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Charlie Goerges

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Can you make money building/operating a golf course?
« on: January 26, 2009, 05:59:56 PM »
Not wanting to derail Peter Wagner's thread, I will ask in a separate one.

Is it possible to build a golf course and make money?

Michael Hendren brought up the old saying that "the third owner makes money" on the course. Is it ludicrous to even contemplate building a new course? And I'm not talking only in the current downturn, but even when the economy is booming again.

And where does the idea of a "standalone" course fit VS resort and real estate courses?
Severally on the occasion of everything that thou doest, pause and ask thyself, if death is a dreadful thing because it deprives thee of this. - Marcus Aurelius

Donnie Beck

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Re: Can you make money building/operating a golf course?
« Reply #1 on: January 26, 2009, 06:31:24 PM »
Of course..... but it isn't going to happen with million plus dollar maintenance budgets!!! There is a definite need for good affordable golf... Until someone comes up with a model where the average working class guy can afford to play twice a week I don't see it being profitable.. IMO golf has reached a point that it can't continue in the direction it is going. It is time to bring the game back to its roots. Find a site with good soils, create some interesting holes, invest in good greens complexes, plant the proper grasses, turn off the water, and I think you will have a winner.

Jeff_Brauer

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Re: Can you make money building/operating a golf course?
« Reply #2 on: January 26, 2009, 06:52:03 PM »
Charlie,

I have run through the math on this a few times over the years.  Right now, it is probably cheaper to buy one than build one.  The exception is if you can find a way for someone else to pay for it, so you don't have to service debt.  That is typically the real estate developer, but they ain't doing so hot these days either.  Costs (can vary a bit by region and either way depending on management and site are generally in the range of maintenance Costs of $600k and Pro Shop at $400K.  But debt service on $10M is about $1Mil per year.  Profit to the owner should be at least 10% (really more) for about $200K.  You can still run a golf course on less than $1.5M if there is no debt.

That means you need 25,000 rounds at a total of $60 per player (maybe $40 greens fee, $12 Cart,  and $4 each for food, merchandise and range balls.  But, if you have a mil annually in debt, you need to get another $40 dollars per round. (Or be in an area where you can get a lot more players)
Jeff Brauer, ASGCA Director of Outreach

Jim_Kennedy

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Re: Can you make money building/operating a golf course?
« Reply #3 on: January 26, 2009, 07:01:03 PM »
Charlie,
A family near me built a nine hole exec. on land they owned. That, naturally, was a big help, but they also made other good choices.

-They built a range w/grass tees, mats, bunker, putting green
-They stayed away from competing with full length courses by building the exec., although it does have a couple of par 4s and a boomerang par 5
-They steered clear of placing the course anywhere near water or sensitve areas. They breezed through every regulatory body, local state and federal.
-They keep hand maintenance to a minimum, no impossible areas to mow, bunkers that are easy to access w/sand pro, firm greens and fairways, judicious use of growth regulators(including on the greens), a smaller clubhouse than the one I have at Hotchkiss  ;D,
-Relatively inexpensive daily fees and season passes.

They have done well from the start.
"I never beat a well man in my life" - Harry Vardon

Donnie Beck

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Re: Can you make money building/operating a golf course?
« Reply #4 on: January 26, 2009, 07:11:04 PM »
Jeff,

I don't see the point in buying someone elses problems. If the course isn't performing well financially what is the point in sinking more money into a looser. There are way too many dull boring golf courses in this country that will never do well financially.

Tom_Doak

  • Karma: +3/-1
Re: Can you make money building/operating a golf course?
« Reply #5 on: January 26, 2009, 07:31:32 PM »
Jeff:

Did you just retire with your last post?

Mike Sweeney

Re: Can you make money building/operating a golf course?
« Reply #6 on: January 26, 2009, 07:48:58 PM »
Jeff,

I don't see the point in buying someone elses problems. If the course isn't performing well financially what is the point in sinking more money into a looser. There are way too many dull boring golf courses in this country that will never do well financially.

Obviously you have to find the right course but in the case of Deltona:

1. Developer gets land that has already been permitted. Saves time and money in comparison to a new course. Lawyers get less.  :D

2. Local town does not want to lose the existing golf course/open space to 100% condos and strip malls if the course fails, so the town will be flexible (in some situations) to the developer. Deltona Club was able to add permitting for 200 town homes to a tired old design. Yes the Florida housing market is dead today, but the baby boomers still will head South at some point.

3. Architect gets work, construction crews get work.

4. Mike gets a "new" very reasonably priced course that is a ton of fun to play that is 2 miles from I-4 :






« Last Edit: January 26, 2009, 07:51:28 PM by Mike Sweeney »

Peter Wagner

Re: Can you make money building/operating a golf course?
« Reply #7 on: January 26, 2009, 07:58:46 PM »
Tom,
Now that's funny!


Charlie,
My answer is yes it is possible to build a stand alone golf course and make money.  I took a stab at writing about this back in a June thread:
http://golfclubatlas.com/forum/index.php/topic,34855.msg701744.html#msg701744

Sorry for the length.  

I'm a strong believer in non-equity clubs and even more so today.  

Charlie Goerges

  • Karma: +0/-0
Re: Can you make money building/operating a golf course?
« Reply #8 on: January 26, 2009, 09:24:01 PM »
Interesting replies everyone. One thing that strikes me on this thread, Peter's other thread, and Peter's link, is the overwhelming negativity on debt (that's not me editorializing either). Basically, if a lot of debt is needed to get it going, it sounds like you're headed toward "3rd-owner" territory.

Donnie and Jim (Edit: and Jeff; sorry for missing it.) brought up maintenance costs and construction costs. Other than land costs, is it fair to say that those two are the largest portion of startup and operating costs? I'm just a simple person, but those seem like the biggies.

On your other thread Peter, you mentioned a real-estate component of high-density commercial or something to that effect. I can honestly say that I've only ever thought about real estate (when it comes to golf courses) as housing. I'm curious what might be an example of a commercial use that seems compatible with a course?

P.S. Jeff, if you retire, you can always fall back on your interrogation skills!  ;)
« Last Edit: January 27, 2009, 12:04:13 AM by Charlie Goerges »
Severally on the occasion of everything that thou doest, pause and ask thyself, if death is a dreadful thing because it deprives thee of this. - Marcus Aurelius

cary lichtenstein

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Re: Can you make money building/operating a golf course?
« Reply #9 on: January 26, 2009, 09:24:44 PM »
Impossible
Live Jupiter, Fl, was  4 handicap, played top 100 US, top 75 World. Great memories, no longer play, 4 back surgeries. I don't miss a lot of things about golf, life is simpler with out it. I miss my 60 degree wedge shots, don't miss nasty weather, icing, back spasms. Last course I played was Augusta

Charlie Goerges

  • Karma: +0/-0
Re: Can you make money building/operating a golf course?
« Reply #10 on: January 26, 2009, 09:25:58 PM »
So I see you are a realist Cary.
Severally on the occasion of everything that thou doest, pause and ask thyself, if death is a dreadful thing because it deprives thee of this. - Marcus Aurelius

Peter Wagner

Re: Can you make money building/operating a golf course?
« Reply #11 on: January 26, 2009, 09:38:55 PM »
Impossible

Cary,
How would you explain Bandon Dunes then?  As an outsider looking in they appear to be doing just fine and there isn't a house in sight.

OT - I remember a fun trip 8 of us took from my home course to Bandon/Pacific some years ago.  On the return flight 3 of the guys were drafting their business plan of opening a strip club/steak house just down the road from the Bandon complex.  They felt they had a trapped audience! 

Peter Wagner

Re: Can you make money building/operating a golf course?
« Reply #12 on: January 26, 2009, 09:47:14 PM »

On your other thread Peter, you mentioned a real-estate component of high-density commercial or something to that effect. I can honestly say that I've only ever thought about real estate (when it comes to golf courses) as housing. I'm curious what might be an example of a commercial use that seems compatible with a course?


Charlie,
I was just making stuff up because my look at this back in June showed that you needed to add something extra to increase the success rate.  One of Mike Young's earlier question was about building a course without houses and I was cheating a bit by adding commercial space.  Regardless, I like the idea of office buildings adjacent to a course.  Even if the course is in a suburban location you could still do medical office space or something like that.  Heck, why not a small hospital?  I like the higher density of this better than the low density of houses ringing the course.  You'd have maybe two 4-story buildings along one fairway and then your left with an open course the rest of the way.

I dunno, just what if-ing.

Joe Hancock

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Re: Can you make money building/operating a golf course?
« Reply #13 on: January 26, 2009, 09:54:26 PM »
Impossible

OT - I remember a fun trip 8 of us took from my home course to Bandon/Pacific some years ago.  On the return flight 3 of the guys were drafting their business plan of opening a strip club/steak house just down the road from the Bandon complex.  They felt they had a trapped audience! 

At a very minimum, you'd have to import the steaks......

 ;D
" What the hell is the point of architecture and excellence in design if a "clever" set up trumps it all?" Peter Pallotta, June 21, 2016

"People aren't picking a side of the fairway off a tee because of a randomly internally contoured green ."  jeffwarne, February 24, 2017

John Moore II

Re: Can you make money building/operating a golf course?
« Reply #14 on: January 26, 2009, 10:21:15 PM »
Yes, I think you certainly can build, own and operate a course and make money. You just have to set up a practical business model and keep costs down. It just takes a good amount of work. You'd have to do a detailed market analysis (does the market in question 'need' the course type you are planning, how many golfers in the region, how many total courses, etc), you'd have to figure out to the dollar how much you can afford to spend, what you need to make, and any number of other things. But I have no doubt that given a good business plan, limited debt, and a competent owner/manager you could be very successful at building and owning your own golf course.

Don_Mahaffey

Re: Can you make money building/operating a golf course?
« Reply #15 on: January 26, 2009, 10:29:19 PM »
Yes it is possible, but you need to...

Question every detail and expense like it could be the difference, because it might.

Apply a cost/benefit to every expense, especially any professional fees. Yes, you'll need help, but understand that many are there to separate you from your money. Doesn't mean they don't do good work, but you might be fine without them.

All the experts will tell you it's about revenues, they matter, but expense is the albatross around your neck. Keep in mind that most of the experts have never used their own money nor have most ever actually owned/operated anything. Run your course like your house, you can't spend more than you make, you don't have time for a second job, and you need some savings for a rainy day.

If you’re actually going to build it...keep one rule in mind at all times. It costs a hell of a lot more to build than to design. Get the design right. Hire a designer who can tell you what he wants it to look like, play like, and how to build it. Anyone can make changes after it's built, hire someone who can communicate what they want without making you build it a few times first. Better yet, hire someone who can design it and build it too… I’d avoid the builder who claims to be a designer.
  
Finally, operate with a zero based budget. If you don’t need something, don’t spend. You don’t need to warehouse parts, or food, or anything else. In today’s world everything is 24 hours or less away, you don’t need to stockpile anything, except cash.    



« Last Edit: January 26, 2009, 10:31:49 PM by Don_Mahaffey »

Mike Nuzzo

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Re: Can you make money building/operating a golf course?
« Reply #16 on: January 26, 2009, 10:40:29 PM »
I'm with Don and Donnie on this one.
Jeff your $10MM is the real gonner.

Both Don and Donnie do it every day.
I like Don's thoughts on the designer too.  :)

We definitely helped us get to that point.

Cheers
« Last Edit: January 26, 2009, 10:42:44 PM by Mike Nuzzo »
Thinking of Bob, Rihc, Bill, George, Neil, Dr. Childs, & Tiger.

Mike_Young

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Re: Can you make money building/operating a golf course?
« Reply #17 on: January 26, 2009, 10:45:21 PM »
The old codgers that know how to get it done are not going to tell you.....they don't don't join Golf Course Owner groups, don't have USGA greens( i would wager most profitable courses don't have USGA greens) and have ground driven reels etc.....


and they have a good weeny machine..... ;D ;D ;D ;D
"just standing on a corner in Winslow Arizona"

Mike Nuzzo

  • Karma: +0/-0
Re: Can you make money building/operating a golf course?
« Reply #18 on: January 26, 2009, 10:57:25 PM »
p.s.
Mike S.
That does look fun.
And like a lot more $ to maintain.
Cheers
Thinking of Bob, Rihc, Bill, George, Neil, Dr. Childs, & Tiger.

Charlie Goerges

  • Karma: +0/-0
Re: Can you make money building/operating a golf course?
« Reply #19 on: January 27, 2009, 01:14:01 AM »

On your other thread Peter, you mentioned a real-estate component of high-density commercial or something to that effect. I can honestly say that I've only ever thought about real estate (when it comes to golf courses) as housing. I'm curious what might be an example of a commercial use that seems compatible with a course?


Charlie,
I was just making stuff up because my look at this back in June showed that you needed to add something extra to increase the success rate.  One of Mike Young's earlier question was about building a course without houses and I was cheating a bit by adding commercial space.  Regardless, I like the idea of office buildings adjacent to a course.  Even if the course is in a suburban location you could still do medical office space or something like that.  Heck, why not a small hospital?  I like the higher density of this better than the low density of houses ringing the course.  You'd have maybe two 4-story buildings along one fairway and then your left with an open course the rest of the way.

I dunno, just what if-ing.



I was just wondering because when I read it, I thought of about a million possibilities. In a suburban environment, the medical building would be a nice, low-key tenant. But just about anything could work from manufacturing to storage. Out in the boonies where I live, a host of additional possibilities can pop up. It got me thinking about outdoor activities that are compatible with golf. One that comes to mind is horseback riding. The two activities could inhabit nearly the same space (as long as there was sufficient land) without impinging on each other. The nice horseys could follow trails that run throughout the course so long as they were some pre-determined safe distance from the line of play.

Man it must be late at night, I just typed "horseys".
Severally on the occasion of everything that thou doest, pause and ask thyself, if death is a dreadful thing because it deprives thee of this. - Marcus Aurelius

Charlie Goerges

  • Karma: +0/-0
Re: Can you make money building/operating a golf course?
« Reply #20 on: January 27, 2009, 01:29:36 AM »
Don, JKM,

Many good points; sounds like a lot of work though! I agree that the homework is a must, but Mr. Hendren's comment (even if he was joking) seems to imply that you can do all of that and still go bankrupt. One can be iron-fisted on the expenditures, and if that's what it takes to make the trains run on time, then so be it I suppose. But what if you don't want to be Mussolini?
Severally on the occasion of everything that thou doest, pause and ask thyself, if death is a dreadful thing because it deprives thee of this. - Marcus Aurelius

Peter Wagner

Re: Can you make money building/operating a golf course?
« Reply #21 on: January 27, 2009, 01:47:30 AM »

On your other thread Peter, you mentioned a real-estate component of high-density commercial or something to that effect. I can honestly say that I've only ever thought about real estate (when it comes to golf courses) as housing. I'm curious what might be an example of a commercial use that seems compatible with a course?


Charlie,
I was just making stuff up because my look at this back in June showed that you needed to add something extra to increase the success rate.  One of Mike Young's earlier question was about building a course without houses and I was cheating a bit by adding commercial space.  Regardless, I like the idea of office buildings adjacent to a course.  Even if the course is in a suburban location you could still do medical office space or something like that.  Heck, why not a small hospital?  I like the higher density of this better than the low density of houses ringing the course.  You'd have maybe two 4-story buildings along one fairway and then your left with an open course the rest of the way.

I dunno, just what if-ing.



I was just wondering because when I read it, I thought of about a million possibilities. In a suburban environment, the medical building would be a nice, low-key tenant. But just about anything could work from manufacturing to storage. Out in the boonies where I live, a host of additional possibilities can pop up. It got me thinking about outdoor activities that are compatible with golf. One that comes to mind is horseback riding. The two activities could inhabit nearly the same space (as long as there was sufficient land) without impinging on each other. The nice horseys could follow trails that run throughout the course so long as they were some pre-determined safe distance from the line of play.

Man it must be late at night, I just typed "horseys".

Charlie,

No keep going down that thought process.  Consider golf's heritage at St. Andrews and sheep and all that... I say explore mixing them, mix the horses and the golfers and let's see what you get. 
« Last Edit: January 27, 2009, 08:28:53 AM by Peter Wagner »

John Moore II

Re: Can you make money building/operating a golf course?
« Reply #22 on: January 27, 2009, 02:15:28 AM »
Don, JKM,

Many good points; sounds like a lot of work though! I agree that the homework is a must, but Mr. Hendren's comment (even if he was joking) seems to imply that you can do all of that and still go bankrupt. One can be iron-fisted on the expenditures, and if that's what it takes to make the trains run on time, then so be it I suppose. But what if you don't want to be Mussolini?

Well, it is a lot of work. No one can say it any other way. And yes, he is correct, you can do everything 'by-the-book' and still go bust. However, that is my reason for saying limit debt to the highest degree. If your debt is $0 (doubtful for sure) then you only have to make enough revenue to cover the operating expenses, which can be cut in 'lean' times. But the less your debt is, the less you are liable for, obviously, when there is a downturn. I work for a man who owns his own driving range. This time of year, when we are out of season, he does most of the work himself, only having us come in 2 or 3 days a week at most (great for working on my gym physique but very hurtful on the wallet). If you are going to be an owner, that is something you'd need to be willing to do, at least for a little while until you could establish the business.

And you don't have to be 'iron-fisted' on expenses. The main budgetary item for the year is maintenance. So, have your Super put together a list of projected expenses, add a certain percentage and that is his budget for the year. If you budget him, say, $500,000 for the year, he can spend that money on whatever he wants, so long as he doesn't go over. Same with the pro shop, grill, etc. Butget them a certain dollar amount (assuming you aren't the one in control of it all) and so long as they don't go over that amount, they are fine. Of course, if they have a need through the year which requires more than budgeted, they have to come to you, the owner, for approval. That way, you don't have to be a toolbag as far as the money goes, you just require them be at or below budget unless you approve something higher.

As the owner, you can't be stressing about whether or not your Super buys an extra case of oil or your Head Professional buys a new line of shirts for the season. You just give them a set amount of money to spend and they go spend that amount and not a cent more. Now you audit the books every so often for sure, but you are not counting pennies on a daily basis.

I hope to be able to own my own place someday, anything from a basic retail/repair shop all the way up to a full club facility. No kind of business can be run successfully with excessive debt; debt is the #1 reason that small businesses fail. I would say a very good indicator of potential success would be asset to liability ratio. If its good (high asset-low liability) then it will be far easier to succeed. Thats about the best thing I can say to you if you really intend to own a golf course or any other business for that matter.

D_Malley

  • Karma: +0/-0
Re: Can you make money building/operating a golf course?
« Reply #23 on: January 27, 2009, 09:04:01 AM »

On your other thread Peter, you mentioned a real-estate component of high-density commercial or something to that effect. I can honestly say that I've only ever thought about real estate (when it comes to golf courses) as housing. I'm curious what might be an example of a commercial use that seems compatible with a course?


Charlie,
I was just making stuff up because my look at this back in June showed that you needed to add something extra to increase the success rate.  One of Mike Young's earlier question was about building a course without houses and I was cheating a bit by adding commercial space.  Regardless, I like the idea of office buildings adjacent to a course.  Even if the course is in a suburban location you could still do medical office space or something like that.  Heck, why not a small hospital?  I like the higher density of this better than the low density of houses ringing the course.  You'd have maybe two 4-story buildings along one fairway and then your left with an open course the rest of the way.

I dunno, just what if-ing.

sounds like the set up at Commonwealth National outside philly, a palmer course about 15 years old.  by the way i have heard that they are struggling right now.

Don_Mahaffey

Re: Can you make money building/operating a golf course?
« Reply #24 on: January 27, 2009, 09:52:19 AM »
Tightly controlling the expense side doesn't make you a tool bag, iron fisted or Mussolini.

Go to your favorite family run restaurant and see how they do it; because that's the ethic you'll need to bring...if you’re actually selling golf for profit.

Now, if your selling something else like real estate or a club experience where all the members have equity and they want it a certain way and are willing to pay for it, completely different story.

Budgets are a necessity because you have to plan and that's all budgets are, a plan that explain the expense and justify it as well.

But, the problems start when budgets run the management. If you budgets 2K a month for equipment repair and you only spend a few hundred, that doesn't mean you spend the rest to stock up on things you "might" need or "extras". There will be months when you go over budget due to catastrophic engine failures or whatever.
Manage the budget, don't let it manage you and the best way I've seen is using a zero based budget that simply requires justifying each expense. Too many times I've seen arguments made for non-essential purchases because someone is under budget...and necessary expenses delayed because you’re over budget.
If you want to make money managing a golf course you need to know where your money is going at all times...the margins are that thin.