Golf's pricing problem

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Golfers are playing about as many rounds in 2009 as they did in 2008. In fact, for the first three quarters of the year (January to September), rounds actually are about 0.5 percent higher this year than last, according to Golf Datatech’s National Rounds Played Report.
 
So why are so many course operators in default on their loans, filing for bankruptcy or just plain struggling to survive? Clearly, flat rounds numbers are not translating into flat revenue performance. The PGA of America’s PerformanceTrak statistics reflect that: Total median revenue per facility for the first nine months shows a drop of 5.1 percent. (Median means there are an equal number of courses with revenue below and above that total.)
 
A recent survey by the National Golf Foundation offers some clues as to what’s happening. The NGF quizzed 300 golfers about how they’re managing their cost per round given the current economic situation and came up with some conclusions that might help operators understand what’s going on with their customers.
 
Golfers are employing a variety of strategies to cut their costs: 61 percent are playing during off-peak days and times and 58 percent are playing less expensive courses, the NGF found. And 53 percent have cut food and beverage spending. They’re also walking more instead of paying for golf carts, buying less expensive equipment, tipping less and buying used instead of new golf balls.
 
We’d like to know if you’re seeing those same trends at your courses. How have playing patterns of your golfers changed over the past year? And how have you adjusted your operations to adapt to those shifting golfing patterns? Have you revamped your rate structure? Or provided added-value incentives for golfers? We would like to hear what you think about these critical issues.  

Comments

In St. Louis we are experiencing the same problems. The key or rack rates that facilities charge is always increasing but revenues and most importantly revenue per round is decreasing. Facilities must try and find ways to increase revenue for their facilities and we are going about it all wrong! percentage of rack rates have decreased each year for the past 10 years . What has increased is participation in all the fringe rates, Seniors ( who are increasing each year by numbers) twilight rates are starting earlier and winter rates begin sooner each year. Their needs to be education that # 1 players are not entering the market, 2.cost to produce rounds of golf are increasing, #3 discounting golf is business suicide(a decrease in rate of 20% has to have an increas of 25% participation to break even) Their is no supply of extra golfers and facilities must understand that fees for golf must increase across the board to be sucessful. Value added services, customer loyalty programs must be impememted and operators must be consistant with operation standards so all facilities are playing by the same rules. In no way am I speaking of price fixing because all facilities are different in both quality and expenses but some standardization must be present. I could go on and on but bottom line we need more revenue from the prices we charge.

I was told yesterday by an employee of a club I consult with that anther competeing course had a special the previous Monday, golf with cart for $16. The employee said there were over 100 people and they thought it would be a great idea to increase rounds next year. This golf course has regular rates of $65weekend and 47weekday, but it's employees think it worth around $16. Maybe the industry should take that advice and offer $16 golf to everyone that currently pay nothing for it. Golf pros, managers, employees, and even all of their friends who are currently all get the "deal" and tee off for free. Everybody, and I mean everybody who goes off the 1st tee now pays at least $16 per round. Maybe if everyone who sold golf for a living had to pay to play it, golf would have more value!

Fair play needs to also apply to high end municipal golf courses. It is crazy that as citizen's we are subsidizing the operating deficits of high end municipal golf courses, sometimes in the millions, while they in turn drop rates so low they single handedly drive down the value of the daily fee courses and private clubs in their markets. Seems like some city council members prefer to build a personal kingdom vs focus on good business. Check out the IW Club in Indian Wells,CA. What's up with that?

Previous posters have touched on all the key issues. Stagnant number of golfers, aging population expecting deals, "volunteer"-employee & pass players playing A LOT of golf. All of that and the unfair playing field of municipals having a tax base to fall back on instead of bankruptcy are all causing pressure on privately owned golf courses. We have been fortunate to increase revenue and rounds this past year but the mild summer was probably the biggest reason. The plan for the future is to reduce or eliminate discounted fees (coupons), improve our frequent player program and most importantly hire the friendliest people we can find. Good luck to all.

Much of what Brad stated about St. Louis holds true in michigan as well. Too many operators simply do not understand the cycle we are going through and their panic results in deep discounting that damages the entire industry. It boggles my mind that consumers are paying an increased cost for just about everything they purchase or use on daily basis, but aren't even willing to pay what is costs us to put them on the course. On top of that they expect course operators to offer them a 5 star quality golf course with this miniscual green fee. Dont get me wrong, I am not piling all the blame on the consumer, we as an industry have allowed this to happen and its growing into and ugly monster. I think the industry as a whole needs to hold strong and respect the integrity of their rates. Keep your rates steady, no knee jerk reactions, but most importantly, DO NOT decline on service or quality. There is great value in spending 4 1/2 hours with family and friends on a golf course with a quality experience and good service. Once we allow that value to disappear with deep discounting, we may never get back and that spells Doomsday for all of us.

We are valuing golf courses all over the US and are seeing operating statements from those courses which are producing some trends. The single public course owner and equity clubs seem to be the hardest hit. Even though rounds are the same or slightly down, revenues for the single course owners are off 8-15% depending on region. The private equity clubs are off even more, as much as 15-20%. EBITDAs are also off, but for those same course owners, EBITDA is off more than revenues. However, this is not as true for the multi-course owners. We talked to a lender that has 60 + courses in their portfolio, with a small number of owners controlling those courses. The collective revenue is off approximately 5 %, yet EBITDA is up approximately 6%. The increase in EBITDA is coming from the economies of scale multiple course owners have and their ability to cut costs along with a little help from lower interest rates. The question is, if revenue drops further and most courses have cut as much as they can, where can operators find more expenses to cut? The answer is, they can’t. One more trend we noted is that, the Northeast and Midwest course owners seem to be holding their revenue much better than some of the southern states like Florida, and Arizona. We are seeing some bright spots in the market. There are exceptional operators and managers which are beating the market. We have a client who hired a GM that has moved the EBITDA for 2009 YTD, $250,000 higher by paying attention to the details, getting his staff to buy into his new initiatives, redesigning their marketing and increasing customer service. In another case, we looked at 6 courses from a national owner with EBITDAs from $250,000-$3,000,000 and their EBITDAs are about even with last year. So there are courses cash flowing nicely, bucking the trends and on solid footing without slashing green fees, cart fees etc. It can be done. Steven Ekovich, VP, Director of the National Golf Group, Marcus & Millichap. We have golf courses for sale nationally, help lenders value their reo, sub and non performing assets as well as help owners find solutions to their financing and strategic ownership needs. <a href="http://www.NationalGolfGroup.com">Golf courses for sale</a>

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