Relationships fuel so many businesses — including accounting — but for the clients of San Jose, California-based PP&Co.'s fastest growing industry specialization, they are the "lifeblood," according to assurance partner Richard O'Leary.
More specifically, for the Regional Leader's burgeoning private and public club industry clients, members are their foundation.
"Membership is the lifeblood and lifeline of the industry — keeping members, and especially always getting new members, is paramount to the industry," explained O'Leary of the firm's club clients, part of its wider hospitality group that includes private clubs as well as public golf clubs, city clubs, yacht clubs, equestrian/athletic clubs, hotels, amusement parks and conference centers.
O'Leary has worked with this type of client since the mid-1980s — first as part of a New York firm that specialized in hospitality and transferred him to the Bay Area, and later at their largest competitor in that niche in 2018, as PP&Co. was, according to him, "dominating the Bay Area in this particular industry."
And PP&Co.'s success has only grown in recent years, he reports. "We did have a very good 2024 in terms of new client opportunities," O'Leary said. "That comes from brand recognition, name recognition, all of these clubs and hospitality clients all talk amongst one another — 'Who are your auditors, your tax providers? Do you work well with them? Do you get along with them?' Opportunities come by word of mouth and reputation. And other firms — there isn't another firm in the state of California that does as many clubs as we do. We are dedicated to the industry. There are other firms that just dabble in the industry and don't provide [full] service and the clients can tell. It's only a matter of time before they want to change service providers."
Long before his decades serving these clients, he had an understanding of their business as a "country club kid" growing up in New York. It even led to his first accounting firm job.
"My parents belonged to a local club and I was kind of raised in the country club environment," he shared. "My pop referred me to the partner that did that particular country club's audits — my pop was treasurer at the time. I connected with the partner at the firm, and that's how I got the interview."
As a direct beneficiary of the powerful connections that can be formed at clubs, O'Leary can personally relate to the needs of his clients — the overriding one, again, being to maintain and grow membership. This has led to changing priorities as these organizations aim to bring in younger members.
"New members, the younger generation of their parents, belong to these clubs," O'Leary said. "Keeping membership strong is one of the challenges the industry faces. In order to attract younger members, the industry has to react to the changing trends of younger generations. We are seeing that happen within clubs providing things like casual dining versus formal dining, fitness facilities — things the younger generation is more interested in versus the older generations. There are a lot of changes in the industry."
Keeping pace with a changing industry
Recent changes to regulations, especially in the wake of COVID, mean O'Leary and his practice are kept busy as they keep clients up to date and informed. The firm provides traditional assurance and tax services to these clients, though that work has expanded to include more consulting work.
"There's always opportunity in the industry to educate your client base," he explained of his club clients, which he estimates to currently include about 45 organizations in the Bay Area. "Because a lot of clubs are tax-exempt, the industry comes with lots of rules and regulations that need to be understood to preserve tax exemption and to understand what aspects of the business are taxable, where to pay tax. With that, there is a world of opportunity to consistently and constantly advise clients on these rules and regulations."
While this year-round advisory work, including recently updated Internal Revenue Service regulations, keeps PP&Co. in ongoing conversations with clients, O'Leary aims to also strike up new ones with his involvement and board memberships in several local industry and networking groups.
In addition, he shared, "There are a myriad of opportunities for the firm and for myself to provide articles, webinars, to stay face-front to our clients and the industry itself."
Fluctuating regulations and membership numbers are not the only things keeping these clients up at night. "On a ratio basis, it is one of the most capital-intensive industries that exists," O'Leary shared. "[Clients] need to have a clubhouse where members can come and use the facilities, mingle with fellow members. They need to have a golf course, tennis facilities, swimming facilities … it's very capital-intensive."
Nationwide, the industry encompasses 5,000 to 6,000 clubs, O'Leary cited from a recent study, generating $32 billion of direct revenue to the economy.
"It's a very labor-intensive industry," he explained. "To where payroll expenses have been tabulated to be $17 to $18 billion, with the number of employees at almost 600,000."
With this kind of reach, certain misconceptions about the niche abound, according to O'Leary.
"It's a very large industry," he explained. "The industry sometimes gets a little of a bad rap, from the public, from the media, because members are in the top 1% of the country and get an unfair advantage, or tax breaks. That's not really true. The industry is an incredibly large employer to the economy in the U.S. It often gets misunderstood. The needs of these organizations are solely that they get together and provide social and recreational activities to their membership group. It's why the organizations exist. Some are formed as tax-exempt organizations, some are taxable organizations. It's just specific to the voice of each individual club, and the path they want to go when the club is formed."
As for O'Leary's personal career path, his success can be attributed to "basic familiarity with the industry, being connected at a young age," he said.
"It's just kind of cool, as a young kid, a junior playing golf and using the club my parents belong to, it's just kind of cool to have turned that into your career," he shared. "There's just a lot of passion associated with working within the industry you grew up in. From the kid-of-a-member perspective, now providing those services and expertise, it's kind of cool."
