Can you make money building/operating a golf course?

[cary lichtenstein]

One of the priniciples I follow is never to invest money in a declining industry and golf really is one of those.

I understand the passion for the game and the desire to develop, design golf courses, but the practically arrives the day after your grand opening and reality sets it that you must now rely on a stream of revenue that will be smaller than any of your pro formas and expenses that will exceed your expectations.

The banking world is particularly difficult these days, in part due to their own stupidity the past few years, so now they will punish every customer that underperforms, which will be 95% of their clientile.

Personal guarnatees will be the rule, not the exception, and who wants to give a personal guarantee??

I would look for businesses that will be able to make money in the climate we are in, and will be for the next 5 years. What those businesses are, I don't know.

[Adrian_Stiff]

Cary maybe you could try a bit of part time bayliffing

[Ray Richard]

I wonder about the long-term feasibility of any golf course. Ask an average 12-25 year-old about golf and they have no interest in the sport. This includes the children of country club members. The think golf is irrelevant.
They love the fast action of Lacrosse, video games, I-phones and blogs. Don't believe the promote Junior Golf rhetoric from the golf industry, it's not working. They don't read newspapers and they don't like golf. They may learn the sport when they get older but it may be too late.

[Mike Hendren]

No bank in their right mind would finance a new course today without major personal guarantees that are backed by excessive equity!!!!!!!!!!!!!

Guarantor:  "A fool with an ink pen in his hand."

Bogey

[Gary_Mahanay]

I wonder about the long-term feasibility of any golf course. Ask an average 12-25 year-old about golf and they have no interest in the sport. This includes the children of country club members. The think golf is irrelevant.
They love the fast action of Lacrosse, video games, I-phones and blogs. Don't believe the promote Junior Golf rhetoric from the golf industry, it's not working. They don't read newspapers and they don't like golf. They may learn the sport when they get older but it may be too late.

Ray is absolutely correct.  My nephew is 21 years old now and I gave him his first set of clubs at 6 and then his next set at 12 and then his next set at 18.  He's going to college and working part time.  He may have played once in the last 2 years.  None of his friends are interested in the game.  Sure, they'll play that Tiger Woods video game, but to go out to the city course and pay 20$ or $25 during the week to actually play is pretty much out of the question.  They would rather hang out and shoot hoops and play video games.

So if you are building a course planning on that generation to support you, well good luck.  And now you have these aging baby boomers with their retirement portfolios shot all to hell, are not looking all that great anymore either.

The proforma says you need to do 40,000 rounds at  $40, $60, $80 a round?  Who are these folks that are going to be playing the game for the next 20 years or ever how long it will take you to retire the debt?

 

[Charlie Goerges]

I wonder about the long-term feasibility of any golf course. Ask an average 12-25 year-old about golf and they have no interest in the sport. This includes the children of country club members. The think golf is irrelevant.
They love the fast action of Lacrosse, video games, I-phones and blogs. Don't believe the promote Junior Golf rhetoric from the golf industry, it's not working. They don't read newspapers and they don't like golf. They may learn the sport when they get older but it may be too late.

Ray is absolutely correct.  My nephew is 21 years old now and I gave him his first set of clubs at 6 and then his next set at 12 and then his next set at 18.  He's going to college and working part time.  He may have played once in the last 2 years.  None of his friends are interested in the game.  Sure, they'll play that Tiger Woods video game, but to go out to the city course and pay 20$ or $25 during the week to actually play is pretty much out of the question.  They would rather hang out and shoot hoops and play video games.

So if you are building a course planning on that generation to support you, well good luck.  And now you have these aging baby boomers with their retirement portfolios shot all to hell, are not looking all that great anymore either.

The proforma says you need to do 40,000 rounds at  $40, $60, $80 a round?  Who are these folks that are going to be playing the game for the next 20 years or ever how long it will take you to retire the debt?

 

You guys are probably right about that demographic. I think that golf for so long has been the province of men and it's time to start finally looking to the 12-25 girls and women. As a father of two young girls, the atmosphere and attitudes toward women that I've witnessed in the realm of golf bother me and need to change. It's the only way the game can grow.

[Greg Murphy]

My guess is that the 12-25 demographic, male or female, has never been and likely never will be a bedrock of revenue for any golf course. I think it may be very unusual for that age group to find golf appealing. I didn't take up the game till I was 27 and many of the guys I play with didn't get hooked until their late 20's or 30's. Ironically, it seems most of the guys I know that played a lot when they were kids, if they slipped out of playing, are a bit indifferent about getting back into it, but those who took it up later are the true addicts.

There is a young guy I've played with a couple times who is athletically the strongest player I've ever played with. He's played both university basketball and golf, is about 6'5" and hits the highest, purest irons I've ever seen. I asked him which other kids his age he played with when he was growing up and he said there really weren't any. He played with his Dad and his Dad's friends and anyone he could hook up with. He also practiced a ton by himself. He said he kinda liked being alone on the golf course.

I don't think kids have changed that much, though they have more options like video games to take up their time. I think it is the rare 12-25 year old that is passionate enough about the game to devote a lot of time to it. I have three kids 18-22, the two oldest are boys, and they like playing golf but it is not a high priority yet.

As far as girls go, fugettaboutit. Females in general don't derive nearly the same satisfaction hitting things with sticks as males do.

Anyway, I agree that today's 12-25 year olds are not real interested in golf, but I think that's always the case, and when the babyboomer echos get over 25, the demographics for golf may actually improve the long-term feasibility of golf courses.

[Tony Ristola]

I'm curious as to the ethics of building a course, business-wise.

For the sake of argument, say that an area is somewhat over-built with higher-priced (but not outstanding golf-wise) resort courses/CCFADs. In these hard times those places are giving heavy discounts to compete.

Someone could come in to build a cheaper course (like the family Jim mentioned...who already owned the land) that beats them on price at the very least, and perhaps matches or beats the golf (depending on many variables obviously). Should they do it? Resort courses are at least subsidized by the resorts, but CCFADs may be standalone, so the new competitor could potentially put someone out of business, or into bankruptcy. And the local golfers would simply be exchanging one course for another.

Going by the rule of business, they should do it, because a cheaper, better product deserves to succeed. Unfortunately, the issue I see in this situation is the "3rd owner" phenomenon. The CCFAD goes into bankruptcy and a new owner comes in cheaper and leaner, and all of a sudden, they can run very lean and beat the "better run" business.

Any other ethical issues in General?

No question, building that course killer is 100% ethical. It's a business, and when the market is weak, if there is a niche, then the developer should have no reservation. Somebody will fill it eventually. If the numbers work, if there is demand, if the competition has priced themselves out of the market, it was their choice, their business model, their risk analysis. If the others operate on razor margins, it's their doing. Should developers wait for a sale or bankruptcy to emerge? I think not.

It should serve as a warning to future developers. I'd hope the architect did a better job than the CCFAD, so his client has a huge "Margin-of-Safety".

What I don't understand is producing the Big Box products absent the housing component in emerging markets. Markets that don't garner a ton of tourist golf and has a golf population that confuses Jack Nicklaus with Jack Nicholson. They have all the costs associated with the Big Box projects, and only golf to reduce the debt.

[Gary_Mahanay]

My guess is that the 12-25 demographic, male or female, has never been and likely never will be a bedrock of revenue for any golf course. I think it may be very unusual for that age group to find golf appealing. I didn't take up the game till I was 27 and many of the guys I play with didn't get hooked until their late 20's or 30's. Ironically, it seems most of the guys I know that played a lot when they were kids, if they slipped out of playing, are a bit indifferent about getting back into it, but those who took it up later are the true addicts.

There is a young guy I've played with a couple times who is athletically the strongest player I've ever played with. He's played both university basketball and golf, is about 6'5" and hits the highest, purest irons I've ever seen. I asked him which other kids his age he played with when he was growing up and he said there really weren't any. He played with his Dad and his Dad's friends and anyone he could hook up with. He also practiced a ton by himself. He said he kinda liked being alone on the golf course.

I don't think kids have changed that much, though they have more options like video games to take up their time. I think it is the rare 12-25 year old that is passionate enough about the game to devote a lot of time to it. I have three kids 18-22, the two oldest are boys, and they like playing golf but it is not a high priority yet.

As far as girls go, fugettaboutit. Females in general don't derive nearly the same satisfaction hitting things with sticks as males do.

Anyway, I agree that today's 12-25 year olds are not real interested in golf, but I think that's always the case, and when the babyboomer echos get over 25, the demographics for golf may actually improve the long-term feasibility of golf courses.

Greg, after reading your post mine sure does sound like a lot of doom and gloom.  I just think that its a lot easier to catch the golf bug when you're younger and stay a "core golfer" than to pick up the game later in life.  But I do understand where you're coming from because I could not believe the people at my 25 year highschool reunion a few years ago that came up to me and said that they play golf now.  Some of these people, both male and female, were some of our most nerdy non-athletic type folks that you have ever seen.

[Greg Murphy]

Gary,

Because I love the game, I hope you were being a bit overly pessimistic and I hope I am not being unrealistically optimistic. Most of the people on this site get a real kick out of golf courses, not just the game itself. But I think the aesthetic pleasures of the game are lost on most young people. When our boys were young, they played on summer hockey teams and when we'd travel to tournaments I'd always bring my sticks and try to work in some golf along the way. Entering one park, we crested a hill and before us was a beautiful scene of forest and hill and sky and I commented upon it to my son, to which he replied in a matter of fact, almost reverse paternal tone, "Dad, I'm 13 years old, I really don't give a crap about trees and clouds and hills".

The 12-25 age group is certainly not a demographic that can be ignored. It is those young people who are passionate about the game through their twenties that draw others into the game later on. That's what happened to me. A friend I used to play squash with who was a scratch or plus golfer and had competed at the top amateur levels in Canada as a kid, invited me out to play one summer and I was almost instantly hooked, partly by the game, but also by the grounds for the game. If it had not been for a peer of mine like him, I may never have taken up the game.

I think there may also be an element at play for those less than athletic people, like those at your reunion, that turns them into hard core golfers. When they play, they get addicted to the sense of achievement from getting better, a feeling they may never have previously experienced from athletic pursuits. This sense of achievement may be missing for more athletic types that played golf during their youth, who become frustrated trying to recapture what they were once capable of.

[Gary_Mahanay]

Greg,

You're right about that 12-25 demographic, they're not going to be the ones to support the game.  And I have seen plenty of 40+ year olds, non-athletic, 18 hdcps. addicted to the game.  I just think that the greenfee these days is so much higher to expose a kid to the game that there will be fewer scratch players in the future like your friend bringing someone else into the game much like you were.  But, one may not have anything to do with the other.