Green fees inflation rate?

[Doug Siebert]

Is anyone aware of any attempts to study the inflation rate of greens fees?  I remember my dad telling me about how TOC was something like 15 pounds on his first visit in the mid 80s, and is now nearly 10x higher.  The story about the golf nut who payed $8 greens fees at PB in 1964 is pretty scary though -- that's a 50x increase in 40 years.  Can even Silicon Valley's real estate price increases compare to that?

If greens fees at top courses go up another 50x in the next forty years, I'm not sure my retirement savings will be sufficient to pay a $20K green fee in 2045.  Maybe I should play it now so I won't have to bother then

Most importantly, if PB is still considered a top course by most in 2045, will Matt Ward consider it "affordable" at $20K based on the value proposition of a once in a lifetime experience?

[Tom_Doak]

Doug:

I have seen reams of numbers put forward in feasability studies or in financial projections for new courses, most of which use a 3% annual inflation rate for green fees.

Personally, I think that's hogwash; I don't think you can depend on steady increases.  If other courses in the area are doing good business the green fees may rise with the tide for a while, but everything depends on the individual market; and you can almost guarantee that at some point it will get overbuilt and then only the top one or two courses can expect their fees to hold.

With the top courses in America or the UK, it's not the inflation rate that impacts the green fee -- it's probably more like the Dow Jones Average.  When the wealthy are flush with cash, you can bet green fees at prestigious courses are going to go up.

[Casey Wade]

Tom and Sean are correct.  The market, as in discretionary income, along with the market, supply and demand in the amount of golf courses, affect the pricing of golf.  Other discretionary income sports like bowling are not as hard hit as they do not require a sizable investment for equipment and lane fees as golf clubs and green fees.  Believe me that I know how much a bowling ball costs because I'm in a league on Monday nights!

[A_Clay_Man]

The green fee at Pebble in the 30's was somewhere near $1.75 and they bitched like crazy when it went to $3.50.

In the early 80's, the stock market traded it's near-term low around August of 82'. From 83' on, we started to see annual rises in the fees. Demand was high and increasing. The increments were small, but now, 20 something years later, going back to Chicago and paying $57.00 for a middle of the road layout,(Big Run) seems a bit of a rip-off. When it was $35, it was fairly priced. When Dubbs was $57, it was high but worth it. I can't imagine forking over close to $125 for the privledge, now. Waveland was $3.00, what's it now?

I'd rather fly to Pebble, its a steal compared to many over-priced experiences.

[Keith Durrant]

For the record, I played PB in 1978/79 and the green fee was $48. I remember, because it was expensive, even then.

Inflation was high in the general economy in the 70s, so that would have impacted green fees.

[GeoffreyC]

Pebble went up quickly as the first few times I played it in 1976-77 the fee was $25.  Those were my expensive rounds during that period.

[W.H. Cosgrove]

I play in the Pacific Northwest.  We have not in a serious way breached the $100 barrier (Bandon being the exception) in fact many local courses have seen almost no inflation in the last 10 years.  

A course played in 1994 was $45.  They try to get $50 on weekends now but complicated fee schedules used now rarely reach that figure.  

In our area of the country, it seems to me that simple supply and demand have reduced inflation to next to nothing and may in fact be deflationary in some instances.  

I will be interested to see what the public course in Cle Elum next to Tom Doaks private will be charging.  I just don't see much pricing power for these new courses beyond the player who visits once out of curiosity.

[Tiger_Bernhardt]

The visitor rates at the high profiles courses  in Scotland and Ireland seem to be out of control. As much as I love to go there is is more like 10 to 25% a year. This does not take in to account the currency problems that go with a weak President I mean dollar.

[Bob_Huntley]

I played Pebble Beach for the first time in 1963, having recently arrived from Rhodesia. I wrote an article for South African Golf Magazine comparing the cost of golf in America to the cosy arrangements we had in Southern Africa. I cannot find the article at present,  but it went something like this.

"I played Pebble Beach Golf Links today and the beauty of the place and golfing exhilaration is only matched by its cost. The Green Fee was $7.00 and the caddie fee a rather steep $10.00. Compared to Nchanga G.C., that $17.00 would have paid for about seven or eight months of my dues."

[Joe Andriole]

It's a lot like buying wine.  The world is awash with good wine from all corners of the earth and very good wine is more available and more reasonably priced than ever.  However, the great names like Lafite, Romanee Contee are better known than ever.  The top end price rises have risen almost exponential to the market.  I think it is similar with golf.  TOC, Pebble Beach etc are like grand cru and then there's the hot upstarts like Sreaming Eagle which would be akin to  maybe Whistling Straits.  Anyway that's what I'm tinking after a glass of Corton-Charlemagne, Tollot-Beaut '92.

[Jeff_Brauer]

Here is a link to the government inflation calculator.

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

For grins, I calculated my personal inflation index on average mid level public courses when I started in 1967 ($4 weekday, $6 weekend) until now.

$4 translates to $23.43 and $6 translates to $35.16. (presuming I did the math more accurately than my typical scorecard... )

In fact, that is what about what we pay around DFW for mid to high end publics now, which may not have even been invented in 1968.  And, the courses are better than Palatine Municipal Golf Course was in design (but not by much, it was a Larry Packard course) and certainly in maintenance.  Similar municipally run courses can still be had in DFW for under $30 weekends and under $20 weekdays.  So, for the bargain conscious public golfer, it golf imay be as good, as it ever was, unless the "average Joe"  total income hasn't kept up with inflation.

High end is a different story, somewhat.  Had I done this survey a few years ago, my greens fee for high end courses would be higher than the inflation rate, but it has come back down to normal levels.  In other words, methinks that PB and TOC are charigng more now because we'll pay it, where our forefathers never would.  But, we are learning!  As one article I read says, even mid wealthy people shop at Wal Mart now on staples, to save more for their luxuries.

So, while I grant you that Pebble Beach and St. Andrews have gone out of the statosphere in price, they are unusual ias prime tourist destinations.  You could argue that the locals who paid $7 (which would be about $40 now) in the 1960's were probably underpaying quite a bit at that time. I hope they realized what a deal they had!  

Our real problem as Americans lies in the fact that  our savings rate is statistically 0%.  We have perhaps enjoyed our pursuit(s) too much, too early.  The key to balancing our finances is not "now" or "later" its probably less at all times, unless you have a job where you can enjoy golf on someone elses expense account?

[Michael Wharton-Palmer]

Bob thats great!!!!!!
What are the green fees at a place like Royal Durban or The Wanderers in S Africa nowadays?
But back to this thread as yuo are all sying it is the simple supply and demand that govers everything..if can gouge the clientele and get away with it continue!!

The pebble beach area is the biggest culprit there is..but hey the teetimes are always full, and I know that the Pebble Beach partners are really happy about the current scenario.

[Jim_Kennedy]

Jeff Brauer said:

Our real problem as Americans lies in the fact that our savings rate is statistically 0%

Our real problem as Americans (economically) lies in the fact that our incomes have not kept pace with inflation. It would cost $3.10 of 2000 dollars to buy what $1.00 could in 1976, but $1.00 of income in 1976 is only $2.00 of income today. We have lost 1/3 of the value of our incomes to inflation, making it incredibly hard to save.

[A.G._Crockett]

The thing about inflation rates is that, in general, wages for most workers keep pace with or exceed the inflation rate, but ONLY if you look at the rate for the CPI as a whole; it doesn't work for individual items.  Additionally, since inflation rates are calculated on a variety of goods and services, and then weighted to reflect the "typical" purchases of a "typical" family, it would very difficult to make any sense of what has happened to any individual item, much less very unusual golf courses like those two.  I would assume that the rise in greens fees at places like Pebble and TOC is

a. a matter of demand, rather than reflective of inflation generally

b. an "adjustment" to the "market-clearing" level, which we are probably at or near.  

I played TOC in 1984, and paid less than $20 including rental clubs.  My wages have just about tripled since then, which obviously hasn't kept pace with TOC's prices, but still, as a one-time expenditure, it would be a no-brainer.  Supply and demand is alive and well, IMHO.

[Jeff_Brauer]

AG,

As if on cue, the Dallas Morning News had an article about wage rates today, and you are right!  They note that for the most part, the lowest wage workers have been traditionally hardest hit.  However, in this recession, the white collar workers (probably due in part to the internet and computers allowing off shoring of many tech jobs) in the age group 30-44 were hardest hit.

Those would most likely make up the play at upscale publics, resorts and unique destinations.  I suspect that the really unique places will always have their draw, but others will have to find ways to offer specials to draw play.  For that matter, as you get older you start thinking (probably too late) about retirement savings, and get even more financially conservative generally.  And I think all age groups get a bit more conservative after every recession, as they learn their lesson a bit each time.  

Just my $0.02.  Or, with inflation, my $0.005......

[Jonathan Cummings]

Speaking of inflation, with the euro surging against the dollar I wonder if the marquee Irish/Scottish courses are seeing any impact.  

What's Old Head, now $300 euro = about $400.  K-Club isn't far behind either.  Gleneagles and Turnberry are getting equivalent fees if you play without staying in their hotels.

I've been going to Ireland/Scotland for years.  I'll be going to west Ireland twice next summer and as I put together those trips I finding out that the costs are significantly higher due more to the exchange rate than increase in greens fees.

JC

[A.G._Crockett]

Jeff Brauer said:

Our real problem as Americans lies in the fact that our savings rate is statistically 0%

Our real problem as Americans (economically) lies in the fact that our incomes have not kept pace with inflation. It would cost $3.10 of 2000 dollars to buy what $1.00 could in 1976, but $1.00 of income in 1976 is only $2.00 of income today. We have lost 1/3 of the value of our incomes to inflation, making it incredibly hard to save.

Jim,
Basically, the CPI indicates that prices in the U.S. have tripled since 1976, but national disposable income during that period of time has gone up much, much faster, on the order of 5 times.  Much of this is due to the extremely low inflation of the Greenspan years, averaging on 3.1% since 1987, and only 2.7% since 1992.  Since 1992, national disposable income has increased by about 68%, which corresponds pretty well to the golf boom.

The average savings rate in the U.S. is about 2.5%, which is one of the lowest in the developed world (contrasted, for instance, with just under 10% in Germany, or almost 16% in Japan.)  However, most economists attribute our low savings rate to extreme confidence in the economy as compared to other countries, rather than inflation/price problems.

I continue to suspect that the golf boom has been fueled almost entirely by:
a. the aging of the baby boomers and their quest for non-contact recreation.  
b. the aging of the baby boomers and their higher disposable incomes
c. the aging of the baby boomers and their demand for luxury housing, which often means golf course communities.

All of these mean that there will likely be some sort of a shake-out in the golf course market in years to come (which may have already begun), but I really can't see that affecting Pebble or the TOC, except by a slowing of the rate of increase of their greens fees.

[SB]

I'd be curious what initiation fees have done, as well.  Somewhere in the 90's, a $30,000 fee in many cities went from stratospheric to rather common.  Many have come down lately, but they are still much higher than before. If I had to guess, I'd say they about doubled in 10 years, which is an 8% annual increase.

[ForkaB]

Just out of curiosity I checked the journal I kept during my first trip to Scotland in 1976.  Some of the green fees were as follows:

Belleisle  £1.55
Carnoustie, Dornoch and Prestwick--£3.50 each
Blairgowrie and Troon--£5
Western Gailes--£6
Turnberry--£7 (non-guest rate)

These wer all day fees, BTW.........

[Jeff Goldman]

To what extent are corporate outings and play more common than in the 60s and 70s?  These are potentially tax deductible boondoggles which may account for many many rounds at Pebble, BWR and other very expensive public courses.  Even if they were not deductible business expenses, they may not directly hit the pocket book of those playing.  I know that major investment banks, etc. hold closing parties for big deals at these places all the time (golf included), and don't bat an eye over the fees.  Therefore, these places may not base their fees on private person demand but from corporate clients, who are generally far less fee-sensitive.

Jeff Goldman