Rounds vs. Revenues

[Michael Whitaker]

Tom - the guest fee situation at Deal is a large part of what prompted my comments on the other thread. When I joined Deal four years ago I could take three guests on a fourball day at £22 each. It "grew" to £25 per guest, then this year the fees were increased as follows: First guest £30, Second guest £40, Third guest £50. So, what originally cost me £66 now costs £120... an 82% increase in four years. One of the major benefits of being a member at a UK club is being able to take guests at a significantly favorable rate. I'll bet total guest fee revenue will be down this year, not up as they expect. If that is true do you think the guest fees will be lowered? Nope. They'll raise the subs.

Wow.  I believe HCEG also has incremental charges for additional guests but those numbers are very high for UK guest fees.  Even £22 strikes me as on the high side for a UK guest fee but £50?  That's more than the visitor fee at Silloth.

Exactly my point.

[Craig Disher]

Mike,
I wonder if the decision was partly influenced by an increase in guest play (22 ea for 3 guests in a 4-ball at RCP was a great bargain) which affected member access on 4-ball days.

Chappers can correct me but I think most of the revenue from outside play is generated from societies, not members' guests. Has the fee for societies increased at the same rate as the fee for visitors and if so, have society bookings decreased this year?

The situation in US wrt guest play is hard to generalize. So many US golf clubs are actually full-service country clubs and members who join not entirely for the golf often expect a high-end, almost resort like experience. The non-course grounds maintenance added to a large, well-appointed and staffed clubhouse demands a much higher budget than does a very comfortable golf-only club. It's possible that charging a UK-level guest fee would appear to the members that the club was disrespecting their investment.

[Sean_A]

Tom - the guest fee situation at Deal is a large part of what prompted my comments on the other thread. When I joined Deal four years ago I could take three guests on a fourball day at £22 each. It "grew" to £25 per guest, then this year the fees were increased as follows: First guest £30, Second guest £40, Third guest £50. So, what originally cost me £66 now costs £120... an 82% increase in four years. One of the major benefits of being a member at a UK club is being able to take guests at a significantly favorable rate. I'll bet total guest fee revenue will be down this year, not up as they expect. If that is true do you think the guest fees will be lowered? Nope. They'll raise the subs.

Whitty

I think Burnham has done some hand wringing about visitor and guest fees.  I think they were raised last year to £25 per guest.  What the club did right to discourage guests on Saturday (competition day) was to limit each member to only one guest and charge £35.  When I first started playing Burnham 20 years ago I think the visitor fee was £50 or a price which was expensive, but a bit less than the big boys in the UK. The rate has remained fairly flat and only now has gone up to £75(18)/£95(36) - not far off half what the big boys are now charging.  This past winter was the first for a winter rate.  The club is going through a lot of trouble to attract visitors, but the effort has paid off - if one doesn't mind a busier course.

Ciao

[Michael Whitaker]

Mike,
I wonder if the decision was partly influenced by an increase in guest play (22 ea for 3 guests in a 4-ball at RCP was a great bargain) which affected member access on 4-ball days.

Chappers can correct me but I think most of the revenue from outside play is generated from societies, not members' guests. Has the fee for societies increased at the same rate as the fee for visitors and if so, have society bookings decreased this year?

The situation in US wrt guest play is hard to generalize. So many US golf clubs are actually full-service country clubs and members who join not entirely for the golf often expect a high-end, almost resort like experience. The non-course grounds maintenance added to a large, well-appointed and staffed clubhouse demands a much higher budget than does a very comfortable golf-only club. It's possible that charging a UK-level guest fee would appear to the members that the club was disrespecting their investment.

Craig,

The fees for foursome days have gone up as well. I'm sure there is great rationale at the club for the fee changes... the fact is a lot of things look good on paper, but don't work out in practical application. The club should not be making it harder for members to bring guests. If society days are being hurt by too many member guests then just limit the number of guests a member can bring or reduce the number of tee times available to members with guests. Changing the fee structure is an entrenched position that is difficult to rectify.

[Mark Pearce]

The guest fees at the three clubs I belong to are, if I recall correctly, Northumberland £15, Crail £12, Elie £10.  Against visitor fees of £50, £60 and £77 respectively (all midweek rates).  Each club has a limit on the number of guests you can sign in each year and on how many times any individual can play as a guest (of any member).

[Neil Noble]

Yes the "Discount Rate" for local golfers on daily fee courses is more accurately a surcharge on visitors which is and always was a flawed approach, in my opinion it's actually insulting to someone who you have most likely allured from afar to play your course.  Why not restructure fees based on...Demand   .   If you need to give something to local residents for developing the course send them a $50 gift card with their tax return annually.

One new model might include less expensive sun-rise and sun set fees, players trade-off is to deal with on-going maintenance, higher prime-time fees.  With private clubs there is also an opportunity to implement a lesser or beginning membership with play restrictions to less desirable times, those individuals will still likely spend money in the club.

Regardless of the rates if you want more players / to make more money address other deterrents like;

single parents, you don't need child care just a safe place a kid can read a book, is welcome to watch a movie, play craps (whoops ) god forbid you convince your insurance company kids should be allowed to walk or ride along with an adult.  What if that kid took up golf, hell you should give a player a discount for bringing his kid.

Less time, can I please play golf for an hour at lunch, or before work for a reasonable fee?  Hell there's nobody out there, are my hour worth of divots really going to cost $12 to repair?

[Jim_Kennedy]

Someone could possibly show me that I'm wrong, but after making semi-regular trips to the Pinehurst area I came to the conclusion that green fees at all the other courses drifted skyward as a result of the exorbitant hikes at #2. None of them were any 'better', just more expensive.

Same thing happened in Myrtle Beach.

Luckily, quite a few of the private clubs in my area never incurred great amounts of debt, and that's reflected in their guest fees.  

[Michael Whitaker]

Someone could possibly show me that I'm wrong, but after making semi-regular trips to the Pinehurst area I came to the conclusion that green fees at all the other courses drifted skyward as a result of the exorbitant hikes at #2. None of them were any 'better', just more expensive.

Same thing happened in Myrtle Beach.

Luckily, quite a few of the private clubs in my area never incurred great amounts of debt, and that's reflected in their guest fees.  

Jim,

You are spot on. Pinehurst area rates are driven by #2. Myrtle Beach area rates are driven by Caledonia. Hilton Head area rates are driven by Harbour Town. Everything is "scaled" according to what those courses can demand.

[Neil Noble]

Jeff,

There is always a way to refine what you are spending on maintenance and even increase earning potential for the club.  Many changes listed below are dismissed as impossible by superintendents because they require more thinking, planning, supervising, delegating etc.  But I went through the Japan Golf Bubble and recession continually finding new ways to lower cost and increase revenue opportunities while maintaining and at times even increasing the quality of play conditions.

Part-time labor heavy on early AM and Late afternoon crews light on 6-2 AM shifts.  Get two part-time mechanics AM and PM.

Analyze what each thing you do costs and look for savings; product selection (does slow release fert on fw's really cost less than ag grade applied more frequently).

Time of day; cut cups at 7 PM, combining tasks, start working in the dark with lights on machines.  

Preventative equipment maintenance (scheduled, implemented, documented, reviewed determine how breaks occur)

Pest monitor and apply pesticides at ideal timing and for maximum efficacy (ever apply an insecticide, herbicide or wetting agent at night?  try a 1/2 - 1/3 rate after dark and evaluate the results).

[Howard Riefs]

What's are the best examples/case studies for a daily fee or resort course that lowered greens fees and experienced a significant bump in volume?  And the converse -- examples of failure in adopting this strategy?

Someone could possibly show me that I'm wrong, but after making semi-regular trips to the Pinehurst area I came to the conclusion that green fees at all the other courses drifted skyward as a result of the exorbitant hikes at #2. None of them were any 'better', just more expensive.

And also at Kiawah after green fee hikes at with Ocean Course. Pay $225+ for a round at Osprey, Turtle or Cougar Point? No thanks.

[Niall C]

Tom - the guest fee situation at Deal is a large part of what prompted my comments on the other thread. When I joined Deal four years ago I could take three guests on a fourball day at £22 each. It "grew" to £25 per guest, then this year the fees were increased as follows: First guest £30, Second guest £40, Third guest £50. So, what originally cost me £66 now costs £120... an 82% increase in four years. One of the major benefits of being a member at a UK club is being able to take guests at a significantly favorable rate. I'll bet total guest fee revenue will be down this year, not up as they expect. If that is true do you think the guest fees will be lowered? Nope. They'll raise the subs.

Mike

I don't know the situation with Deal at all, but in general terms I agree with everything you say. I just wonder if the club perceive they have a problem of having too many members who are members purely to take pals or clients on rather than to simulate themselves into the club ? Not suggesting grading the guest fees depending on anumber of guests at any one time is the way to do that, but it might be a reason.

Niall

[Rich Goodale]

Tom D

With all due respect, we wee erstwhile "business majors" were never taught to "maximize" "revenues," even in my days in ivy academe, 40 long years ago....

We learned a very few things over those two years, probably two.  The financial one was that to create value you needed to optimize return on the capital invested in any venture.  The second (and most important) one was that all business decisions are made in an environment of often incalculable uncertainty.

Vis a vis golf clubs, optimizing returns on capital often founders on the definitions of "returns" and "capital."  As most on this site will know, I'm a long term (30+ years) member of a Scottish club which went through what Deal seems to be going through 20+ years ago.  At that time the club found out to its great enjoyment that annual overseas memberships could be peddled willy nilly to naive Americans, who were deemed to only infrequently return.  One local expressed to me at that time that the ideal member was one who paid his subs but never ventured across the pond to play the course.  Unfortunately, an increasing number of these "members du jour" fell in love with the course and not only came over more frequently, but also brought friends!  At the time we members could sign on unlimited guests at some fee less that £5, when the visitor fee was 10x that.  Well, what happened was what any economist with a 10th grade education could predict--the cheap visitors drove out lucrative visitors, just as Gresham would have predicted.  So......we stricitly limited the number of visitors that could be signed on and raised the fee less stringently.  Serious members felt that they were getting value for their money and visitors didn't notice a thing. Win-Win.  Optimisation.  At least so far....

At my less affluent local club we also struggle with optimisation.  Only ~20% of our revenues are from visitors, but members intermitently complain about tee times being hogged by visitors.  And yet, the course is often empty, particularly on warm summer evenings.....

Swings and roundabouts, and nobody has the answer, at least as I can see....

Rich

[Mark Chaplin]

Deal is a two ball club, we introduced four ball play twice a week for visitors who did not want to split their group of four and play two ball. Times have filled up with members bringing guests at a too low a visitor guest rate, Deal is not the ideal club for those who want to play four ball.

Craig - societies do form a major part of our visitor income they tend to be school, military and professional groups and yes their fees have risen in line with everyone else.

Mike - you can purchase a book of 10 visitor tickets for a generous discount on the normal guest fee. How do we achieve our numbers if membership fees are held, along with visitor fees and members guests??

Rich - At some Irish clubs members have a finite number of guest passes and once they are gone you've had your allocation of guests. There is a groundswell of opinion from many of our overseas members to make membership harder to achieve and introduce a meaningful joining fee.

[Jonathan Mallard]

Someone could possibly show me that I'm wrong, but after making semi-regular trips to the Pinehurst area I came to the conclusion that green fees at all the other courses drifted skyward as a result of the exorbitant hikes at #2. None of them were any 'better', just more expensive.

Same thing happened in Myrtle Beach.

Luckily, quite a few of the private clubs in my area never incurred great amounts of debt, and that's reflected in their guest fees.  

Jim,

You are spot on. Pinehurst area rates are driven by #2. Myrtle Beach area rates are driven by Caledonia. Hilton Head area rates are driven by Harbour Town. Everything is "scaled" according to what those courses can demand.

Caledonia may be the driver of rates, but there are a sizeable number of courses in the Myrtle Beach area that have closed:

• Bay Tree (54 holes)
• Marsh Harbor (Best New Public course back in the day)
• Robber's Roost
• Gator Hole (A Reese Jones Signature)
• Angel Trace (36 holes - I understand that Ocean View Plantation has acquired 18 and plans to re-open as another "Big Cat"
• Possum Trot, Myrtlewood (36), Azalea Sands, Beachwood... (I have not verified these - I was surprised to hear Myrtlewood)

Point being, folks can set their rates wherever they want to. What matters is that you can still pay your bills. Given Horry County had 15% unemployment last time I looked, it's going to be a while (if ever) that economy "gets back to what it was."

[Michael Moore]

Tom Doak -

I was just reading about this the other day.

http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/

Here is the money quote from Jack Welch - "On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy . . . your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal."

[Brett_Morrissy]

From Neil: ["Yes the "Discount Rate" for local golfers on daily fee courses is more accurately a surcharge on visitors which is and always was a flawed approach, in my opinion it's actually insulting to someone who you have most likely allured from afar to play your course.  Why not restructure fees based on...Demand   .   If you need to give something to local residents for developing the course send them a $50 gift card with their tax return annually.

One new model might include less expensive sun-rise and sun set fees, players trade-off is to deal with on-going maintenance, higher prime-time fees.  With private clubs there is also an opportunity to implement a lesser or beginning membership with play restrictions to less desirable times, those individuals will still likely spend money in the club.

Regardless of the rates if you want more players / to make more money address other deterrents like;

single parents, you don't need child care just a safe place a kid can read a book, is welcome to watch a movie, play craps (whoops ) god forbid you convince your insurance company kids should be allowed to walk or ride along with an adult.  What if that kid took up golf, hell you should give a player a discount for bringing his kid.

Less time, can I please play golf for an hour at lunch, or before work for a reasonable fee?  Hell there's nobody out there, are my hour worth of divots really going to cost $12 to repair?" ] [/i]

Neil - Welcome to the Discussion Group - looks like you will fit in just fine.

An excellent post you have done there, (and also the one further down about outside the square cost cutting measures) - it is a challenging environment in Australia, as it is everywhere else, in trying to set unaccompanied visitors fees and members guests by comparison with other regional courses, or similar 'quality/test/appeal' courses, makes for challenging debate.

For mine, I think members are the ones who deal with annual subscription increases, and should receive some form or appreciation spelt out well in a post above (Mark's?) - you are not embarrassed that you mate is being charged for it, or are happy to 'shout' him the guest rate, but for one time visitors, or annual or quarterly visitors, they should be paying full retail.

Neil, with your description of breaking the week down into demand based tee times, if of course and excellent one, and could perhaps in the future look like an online accomodation booking site, with possibly 8-10 different tee time prices for visitors depending on when they want to play. Makes a lot of sense.

[Tom_Doak]

Isn't the problem with "demand-based pricing" at the other end of the scale?  Will any golfers really pay 50% more than the going rate for the prime times?  Hard to see how that's going to work for most courses.

[Sean_A]

Tom

I don't think green fee structure is a one system fits all situation.  Much of what Brett writes about is already in place at a lot of courses.  We know that the big boys charge what they think they can then taylor a budget to fit that demand.  With the continued prices rises, especially in the southeast of England, I think it is safe to say clubs are still exploring what the market will yield.  The same thing isn't true for some of the big Irish clubs.  They have hit the wall and are now reassessing their fees (thank goodness).  We also know that the big clubs of areas drive prices for the next tier down - so in a way, these clubs are also still exploring the market in select areas of GB&I.  Once we drop down to the next level, I think clubs go through a genuine appraisal of their fee structure and their budget each year because getting it wrong for a year or two can mean losing a small, but in these economic times, significant percentage of membership when there isn't a line of folks ready to take up the spots.  There aren't many, but some have reduced visitor fees.  A great have not raised their fees.  

A decent number of clubs are now part of green fee deals run by outside agencies.  To give you an idea of what is going on, the EGU used to offer an Associate Membership for those who didn't want to belong to a club.  This meant non-club members could maintain an official handicap which in turns meant these players could enter club opens etc.  The EGU dropped this plan because they felt with so many clubs short of members it shouldn't promote ways to avoid club membership.  Also, the EGU has pushed the County Card (this allows a visitor to play a course for about the guest fee once a year - thus adding value to club membership) by making it a perk of EGU membership (the card is included in the yearly EGU fee club members pay) and by encouraging all counties to combine in accepting cards from different counties.  Of course, nearly all the big guns don't accept the card as it isn't in their interest to cut visitor fees.

I don't have a firm sense of what is going on the States.  The one state I do know, Michigan, seems to have been stagnated for 15 years in terms of green fees.  I still can't get over how prices have held for golf for so long in Michigan - especially when I see what has happened in the same period in GB&I.

Ciao    

[Matt Day]

I'm doing some work on yield management options at the moment, its something thats not really seen in public golf in Australia. Traditionally its been weekday and weekend pricing, with senior/concession green fees for weekdays only.

So far from the research I've done the key issues seem to be that you need to understand the predictable demand so that price sensitive and price insensitive customers can both purchase tee times. Whatever the outcome, any change to the traditional model will face a lot of flack

James Keegans "The Business of Golf" is a good read in regards to revenue versus rounds options. Chapter 10 covers yield management and pricing options.

[Brett_Morrissy]

Tom,
I think the point is that the "going rate" for the median price for a clubs gree fee (lets keep it at unaccompanied visitors) is the number that needs to be analysed or highlighted or reviewed.

if that number is currently $60 - with rounds varying from $45 midweek to $75 on weekends - I think if this was downscaled to $50 as the median price point for a good semi private with decent 7 day access, then from there, the Club looks for its most in demand 4 hours (say at Saturday morning 8-12) and least 24 hours sunrise mid week and/or sunset midweek or lunchtime( 4-9 holes) and then work backwards from there.

I am sure the guys that have sufficient disposable income will pay maybe $90 for one of those premuim Sat morning slots, and the golfer that has much less income available for golf, or is just miserly, will happily take an inconvenient tee time at $25.

Doesnt everyone then get what they what, golfers also then have the option as Neil mentioned to upgrade or downgrade as time or money allows them.

there are going to be a lot more happier customers than if the rate was set at $65 7 days per week.
Surely?

This model could be equally applied to Bandon Dunes (as it does now with peak, off peak shoulder, etc) or the local muni.

Let kids play when they have free time and the grown ups are working, let seniors play at a very cheap rate in the times that is convenient for them and the course is at it's quietest.

Does this give the best opportunity to the most golfers at the best price?

[Adrian_Stiff]

Tom Doak -

I was just reading about this the other day.

http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/

Here is the money quote from Jack Welch - "On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy . . . your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal."

You need to create shareholder value in a modern world or you wont have shareholders or investment. Any thinking less than that is short term gain and long term pain. Shareholders and investment partners will understand periods of time with little or no return and even cash calls but ultimately they want value return.

[Adrian_Stiff]

The model is different in the US to UK, but there are quite a few important do's and donts.

Ideally you want to get to your 10 golfers at $100 and not 20 golfers at $50, as Bruce Katona said, there is not much extra yield in the F&B or shop sales. As soon as someone starts talking up the volume method you know they dont know how to operate a golf course.

People in the UK generally pay a premium rate of up to 25% for best times; Weekends mainly though many busy clubs include Friday.
Many clubs have a twilight rate where the golfer may struggle to get the full 18 in.
You need to balance very very carefully your membership rates, your guest rates and your sign in guest rules, people are very aware what golf costs are annually and if you want members you must not create cheaper routes for them to play. If your membership is in excess of 30 times the cost of a round your membership will struggle if its nearer 20 you offer value.

I would probably equate a green fee cost or priciing based on where the club is in the top 100 ratings, you are unlikely to get much change out of £200 for a round at the top and £80 for the #100..thats probably fairish but there will be plenty that offer better value or not so better.

[Tommy Williamsen]

Interesting topic. I ifnd that private clubs are all over the map on this one.  Last year one of my clubs raised dues 20%, lowered initiation fee, and lowered guest fees 10%.  Another raised guest fees but kept the dues structure the same.
I just returned from Scottsdale where bargains abounded.  Many offered last minute green fees at a third of the normal price.

[Scott Warren]

Adrian,

If your focus was not on making a profit but instead solely on maximising your members' enjoyment of the facility while ensuring the club's future, would your stance on the above change at all?

[Adrian_Stiff]

Scott - No it would not really change all clubs should operate in a buisnesslike manner. Its hard to make much money at all out of golf, a real well run facility can only make 7 or 8% so between that and breaking even (a members club) the do's and don'ts are very similar. I think making sure the membership do enjoy their golf club is a very important certainly lowering fees that allow non members to play cheaper is going to get them ziggy. All golf clubs should focus on trying to make a profit even if it is small because you never know when you might need that little bit of stored revenue.