American golf business models that stand the test of time

[Carl Rogers]

Two obvious options:

Option 1:  the well off private club with a lot of old money, the best course around, well conditioned, turf on the practice range with fairly new balls, good service, high $$$, etc.  Maybe the destination resort falls in this category too.

Option 2:  the over used burned out muni (yada yada yada)

It seems that the option(s) in between the two extremes, (which is about where I am), seems often to be in trouble and struggle to hang on.?? 

This is my perception of the market.  Please tell me I am wrong and tell me some examples.

[Mac Plumart]

I'm not a golf course/club expert, but I am fairly astute regarding business endeavors.  In my limited experience, the bug-a-boo is ALWAYS debt!!

The clubs that are biting the dust in my area are the ones who tried to become something they are not too quickly.  Memberships are not full, but they insist on having a fully built out and wonderful club house, immaculate maintenance on a "signature" designers golf course that probably cost them an arm and a leg.  This is fine if they raise the capital up-front, then deploy it.  But if they put together a business plan based on x number of members and get a loan from a bank to build the thing out, but fail to get the members they are doomed.  Full scale debt service costs, full scale maintenance budget, up-front payment for the signature design but 50% or less of the required number of members to run the course.  Ugh!

That is what I am seeing, for what it is worth.

[Mac Plumart]

Carl...my bad, I just told you the bad and not the good.

My club is not a big time historic club, but is doing well.  In fact, it just did a mulit-million dollar rennovation, membership is over-flowing, and the course, tennis courts, and grill/dining rooms are usually very busy.  Other "mid-tier" clubs (if you will) in the area are doing well. 

If you are looking to join a club, you should know within a few minutes of being on the premises if it is struggling or not.

The two I've frequented that I know for a fact have gone under (or are looking for new investors or whatever you want to call it) were amazingly beautiful, luxurious, opulent, but no one was ever there.  I could play a round of golf with my group, enjoy lunch, drive by the pool and I would be hard pressed to see 5 other people.  Not a good sign!!

So there it is the good, the bad, and the ugly according to a non-golf club expert!!!

[SB]

Two obvious options:

Option 1:  the well off private club with a lot of old money, the best course around, well conditioned, turf on the practice range with fairly new balls, good service, high $$$, etc.  Maybe the destination resort falls in this category too.

Option 2:  the over used burned out muni (yada yada yada)

It seems that the option(s) in between the two extremes, (which is about where I am), seems often to be in trouble and struggle to hang on.?? 

This is my perception of the market.  Please tell me I am wrong and tell me some examples.

Do #1 or #2 really qualify as good business models?  The first relies on the ability of a board to extort money from members to cover operating losses.  The second relies on government to extort money from everyone to cover operating losses.  Both sound like socialism to me, which is the opposite of a business model.

There are plenty of clubs and golf courses run for a profit, even today. 

[Tom_Doak]

Carl:

I didn't go to business school, but according to some friends who did, there are two basic ways to compete in the marketplace.  You can compete on quality, or you can compete on price.  Which is basically your two models.

It's very hard to work the middle of the market ... if you're not at the top, your price is always being dragged down by the competition.  This is true for golf course architects as well.

[Jeff_Brauer]

I would have to say the golf course/housing model.  Not only do you have built in customers, but you get construction paid for using OPM (other people's money) and can start out life as a golf course without debt, as noted above.

Most golf courses can make it on their own if the cost of construction doesn't need to be paid for.

Slightly OT, but perhaps the answer is "avoid excessive maintenance".  I visited two courses today.  One had 1.5-2 Xthe budget as the other, (depending on whether you counted water cost and capital improvements) but I couldn't really tell a lot of difference in course presentation. As far as I could tell, the budget differences were in landscape maintenance, and frequency of bunker raking, bunker edging, cart path edging, etc.  Labor makes up 55-60% of the golf course budget and sending out 4 guys 7 days a week for perfect bunkers cost a lot more than sending out two guys for four half days a week and letting players have slightly crusty bunkers on three days a week.

[Carl Rogers]

Tom, Jeff & et al,
Thank you for your responses ...  I did not go to Business School either.
As I try to do here on this site, I was trying to make an observation and it seemed that it was confirmed.

Jeff,
When Scott Weersing (a poster on this site) and I played Beechtree (RIP NLE) last year at the end of October on a Monday, we were riding around in a cart at 9:00 am or so waiting for the frost to melt before teeing off.  One of the marshalls was also out in a cart observing the frost melting, but he had a rake and was simultaneously raking and smoothing many of the  bunker edges the sand pro could not get reach ... pride of place ...  .  The course closed 6 weeks after we were there.

[Michael Huber]

I always figured these things would be important:

A.)  League friendly
B.)  Cart friendly
C.)  Wallet Friendly
D.)  Beer friendly
E.)  Acceptable architecture
F.)  Acceptable maintenance
G.)  Ownership that knows their own limitations.

There are a few local courses I have in mind.  A lot of golf purists tend to think little of golf leagues, but I think they generate a lot of positive things for a golf course.  I don't know if the courses I have in mind are making big bucks...I don't think it's possible to make big bucks charging $30 a round on the weekend.  But I think it's a sustainable model.