A revelation..golf was never meant to make $$$$$

[Mike_Young]

Come on Joe....got to make a profit   unless of course golf was not meant to make a profit
hope all is well....

[Chris Cupit]

I agree with Wayne's submission above.

I like the idea of "mom and pop", but the municipal idea gets a few more points in my book.  Could one of our resident developers or architects fill me in on an extremely rough pricing model for a course that?

1) Has a private, single enterprise owner, i.e, "Mom & Pop".
2) Already owns the land
3) Builds a single, 18-hole complex with a practice area and...
4) Modest clubhouse and amenities.

I'm hearing a lot about the model, but what does it look like?  I'd still want to know how "Mom & Pop" make enough in profit to pay themselves a good wage. 

I know a few on here have experience with the "municipal" model.  I would think the above example works much better as a municipal project. 

Here's my "mom and pop" model:
Nice golf course with a lot of architectural interest known locally as a "players" course.  Busy/active but in good condition (greens are key as that is what everyone judges you on).

The only reason I've made it is because in many ways I'm cheap.  I am there every day.  I am the GM, Membership Director, Marketing guy and I am in the shop answering phones, booking times, etc...  My mother (who with my now deceased father started the club in 1973) is 71 years old and she is at the club 3-4 days a week answering phones, filing and "decorating" tables, buffets or whatever.

Total Debt today after the remodel in 2006 is 3.6MM.  Clubhouse is old and not fancy but we have resisted the desire to build a new 8MM clubhouse and get into so much debt that the numbers don't work.  Clubhouse has a small but well stocked shop, locker rooms, nice grille, bar and a dining room that can handle the occasional dinner dance, brunch......

Turf Care budget is $800,000.  Membership is full with 125 seniors who can play weekdays only and 475 full members (also about 125 social/clubhouse members).  Rounds are way down this year and we'll do 32,000.  High years would be slightly over 40,000 although 37-38,000 would be normal.

Key is our pricing.  I am surrounded by about 8 higher end private clubs--newer clubhouses, bigger pools, tennis courts...They all were in the 25k-85k initiation fee and $475-$800 per month in monthly dues.  I have been able to keep my fees low with my ID of $7500 after the renovation.  Full monthly dues including unlimited range use, monthly food and beverage service charge is $350 for a full family (less if you are single ($319) or if either spouse is under 40 ($298)).  After last September all clubs began discounting IDs.  Actually you could join all but the elite clubs for little or nothing down.  Many clubs fell into the death spiral of discounted or zero ID, raising dues to cover losses, losing members because dues keep going up...lather, rinse, repeat!  Clubs that have healthy mortgages lived off initiation deposits that they were "stealing" for operating expenses and when the ID market went south or in some cases went to zero, those leveraged clubs were doomed.

Also we have a no assessment policy.  No assessments since 1973 and yet many of my competitors have had them.  We've earned a reputation as a good golfers club where you can join and not have to worry about the politics of running a club or assessments.  It's not easy but the numbers work.  There are surely fancier, nicer clubs and some people are turned off by our activity--we are busy for a private club.  But, for a good game and a good, solid golf experience and a friendly place for a burger and a beer afterwards, we fit the bill for a lot of folks.

I know of numerous foreclosures all around me.  I have no idea how a club with more than $6.5MM in debt service can make the numbers work--any bump in the road and you're toast.  Many in my area have debt between $7.7MM and $26MM!!!!  I'd have trouble sleeping with all that debt hanging over me.  

[Mike_Young]

Chris,
I think the main thing you left out for all of these guys is all the golf you get to play daily along with all the practice time you have for the tourneys you constantly play.....

[Joe Hancock]

What's the difference between a municipality paying staff to operate a golf course vs.  mom and pop running themselves for a meager living?

Besides the subsidization part, of course.......

Joe

Another difference....at the mom and pop, a few unregistered cash transactions are an IRS audit issue, with penalties if discovered...at the muni, it's embezzlement and a criminal record.

[Tom_Doak]

Tom,

Yes, a good point. If I actually had the opportunity to do this, I would look for investors who were interested in creating a lean and cost effective business model that would allow for the creation of a golf course with green fees at levels that the "average joe" could afford on a weekly basis. I would target a reasonable ROI for the investment, but nothing crazy. I agree that you need some sort of financial goal not to run a business into the ground very quickly.

I would probably also consider having a local membership option with reduced greens fees but allowing outside visitor play for higher green fees (obviously the course would need to be compelling enough to do this). The clubhouse would be temp until there was enough funding to build a real one (they did this at Aspen Lakes in Sisters) and, ideally, there would also be a short course or pitch and putt created for kids/families to use. One of the things I really enjoyed about summers in Ireland was playing with friends at the local pitch and putt - that's where Irish kids get hooked on the game.

Rob:

Not exactly what I think Mr. May meant.  He was not looking for an ROI, so much as a club that members could join as partners, without worrying that their investment in the club would become worth less over time.  He figured most of them could afford a near-zero return on $35,000 of their portfolio in return for being a member of a good club.

As soon as you mention the letters ROI, people are looking for 20%, and I don't know if there are 10 golf courses out of the last 3,000 that were built that actually had a golf ROI of 20%.  Lots of investors have been promised that sort of ROI, but those were ridiculous pro formas that the founder probably knew to be unrealistic.  I don't know if Moody's was in on the action or not.

[Chris Cupit]

Chris,
I think the main thing you left out for all of these guys is all the golf you get to play daily along with all the practice time you have for the tourneys you constantly play.....

Can't put a price on that

Was up your way today and actually played a round--79 with a chip in!  

[C. Squier]

The only reason I've made it is because in many ways I'm cheap.  I am there every day.  I am the GM, Membership Director, Marketing guy and I am in the shop answering phones, booking times, etc...  My mother (who with my now deceased father started the club in 1973) is 71 years old and she is at the club 3-4 days a week answering phones, filing and "decorating" tables, buffets or whatever.

Sounds awfully similar to the restaurant business.  From my narrow point of view, the ones that make it in that business are the ones who get their hands dirty.  Not only because you save by not paying someone else to do the work, but because when the cat is home, the mice have to work!  I also believe management makes better decisions when they have skin in the game and not playing monopoly with someone else's dough.

Look at it this way, you get to field every golf pro's favorite phone call....."is it raining at the course?" from the guy who lives 5 blocks away  

[Chris Cupit]

Tom,

Yes, a good point. If I actually had the opportunity to do this, I would look for investors who were interested in creating a lean and cost effective business model that would allow for the creation of a golf course with green fees at levels that the "average joe" could afford on a weekly basis. I would target a reasonable ROI for the investment, but nothing crazy. I agree that you need some sort of financial goal not to run a business into the ground very quickly.

I would probably also consider having a local membership option with reduced greens fees but allowing outside visitor play for higher green fees (obviously the course would need to be compelling enough to do this). The clubhouse would be temp until there was enough funding to build a real one (they did this at Aspen Lakes in Sisters) and, ideally, there would also be a short course or pitch and putt created for kids/families to use. One of the things I really enjoyed about summers in Ireland was playing with friends at the local pitch and putt - that's where Irish kids get hooked on the game.

Rob:

Not exactly what I think Mr. May meant.  He was not looking for an ROI, so much as a club that members could join as partners, without worrying that their investment in the club would become worth less over time.  He figured most of them could afford a near-zero return on $35,000 of their portfolio in return for being a member of a good club.

As soon as you mention the letters ROI, people are looking for 20%, and I don't know if there are 10 golf courses out of the last 3,000 that were built that actually had a golf ROI of 20%.  Lots of investors have been promised that sort of ROI, but those were ridiculous pro formas that the founder probably knew to be unrealistic.  I don't know if Moody's was in on the action or not.

I've seen some of those pro formas and the least ROI I've ever seen is in the 14% range and that was considered "low" and was only palatable given a long history of successful projects.  To be forced into a secondary market for money with guys wanting double digit returns is REALLY a tough way to make a living.  

Debt kills.  Expensive debt kills, quickly.    

Maybe we will see a return to earth as people learn you can't always afford what you see on TV and golf will return to its roots, the game will become affordable and popular and start to grow aga.............sorry I guess I was dreamin

[Chris Cupit]

The only reason I've made it is because in many ways I'm cheap.  I am there every day.  I am the GM, Membership Director, Marketing guy and I am in the shop answering phones, booking times, etc...  My mother (who with my now deceased father started the club in 1973) is 71 years old and she is at the club 3-4 days a week answering phones, filing and "decorating" tables, buffets or whatever.

Sounds awfully similar to the restaurant business.  From my narrow point of view, the ones that make it in that business are the ones who get their hands dirty.  Not only because you save by not paying someone else to do the work, but because when the cat is home, the mice have to work!  I also believe management makes better decisions when they have skin in the game and not playing monopoly with someone else's dough.

Look at it this way, you get to field every golf pro's favorite phone call....."is it raining at the course?" from the guy who lives 5 blocks away  

He lives next to the driving range   No shit.

[Mike_Young]

Chris,
I think the main thing you left out for all of these guys is all the golf you get to play daily along with all the practice time you have for the tourneys you constantly play.....

Can't put a price on that

Was up your way today and actually played a round--79 with a chip in!  

I was here...where did you play......our Orlando friend called or texted at least 10 times regarding GT and how great the game was/ how Athens was joyous and other various notations regarding the jackets.....he is not allowed to express much love for GT on the air.....

[Mike Nuzzo]

I was told the sotry of a small family owned local grocer who had provided a very nice living for his family for two generations....he sends his grandson to college and he comes back with the business degree and says lets build three more stores....then his son goes Ivy League MBA and convinces dad they need to do an IPO......and then a year later all is over.....THAT is what I am trying to say about golf not being meant to make $$$$$$.....it will never work for big business.....JMO

I hope he learned his lesson.?!?.

"The club doesn't have the money, the members do"
                  - Mr. Jackie Burke Jr.

I guess it could be rewritten this way -- "The members have most of the money, the club gets a percentage"

[Rob Rigg]

Chris and Tom,

I was thinking of a scenario where you have some "angel" type investors who are into golf, like many are into wine. In order to provide them with the "we will make money incentive, you are not flushing it down the toilet" you provide a ROI that would be palatable for someone with cash who is essentially investing in a good cause - meaning a 5% to 10% ROI. ie) you are clipping a bit of a coupon but the business model must be dialed or your risk profile is way out of wack.

Obviously not Mr May's line of thinking - but my thought here is that the course would be for public consumption and growth of the game, not just another private club.

Don't most members of private clubs just assume that their initiation and dues are going towards keeping the place afloat?

Chris,

Sounds like your operation is lean and mean - just like it needs to be. Great to see something like what you have surviving in these tough times.

[Chris Cupit]

Chris,
I think the main thing you left out for all of these guys is all the golf you get to play daily along with all the practice time you have for the tourneys you constantly play.....

Can't put a price on that

Was up your way today and actually played a round--79 with a chip in!  

I was here...where did you play......our Orlando friend called or texted at least 10 times regarding GT and how great the game was/ how Athens was joyous and other various notations regarding the jackets.....he is not allowed to express much love for GT on the air.....

Practice round at The Georgia Club--I had to play today
Could be another UVA-GT showdown--those mighty Hoos are still undefeated in the Coastal!!  (william and Mary kicked our ass though)

I'm sure I'll be hearing from him this week--hopefully not too much as that just means the little bees are having a good Saturday

[Rob_Waldron]

Mike

Once again you hit the nail on the head. From there inception golf courses were not built to produce profit but to provide recreation. The wealthy had their "Not for profit" private clubs and the regular guy had municipal courses which were viewed in a similar fashion to tennis courts and parks...recreation fot he masses. Unfortunately private clubs decided to judge themselves by the $$ they could charge for initiation. At the same time municipalities determined that they could charge more from golfers and subsidize the non profitable tennis courts and parks. The daily fee course for profit was born. Unfortunately far too many were built more on ego than sound financial basis.

[RJ_Daley]

I would have something of a side bar note to mention, and don't know how you would fit the concept into your discussion here Mike, but historically, The Spaulding-Bendelow model has something to do with the development of the two tiered models of private clubs- not meant to make serious money, and municipalities deciding when land was abundant and a new recreational craze was sweeping the nation, that building those rec facilities was a valid expense not intended to make $$$$.  The Spaulding company promoted these developments both on the private club side and muni side by paying for the cost of the archie (or at least partially paying and subsidizing Bendelow to make this nationwide mission) to promote and 'lay-out' courses for for any private or public entity that wished to have him there for a consult and a lay-out.  In Bendelow, we have a fellow that layed-out both a couple of the earliest private family estate golf courses and one who layed-out the first muni course at VanCortland park (I believe it was conceived to always be muni).

But, I bet Bendelow never told any of the clients they were going to cut a fat hog in the arse by getting into the golf development and operation.  And, Spaulding's interests were obviously to literally create a market for their sporting goods.  So, Spaulding was interested to see that the golf operations were viable (though not necessarily highly profitable) inorder to keep their customers buying the goods.

Also, it seems to me that one model not often used in modern golf development is the third party economic interest promoting or subsidizing, or actually owning a course to generate a separate market or service.  The Farm or whatever that course is that the Fert company owns in Alabama (I think), or a seed company owning one, or the corporation owning one on its grounds for customers and employees, like 3-Ms or the Wicker Basket company (I forget that name too). 

Finally, a very few non profit organizations own courses, like the American Baptist Assembly owning Lawsonia, or Culver Academy, or the Malvern School course, or even the little course Chi Chi runs in Tampa for vocational training of wayward kids.  I once thought of approaching Boys Town to consider a partnership to do a vocational training course facility in the Sand Hills... Pete Dye was going to donate his fee to design one for the Cistercian Abbey, which I guess would be non-profit org. 

An executive in a non-profit healthcare organization once told me that the most profitable organization was a non-profit organization...maybe that hold true for non-profit golf orgs also 

[Tom_Doak]

RJ:

That's why the PGA Tour is a non-profit organization.

[Jim_Kennedy]

RJ,
One more that you forgot, and could be a very beneficial way for some course owners to maintain their business, is the buy-out of the development rights for conservation/open space, with states, municipalities and private investors as a market.

Owners get a good piece of change and lower taxes going forward. If it was a M&P operation they could put the chunk into a retirement account and continue to run the course, or sell it for the business value.

Everyone wins, the course still pays RE tax + all other related taxes, the operation doesn't need to generate exorbitant profits to sustain itself, and people in the community get the benefit of realistically priced golf.

[Lou_Duran]

Since we have all these uber smart, nobly motivated people planning our lives, let's just ask them to think really big.  We now know that profits are evil- they screw everything up and at times tempt some of our otherwise really good leaders- why not just do away with money, prices, rents, wages, taxes, exchange mechanisms, etc.?  We can all continue to work, producing things for free and taking only what we need to maintain our production (food, shelter, health care, recreations, etc. all as a means to sustaining an egalitarian society).  And who cares if a 50 year old decides he no longer should produce, but still consume?  Aren't we all in this together?  Don't we have a sacred social contract?    

Sorry Mike Young.  Golf courses as all activities rely on profit.  The private club was built on the profit of its members who provided the initiation fees, dues, and assessments to build and operate them.  The municipal course relied on the profit- the wages- of the citizens to pay taxes and fees which were used as collateral to float bonds and repay them.  The privately owned daily fee course required the investment of its owners and a return- a profit- which allowed them to pay the lender and/or provide the return of capital and some reward for risk.  And all those noble "not for profit" organizations most certainly depend on the profits of its donors and benefactors for their existence.  Afterall, the G-5s their executives fly to D.C. on aren't exactly cheap.

In reality, golf cannot survive as a sport played by a wide segment of the population unless it and the society are profitable.  All schemes seeking to equalize income may achieve that result only by ensuring that everyone is poorer in the long run.  Taking money from the productive segments of the society to redistribute to the less productive segments will, by mathematical necessity, result in a less productive overall society.  If I was one of those really smart, good people, I think I might be trying to find a way to make the most productive types take it up a notch and do a little more, as opposed to demonizing the fruits of their labor- wages and PROFIT- on which a significant portion of our population depend on.  But that's me, a right-wing, angry but not-so-white male, conservative whacko who can't break 80 any more on a good day.  What do I know, and who gives a damn what I think?

          

[Jim_Kennedy]

Lou,
Outside of the fact that you've misappropriated what 'profit' meant on this thread and then proceeded to turn that into an overblown response, I totally agree with your last two sentences. 

Cheers,
Jim

[Kalen Braley]

I agree in concept with Jim,

What exactly is "profit"?  If a guy runs a non-profit church and the church makes no money because his salary is $500K per year, is this a bad thing?

I'm not trying to suggest Ma and Pa's and other struggling courses pay exobiriant salaries, just saying just because one "doesn't make any money", doesn't mean its because one isn't making any money.

Reminds me of the old joke where a CEO asks an accountant what 2 + 2 is and the reply is: what do you want it to be?

[JC Jones]

Lou,
Outside of the fact that you've misappropriated what 'profit' meant on this thread and then proceeded to turn that into an overblown response, I totally agree with your last two sentences. 

Cheers,
Jim

No way, Jim, lets just be honest, we are all communists using this thread to push our agenda

[Jim_Kennedy]

Da Kamerad!

Now, send me  20 bucks and I'll tell you why capitalism is so corrupt. 

[paul cowley]

Since we have all these uber smart, nobly motivated people planning our lives, let's just ask them to think really big.  We now know that profits are evil- they screw everything up and at times tempt some of our otherwise really good leaders- why not just do away with money, prices, rents, wages, taxes, exchange mechanisms, etc.?  We can all continue to work, producing things for free and taking only what we need to maintain our production (food, shelter, health care, recreations, etc. all as a means to sustaining an egalitarian society).  And who cares if a 50 year old decides he no longer should produce, but still consume?  Aren't we all in this together?  Don't we have a sacred social contract?    

Sorry Mike Young.  Golf courses as all activities rely on profit.  The private club was built on the profit of its members who provided the initiation fees, dues, and assessments to build and operate them.  The municipal course relied on the profit- the wages- of the citizens to pay taxes and fees which were used as collateral to float bonds and repay them.  The privately owned daily fee course required the investment of its owners and a return- a profit- which allowed them to pay the lender and/or provide the return of capital and some reward for risk.  And all those noble "not for profit" organizations most certainly depend on the profits of its donors and benefactors for their existence.  Afterall, the G-5s their executives fly to D.C. on aren't exactly cheap.

In reality, golf cannot survive as a sport played by a wide segment of the population unless it and the society are profitable.  All schemes seeking to equalize income may achieve that result only by ensuring that everyone is poorer in the long run.  Taking money from the productive segments of the society to redistribute to the less productive segments will, by mathematical necessity, result in a less productive overall society.  If I was one of those really smart, good people, I think I might be trying to find a way to make the most productive types take it up a notch and do a little more, as opposed to demonizing the fruits of their labor- wages and PROFIT- on which a significant portion of our population depend on.  But that's me, a right-wing, angry but not-so-white male, conservative whacko who can't break 80 any more on a good day.  What do I know, and who gives a damn what I think?

          

I do Lou.

[Mike_Young]

Since we have all these uber smart, nobly motivated people planning our lives, let's just ask them to think really big.  We now know that profits are evil- they screw everything up and at times tempt some of our otherwise really good leaders- why not just do away with money, prices, rents, wages, taxes, exchange mechanisms, etc.?  We can all continue to work, producing things for free and taking only what we need to maintain our production (food, shelter, health care, recreations, etc. all as a means to sustaining an egalitarian society).  And who cares if a 50 year old decides he no longer should produce, but still consume?  Aren't we all in this together?  Don't we have a sacred social contract?    

Sorry Mike Young.  Golf courses as all activities rely on profit.  The private club was built on the profit of its members who provided the initiation fees, dues, and assessments to build and operate them.  The municipal course relied on the profit- the wages- of the citizens to pay taxes and fees which were used as collateral to float bonds and repay them.  The privately owned daily fee course required the investment of its owners and a return- a profit- which allowed them to pay the lender and/or provide the return of capital and some reward for risk.  And all those noble "not for profit" organizations most certainly depend on the profits of its donors and benefactors for their existence.  Afterall, the G-5s their executives fly to D.C. on aren't exactly cheap.

In reality, golf cannot survive as a sport played by a wide segment of the population unless it and the society are profitable.  All schemes seeking to equalize income may achieve that result only by ensuring that everyone is poorer in the long run.  Taking money from the productive segments of the society to redistribute to the less productive segments will, by mathematical necessity, result in a less productive overall society.  If I was one of those really smart, good people, I think I might be trying to find a way to make the most productive types take it up a notch and do a little more, as opposed to demonizing the fruits of their labor- wages and PROFIT- on which a significant portion of our population depend on.  But that's me, a right-wing, angry but not-so-white male, conservative whacko who can't break 80 any more on a good day.  What do I know, and who gives a damn what I think?

          

Lou,
No need to be sorry.....you are sort of answering my question on your post....
I realize that golf courses rely on profit.....but they do not exist except in very few instances as a business model that one would enter to make profit unless he was in some way "into golf".....JMO

[Tom_Doak]

 If I was one of those really smart, good people, I think I might be trying to find a way to make the most productive types take it up a notch and do a little more, as opposed to demonizing the fruits of their labor- wages and PROFIT- on which a significant portion of our population depend on.
          

Lou:

There was actually much in your post I agreed with, including the fact that golf development must find a way to live within its means, or there just isn't going to be any more of it.  I'm not sure what to make of the fact that the only people who believe golf will be profitable are a small bunch of capitalists in China.

The one thing I disagree with you on is that there are certain productive guys in the financial industry whom I do NOT want to encourage to "take it up a notch".