The Golf Course Business Consultant
WHERE IS THE GOLF BUSINESS HEADED?
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I feel I am as qualified as anyone to predict the future of golf as an industry. After all, I've been working in the business since the 1950's. Back then the game was beginning its transformation from a 90% private club domain to a pastime now over 75% public. The 'Pay-as-You-Play' golf course I worked at as an assistant golf professional in 1958 had 100 sets of rental clubs (not many people owned golf clubs in 1958). It was common for every set to go out twice in a day (I know, I cleaned them every night). There were only a dozen golf courses you could play for a 'green fee' in Toronto in 1958.
Web site: www.torontogolf.com states, "200 golf courses in the Greater Toronto Area."
Like I said, I was part of the growth of golf from the 50's - and I'm still at it. The game grew by leaps and bounds, but unfortunately, they continued building golf courses on and on until they outstripped the demand. This fact was becoming evident in the mid 90's when an estimated one in four golf courses was in financial difficulty. In 2000 the National Golf Foundation produced a document stating that participation in golf had not really grown since 1990. Yet over 3,000 golf courses were built since 1988.To add to their cash flow burdens, thousands of golf courses thought they needed extra amenities to build play and membership. What really happened? All those nice pools, tennis courts, and fitness centers added overhead but little or no additional revenue. The big dining room not only costs a lot to maintain, it robs energy from operators - best spent providing the best possible golf course to golf players. Empty dining rooms and weeds in the bunkers - a common site these days.
CORPORATE DOESN'T WORK - WHERE I'M GOING WITH THIS...
If history means anything, corporate multi-course ownership doesn't work. Virtually every corporate multi-course golf course owner has fallen on hard times in the past few years and many have gone bankrupt - I.E.: Koll-Star, American Golf, and Golf Trust. They failed because in my opinion, cookie-cutting golf courses like hamburger stands absolutely, positively does not work. Golf courses are in trouble when decisions are being made by accountants and CEOs from 1,000 miles away. Their decisions are simply not sensitive to nature, the neighborhood, and elements that affect the golf course businesses.
Man, I've seen it all!
- I watched a major corporate golf course company refuse funds for a *mole cricket treatment, because it wasn't in the budget (a course in Jacksonville, Florida). The result? A small problem repaired for a few $1 thousand dollars wound up costing many $ thousands in pest eradication, sod replacement, man-hours, and lost business. (*Mole crickets are big ugly bugs that live underground, multiply like crazy, eat your grass, and can reduce patches of fairway the size of a football field to mud in just a few days!)
- A machine operator sat idle on his mower waiting for a $20.00 drive belt so he could get back to work (at a well known course in Orlando). The 'bean-counters' who approve purchase orders were playing golf that day, a Friday, and were unavailable again until Monday. Amazingly, the source of the belt that would put the man back to work was only a block away - the bean-counters were 1,000 miles away!
- A CEO sitting behind a desk in California makes a simple key stroke on his Excel spreadsheet and exclaims, "We only need to raise fees $10.00 and we increase revenue by $5 million at our Florida based group of golf courses!" They went bankrupt, because the $10.00 increase chased 50% of play down the road.
- A management company took the equivalent of close to $200K in fees and 'expenses' from a golf course under their care. The course, reporting less than $2 million in revenues, wasn't making money before the management company took over. It was earning even less after hiring the management company.
- Economy-of-scale turns out to be a mirage, because I've yet to see a cart lease, fertilizer purchase, or a food service contract that offsets the cost of corporate overhead.
BACK TO THE "MOM AND POP" DAYS - WHERE I'M GOING...
Meanwhile, many family-owned and operated golf courses with lower debt, where decisions could be made on site remained healthy and competitive. As owner-operators, like the person at the helm, they can detect a change in wind direction and adjust their sails immediately. Out in the storm, corporate course owners take months, even years to adjust to local market conditions, which is why so many corporate golf courses sink.
Corporate golf courses worked in the early 90's when the demand was still strong. But as they kept building more and more courses play and revenue at most courses declined. Corporations had their expensive infrastructures, including six-figure CEO salaries to uphold. When play slowed down corporations cut service staff, and reduced maintenance budgets - never considering reductions in corporate overhead. At the courses themselves there wasn't enough money to maintain the grounds, more play stayed away, and so on. Meanwhile, owner-operators tended to innovate, work harder, react faster and do 1,000 little things to keep the ship afloat. They could also prey on clumsy corporate courses to steel their play - which they did.As I mentioned earlier, budgets don't work for golf courses. I have prepared many over the years, and in my opinion, a budget is only a vague guess. Budgets don't differentiate between rains on Sunday or Monday - a major difference in cash at most golf courses. Where do budget cuts take place first when revenues fall? Usually it's people (employees). Next it's the marketing budget (the one that should be increased).PALACES FOR CLUBHOUSES, POOLS, TENNIS COURTS, AND FITNESS CENTERS ARE NOT (FOR) GOLF!Now, it's about those 20,000 square foot palaces (clubhouses). I've been in hundreds of clubhouses and most of the time 90% of the rooms in those big buildings are dark! So many are designed and planned to make it impossible to operate efficiently. To me it's more than a coincidence that courses that seem to be making money are the ones with less than 5,000 square feet of clubhouse to staff, heat, and air condition. No pools, no tennis, no fitness centers, no fancy dining rooms.
Here's what does not work in the golf course business:
- Economy of scale
- Managing a golf course from 1,000 miles away
- Highly leveraged debt
- 20,000 square foot clubhouses
Another suggestion: Unless it's a high-end private golf club, fill in the swimming pool, turn the tennis courts into more parking, and use the fitness room for storage.I'm just about there...
I believe the golf course business is sorting itself out from the overbuilding and stagnant growth in participation through the 90's. As we saw, many golf courses went into bankruptcy last year and the year before - some closing their doors for good. Estimates suggest there are hundreds of planned new courses either on hold, or scrapped altogether. People who don't belong in the business are weeding themselves out due to mismanagement, over leveraging, or fallout from an oversupplied market. There is, however, a new breed of golf course owner emerging (really a revived dinosaur).
I see golf courses going back to the owner-operator mode more and more. Many are family owned and operated like fifty years ago. I've been involved in acquisitions where dad puts up the money and the offspring works the clubhouse and maintains the golf course. When the money stays in the 'family' the economy improves immensely - upwards of 30% to 40% immediately! Think of it! No corporate headquarters, no CEO, no travel expenses, no management fees, no accountants running the course (from 1,000 miles away). Everything is on site. To me, that's the only way to run a golf course.
Here's what works in golf course operations (always did and always will):
1. Manage your own golf course2. Advertise3. Provide old fashioned down-home service4. Provide good greens5. Keep it simple: get rid of pools, tennis courts and fitness centers.
An enduring rehabilitation…
I see the golf course business improving in the next couple of years, notwithstanding another 9/11 type disaster. There is a greater effort to bring new players into the game, which I believe will put golf back into a seller's market situation. I see stability in the player market as new courses will not be built at anywhere near the pace of the past twenty years.I believe golf course operators should stick to golf and forget all the amenities that cost more than they will ever bring in - swimming pools, tennis courts, big dining rooms, and fitness centers. Operators who concentrate on delivering good greens, tees and fairways will always get their share of play.
"The best money in the golf business comes from the golfer who pays a green fee, buys a few balls, plays 18-holes, has a beer and a sandwich, and goes home." Mike Kahn