[Jim_Kennedy]

Mike Young,

http://sos.georgia.gov/plb/cosmetology/default.htm

 

[Sean_A]

Sean

See Bruce Katona's informed post above.  Even if one has no debt (i.e. buys the facility for cash), there is still a cost of the equity capital , which cost is higher (given the higher risk) than that for debt capital.  The relevant numbers are the low asset turnover (cost of facility/revenues) which is available to a typical golf course property.  With such a low turnover ratio (revenue/assets), you MUST have high margins, as ROI=income/revenues*revenues/assets.  Simplistic, but true.

rfg

Rihc

I am disputing the that high margins are a must in the game.  What I am disputing is how high those margins need/should be.  A leanly run course as Jeff B describes should be able to make a go of it in the mid 20s - in survival mode.  It isn't great, but that is the business - no? As I say, I wouldn't risk my capital on a venture like that even if the margin were double that figure.  

Ciao

[Bruce Katona]

Jeff: Before I came here, the group I was with - Kitson Partners - out of Palm Beach, FL (they still use this business model) specialized at stabilizing underpeforming golf assets, ramping up the NOI and either refinancing  the asset to pull out some cash or spin it off to another investor for a profit.....I spent loads of time working on what to do to increase rounds or reposition assets to maximize revenue.

These types of opportunities are beginning to surface again in tough times....groups with access to debt and equity can begin to acquire properly priced golf assets again.

[Jeff_Brauer]

Shiv,

I know you are joking, but the use of Mexican labor and providing them a place to live has probably kept most maintenance labor costs down as far as legally allowed - minimum wage to about $10 an hour is standard, I think. Ditto for using retirees paid in free golf for pro shop operations.

In some ways, I think most of golf will go through what the airlines did - when SW realized that there was no more magic to flying, its just a big bus that goes further faster.  Transportation is all people want there, just as 18 holes is what most want for about $25.

Its an interesting notion that the GCSAA or USGA has set the standards. Do they, or do they just respond to what they percieve golfers want?

I once heard the president of another management company opine for reduced fertilization - "If I fertilize it, then I have to cut it!"  In tough times, photos of those courses under that regimen showed a distinct yellow tinge and it wasn't nearly as attractive as some here think "brown" should be. 

I have always felt enviromentalism and firm and fast would come to golf courses as a result of costs and not altruistic reasons.

[Davis Wildman]

There are some informed comments on Golf Inc's 'Critical Issues Blog' regarding Mr. Silverstein's and Mr. Steranka's comments at the conference: http://www.golfincmagazine.com/blog/silverstein-steranka-how-best-control-costs

[Rich Goodale]

Sean

See Bruce Katona's informed post above.  Even if one has no debt (i.e. buys the facility for cash), there is still a cost of the equity capital , which cost is higher (given the higher risk) than that for debt capital.  The relevant numbers are the low asset turnover (cost of facility/revenues) which is available to a typical golf course property.  With such a low turnover ratio (revenue/assets), you MUST have high margins, as ROI=income/revenues*revenues/assets.  Simplistic, but true.

rfg

Rihc

I am disputing the that high margins are a must in the game.  What I am disputing is how high those margins need/should be.  A leanly run course as Jeff B describes should be able to make a go of it in the mid 20s - in survival mode.  It isn't great, but that is the business - no? As I say, I wouldn't risk my capital on a venture like that even if the margin were double that figure.  

Ciao

Sean

You dispute needlessly and incorrectly.  Do the maths.

rfg

[Rich Goodale]

Richard The Magnificent:

What the hell is this new name of yours? Are you trying to hide from me again??

Not a name, but a beacon.  So far it's working.

[Jeff_Brauer]

Sean

See Bruce Katona's informed post above.  Even if one has no debt (i.e. buys the facility for cash), there is still a cost of the equity capital , which cost is higher (given the higher risk) than that for debt capital.  The relevant numbers are the low asset turnover (cost of facility/revenues) which is available to a typical golf course property.  With such a low turnover ratio (revenue/assets), you MUST have high margins, as ROI=income/revenues*revenues/assets.  Simplistic, but true.

rfg

Rihc

I am disputing the that high margins are a must in the game.  What I am disputing is how high those margins need/should be.  A leanly run course as Jeff B describes should be able to make a go of it in the mid 20s - in survival mode.  It isn't great, but that is the business - no? As I say, I wouldn't risk my capital on a venture like that even if the margin were double that figure.  

Ciao

Sean,

I don't quite understand. You advocate others should be pleased with "survival mode" profits while saying quite clearly that you would never invest with such a scenrio?

[Sean_A]

Sean

See Bruce Katona's informed post above.  Even if one has no debt (i.e. buys the facility for cash), there is still a cost of the equity capital , which cost is higher (given the higher risk) than that for debt capital.  The relevant numbers are the low asset turnover (cost of facility/revenues) which is available to a typical golf course property.  With such a low turnover ratio (revenue/assets), you MUST have high margins, as ROI=income/revenues*revenues/assets.  Simplistic, but true.

rfg

Rihc

I am disputing the that high margins are a must in the game.  What I am disputing is how high those margins need/should be.  A leanly run course as Jeff B describes should be able to make a go of it in the mid 20s - in survival mode.  It isn't great, but that is the business - no? As I say, I wouldn't risk my capital on a venture like that even if the margin were double that figure.  

Ciao

Sean,

I don't quite understand. You advocate others should be pleased with "survival mode" profits while saying quite clearly that you would never invest with such a scenrio?

Jeff

I am not advocating that others be pleased with the scenario by any means.  I am just saying that it is what it is - whats the alternative?  If there is a good one perhaps it should be taken.  I can't see how blaming professional societies/associations is going to double the margins.  There are many factors at work and its easy to point the finger during times like this. 

Rich

I mispoke earlier.  I meant to say I am not disputing that high margins are a must in the game, but what I am disputing is how how those margins need to be to be reasonable.  Taking on a $6 million debt and investing $2 million for a return of $100,000 is not my idea of a great business opportunity.  This is why I said there is an oversize debt on the books using Bruce's model. 

Ciao

[Bradley Anderson]

"The Golf Course Superintendents Association [of America], the USGA as an advisor to our clubs [and] the PGA of America have set standards that the owners have allowed to be set, that have created an expectation from our customer base, that has made, in most cases, the viability and the investment in golf, not very strong."
[/quote]

Who you crappin?

To blame the servants of the game of golf for problems that are universally happening throughout the entire economy is really unfair. Every business is responding to higher consumer demands with higher supply costs. IT'S CALLED CAPITALISM.

[Jeff_Brauer]

Sean,

Well, I think thats just what Jeff is doing -exploring different options to create a more profitable model.

That said, I have a phrase that sort of encapsulates your sentiment - "It costs what it costs." By that I mean that if you cut initial quality in construction, you end up rebuilding sooner.  If you hire a 25 year old super for $25K, you save money for years - until he makes a mistake that a more experienced superintendent would most likely have avoided, etc.  Sooner or later, IMHO, it usually evens out.

There are some real shades of gray.  I doubt the PGA or the especially the superintendents, who had such an uphill battle just to be recognized as professionals on equal footing with the pros, pushed their education programs and certification programs just to raise the pay level of their members to unrealistically high levels.  While times were good, and the environmentalists were stalking, having a certified super sort of proved that you had someone who truly could say they knew what they were doing.

However, the percentage of superintendents who are certified remains small, and owners are not usually under any pressure to hire them, unless as part of a permit for construction.

Bradley,

In the end, he actually is blaming owners for allowing those standards to be set if I read the quote correctly.  In capitalism there is always the give and take of cost vs demand, etc.  Not all businesses are responding with higher costs.  Target just cut prices to match Wal Mart, gas has dropped becuase of reduced worldwide demand stemming from $4 per gal prices.

I think he is saying we can't, as you imply, just keep presuming that costs can go up and that we can pass them on to the consumer, at least in a recreation oriented business, which are always the first to suffer in economic declines.

I think its fair to say he isn't waiting for a congressional bailout of the golf industry!

[Bradley Anderson]

Jeff,

Jeff,

His words mean that the GCSAA, USGA, and PGA have set standards that are unrealistic for owners to attain profitably.

I spent many years at a resort club where all I did was provide a product that was affordable and enjoyable. And like many superintendents  I worked my ass off a lot of hours. The GCSAA and USGA provided me with the education and resources that I needed to be a good money manager, and my costs were actually lowered every year, even in the face of rising supplies costs. 

I have never met a superintendent who wants to raise an unmaintainable standard. All we do is respond to the market.

If an owner builds a big expensive golf course to maintain, all we can do is take care of it. We are the ones who have to make stupid business plans work! This is ridiculous to blame us for bad business decisions.

[Mike_Young]

Jeff,

Jeff,

His words mean that the GCSAA, USGA, and PGA have set standards that are unrealistic for owners to attain profitably.

I spent many years at a resort club where all I did was provide a product that was affordable and enjoyable. And like many superintendents  I worked my ass off a lot of hours. The GCSAA and USGA provided me with the education and resources that I needed to be a good money manager, and my costs were actually lowered every year, even in the face of rising supplies costs. 

I have never met a superintendent who wants to raise an unmaintainable standard. All we do is respond to the market.

If an owner builds a big expensive golf course to maintain, all we can do is take care of it. We are the ones who have to make stupid business plans work! This is ridiculous to blame us for bad business decisions.

Bradley,
I don't think this is aimed at indivdual supts, pros or managers.  I am one that is wary of associations.  For instance I can't see any reason for a NGCOA other than salaries for the pseudo buying group and executives.  And I think that holds true for many such associations.
The idealistic view comes from such sites as this one where we discuss maybe 200 courses.  The realistic view comes from the real world where 16000 other courses try to make it.   When a USGA guy comes and tells one of the courses that it needs USGA spec greens in order to improve yet it's greens are good 10 months out of 12 and the owner is thinking one way but his supt is saying he wants USGA spec....well....you have to weigh the cost on the two bad months....you don't have a problem with the other 10.....one could close for two months for 10 years and come out better in many cases....because here in the south the really hot months that stress the grass dont really get the big play anyway....or say a course goes with a computerized irrigation system with 1200 heads at twice the cost of a minimal coverage system.....Not one time have I seen a supt encourage the owner to go with the cheaper method......UNTIL.... that supt buys a small golf course and all of a sudden the shoe is on the other foot.....lightweight fairway mowers become ground driven reelmasters,  walkers become triplex greensmowers etc....and even irrigation can go below the most basic they ever thought they would use.....and you know what...they love it....

[Sean_A]

Sean,

Well, I think thats just what Jeff is doing -exploring different options to create a more profitable model.

That said, I have a phrase that sort of encapsulates your sentiment - "It costs what it costs." By that I mean that if you cut initial quality in construction, you end up rebuilding sooner.  If you hire a 25 year old super for $25K, you save money for years - until he makes a mistake that a more experienced superintendent would most likely have avoided, etc.  Sooner or later, IMHO, it usually evens out.

There are some real shades of gray.  I doubt the PGA or the especially the superintendents, who had such an uphill battle just to be recognized as professionals on equal footing with the pros, pushed their education programs and certification programs just to raise the pay level of their members to unrealistically high levels.  While times were good, and the environmentalists were stalking, having a certified super sort of proved that you had someone who truly could say they knew what they were doing.

However, the percentage of superintendents who are certified remains small, and owners are not usually under any pressure to hire them, unless as part of a permit for construction.

Jeff

I must admit this whole business has me perplexed.  The guy seems to know what the problem is yet the problem persists.  Furthermore, why are these issues a problem now, but weren't 3 years ago?  If he is running a lean operation how did things get so bad?  Honestly, I think the times have a lot to do with the problems.  Guys chucked loads of dosh around and now the market is threatening to shrink more rapidly than it has done in recent years.  It sounds like a case of the wrong place at the wrong time.   

Ciao

[Bradley Anderson]

As I said before, the market pressures that golf is experiencing now have been happening to virtually every enterprise in the world. You can not correlate golf's woes to the servants of the game. Golf is a lagging economic indicator. Basically what has been happening everywhere is starting to catch up to golf. And the servants of the game will save the investors from their bad business decisions. How stupid is it to blame the servants of the game, whenthey will be the ones who will have to make the bad business decisions work? Give me a friggin break!

[Michael Blake]

I have nothing to add to this thread other than that's one of the funniest John K lines I've ever read.

 I hope he died estimating a job he never got.

[paul cowley]

Mike Young's last post was a good one....times are tough now, but they will become a whole lot tougher before its through.

The resourceful amongst us will survive.....which will hopefully bring us back to what GOLF has strayed from.

That's a good thing.

[Mike_Young]

As I said before, the market pressures that golf is experiencing now have been happening to virtually every enterprise in the world. You can not correlate golf's woes to the servants of the game. Golf is a lagging economic indicator. Basically what has been happening everywhere is starting to catch up to golf. And the servants of the game will save the investors from their bad business decisions. How stupid is it to blame the servants of the game, whenthey will be the ones who will have to make the bad business decisions work? Give me a friggin break!

Bradley,
What are you smoking?   The so-called servants of the game( including architects) are a commodity just as fertilizer or a greensmower.  Trust me ..the guys that are signing the notes will make the golf industry work....small business people...mom and pop.....not big management companies , signature archies, post tour golf professionals or supts with 2 degrees and 4 pair of footjoys in their office.....
When I was a salesperson for a toro distributor in the early 80's my best memories are sitting in the "barns" of the  old supts and listening to them tell how they did it.....some of theses guys grew corn on their farm in the mornings and then went to the course to handle it in the afternoon....they were much easier to deal with than the up and coming super supts in the large metro clubs with 4 assts.  And these old guys could get it done on a shoestring. 
And we are headed back there......it will be good......

[TEPaul]

Bradley:

Regarding your post #60---who said that about what you called 'the servants of the game'?

[Bradley Anderson]

Bradley,
What are you smoking?   The so-called servants of the game( including architects) are a commodity just as fertilizer or a greensmower.  Trust me ..the guys that are signing the notes will make the golf industry work....small business people...mom and pop.....not big management companies , signature archies, post tour golf professionals or supts with 2 degrees and 4 pair of footjoys in their office.....
When I was a salesperson for a toro distributor in the early 80's my best memories are sitting in the "barns" of the  old supts and listening to them tell how they did it.....some of theses guys grew corn on their farm in the mornings and then went to the course to handle it in the afternoon....they were much easier to deal with than the up and coming super supts in the large metro clubs with 4 assts.  And these old guys could get it done on a shoestring. 
And we are headed back there......it will be good......
[/quote]

Mike,

That sounds like and episode of Green Acres you just described there.

[Bradley Anderson]

Bradley:

Regarding your post #60---who said that about what you called 'the servants of the game'?

Tom,

See post #1 of this thread.

[Lou_Duran]

I get a kick from the measured terms we use on this site.  Those who put up the capital, take the risks, meet the payrolls, and pay the bills are "blood suckers".  The employees who voluntarily agree to the terms of their employment, get paid for their work accordingly, and can get up and leave whenever they want, they are "servants of the game".

We just can't seem to get beyond this class warfare mentality.  And it doesn't seem to vary with education.  I have a couple of family members with doctorates working in academia and government who characterize theirs as "giving" professions.  For the sake of familial tranquiltiy, I didn't ask them to classify mine, but I assume that "taking" or "extracting" may have come to their mind.

I also find it amusing that many of the same guys who decry expensive golf courses with high maintenance are the first to call for a "living wage" for the lowest entry level employee and higher pay for at least the superintendent if not the golf pro.

If there is a culprit in golf today maybe it is us, the consumer.  We seem to want to play $10 Million golf courses with $1 Million maintenance budgets for less than $50 in green fees, cart included, and in under four hours.  We disregard the fact that golf courses are very capital intensive, and when a highly qualified industry expert suggests that something has to give, we shoot the messenger.

It is relatively simple, really.  Demand (# of rounds played) has been flat for years while supply (course additions less closings) has expanded considerably.  Input inflation (labor, fuel, utilities, chemicals, taxes, fees, etc.) has increased considerably while the industry has little to no pricing power.

Prior to the financial markets collapsing, I thought that the demographics in the U.S. were favorable for the golf industry over the long run.  Today I am not sure.  Even if the new administration meets some of its supporters' expectations, I don't know that the baby boomers will spend on recreation as they would have before.  If it takes 10 years to make up the portfolio losses as some predict, it will probably be too late for the industry as we know it.  It may be best to consider Jeff Silverstein's arguments with some reflection and no acrimony.       

[Mike_Young]

I get a kick from the measured terms we use on this site.  Those who put up the capital, take the risks, meet the payrolls, and pay the bills are "blood suckers".  The employees who voluntarily agree to the terms of their employment, get paid for their work accordingly, and can get up and leave whenever they want, they are "servants of the game".

We just can't seem to get beyond this class warfare mentality.  And it doesn't seem to vary with education.  I have a couple of family members with doctorates working in academia and government who characterize theirs as "giving" professions.  For the sake of familial tranquiltiy, I didn't ask them to classify mine, but I assume that "taking" or "extracting" may have come to their mind.

I also find it amusing that many of the same guys who decry expensive golf courses with high maintenance are the first to call for a "living wage" for the lowest entry level employee and higher pay for at least the superintendent if not the golf pro.

If there is a culprit in golf today maybe it is us, the consumer.  We seem to want to play $10 Million golf courses with $1 Million maintenance budgets for less than $50 in green fees, cart included, and in under four hours.  We disregard the fact that golf courses are very capital intensive, and when a highly qualified industry expert suggests that something has to give, we shoot the messenger.

It is relatively simple, really.  Demand (# of rounds played) has been flat for years while supply (course additions less closings) has expanded considerably.  Input inflation (labor, fuel, utilities, chemicals, taxes, fees, etc.) has increased considerably while the industry has little to no pricing power.

Prior to the financial markets collapsing, I thought that the demographics in the U.S. were favorable for the golf industry over the long run.  Today I am not sure.  Even if the new administration meets some of its supporters' expectations, I don't know that the baby boomers will spend on recreation as they would have before.  If it takes 10 years to make up the portfolio losses as some predict, it will probably be too late for the industry as we know it.  It may be best to consider Jeff Silverstein's arguments with some reflection and no acrimony.       

Lou,
The mindset one has always comes down to which side of the paycheck they sign.  As you say education doesn't factor in.

[Jim Thompson]

Uh Oh!  Looks like common sense just reared its ugly head again.  The fact of the matter is that risk should have the greatest chance of being rewarded since it also has the greatest chance of being punished.  Without going into certifications, alphabet soup after ones name and all, it seems to me that an awful lot of folks in our nation today seem to think that once they get their letters they get a free pass or get to coast.  Those old timers out in the barns just went to work and that used to be good enough.  Further they were willing to let their record, accomplishments and reputations do the talking for them.  Also, it is very ironic that each of the departmental certification groups claims to vouch for its memberships ability to run the whole show, yet rarely are their members able to work together and compromise for the good of the entire operation as oft times they are trapped in having to self promote for their next job which will only be based on their prior / current departmental performance.  I've never seen golf pro reference the success of the F&B dept on their resume which result from them getting another year out of the cart fleet so they could update the kitchen.  That analogy can be cross made for each department as well.  That's why we don't see folks promoting single coverage irrigation, true minimal aesthetic conditioning etc...  I get it and so do the rest of the folks who've ever had to operate a club like it was their own.

On a strange related note.  This current economic mess might just be enough to SAVE golf in America.  Certainly some of the fat will fall of the bone and it will be painful for some folks, but real savvy operators will be left in an environment to operate fiscally healthy courses and organizations that will not be dependent on overextending conditioning levels, F&B operations, Club facilities and the like.  They'll probably charge less at the end of this then when they started and provide a little less also, but the customer, industry et al have been victims of their own excesses for the last few years.  Those that are still interested in Trophy Hunting will be happy to find that the haves will have more at the end of this as they will be the only ones who can afford to buy everything when it swings back up.  I'm sure the Augusta types will find an even more brilliant shade of green, but the heart of the game and the industry will be purged of many of the burdens it has willingly carried over the last fifteen years.

Another side note, all economics are local and seasonally dependent.  So just 'cause a pro or super pulls a wage in a region that can accommodate play 10 + months year cannot be comparable to regions that only have play 6 months of the year.  In my opinion, this is the greatest problem that national organizations create.  It would make more sense to me if the labor and operational comparables were done relative to the old plant growing zone than even the regional ones we see today.  Further, all national averages are worthless for any golf statistic they express.

Cheers!

JT

[Bradley Anderson]

Lou,

Maybe I am wrong, but it sounds like you are characterizing the greenkeeping profession as having the class warfare mentality? I guess there may be people like that in every walk of life, but I would not characterize the members of my profession that way. In fact I would say it is quite the opposite.

Maintenance costs are driven by design issues and the conditioning expectations of the clients. Every golf course superintendent that I know works diligently to meet those expectations with minimum costs. Without going in to great detail I can say that most golf course superintendents that I know were not asked if any of this was good business planning, nor would their opinions on that subject had been welcomed.

I really do not understand all of the hostility on this site towards superintendents.

Let me repeat, every enterprise in the world is struggling in this economy. You can not blame the problems that golf is having today on golf course superintendents, golf pros, architects, or the USGA. Our job is to do what we have been asked to do.

The expectations of the client just got bigger every year, and we all worked hard to figure out ways to meet them. I was there at the conferences and the trade shows when we went to light weight mowing in the 80s' and computerized triple row irrigation systems in the 90's. I can tell you, no bullshit, that we were all just reacting to what we were supposed to do to stay in the same league as what every one else was doing. But to listen to some of the venom that is being spouted here, you would think we were all in some kind of conspiracy. 

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