[Tom_Doak]

I was having dinner with my wife the other night and talking about the state of our business when the truth suddenly hit me like a ton of bricks.  We've been dodging around it for months here but never coming to the big conclusion:


The economics of golf course construction in America NO LONGER WORK.  New courses depend on people willing to pay a premium for elitist memberships, OR on a housing development to subsidize the costs of construction.


I've heard many golf course management firms say the latter over the past few years ... i.e. a stand-alone golf course can't pay for itself.  But I never thought they really meant it!  Isn't this nuts?  Will someone not react?

This cold hard truth is NOT a cold, hard truth.  The truth is that our standards for construction and maintenance have become so costly that THEY don't work ... not the game of golf itself.  Yet there are 200 courses being built right now in America, and about 175 of them are being built to a standard that makes no sense.

If we don't come to our senses soon, we deserve to all go out of business.

[Marc Haring]

So do you have an answer Tom?

[Garland Bayley]

Is Gil Hanse's Rustic Canyon an example of the way out of this dilema?

[Neal_Meagher]

While I agree with Tom's assessment about new course construction being endangered by HAVING to be a part of an elitist club or a housing development, there is another factor to consider.

Since around 1970 when "ecology" was a new buzzword and the environmental movement began in earnest, regulations have become strict and onerous for all development, and not just for golf.  I believe that we should be protecting our environment and that development should strive to protect it whenever and wherever possible.  Our precious resources have a right to be protected.

Yet, with the current state of local, state and federal statutes designed to protect our resources, the added costs to a project have to be considered as one of the primary poisoners if you will, of reasonably-priced development.

Marc Haring asks Tom if he has an answer to his hypothesis, and I must admit I don't have much of one for this addendum to it.  At its core, we may be looking at a reinvention of an entire industry, much like the Detroit of the 1960's model had to give way to the automotive practices of Japan to compete in that marketplace.  Perhaps government regs may be the very thing to become a catalyst for simpler and more humble construction and maintenance.

In essence, it may take a series of far-sighted golf developers and management companies to use existing rules to actually aid in this movement.  In other words, it may be better to join than to fight, thereby enabling the most vociferous opponents of golf projects to come aboard to welcome a more honest, simple and, well, Scottish way of viewing golf courses.

[Mike Nuzzo]

Marc,

Here is the answer Tom is referring to...

Pacific Dunes, Wild Horse, Sand Hills, Black Mesa...
Courses built inexpensively.
I hope to do the same.

He is also referring to standard irrigation budgets over $2MM, Maint budgets over $1MM and Maint equip over $1-2MM.
Golf doesn't work for those that don't know what golf can be...

[cary lichtenstein]

Tom:

As I have traveled around the country, the truth you describe is 100% correct.

Not only that, but the market for those private clubs with elitist memberships is nearing its saturation point.

As an example, all the privates here in Jupiter/Palm Beach area except Seminole and Jupiter Hills are looking for members, and others that are full, have a waiting list to get out with their resignation fee.

I think that market will shrink over the next 10 years and then disaappear almost entirely.

That leaves the gated community/housing primarily in the Southern band of the US as the only viable new construction market for golf courses. That market should remain strong as the population ages for the next 20 years.

[Patrick_Mucci]

Tom Doak,

Acquisition costs are a major factor in the equation.

Golf has pretty much followed the population centers over time, but acquiring land in areas readily accessable to the population has become excessively expensive, and, the resistance to land being converted to a golf course comes from a variety of groups and makes development more difficult and certainly more costly as well.

It's going to be interesting to see how Trump National, Hamilton Farms, Liberty National and Bayonne golf courses fare over the next few years.

Closer to home for you is how The Bridge, Friar's Head, Sebonack and East Hampton will fare, when NGLA, Westhampton, Maidstone, Shinnecock and Southampton have preceeded them.

Ask yourself the following.

How would the same eight clubs I just mentioned fare if the initiation fees were $ 40,000 with dues of $ 6,000 per year ?

My guess is that they'd all be sold out.

When you consider the acquisition costs, golf course construction costs, clubhouse costs and maintainance facilities costs, it's almost impossible to develop anything but a golf course for the very wealthy in any area close to population centers.

Do clubs like Sand Hills have enduring appeal to their memberships ?

Is there a membership shelf life for remotely located golf courses ?

Once the initial romance or glamour wears off, how long before the trek to get to the golf course begins to erode the desire to belong to the golf course ?

Could Sebonack have been built if it wasn't for Mike Pascucci's passion and deep pockets ?

Today, you need both, or a golf club in a densely populated area can't survive.

Time will tell if remotely located golf courses can  endure.

Garland Bayley.

Rustic Canyon is not private.
Rustic Canyon had NO acquisition costs.

[Tiger_Bernhardt]

Tom, I think your conclusion has been a fact for over a decade with the exception of a few select underserved markets for higher end daily fee/resort projects. The other exception is the courses located in fact situations like Mike Nuzzo noted. It seems land costs, consultant fees, design standards and future maintenance costs are all in the mix. I mean the Tour guys along with Jack and Fazios group set the standard. The tour projects are past stupid into only a fool would do them department. It will be interesting if common sense changes these paractices or we will go back to the general idea the 3rd owner of the course is the one who makes money. And then only on the ones built to be maintained at a reasonable cost.

[cary lichtenstein]

One other point regarding the elitist clubs...Me thinks that that the remote ones will lose membership over time as the reality of playing there just a few times per year starts to wear on both minds and the pocket books of the members.

Realistically, how many rounds of golf is someone going to play in a remore area? Let's say, 2 trips for 4 days is probably max, so that's 8 rounds of golf.

If the dues are $8,000, that's $1,000 per round + transportation + lodging = $1,250 without taking into account the lose of use of the initiation dollars.

A bunch of members of these clubs also belong to 3 or 4 other remote clubs, however you do the math, once the honeymoon and excitement is over, there will be an annual attrition.

I remember having a drink with one guy at an elitist club and he told me his adm ass't brought him a spreadsheet on the 12 clubs he was a member of and how embarrassed he was that one club he had never played yet and 3 or 4 he hadn't been to in a few years. Now he was probably just bragging as some of these guys do, but you get the point.

When they hit 70 years old, the number of rounds played annually away from their home course drops dramatically as the travel takes its toll.

The new elitist clubs in rempte areas are all pitching to the area crowd of guys, how many more do they need or will they join?

[Craig Sweet]

Words of wisdom Mr. Lichtenstein....

Out here in the west, where land is still relatively plentiful and cheap, water is scarce and wages are low.  A course with a $35-45 greens fee is pushing the limits of what many Montanans can pay to play...

[Garland Bayley]

Tom,

You are familiar with Deer Lodge, MT. If the city had 200 acres of land, could you do a golf course there that would survive on $35-$45 green fees?

Could this be the municipal Bandon model?

[John Kirk]

Tom,

In my opinion, the current Bush administration has adjusted the tax policies to benefit wealthy Americans, and there are lots of wealthy Americans to build fancy golf courses for.  The supply of expensive golf courses may still exceed the demand for memberships, though.

Do all of the architects here build expensive, complex golf courses?

Golf architecture is largely tied to the country's economic prosperity.  The last 10-15 years have arguably been the most prosperous period in the country's history.  Coincidentally, the last 10-15 years has seen a second Golden Age of architecture.  There are a lot of great new golf courses out there.

I happen to think that a great deal of America's recent prosperity is a mirage, fueled by increased government spending and masked by deceptive economic reporting.  The country has some serious economic problems, such as national debt and rising energy costs, which will have to reckoned with.    

The first Golden Age of architecture peaked in the economic heyday of the 1920s and early 1930s, then ended as America battled with the Great Depression and then the second World War.  Are we in the process of watching history repeat itself?

A big thanks and good luck to all the architects who participate here.  I believe competition for choice jobs will get tougher in the next 20 years, and some great courses will be forced out of existence.  I still think it's more important to make the course fun to play, at some additional maintenance cost.  People will pay for fun, and greens fees and maintenance costs will fall, if that's what it takes to have fun golfing.

It's sort of like following the stock market, where Fazio and Nicklaus represent the ExxonMobils and General Electrics of the world.  Which one of you will become the next Google of golf architecture, a true innovator who built a better, cheaper product?

Mostly coherent rant is over.

[rgkeller]

Golf in the USA is pricing itself out of existence.

About the only young folks who play golf either are trying to make a career of it or are playing on their parents' nickel.

So even the "elite" golfers are disappearing.

[Craig Sweet]

Garland, as you know Old Works is about 15 miles from Deer Lodge and I believe their greens fee is about $45.

However, the cost of building that course was for the most part Superfund money and Arco money as per an enviromental remediation plan.

[PThomas]

well, we all know that too many courses have been built in the last decade, so oversupply is a problem

maintenance to an nth degree and  too large clubhouses also add unnecessary expenses

[Brent Hutto]

To the best of my knowledge, there is one golf course in my area that makes money and has always made money. Its 27 holes were built nine holes at a time by a rural landowner (that area is now suburbs) starting in the mid-70's. No debt in the history of the course and it has therefore been consistently profitable for almost 30 years. I played there yesterday (Saturday) for $20 walking, I think with a cart it is $35-$36 or so.

In the last few years the owner has sold off much of the land surrounding the course for somewhat upscale housing. So that is no doubt a large windfall. But for the first 20+ years it was made a slight operating profit and paid a salary to the owner out of nothing but golf-course operations. The course is semi-private with "all you can play" memberships for around $800/year (we play all 12 months here).

My conclusion is that by minimizing or avoiding large land acquisition costs and running a tight business there is modest profit to be made at the lower end of the public and semi-private golf market. I don't see that changing much even when John Kirk's depression hits. The magic formula is to run your operation cheaper than the other decent courses in the area and keep course conditions better than the other cheap courses in the area. There are plenty of people who want to play golf if for $20, $30 or $40 they can play on a course with puttable greens, decent grass on the fairways and sand in the bunkers. Many of those people would just find something else to do if the golf costs $50-$75 a pop no matter how elaborately manicured the course might be.

So here's my question. How cheaply can one build a no-frills golf course if someone owns a couple hundred acres of good rolling sandy terrain covered in pine trees and soybean fields? Can push-up greens and a rudimentary irrigation system save a bunch of the money? How about clearing and grading the corridors with locally available construction labor and equipment rather than a golf-course expert contractor?

I think that the day is coming soon when any major "growth" in the golf course industry will be predominantly in places where the answer to these kinds of questions are yes. It seems possible that as golf course land that is now surrounded by high-density suburban development gets gobbled up for housing and roads, there may be another ring of more-distant sites developed as golf courses. If that were to happen it would likely be something at the more affordable end of the market where the debt load is kept manageable by ruthlessly minimizing construction costs rather than counting on housing developers to pitch in the lions share (at least until the course and the housing builder have gone bankrupt a couple times).

[Chris Kane]

If the dues are $8,000, that's $1,000 per round + transportation + lodging = $1,250 without taking into account the lose of use of the initiation dollars.

Anyone spending that sort of money on golf (or more) clearly has so much that the economics shouldn't matter.

[Tom_Doak]

Garland:

Deer Lodge is only big enough to support nine holes for townfolk.  I believe they do have a nine-hole course of very modest means.

Chris:

There are lots of people right now to whom the economics don't matter, and that's one reason the golf business is still booming.  It is not something we should be banking on long-term.

I don't mean to be Mr. Gloom and Doom.  I just think it's time we seriously re-think the average project.  We should be building $2.5 million courses, not $5 million courses.  A $5 million course plus grow in plus maintenance building plus clubhouse equals an $80 green fee, and most courses are not getting that $80 green fee.

[Chris Kane]

Absolutely right Tom - a downturn in the economy might mean some people are forced to review discretionary expenditure like high-end golf club memberships.  When they can't justify what they spend, the clubs will suffer.

We're seeing the same thing in Melbourne, with a number of clubs offering share-based memberships struggling to sell enough to be viable.  6-8 years ago, the memberships at The National went like hotcakes, now those shares are trading at around 1/3 of what they were in 2002.

[paul cowley]

This thread made me mentally tally the primary courses I have been involved with in the past several years and ;

1] Public Resort Course/ 6mil/ 125$ to 175$?/ doing well in a very competitive market.
2] Public Play only/ 1.3mil/ 30$ wo cart/ they called yesterday to say the are paving their gravel parking lot as they have the cash.
3] Private Members Resort Course/ 8mil/ 250$ plus/ must be doing well as the resort is in the top 10 nationally and golf is probably a loss leader but who cares when you do 300 mil+ in R/estate sales annually.
4] Private Members Club/ 3mil/ modest club membership fees with 650 members/ foreign ownership seems pleased, it hosts a Tour event.
5] Semi-Private Resort Course/ 3.5mil/ 12,000$ down, modest annual fees/ sales driven but doing very well.

The sky is not falling for any of the above and our future work looks similar....maybe we are just lucky and/or fortunate.

...but it does concern me that Trophy Course Collecting Membership play is down....that's the real canary in the mine .

[paul cowley]

....but I would do 2.5ers all day if they come along and the site and conditions are favorable...I love affordable golf.

[Tom_Doak]

Paul:

Glad to see the construction costs of your projects are what they are.

I wish ours were the same, but a lot of the clients I've had lately don't want to hear anything about cost control, they just want "the best."  It's amazing to me that they can afford it, but all of them seem to know what they're doing.

[Jin Kim]

Tom,

In my opinion, the current Bush administration has adjusted the tax policies to benefit wealthy Americans, and there are lots of wealthy Americans to build fancy golf courses for.  The supply of expensive golf courses may still exceed the demand for memberships, though.

Do all of the architects here build expensive, complex golf courses?

Golf architecture is largely tied to the country's economic prosperity.  The last 10-15 years have arguably been the most prosperous period in the country's history.  Coincidentally, the last 10-15 years has seen a second Golden Age of architecture.  There are a lot of great new golf courses out there.

I happen to think that a great deal of America's recent prosperity is a mirage, fueled by increased government spending and masked by deceptive economic reporting.  The country has some serious economic problems, such as national debt and rising energy costs, which will have to reckoned with.    

The first Golden Age of architecture peaked in the economic heyday of the 1920s and early 1930s, then ended as America battled with the Great Depression and then the second World War.  Are we in the process of watching history repeat itself?

A big thanks and good luck to all the architects who participate here.  I believe competition for choice jobs will get tougher in the next 20 years, and some great courses will be forced out of existence.  I still think it's more important to make the course fun to play, at some additional maintenance cost.  People will pay for fun, and greens fees and maintenance costs will fall, if that's what it takes to have fun golfing.

It's sort of like following the stock market, where Fazio and Nicklaus represent the ExxonMobils and General Electrics of the world.  Which one of you will become the next Google of golf architecture, a true innovator who built a better, cheaper product?

Mostly coherent rant is over.

That rant is not even remotely coherent.

[Patrick_Mucci]

Tom Doak,

Will escalating costs cause Country Clubs to transition into Golf Clubs ?

There's not a golf club I know of that makes a profit or breaks even in the kitchen or food service department.

Will this constant drain cause clubs to close dining facilities and turn away from the social country club toward the golf club with limited social and dining activites ?

I can't see how clubs can sustain themselves as full service Country Clubs, especially as more and more clubs are short members and potential members.

[paul cowley]

Tom, as you well know, when you cut your teeth on making the most out of a very little, it can be hard to accept excess.

...but you have to try your best to survive .

[Tags:]

Tags:

[Tags:]

Tags:

Call to undefined function theme_linktree()