offering but still owns 51 percent of the company. Affeldt, who gave up his partnership in the equity firm to become ClubCorp CEO in 2006, owns 641,000 shares that trade on the New York Stock Exchange for about $18 per share, the News reported.
Not enough, Affeldt jokes, for the “brain damage” he suffered in taking the company public, which he likens to his 50th birthday skydiving adventure. “I’ve now jumped out of a perfectly good airplane, and I’ve taken a company public—neither of which I ever want to do again.”
Affeldt, a native of Southern California, moved to Vail, Colo., in 1982 to start his financial advisory company a few years after earning a degree from Claremont McKenna College.
During the 11 years he lived there, Affeldt served on the city council, the planning commission and hospital board. At the time, skiing was on a downward course. The response by Vail Resorts Inc., which owns Vail and Beaver Creek resorts, provided a bit of a roadmap for Affeldt’s ClubCorp strategy, the News reported.
“People were saying, ‘Boo hoo. Sell your house in Vail or Beaver Creek because it’s not going to be worth anything in 20 years because there won’t be any skiers,’” Affeldt mocks. “Well, Vail Resorts basically said, ‘We don’t believe that.’”
The resort company upgraded its food and beverage offerings, started marketing to a younger generation of snowboarders and bought additional ski property around the country at depressed prices, the News reported.
“That’s similar to what we’ve done here,” Affeldt says.
ClubCorp prefers to talk about its rising operating profits and not its growing net income losses. But both are running according to plan, Affeldt says. The red ink is largely the result of reinvestment. Revenue from dues, food and beverage, private events and golf operations from existing clubs is rising. Acquisitions are coming on stream. Margins are widening thanks to reduced costs, the News reported.
Last October, ClubCorp used money from its IPO to pay down its high-interest debt. In April, it further reduced its interest costs by $13 million annually. The nine primary analysts who cover ClubCorp seem to agree, giving the company a consensus “buy” rating, the News reported.
Affeldt’s toughest job as diplomat to Wall Street is explaining “what the heck a ClubCorp is” — and isn’t. Many think of ClubCorp as just golf courses. “We’re golf with a small g, not a capital G,” Affeldt says. The company is really a dues-driven hospitality and entertainment company with large-scale real estate holdings, the News reported.
If you consider its $220 million in annual food and beverage sales, ClubCorp is a medium-size restaurant company. That’s why Affeldt enticed retired Brinker International CEO Doug Brooks to join ClubCorp’s board a year ago, the News reported.
“I have incredible respect for Eric,” said Brooks, a longtime member at Gleneagles. “Love the company. Love the reinvention strategy. Love the people. And I’m having a blast. Eric is bringing a family mentality to the clubs that for years had this image of an old men’s club. The rooms now look like the W Hotel.”
To engage younger adults, clubs have added live music, trivia nights, craft beer and wine tastings, karaoke classes, chili cook-offs and group outings to sporting events. Family-friendly offerings include bingo, drive-in movies at the pool, cooking classes for kids, breakfast with superheroes and overnight camping on the golf course. The country clubs hold Family Fun Days on Sundays, the News reported.
Affeldt has come up with little corrective actions that have more to do with fun than finance. The big knock on golf is that it’s too time-consuming. To speed play, ClubCorp moved the closest set of tees even closer to the green. Members are encouraged to be realistic about which tees to play from, the News reported.
For the time-strapped, some clubs offer deals like “Route 66,” six holes and a $6 meal, and the self-explanatory “Nine and Wine.”
“We’re trying to encourage people to come out and have fun and don’t take it so gosh-darn seriously,” Affeldt says.
One of his first edicts as CEO was that every club had to have at least one denim-friendly dining area. Some general managers fought to keep things coat-and-tie. “You would have thought I was the antichrist,” he said. “I said, ‘Guys, get a grip. Where else do you see this? Virtually nowhere.’ Some of those GMs have come back and said, ‘You were right.’”
Meanwhile, ClubCorp has announced plans for the opening of West Lake Lu, a 170,000-sq. ft. private club and boutique hotel in the resort area of Hangzhou City of Zhejiang Province in China. ClubCorp will manage Lu, slated to open in December 2014.
“We are very excited to further expand ClubCorp’s presence in the world’s fastest-growing economy,” said Affeldt. “Lu is set to be like no other venue in China—a luxury hotel with a private club feature—and will provide extraordinary experiences for visitors to the area, business leaders in the community and the many members of clubs in the ClubCorp family who travel internationally.”
The opening of Lu will increase ClubCorp’s overall portfolio of owned and operated properties to 161 clubs in 25 states, the District of Columbia, Mexico and China.
Inspired by classical Italian and European architecture with a modern twist and touches of Asian culture throughout, Lu will offer a unique and sophisticated setting within the Hangzhou Zhijiang National Holiday Resort. Features of the hotel will include:
• 88 suites
• 12 villas
• Stylish lounge
• Sophisticated restaurants offering Chinese and Western cuisine
• Banquet rooms ideal for business dinners or celebrations
• Fitness center featuring indoor swimming, fitness room with state-of-the-art equipment and a variety of treatment and therapy offerings
The private club, located on the second floor, will feature:
• Exclusive club entrance with an elegant lounge and sitting area
• Private dining rooms and meeting facilities
• Reading Room
• Wine and Cigar Bar
• Exclusive Board Room
ClubCorp has also announced financial results for its fiscal-year 2014 second quarter ended June 17, 2014. The second quarter of fiscal 2014 and fiscal 2013 consisted of 12 weeks. All growth percentages refer to year-over-year progress.
Second Quarter Results:
• Revenue increased $15.8 million to $211.4 million for the second quarter of 2014. Revenue was up 8.1% compared to the second quarter of 2013 due to revenue growth from both same store and newly acquired clubs.
• Adjusted EBITDA increased $4.0 million to $49.9 million. Adjusted EBITDA was up 8.7% from increased revenue and timing of cash distribution from equity investments.
• Same Store sales grew $7.9 million, up 4.1% versus the prior year; while same store adjusted EBITDA grew $1.9 million, up 3.5% driven largely by stronger operating results at reinvented clubs, and increased dues, a la carte, private event and golf operations revenue.
• Newly Acquired Clubs, clubs acquired in 2013 or 2014, contributed revenue of $8.3 million and adjusted EBITDA of $1.0 million.
• Reinvention. Since 2007, ClubCorp has reinvented 22 golf and country clubs and 17 business, sports and alumni clubs. Reinvention is still underway at three same store golf and country clubs and three business, sports and alumni clubs. Also, the addition of reinvention elements are underway at all seven newly acquired clubs, including Oak Tree, Cherry Valley, Chantilly, the two Prestonwood properties and both TPC properties.
• Acquisitions. As previously disclosed, ClubCorp has added four golf and country clubs associated with the acquisitions of Prestonwood Country Club in Dallas, Texas, TPC Piper Glen in Charlotte, North Carolina and TPC Michigan in Dearborn, Michigan. ClubCorp will also add a new alumni club at the new Baylor University football stadium under construction in Waco, Texas, and two more management agreements to operate business clubs in Hefei, China and the future opening of West Lake Meilu in Hangzhou, China. In total, ClubCorp’s expanded portfolio of owned or operated clubs will be 161.
• Membership. Total memberships as of June 17, 2014 were 151,758, an increase of 4,371, up 3.0% over memberships at June 11, 2013. Same store golf and country club memberships increased 1.1%, while total golf and country club memberships including newly acquired clubs increased 5.2%. Total business, sports and alumni club memberships decreased 0.1%.
• O.N.E. and Upgrade Products. Participation has steadily increased with approximately 45% of our memberships now enrolled in one or more of our upgrade programs, compared to 41% a year ago.
• Free Cash Flow. Free cash flow over the last four quarters was $87.6 million, up from $72.4 million a year ago.
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