How would a "Scottish" model work here?

[Richard Choi]

I just want to ask those of you who know about this subject a lot more than I do on exactly how something like this would work.

There has been a lot of talk about courses going in foreclosure with the economy that we have. And that includes many courses that many of us love. We have also had various discussions over the years about creating a GCA.com course.

I want to see if I can marry these two topics to see just how realistic it really is.

Let's say there is a course of note that is on the market for $5 million (this number is completely out of thin air, I would be happy to listen to see what actual numbers are these days). We want to buy this club and run it as a GCA course.

Obviously the membership price is easy enough to figure out: $5 million divided by 1500 (best case scenario) is $3300, or $5000 if we get 1000 members. Obviously, this would have to include people outside of member of GCA.com, but we are expecting national memberships. We could perhaps charge 3X or 5X for people who live within 100 miles of the site.

If we get those 1500/1000 members to pony up $500/year, we get operating revenue of $750,000/$500,000. I am guessing this course probably won't see more than 30k to 40k rounds a year max. Will that be enough revenue to keep it in decent shape with minimal staffing?

It think the above number is quite close to what the membership is like in UK. Could this work here in US?

[Dean Stokes]

No. We just had this debate the other day an i was assured by several that it wont. You all pay full or you dont play! "put up or shut up" i think was the word!!!!

[Ronald Montesano]

Darn it! I thought the title of the thread was leading me to a scantily-clad redhead, covered up only by her pipes and sheep's bladder...

[Sean_A]

Richard

Your intake is about right, but your fee is quite low with the membership quite high.  You may have to look at 650 members at $1500 subs, then the joining fee of $5000 begins to make some sense.  Of course, then you have a huge gap in funding the purchase.  Bottom line, for cheap numbers to work, the course price has to be closer to 3 million if not less.  Even at that price you couldn't be carrying debt, would have to have a very basic clubhouse and small green/house staff.  Maybe two full-time in the house with 3-5 part-timers.  Same for the green staff.  You couldn't afford much capital expenditure - leasing machines etc.  Basically, I think this is a shoe string operation that would need something special about it to attract outside play at a decent rate to make ends meet. 

Ciao

[Richard Choi]

What about guest/non-member play? How much do you think you can bring in if you allowed non-members to play at certain times for $100 to $150 per round and charge slightly less for guests. How much additional revenue would that reasonably bring.

I think $1500 fee per year is certainly within reasonable range, though it would be much better if it is under $1000. I am guessing this is a course where members really only visit handful of times a year. I am expecting this to be a fairly remote course as ones nearer to metropolitan areas would be much more expensive.

[Brian_Ewen]

The "Scottish" model isn't even working in Scotland now !

[Tiger_Bernhardt]

I think that is a very low maintenance/overhead number for a non links course.

[Rob Rigg]

Rich,

This is something we were toying with when discussing The Walkers Course.

The big question is how many members is too many - ie) at what point are guys not able to visit the club when they want to without booking 4 months ahead (or whatever)

Also - What is someone willing to pay for "more exclusive" rights

I think the challenge is being able to put something together where you buy a club outright for $5M - that's a lot of new members. $3M or $2M is probably more manageable if a bank is willing to write off a couple M to get it done.

500 members a year X $2k in dues seems reasonable if you expect to visit 2 or 3 times a year. $3k or $4k is probably more realistic from the club side but maybe some outside play can offset the lower dues.

Another way for the club to make pretty good $$$ is to host member sponsored events or outside events where 12 to 50 guests come in and play $150 or $200 a day for unlimited golf, plus lodging and food. If these events are Monday to Wednesday it also makes it easier for members to stomach. A lot of GBI clubs make great use of outside events or society visits to pull in some nice scratch.

$5k initiation x 500 guys gets you $2.5M - plus $3k per year gets you $1.5M per year in Operating Expenses. Some group events and outside play might be able to get you over the hump.

That being said - 500 guys at $5k is a lot - maybe 250 at $10k is more realistic? I think the key is keeping the annual nut low enough that it's not prohibitive.

I hope this model can work here - allow more people to play some great courses - both as members and outside play guests

Looks kind of tough though if you have to pay $3M plus up front from initiation fees.

[Adrian_Stiff]

The most important thing is location. The Scottish model is not the one you are saying Richard. Our UK model is more about the course already being there and a group of members 400-600 just split the run costs.

Debt and Location will be the biggest factors in courses going under. In this climate with low intrest rates the debt should not really be crippling, but if your numbers are poor, you miss your targets and you dont have the revenue any interest rate becomes tough to pay back.

I said a few years back the better courses are likely candidates for the toilet. The mum and pop courses are more immune.

[Niall C]

Richard

Like Tiger said, your course maintenance budget might be low. I suspect even on inland courses in the UK the maintenance is likely to be less due to climate/grasses etc. Of course I'm no greenkeeper and could easily be talking nonsense.

Niall

[Richard Choi]

Thanks for the post Rob, that makes a lot of sense.

But what if a course took more of a time share model? You pay something low, like $2000 to join the membership and then pay $600 ~ $1000 to get two shares. Each share entitles you to a weekend of unlimited golf or 1 full weekdays of golf. With each share, you can invite 3 other players who play at a discounted rate.

With that, you could probably get >1000 members and be just fine. If it is course that is in more remote location, getting two shares a year would be probably enough and the costs are low enough that you have a much greater potential market.

[Dan Byrnes]

The biggest issues that I have learned or think I have is to get a cheap course it's location isn't very strong.  To get a good course in any location is not likey to be cheap.  My old club sold turn key for 1.575 million in Albany NY as club president at the time I could have gotten for a million.  So 200 golfers at 5k it's paid for.  With no debt operating costs going real light on ammenities and services say 700k budget plus not including a food and beverage operation that breaks even, which might not be doable depending on the membership.

So now we need 500 golfers to pay $1500 annually.  The problem is outside of the Albany NY area I can't see non locals wanting to travel here for a run of the mill course not bad but nothing special.

So you need a  unique set of circumstances; an opportunity to buy a great course cheap, not saying it would be cheap but a Ballyneal type of place for a million or two,  get enough folks in the owners group to pay cash without ANY concern for a return.  Pretty much a donation.  Then you have to get enough members, outside guest and other revenue to maintain the club at a high level, not even sure if 1000 at 2k would work.  As if the place isn't wow enough to enough people those 1000 won't stick around?

Now if you were lucky enough to get a great course in Westchester county NY that cheap or even 5 million+ it could work  as you have the combination of great course, large population in a close vacinity, as well as the potential of travelers from outside the region.  Ofcourse land values would never let that happen unless some did it to be benevolent.

I think the bottom line the courses you could get either the land value would give a more profitable use, they are to remote which requires special expensive conditioning, lodging and f&b.

While there may be some purists who would travel to a Ballyneal like place, sleep in a bunk room and bring their own food and drink there aren't enough of them to support the place IMHO.