Architect Fees, 1962 vs. Now: More Money, Yes, But More Value?

[Mark Bourgeois]

Sports Illustrated in 1962 quoted architect fees of $25,000 to $50,000.  Adjusting those figures for inflation produces a 2006 bracket of $166,667 to $333,333.

The article topic was Dick Wilson vs. Robert Trent Jones, so I'm assuming that $25K-$50K represented the high end of the market, which means fees today on the high end have, what, tripled -- after adjusting for inflation?

Questions:
1. Taking $25K vs. $166,667 as the low end for "quality" or name architects, have fees increased during that period in real terms for these designers?

2. Beyond marketing, branding, supply-and-demand, that sort of thing, are there any reasons to explain why fees rose in real terms by such large amounts?  Do architects do more today?  Are they somehow vastly more competent?  Are available sites worse and therefore demanding of greater competencies? Are today's designers able to build courses more cheaply owing to their vast training, expertise at drainage, etc.?

3. Why the heck have high-end fees skyrocketed in real terms?  Please try to avoid knee-jerk responses like "Jack Nicklaus" or "marketing." Those seem at heart really more about the new business model of development courses.  But then why couldn't I just slap a famous golfer's name on a project, pay a lower fee and get the same business result?

4. Getting to branding, how much of this actually is down to the use of branding as a proxy for quality -- more specifically, to reduce uncertainty.  Just like you always know what kind of hamburger you're going to get when you go to McDonald's, you always know what kind of golf course you're going to get when you go to Fazio, Dye, Nicklaus, et al.  Have golfer expectations of design changed somehow -- not conditioning or that sort of thing, but rather about the "experience" and crucial to the argument here knowing with certainty in advance what that experience likely is to be.

5. Is 1962 representative?  Or if the post-war period was the dark ages of design did fees represent a nadir, and for a better picture we'd need to go back to the 1920s fees?

Mark

[Jeff_Brauer]

Thanks for the links and article snippets.  Good - no, great - stuff.

It sounds to me like like top end gca's - much like movie actors and sports stars - had not yet fully explored just how much more they could have gotten for being a "star" in their field.  That's pretty general, but true across many fields.  Specific to gca, remember that in that era, there were still "standard minimum fee" charts in all the design professions.  I recall that ASGCA's chart allowed  designers to charge more, but perhaps as past president, Jones didn't feel like he should charge that much more?

[Jim Nugent]

Some of it may be due to the spread of housing/golf course communities.  i.e. the golf course often does not have to stand on its own now, but has become part of the lure to sell houses.   

Also, remember that the CPI is not that great an indicator of price rises.  It is an average, that leaves out some of the biggest price changes of all: real estate and autos.   

But I suspect most of it comes down to the explosion of interest in golf, i.e. demand/supply. 

[Jim_Kennedy]

Mark,
Good negotiations.
I am familiar with structure architects, who's fees are a percentage of the value of the finished product. They are making more money today because the project has a much higher 'worth'.
This isn't much different than a baseball player who made in the thousands 40 years ago but in the millions today. Baseball revenues soared and players negotiated their piece.
This is what hurts the average production worker today. While companies are making record profits on increased production, no one seems to be able to negotiate a fair share for the workers.

A GCA building a course in '62 was turning out a finished product with a much lower price tag. When other influences like inflation, gas prices, real estate costs, stupid buyers, etc., caused a major increase in the cost of building a course, architects fees rose with them. I'll bet that their fees, as a percentage of the finished product, are generally the same, excluding the Derek Jeters of their field.  

[Mark Bourgeois]

Jeff and Jim

Thanks for the replies.  Here's Nicklaus's take on it in 1974:

"The big limitation to what sort of course you can build today is the quality of the land left over once the developers have had their pick. Almost every major American course was built between the two world wars as a private club, using prime land then easily and cheaply available, with virtually no real estate or other commercial considerations. The choice of land, the designing, the construction, the maturing maintenance, were all labors of love.

"Those days are vanishing, almost certainly forever. National Golf Foundation statistics show that of the 10,896 golf courses in operation at the end of 1973, 4,710, or 43.2%, were "for-profit" operations. Two decades earlier only 26.1% of the nation's courses were operated for profit. NGF figures also show that only 21.46% of the full-size courses built in the U.S. in 1963 were part of either second-or primary-home developments, whereas 44.38% of the courses built in 1973 were in those categories. It's a safe bet that most of those 1973 real-estate-linked courses were built on leftover dirt—the best land having gone for homesites and utilities. Considering the land-money limitations within which they have had to work, I've come to believe that the majority of real pros among U.S. golf-course designers are doing some fine work."

As a rank layman, I hadn't thought of Nicklaus's point about development courses being for-profit vs. the old model of nonprofits.

That's interesting to me, although I don't know if it actually explains the cause rather than a symptom.  And even the nonprofit side seems to have changed, too, yes? In the Old Days it seemed like it was groups of "prominent citizens" that formed clubs whereas today it's gazillionaires who inevitably have some sort of "vision."

Mark

[Jeff_Brauer]

Mark,

I think there was a gradual realization that golf had to be operated at a profit for the game to survive, at least in the US.  Even the old line clubs started booking weddings and corporate outings, getting tired of divvying up the bill at the end of the year, with the exception of the richest clubs who prefer privacy.

Getting back to your fee issue, its quite possible that the non profit motives of Golden Age courses held down fees.  Is it possible that a Ross or a MacK used their reputations to get more work, rather than bigger fees for each project?

[Peter Pallotta]

Mark

I think it was Golden Age movie star Ronald Coleman who, when asked what he thought he was worth, said "Before God, about a dollar and a half; before Hollywood, as much as my agent can get me".

Doesn't add anything to this thread, I know, but I've been trying to find a place to use that line for months.

Peter 

[Ian Andrew]

1. Taking $25K vs. $166,667 as the low end for "quality" or name architects, have fees increased during that period in real terms for these designers?

No people work for less than that, but on the upper end the numbers are off the charts – but that speaks to celebrity doesn’t it.

2. Beyond marketing, branding, supply-and-demand, that sort of thing, are there any reasons to explain why fees rose in real terms by such large amounts?  Do architects do more today? 

Yes, wetlands, water issues, reclaimation sites, wetland issues, storm water management requirements , severe topography, environmental issues, and the approvals process is far more complicated each an every year

Are they somehow vastly more competent? 

Technically I would think so - but that's a generalization. The requirements of detailed projects in difficult sites is far beyond the past. Having to produce multiple revitalization and reclaimation drawings is likely not common to the past.

Are available sites worse and therefore demanding of greater competencies?

Yes and no. We are certainly asked to build on sites that are not really made for golf and that involves a terrific amount of work - but then again Lido wasn't a great site either was it.

Are today's designers able to build courses more cheaply owing to their vast training, expertise at drainage, etc.?

No, I think past designers built more cheaply – a few choose to use the same ideas but they are the minority.

3. Why the heck have high-end fees skyrocketed in real terms? 

Celebrity – by having a celebrity involved it makes many people think they are more important. They love showing the photos to their friends. Wait till you see the fees on the new Britney Spears course in planning – just kidding.

Please try to avoid knee-jerk responses like "Jack Nicklaus" or "marketing." Those seem at heart really more about the new business model of development courses.  But then why couldn't I just slap a famous golfer's name on a project, pay a lower fee and get the same business result?

The famous players know the value of their name. For Jack his name is worth 1.5 million, for Tiger its 5 million, for a top 20 its still around a million. It’s the name that you buy – not their skills (I’m not debating involvement but mearly pointing out where the bulk of the price comes from).

4. Getting to branding, how much of this actually is down to the use of branding as a proxy for quality -- more specifically, to reduce uncertainty.  Just like you always know what kind of hamburger you're going to get when you go to McDonald's, you always know what kind of golf course you're going to get when you go to Fazio, Dye, Nicklaus, et al.  Have golfer expectations of design changed somehow -- not conditioning or that sort of thing, but rather about the "experience" and crucial to the argument here knowing with certainty in advance what that experience likely is to be.

When People seek out a new course they general go to a course designed by a name they know and trust. Nicklaus is like a trustworthy chain where you know what you will get - good design and great conditions. People on this site will seek out a Doak or Coore because they want a certain type of course. The average player will seek out Dye, Nicklaus, Fazio or even Palmer because the recognize the name and assume quality.

5. Is 1962 representative?  Or if the post-war period was the dark ages of design did fees represent a nadir, and for a better picture we'd need to go back to the 1920s fees?

No, the aboration is recent – back in the 1980’s the design fees changed forever when the golf architect became a celebrity. Dye's American Express commercial meant a great deal to designers - they were now celebrities - since people wanted to know the name of the architect. Anyone making the top end money owes Dye and Nicklaus a thanks for what they did for them.

That was a lot of questions Mark...

[Forrest Richardson]

I used to take great pains to calculate my fees. Then it became apparent that I do not do this for money (purely) and I made that revelation public. Frankly, I am weak! I do what I do — not for money — but, of course, it helps.

Here is how I explain the above:

http://www.golfgroupltd.com/writings/toy_boat.html

[Jeff_Brauer]

Ian,

I agree that it has gotten more complicated, but there are also more consultants, too. So, in addition to the gca fees, over the years the things we USED to do have been farmed out to more "expert" people, including agronomists and soil science labs, irrigation designers, wetland delineators and restorers, landscape architects, master drainage engineers, perhaps cart path designers, and a host of other environmental consultants, including Audubon International or similar.

So the owner pays a LOT more in fees, even if paying the low end fee to the gca.  Two things may be happening - first, the total cost of golf development (and ahousing development) have gone up, so design fees can go up.  Even if a regional architect is charging 10% rather than 7% of his fee, it seems to get absorbed in a bigger budget.  And, maybe the entire cost structure sort of makes the big name fee seem more worth it, or at least more of a risk mitigation, given the costs.

[Brad Klein]

There are two kinds of mentalities when it comes to freelancers -- and architects are freelancers.

The one says to do 'right thing," be modest, do it for the love, make enough to keep things modest and to keep busy but to price your fees at what it means to you in terms of your time.

The other says to price what the value is to the client, that fees are in actually "inversely elastic" because the higher the rate the more valuable they are to someone who values it. Besides, why try to save money when you're dealing with rich people and lawyers who charge $300-$800 an hour? On this theory, the idea is to charge enough that you are not always chasing work, each project enhances your equity, and you are able to pick and chose you work on projects based upon what you want to be working on rather than staying desparately busy just trying to keep up with your portfolio. It takes guts to go the second route, but it actually enables you to do better work.

I see the same mentality among freelance writers -- there are lots of great writers who undervalue themselves and end up being extremely busy because they have to take on a lot of work to make even a modicum of a living, while others with a different sense of self, a different magazine profile and a bit of luck (probably more so than skill) have wider options at a much higher rater.

[Jeff_Brauer]

One of my favorite cartoons from long ago shows two contractors, standing on the street in ragged clothes.  The first says, "I always bid too high" and the second says, "I always bid too low."

There is an old saying that if you get every job you go after, your fees are too low and its time to raise them.  It similar to golf courses - would you rather have 50K rounds at $40 or 40K rounds at $50?  Same revenue, less hassle and course damage.

The trick is finding the exact right range for your percieved value.

[Lester George]

You mean there are actually guys getting paid to do this?  Man am I stupid!

Lester

[Matthew Hunt]

I used to take great pains to calculate my fees. Then it became apparent that I do not do this for money (purely) and I made that revelation public. Frankly, I am weak! I do what I do — not for money — but, of course, it helps.

Here is how I explain the above:

http://www.golfgroupltd.com/writings/toy_boat.html

Class story Forrest.