[Jeff_Brauer]

George,

I don't want to go all political on this, but both parties are to blame, third parties rarely work, and that leaves no way to change it via voting. One elected official told me that the deficit spending thing is just too far out of control to ever be changed unless its changed for us! 

[BCrosby]

I know a bit about club failures in the ATL area. In the cases I know something about, banks extended credit on the assumption that lot sales would pay down loan balances. Lot sales were what drove the credit approvals.

Most banks actually did a pretty good job of predicting the golf course revenues. But they always saw golf course operations as a loss leader, albeit they hoped a minor one. In most cases, golf course revenues are down a bit, but not by crazy numbers.

It was the collapse of housing sales that got the banks upside down.  

So the banks have some tough choices. You either sell the mortgaged property for pennies on the dollar based on projections from golf operations alone. Or you wait it out in the hope that someone will buy the property for its long term development value.

Bob

[Philippe Binette]

I have a hard time thinking this year stats of number of rounds are appropriate. Wait til next year

[Rob_Waldron]

I see the golf industry as mirror of our economy and retail businesses in general. The wealthy will continue to be wealthy and the places that they spend their money will flourish including their elite Country Club playgrounds, upscale restaurants and retail stores like Nordstroms.

 On the other hand the middle class will continue to shop at Walmart and play golf at the local munis. Everything in between is in trouble. We have actually experienced increased rounds at many of our "Affordable" courses with price points in the $35 - $65 range. The courses in the $75 -$100 range competing for the "Wanna be" $$$ are suffering. The "Member for a day" daily fee courses which were built in the past 10 years for $10-$15 mil. were underwritten with a failing economic model are hurting. The current economic model can only support $3 - $5 million.

I am often asked if courses have been over built and my answer is that courses are overbuilt in the higher priced market niche and underbuilt in the affordable niche. Unfortunately the cost to build a new course has made building the courses prohibitive. This is a combination of the demand for ultra high coirse conditioning, environmental and other restrictions from municipalities and the cost for land.      

[Bradley Anderson]

Jeff,
I am helping a bank right now with a bankruptcy of a course where 5.6 mill is owed and it will go for around $200,000 so that a person can clean it up and increase the potential sale value of the land around said course where the bank has another note for considerable more......I bet we see some of these thing sgiven away with the stip that they be brought up to par by the new owners.....Mike

Wow this struck me initially as being good news, but then I thought what if I was the golf course operator across town who didn't make all of those bad business decisions. I'm getting hit with the double whammy here. This big shot, leveraged a lot of debt to build a high end course to entice business away from my course, and now that the whole plan has failed, a new guy is going to take it over with both bites of the apple: a high end facility, with no debt.

Unless I don't understand this right, that's really unfair.

Do I understand this right?

[George Pazin]

Bradley, I believe in Mike's example that the purchaser would assume the underlying debt, so the facility would not be debt free. Even if it were, as long as it is a free market purchase, there's nothing to stop anyone else, including the golf course owner you fear for, from purchasing said facility. There's also little to stop a developer from purchasing it and plowing it under for more housing sites, so the course could still become NLE.

[Adam Clayman]

Most banks actually did a pretty good job of predicting the golf course revenues. But they always saw golf course operations as a loss leader, albeit they hoped a minor one. In most cases, golf course revenues are down a bit, but not by crazy numbers.

Bob, I've never been that directly involved, but, for as long as I can remember noticing, nearly every single housing development course has had serious problems. Climaxing in the course being spun off separated from the housing development resulting in a downward spiral of the courses conditioning and stature amongst core golfers as a place to go and play.  The banks failure to see the flaws in that model should not be ignored on assessing blame.

Another factor working here proves that size does matter.

Hows Rustic Canyon doing these days?

Indirectly, this helps validate how important the qualities of the finer points in the architecture matter. 

 

[Jeff_Brauer]

Adam,

I seriously doubt any typical housing developer ever wanted to keep a golf course long term.  They built it and ran it until lot sales were complete and then always planned to find a buyer, whether the club members themselves or a golf management group.  Your "climax" was planned out years in advance and actually makes a lot of sense.

Now, if the club then gets into the debt messes desribed, or the managment group spends wisely (i.e. avoids overspedning in bank terms) which basically means that the course goes downhill.  The numbers really don't work and we can't have it both ways - most courses can spend within their revenues and you don't have enough for high end maintenance and infrastructure replacement.  They can go into debt to spruce up and that plan works until the economy goes downhill.

I basically think that golf is an average business at best.  It was never meant to be a NYSE type operation, because most courses - muni for publics and equity privates - were traditionally run as non profits.  The shear numbers of courses with those business model makes it hard for the for profit types to match.  Only in a few rare periods of time (one just ended) can a substantial number of stand alone public courses be really profitable to the degree that many other businesses can be.

[Tim Liddy]

Jeff,

I agree and if these housing golf course projects go away it will be for the best. 90% of them are poor golf experiences with tight corridors, long green to tee walks, poor drainage and wonderful views into backyards with plastic swing sets and storage sheds.

[Mike_Young]

Jeff,
I am helping a bank right now with a bankruptcy of a course where 5.6 mill is owed and it will go for around $200,000 so that a person can clean it up and increase the potential sale value of the land around said course where the bank has another note for considerable more......I bet we see some of these thing sgiven away with the stip that they be brought up to par by the new owners.....Mike

Wow this struck me initially as being good news, but then I thought what if I was the golf course operator across town who didn't make all of those bad business decisions. I'm getting hit with the double whammy here. This big shot, leveraged a lot of debt to build a high end course to entice business away from my course, and now that the whole plan has failed, a new guy is going to take it over with both bites of the apple: a high end facility, with no debt.

Unless I don't understand this right, that's really unfair.

Do I understand this right?

Bradley,
In my example the course would be purchased for a price say $200,000 and that would be all of the debt owed but in some cases that may be too much since they have to rebuild the greens, cart paths, clubouse work, irrigation work and all will add up to over 2 million before equipment and advertising.....that is why bannks will sell these things for such prices....because the people that would be in the market know they can't make them work for more.

[jeffwarne]

Don:

Thanks for a dose of common sense.

Not to pick on Mike but his example is a perfect microcosm of what's wrong with America.  If that golf course is refinanced for 10 cents on the dollar, the members will get a nice new course, and who has picked up the tab?  A failing bank -- we taxpayers have got a lot of those coming our way.

But who is really to blame?  It's not the bank -- it's the members of the old club [or maybe a developer, Mike didn't lay out the scenario] who borrowed for something stupid and now blame the bank for loaning them the money.

That's the whole financial crisis in a nutshell -- loan me some money so I can live beyond my means, and maybe I'll pay you back later if it works out.

Tom,
The bank is not to blame as well???
If they had assessed the risk properly AND NOT MADE THE LOAN, they wouldn't have lost the money and we wouldn't be bailing them out.
There will always be irresponsible people who try to borrow/live beyong their means-it's up to the lender to be the grownup and say no when appropriate.

[W.H. Cosgrove]

Firstly, I wonder if rounds played over the last twelve month period is the best benchmark to use.  Consumers really didn't turn the spigot off until later this year. 

While, public golf will probably do well and high end privates won't suffer much, my crystal ball tells me that mid level privates and CCFADs might be in some trouble.  Locally, it is already clear that some clubs are feeling some pretty deep stress. 

Clubs have lost members.  Debts incurred over the last 10-15 years still require payments.  Think of servicing a $5 million note, having spent 100% of your income each year, and then losing 30 members.  The club goes from a 'balanced' budget to a $200,000 shortfall pretty quickly.  With recession fears keeping people from joining clubs, there is little immediate hope of replacing that income in the short term. 

I think 2009 is going to be a very difficult year for these clubs and courses and I don't think I'd want to be an equipment salesman in the next twelve months either.  Of the 4 private clubs in my home town, I wouldn't be surprised to see one of them fail or to go up for sale and change their business model.  The only silver lining is that with real estate so depressed, the courses may actually be saved and not plowed under for housing. 

[Chris Cupit]

I have always said that a problem somewhat unique to the golf industry is this:  tough economic times should help weed out the inefficient or poor operator.  However, unlike other businesses that fail and close up, in golf the failure never goes away--it is very rare that a club disappears and is replaced by something else--eventually and at the right debt structure the club succeeds.

This isn't unique to the golf industry. Any business that has underlying asset value will not simply vanish if it goes bankrupt, and there's arguably no better underlying asset value than real estate. That's one thing that often gets overlooked in all the bogus "Too big to fail" arguments - the businesses in question won't necessarily just shut their doors and fire all the employees. In many cases, there would be a bankruptcy process that would yield a superior business model going forward, just like the recapitalized golf courses remain your competitors.

Nobody ever said running a business was easy! Actually, that's not true, there's 537 elected folks in DC who think they know everything, including how to run every business (in spite of a general lack of experience in industry, and a proven track record of running the government rather poorly).

I should have said no one who has ever run a business would say it's easy. I always tell people they are more accurate than they realize when they say they'd like to own their own business - they want to own it, not run.

Which golf course do you own?

George,

I (and my mother) own and operate Rivermont Golf and Country Club in the newly created city of Johns Creek, GA.  I can assure you my family needs no lectures in how "easy" this or any business is.  One example--after 15 years with a business partner and while I was still finishing college my father suffered a freak accident that left him a C-3/4 quadrapalegic for the last 17 years of his life.  Despite this set back our family pulled together, bought out his partner and have operated the club alone since 1988.  Since graduating in 1991 I have worked (more ) than full time at the family business.

I really don't think I need the "life's tough" speech .  Although, running a business is actually one of the easier things my family has ever done together.  I love the industry (I also volunteer a significant amount of my time trying to help my state golf association, my junior golf associations (I do not have children) and many other groups that seek to help grow the game), I love my club and members and I look forward to being a good steward of the club for another 35 years in the industry. 

If you're ever in Atlanta, come play--I'm the one behind the counter

[George Pazin]

Chris, just to be clear, I wasn't lecturing you, nor giving you a life's tough speech, I was merely pointing out that the problems you face are not unique to the golf industry. You will find no person in the world with greater respect for any business owner than yours truly. Unlike many who constantly rip business owners for their supposed greed, heartlessness, etc. , I know the truth.

 

I hope I do make it to Atlanta someday to see your operation, sounds like you have a lot to be proud of, including the proper attitude.

[JLahrman]

GM has let go of Tiger Woods.  If he can't keep a job who can?  He needs to sign on with Lamborghini or Ferrari or somebody like that.  Tiger in a Buick?  That just ain't right.

[Mike_Young]

George,

I (and my mother) own and operate Rivermont Golf and Country Club in the newly created city of Johns Creek, GA.  I can assure you my family needs no lectures in how "easy" this or any business is.  One example--after 15 years with a business partner and while I was still finishing college my father suffered a freak accident that left him a C-3/4 quadrapalegic for the last 17 years of his life.  Despite this set back our family pulled together, bought out his partner and have operated the club alone since 1988.  Since graduating in 1991 I have worked (more ) than full time at the family business.

I really don't think I need the "life's tough" speech .  Although, running a business is actually one of the easier things my family has ever done together.  I love the industry (I also volunteer a significant amount of my time trying to help my state golf association, my junior golf associations (I do not have children) and many other groups that seek to help grow the game), I love my club and members and I look forward to being a good steward of the club for another 35 years in the industry. 

If you're ever in Atlanta, come play--I'm the one behind the counter

Chris,
I know somebody that wants to give you a lecture but he now must talk to his agent before speaking with someone such as you

Hey Guys.....when Chris speaks of his Dad check it out....I think you will find his Dad and his brother played the tour for a while and I believe his uncle had a playoff with Palmer for the U.S. Open....

[Ken Moum]

Hey Guys.....when Chris speaks of his Dad check it out....I think you will find his Dad and his brother played the tour for a while and I believe his uncle had a playoff with Palmer for the U.S. Open....

Cool, every time I see his name I wonder if there's a Jackie in there somewhere.

Ken

[Chris Cupit]

Chris, just to be clear, I wasn't lecturing you, nor giving you a life's tough speech, I was merely pointing out that the problems you face are not unique to the golf industry. You will find no person in the world with greater respect for any business owner than yours truly. Unlike many who constantly rip business owners for their supposed greed, heartlessness, etc. , I know the truth.

 

I hope I do make it to Atlanta someday to see your operation, sounds like you have a lot to be proud of, including the proper attitude.

Sounds great and sorry if I over-reacted a bit.  Again I love what I do and sometimes it seems that people relish when times are tough for others or think business owners are just greedy bastards out to screw their customers when overwhelmingly that is not the case.  I now know that is not at all what you were trying to say.

As Mike alluded to my family included 8 "Cupit" brothers, 5 of whom were golf professionals (Buster, David (my dad), Jacky, Bobbie & Jerry).  When you are the "chop" in the family, you get stuck minding the store while the other guys get their name on their bags  

BTW, Jacky beat Palmer in the play-off--unfortunately, that old guy Boros whipped 'em both that Sunday.  I know Jacky is in the Texas Golf Hall of Fame but I am not sure about Buster.  My father has been nominated for the GA. Golf Hall of Fame and hopefully one day he will be honored.  Since I am already bragging on them I'll continue at least about Jacky and Buster:

Jacky--rookie of the year PGA Tour (1961) and set money record ($22,000)that lasted until that fat Ohio boy came out the next year!

Won Canadian Open where his brother Buster finished as runner-up.  Won Phoenix, Tuscon and at age 25 lost the '63 Open in a play-off to Boros.  He double-bogied his 71st hole and then hit a truly great 6-iron to 12-15 feet on 18 for the win and just missed

I think he has the dubious Masters record for greatest front nine/back nine difference in score--34-48

Jacky may have been one of the greatest college players ever--wins the 1956 NAIA? or Div II? CHamp while at North Texas State.  Transfers to Houston and helps begin a pretty incredible run--three straight NCAA Team Champ '57, '58, '59.  Three years of an undefeated Houston team.  He is two-time NCAA medalist.  2nd Team All-American as a soph. and 1st team All-Am his Jr. and Sr. years--this is when All-AMerica teams had 5 people on each team--not 25! 

Maybe his most incredible record ever in college is this:  For his competitive year as a Junior, he did not record a score higher than a bogey.  Fall and Spring and NOT ONE DOUBLE!  Dave Williams and others have called it one of the most incredible years they had ever seen.

Buster had a handicapped son and travelled very little but as a club pro played in 7 or 8 US Opens, several PGAs including a top t-8th finish one year.  I think he won at least one Oklahoma Open back when a lot of really strong players competed.

He owns/operates Longview CC--a tiny public course in East Texas.  He is 80 this year and he WALKS and plays 3 times a week.  His course is maybe 5900 yards long and a par of 71.  He has shot his age every year (except one--when he was 59) at his home course SINCE HE WAS 58   That round was 13 birdies and 5 pars.

His daughter pretty much runs the club now and when you drive down the dirt road you'll see a "fleet" of very old three-wheeler EZ-GOs, oil derecks scattered around the course and when you check in you can grab a cold drink from the cooler and the sandwhiches are home made--ham and cheese, white bread, wrapped in wax paper and made up that morning by my aunt Joyce   No dress code, jeans expected although I do think shirts are required--maybe. 

[Mike_Young]

Chris,
I live in athens.....I am not a bulldog

Jackie and North Texas State....they had some good teams...Joel Edwards I think played there...one of charlies's buddies that comes by and plays the Nationwide each year....and about 5 other AA from different years....
A guy that shaped for me for almost 10 years was a AA at East Texas about the same time as your uncle at North Texas...Craig Metz....his dad Dick Metz was Hogan's running mate or traveling mate and then worked at Westchester before Hogan got him the job as head pro at Shady Oaks.  Graig was a fanatic when it came to golf architecture and shaping.  I know when he was in ATL with Fazio group he would come by and see your dad all the time.  A few years back we found him dead of a heart attack at an apartment on a job he was shaping.

[George Pazin]

As Mike alluded to my family included 8 "Cupit" brothers, 5 of whom were golf professionals (Buster, David (my dad), Jacky, Bobbie & Jerry).  When you are the "chop" in the family, you get stuck minding the store while the other guys get their name on their bags  

BTW, Jacky beat Palmer in the play-off--unfortunately, that old guy Boros whipped 'em both that Sunday.  I know Jacky is in the Texas Golf Hall of Fame but I am not sure about Buster.  My father has been nominated for the GA. Golf Hall of Fame and hopefully one day he will be honored.  Since I am already bragging on them I'll continue at least about Jacky and Buster:

Jacky--rookie of the year PGA Tour (1961) and set money record ($22,000)that lasted until that fat Ohio boy came out the next year!

Won Canadian Open where his brother Buster finished as runner-up.  Won Phoenix, Tuscon and at age 25 lost the '63 Open in a play-off to Boros.  He double-bogied his 71st hole and then hit a truly great 6-iron to 12-15 feet on 18 for the win and just missed

I think he has the dubious Masters record for greatest front nine/back nine difference in score--34-48

Jacky may have been one of the greatest college players ever--wins the 1956 NAIA? or Div II? CHamp while at North Texas State.  Transfers to Houston and helps begin a pretty incredible run--three straight NCAA Team Champ '57, '58, '59.  Three years of an undefeated Houston team.  He is two-time NCAA medalist.  2nd Team All-American as a soph. and 1st team All-Am his Jr. and Sr. years--this is when All-AMerica teams had 5 people on each team--not 25! 

Maybe his most incredible record ever in college is this:  For his competitive year as a Junior, he did not record a score higher than a bogey.  Fall and Spring and NOT ONE DOUBLE!  Dave Williams and others have called it one of the most incredible years they had ever seen.

Buster had a handicapped son and travelled very little but as a club pro played in 7 or 8 US Opens, several PGAs including a top t-8th finish one year.  I think he won at least one Oklahoma Open back when a lot of really strong players competed.

He owns/operates Longview CC--a tiny public course in East Texas.  He is 80 this year and he WALKS and plays 3 times a week.  His course is maybe 5900 yards long and a par of 71.  He has shot his age every year (except one--when he was 59) at his home course SINCE HE WAS 58   That round was 13 birdies and 5 pars.

His daughter pretty much runs the club now and when you drive down the dirt road you'll see a "fleet" of very old three-wheeler EZ-GOs, oil derecks scattered around the course and when you check in you can grab a cold drink from the cooler and the sandwhiches are home made--ham and cheese, white bread, wrapped in wax paper and made up that morning by my aunt Joyce   No dress code, jeans expected although I do think shirts are required--maybe. 

Thanks for sharing, I love reading stories like this on here, they add so much.

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