Why are golf carts extremely profitable?

[Tom_Doak]

I always saw carts in the US as just a basic part of the speed everything up to get more turnover game. Since the average public course player is slow this certainly helps and serves a purpose.

Put them in carts, make them mandatory and we speed up play so we can funnel more rounds through the course.

It's similar to all these restaurants where they want to turn tables, get you in, get you out and off to the movies because instead of having one sitting per night they want to have as many as possible.

I agree with the arguments above but I think (unless I missed it) volume is a large part and I'll be most of the golfing public outside of GCA sees carts as a luxury, especially when equipped with a beer cooler, GPS, airconditioning, ball and club cleaner etc etc....

But in fact, golf in the US keeps getting slower -- in part because the courses are more spread out, to accommodate golf carts and cart paths, and sometimes deliberately so that golfers will feel they NEED to take a cart.

[SL_Solow]

tom, I agree with your analysis to a degree.  But your model, that all in cost is the key factor, depends on an assumption about elasticity of demand and the impact of carts on total rounds.  If carts  add to the total rounds played then they add profit so long as each round drops dollars to the bottom line.  Moreover, if there is a different rate for walking, one can determine the impact of carts by comparing the number of rounds and the net benefit.   Costs of cart barns, paths, electricty/gas, maintenance can all be deducted if amortized properly and I suspect the profit will be substantial.

that is not to say that tis is the best way to play the game.  As you know, i am a walker.  But in an era where courses are closing, it is naive to expect course owners and operators to ignore a significant source of revenue.  Each course should undertake its own calculation so that it understands the costs and benefits.  Depending upon their situation and the nature of their facility, they may choose a form of pricing and permissible cart usage that is suited to their respective goals.  the architecture benefits when there are no paths.

[Pete Lavallee]

Put them in carts, make them mandatory and we speed up play so we can funnel more rounds through the course.

With most public courses using 7 minute spacing between tee times, all that really matters is how quickly the group on the first tee can get out of the range of the next group; carts don't make much of a difference here.

[Kalen Braley]

Just a few comments:

Carts also enable:

- Shotgun starts
- People getting a real meal at the turn cause they got a place to store it, instead of just chomping down a dog real quick
- Enable far more people to do 36 in a day as opposed to 18.
- Allow people to play in inclement weather cause they have a place for shelter in between shots.

I would have to disagree with Tom a bit on his pricing assumptions.

Both here in Spokane, WA and Northern Utah...the cart fee is almost always the same, regardless of the green fee. For example, I can play my home club for $26 green fee + $17 cart fee.  When I go to Palouse Ridge, the green fee is double, but the cart fee is about the same.  Ditto for any other course I've played in the last 5 years.  So while there is great variability in green fees, $20 to $100 the cart fees are always between $15 and $18.

[Greg Tallman]

Our cart fee is $0

[John Kavanaugh]

Carts also carry divot fill material.  You can see a noticeable increase in unfilled divots during cart path only time periods.  It is a fair assumption that walkers do not carry sand to fill divots thus making playing conditions less desirable. 

[Kalen Braley]

Greg,

There are always exceptions.  I've played a handful of courses in Utah and WA that are carts mandatory, so its just one fee and hard to know where thier numbers come in at.  But these courses represent easily less than 10% of the courses in this area, as the rest are all cart optional.

[Bob_Huntley]

It's a pity we can't call upon Mike Souchak to answer this question. He died a wealthy man helped by the fact that a golf cart is generally amortised within a year.

At private clubs one does not pay a green fee, so the rental of a cart probably produces a profit many times that of the loss from Food and Beverage.

Bob

[Kalen Braley]

Bob,

Excellent point.  After that 1st year, its all gravy after that!! 

[Greg Tallman]

Greg,

There are always exceptions.  I've played a handful of courses in Utah and WA that are carts mandatory, so its just one fee and hard to know where thier numbers come in at.  But these courses represent easily less than 10% of the courses in this area, as the rest are all cart optional.

Our carts are not mandatory.

[Greg Tallman]

Along the lines of what Tom is pointing out it would be an interesting study to advertise a $25 green fee and $330 cart fee and see what would happen over the course of a week. Yes, the numbers add up to our normal all in fee.

[Brent Hutto]

Carts also carry divot fill material.  You can see a noticeable increase in unfilled divots during cart path only time periods.  It is a fair assumption that walkers do not carry sand to fill divots thus making playing conditions less desirable. 

It's the reason I almost never play without my 3-wheeler. I have a lightweight golf bag and with 9-10 clubs it does not weigh very much. But put eight pounds of sand in there and suddenly it's a 20+ pound burden.

At my club, if not the majority then certainly at least half of the walkers use push-carts. Walkers with push carts generally fill divots at about the rate as golfers in riding carts. About 2/3 of them fill their divots and 1/3 do not.

Walkers with their bag on shoulder? I'd say maybe 10-20% fill divots, if that. I carry some sand/seed mix even when I'm shouldering the bag but generally run out at some point between refill stations. But I do agree with the general point that more walkers (without push carts) leading to more unfilled divots.

[Tom_Doak]

Carts also carry divot fill material.  You can see a noticeable increase in unfilled divots during cart path only time periods.  It is a fair assumption that walkers do not carry sand to fill divots thus making playing conditions less desirable. 

John:

In Australia nearly all golfers carry a small pail of sand on their trolleys to fill in their divots.

[Tom_Doak]

tom, I agree with your analysis to a degree.  But your model, that all in cost is the key factor, depends on an assumption about elasticity of demand and the impact of carts on total rounds.  If carts  add to the total rounds played then they add profit so long as each round drops dollars to the bottom line.  Moreover, if there is a different rate for walking, one can determine the impact of carts by comparing the number of rounds and the net benefit.   Costs of cart barns, paths, electricty/gas, maintenance can all be deducted if amortized properly and I suspect the profit will be substantial.

that is not to say that tis is the best way to play the game.  As you know, i am a walker.  But in an era where courses are closing, it is naive to expect course owners and operators to ignore a significant source of revenue.  Each course should undertake its own calculation so that it understands the costs and benefits.  Depending upon their situation and the nature of their facility, they may choose a form of pricing and permissible cart usage that is suited to their respective goals.  the architecture benefits when there are no paths.

Shel:

I'm not advocating that courses outlaw or even limit cart use.  Actually, in some respects I prefer to see the higher prices for carts, as that alone might encourage a few more people to walk instead.

Per David's original question, I'm just saying that the pricing of golf carts has nothing to do with supply and demand and operational cost.  It's a profit center because it's a monopoly and because someone prefers to assign more of the total cost to "carts" than to "green fees".

In Myrtle Beach years ago, you always booked package deals which included your hotel and your green fee.  It did NOT include cart fees, so courses made carts mandatory and jacked up their cart fees as a way to charge a surtax on the golf.

Hey!  That's what it is -- a mandated SURTAX!  That'll win some more people over to my side of the argument 

[Brent Hutto]

These accounting games can have real-world implications. For the first 10 years I played golf it was at a fairly scruffy and crowded public course near my house. Semi-private, all the golf you could walk for $65/month (this in the mid-late 1990's). Then one summer I moved upscale to a much nicer course across town. Another semi-private but they were really hurting for members so they made it $100/month with no initiation fee and brought in a fair number of newcomers, including myself. Once again, no charge for walking and I think carts were like 20 bucks if you wanted to ride.

Here's the problem. They would book a certain amount of mid-week package deals for out-of-towners. The operator of the package deal charged whatever they charged and the golf course basically got a van loads a day of one-time visitors and the course's revenue was the $20 cart fee plus whatever F&B they bought while they were there. I guess it worked out to a couple hundred bucks worth of cart fees per day, two or three days a week.

Apparently the package-deal folks noticed some of the regulars walking. They wanted to walk too and avoid the 20 bucks. Well the course is going to do no such thing as that was about 90% of their income from the visitors (who tended not to buy much F&B anyway). So the package-deal operators complained and said they were going to go elsewhere and avoid the complaints.

Final result was an edict. No walking, period. I offered to pay the 20 bucks a round and walk anyway but no dice. It was the money they'd get from me they wanted. It was the ability to charge 20 bucks to everyone across the board. Didn't make a lick of sense but myself and just about all of the other newcomers moved on to other places after the no-walking edict. I hope they lost money on the deal but probably not, alas.

[SL_Solow]

Tom;  Interesting point.  However, if one really wanted to figure out the appropriate pricing, one would figure all of the costs associated with the golf portion of the operation e.g. mortgage,maintenance including equipment amortization, necessarry locker facilities, pro salaries etc and divide that by a target number of rounds.  Add an achievable profit margin and you have a cost per round.  You may then target a number of rounds for cart use, figure the additional cost of carts including acquisition/rental, cart path maintenance and the like, add the same profit margin and you determine the normalized fee differential.  I suspect that you are correct that the current charge for carts includes a greater margin than for walking rounds.  The imponderable is whether, in order to achieve the same income as under the current regime, the operator would have to increase the charge for walking to offset the lower margins on carts and whether that would reduce the number of walking rounds.  If it did, then the cost of fleet maintenance would likely increase, thus creating an imbalance which would require pricing adjustments until one achieved an equilibium.  If one assumes that the operator is trying to maximize profits (which may not be true in all cases, particularly private clubs), and further assumes sufficient information (another dubious assumption) current prices should reflect these realities.  But in the real world, it is entirely conceivable that the operators have miscalculated and/or there are other goals beyond profits.

[Colin Macqueen]

John K,

At my club, Indooroopilly Golf Club, in Oz it is mandatory that every golfer carry on bag, push buggy or motorised cart a small plastic pail with "sand mixture" and the majority of divots are filled right away and as often or not a few extras on the way around. It is really frowned upon if you do not have yer bucket with you and yer guilt (at least for this lapsed Catholic!) seems a powerful motivator and the sinner has found a bucket and sand by the third hole.

Cheers Colin

[Brent Hutto]

For me not having my sand bottle has the same effect as playing off muddy lies. I try so hard to "pick" the ball I end up topping it or thinning it. Best to just keep the sand close at hand and go ahead making divots as necessary.

But what do I know. If I'm not keeping score I kick the ball into the rough. I figure if there's no stakes on the line I don't deserve to be chewing up the fairway...

[Ken Moum]

But what do I know. If I'm not keeping score I kick the ball into the rough. I figure if there's no stakes on the line I don't deserve to be chewing up the fairway...

Oh My!

Even Melvin would have to be proud of that attitude... I hope.

Of course our rat-bastard handicap system says you aren't allowed to play without keeping score.

Not that anyone around these parts worries about that kind of stuff.

K

[James Bennett]

It is amazing to think of the significant financial and human investment involved in designing, constructing and maintaining a golf course for perhaps a $70 green fee, and the limited investment and maintenance requirements for a $30 cart fee.

It would be more like 90/10 at least, wouldn't it!

The cart fee is really golf's answer to 'do you want fries with that burger sir?  And a large (diet) coke as well?'

[Jud_T]

David,

A five hour round is a five hour round regardless of how one transports onesself around the course.

[Bill_McBride]

I always saw carts in the US as just a basic part of the speed everything up to get more turnover game. Since the average public course player is slow this certainly helps and serves a purpose.

Put them in carts, make them mandatory and we speed up play so we can funnel more rounds through the course.

It's similar to all these restaurants where they want to turn tables, get you in, get you out and off to the movies because instead of having one sitting per night they want to have as many as possible.

I agree with the arguments above but I think (unless I missed it) volume is a large part and I'll be most of the golfing public outside of GCA sees carts as a luxury, especially when equipped with a beer cooler, GPS, airconditioning, ball and club cleaner etc etc....

Who told you carts are faster?   The duration of a round is the same either way, it's the rhythm that's different.

Who is charging $27 per player for carts?   That seems high.  Ours is $18. 

[Brett_Morrissy]

To Dave's original question which seems to highlight 'extremely':
I would say that rarely are the full costs considered by any facility in costing of the a round of golf in a cart, and so they are not extremely profitable

If we were to look at a real world, hypothetical test case, that both Dave is well aware of and one of the chief posters on this particular thread.

If we looked at St Andrews Beach, currently offering free carts (as a marketing incentive) with any mid week round. A course built on sandy coastal base, and without a permanent clubhouse so let's assume there is not a lot of budget available for capital expenditure. Sealed cart paths, from my recollections, are only of the steepest slopes - down to 1st tee, 16th to 17th fairway and 18 green back up to temporary house. 

Now as will undoubtedly occur, pot holes, ruts etc will need to be repaired by maintenance staff, damage done to cart suspension requiring expensive repairs (say 20% of new ) especially after significant rainfall as we have had this year, eventually the prudent management team, super, members or guests say - please - seal all the cart paths, it will cause less damage to the carts, will reduce our repair and maintenance workload, will reduce dust in summer months, etc

I would guess this would be at least A$1 m, probably a hell of a lot more. (imagine trying to get fully laden cement trucks out onto a links course)

Add this to a cart fleet that needs to turned over every 3-6 yrs depending on the impression you wish to portray to players and visitors - 60 carts every 5 years - add another $75k per year.  Plus cleaning, someone to get them out of shed each morning and put them away again at night, replace the odd dodgy battery, repair damaged seat, wheels, insurance, signage, etc

Cost to build a shelter shed and charging gear ? Realistically, probably at least $500k.

I understand that accountants can apply taxation, deprecation schedules etc - but at the end of the day, the club or owner still has to pay for it.

I know there is profit in renting our an item with a reasonably low cost with minimal actual maintenance comparative to income, but when infrastructure, that is usually buried under set up is taken into account, maybe it is not as much as the industry proponents say....and that the aesthetics do come into play, in perception of a golf course and it's quality and experience delivered to the players.

[Kris Shreiner]

Rich,

Hardly Toto-land my friend. Caddies have their place....JUST LIKE CARTS! An entire industry spends an inordinate amount of time AND money PROMOTING cartball. Human beings are inherently lazy and gullible. How can one expect them not to graviate to sloth and the cart game when damn near every avenue portrays it as the way to play? I frequently play golf from a cart, though it isn't my first choice.

The idea that you MUST play from a cart is pathetic and TOTALLY driven by greed and lack of an efficient model when designing and running the facility. These places constantly struggle and eventually go under. Golf can be played in many ways and a variety of options is essential to the game's health longterm. Well-run facilities with folks that put delivering a solid golf experience FIRST, regardless of the price-point level, are the best insurance against a continued slide of the sport.

Cheers,
Kris

[David Cronheim]

Tom,

At a private course, the members pay no greens fees, simply an upfront fee for usage of the course. I do not believe that the cart fee would be higher if the dues were lower or vice versa. I think both are determined independently in the private club world based on what market forces allow. A super high end club can get more in dues, but if they charged $80/round to use a cart, the members would not be all that happy. To use your example and assume that the two are linked, a course with super low dues, could not charge a very high cart fee to compensate for their dues. I think your argument works theoretically for both private and public courses, but in practice, only really for public courses where the cart fee is often wrapped into the "greens fees."

David