Why Is U.S. Golf So Expensive?

[Ed_Baker]

I just was going over lasts years annual report for my club and it suddenly occured to me that all the non golf activities cost over four million dollars!

Geezus, the "chowdah and bisque" are good, but four million bucks?

We spent a little over one million three hundred thousand on the golf course maintainence and grounds eqipment.

We blew up the old clubhouse and did the bulk of the golf course restoration in 1997 to the tune of six million bucks. Now five years later we are spending damn near the cost of the project every year to run the place! Silly!

How do they "do it" across the pond. Places like Dornoch offer world class golf and great hospitality for a fraction of the money. How?

[RandyC]

Greed - because they can!

[Bob_Huntley]

Ed Baker:

Dan Jenkins wrote a wonderful piece on this in Golf Digest in the late sixties, if memory serves me well it was, "Do shower slippers make the difference." It is as accurate today as then.

The bit about the trickle of cold water in the British showers and half a hand towel to dry on was so spot on I nearly cried laughing. If you can get GD to go through the archives it is well worth reading.

[John_Conley]

In writing your question you also answered it.  The level of service provided at a club in the U.S. is higher, whether or not you want that.  

Also, newer courses have not yet absorbed their land cost.  Dornoch certainly has.

Lastly, it has been widely discussed on this board that overseas clubs are likely to allow some outside play, defraying the cost for membership.

A fair comparison is to measure a newer U.S. course to a newer overseas course (not Dornoch).  You won't see as much of a spread.

[Chip Royce]

Ed -

I hear you... I ditched my membership at Georgetown (MA) for the very reasons cited here in the thread:
 - Amenities I don't want
 - Cost structures that are prohibitively expensive
 - Uncertainly over continuing at a club that I can't be assured will continue to exist.

Here in the U.S., we started many golf clubs too late (land costs) and many clubs are trying to create bastions of new money / gentry that appeal to many when the economy is going well... and not good when things aren't going well.

I really hope that a new model of golf club ownership membership develops that mimics the British / European formula:
 - Well designed, playable courses that don't attempt to mimic the conditions at Augusta
 - Semi-Private conditions - reserve tee times for members, esp. at peak times. Open times for public, requiring proof of handicap and/or introduction.
 - Modest buildings and facilities (Clean bathrooms, perhaps a small bar and tables for pub food. If you want function space, build a good building AND lease it to a catering company)
 - Memberships that are priced reasonably taking into account the points above. (Ex: Initiation at $5K.... annual dues 1500 - 3000 / year AND eliminate the goddamn MINIMUM)

[Richard_Goodale]

Chip's got it.

Without going into specifics, the annual expenditure for Dornoch, with 2 18-hole course and a clubhouse and including significant capital expenditures (5 completely new championship golf holes on the Struie, completely up-to-date greeenskeeping equipment, clubhouse which undergoes renovation almost annually) is well under $2 million per year.  This is at the high end of the range for Scottish courses.  Many good clubs get by with well under $1 million/year.  In addition to what Chip says, other factors in the Scottish golf equation include:

--Professional and Food Services essentailly acting as independent contractors with little club funding.
--Bar staffed and budgeted to break even or turn a small profit
--No masses of greeters, club cleaners, shoe shiners, cart boys, beer girls and other superfluous functionaries
--Club members providing services at minimal cost (e.g. starters, rangers) or on a volunteer basis (e.g. tournament and handicap administration).
--No security guards, or even gates to maintain!

Also, costs and expectations are lower.  Salaries are significantly lower for all grades of personnel, and for tradesmen and other contractors.

So Ed.  How do you possibly manage to spend $4 million on non-golf activiites?  My mind boggles!

PS--John Conley.  You might find some more pricey new clubs in England, but there aren't too many of them in Scotland.  Very few truly private clubs have been built in the last 50 years.  Also, Ed's club probably has zero land cost too.

[John Foley]

Chip hit a home run. I struggled a few years back w/ going private. Last year I moved into a new house across the street from a pretty nice private course. A friend is a member and the mebership director has been hounding me for years. Seems I fit the target demo for thier course. When I look at the investment and what i get for it, it's not even close to worth it. I would be out $2500 a year on bag storage, locker rental, range fee (can't believe that one!) bar mins and the such. That coupled w/ monthly nut, that makes it outrageous. These amenities are out of control. It's amazing that w/ these numbers anyone is joining or staying!

The good news on this is that another member got pissed, took the head pro built his own public course about a mile away (Robin Nelson design) which is a great alternative. Place will open the full course (after a fall 9 hole preview) this spring and I can't wait!!!

[Justin Hanrahan]

From a slightly different perspective, I can say that the level of amenities has done nothing in the US to what it has in Asia.

I've grown up playing in Australia where clubhouses, carts, caddies etc are either non-existent or extremely understated. Royal Melb for example has one of the crappiest clubhouses you'd ever see, but no one cares.

It is only in recent years where land and construction costs have gone so high that you start to see the types of "taj Mahals" you guys are talking about.

In Asia? Well, double the course construction costs and you start to look at he budget for the clubhouse.

In the Philippines the place I worked on had about $35M to spend on a Taliesin (Frank Lloyd Wright) designed clubhouse.

No member cares or has a clue what the significance of Taliesin is, nor would they care what came with it. How many fries they get with the club sandwich? You bet they'd care about that, but who designed the clubhouse and what pit the marble was mined from? No way.

If anyone has a few bucks to spare and wants to get into buidling "muni" golf courses in SE Asia, get in touch with me. Forget the ridiculous wages a pretentious shaper receives...I have a crew of locals who could do the job in a heartbeat. Faster and with less grief.

Get a young architect who doesn't care if the shaper is not from Alabama or has dark(ish) skin, but wants a qaulity finisher and you're on the way to getting a golf course.

Of course, you probably won't get a bidet to do your dirty work, but sounds like that is a service we could all do without...

[Craig Rokke]

Wages & Benefits

[Matt_Ward]

For what it's worth -- too many Americans are into the "show" rather than the "product." The whole movement of the upscale daily fee is premised in giving the customer "more" of whatever there is. Clearly, the golf is part of that mix but other elements have been added to make your "experience" be that more complete.

Many times it's about how big the burger is, does the shower head cover envelope the whole body, do you get the "meet and greet" fanfare when you arrive, do the cigars provide the right amount of ash, is there a GPS system in each cart instead of people taking a lesson, blah, blah, blah. It's really sad to say but too many American golfers want all the pomp and circumstance but many times the actual product (the golf course) comes in second place.

A good example of how to provide quality golf in an area where upscale golf is taken to the max is the qualities of Apache Stronghold in Globe, AZ. The Tom Doak designed course is a wonderful layout and the fees are very reasonable. You get fine service without the Broadway gigor you get when you're playing all the hyped and many times overpriced layouts in the general Scottsdale area.

The rise of the McMansion clubhouse is another element of the "over-the-top" mentality that exists in so many ways. I always search out places where the "product" not the "show" comes first. Sad to say but the market reacts to what people want and are able to afford. Yet, to the game's credit, there are places you can find where people who do own facilities really understand what core golfers want (and don't want) and make it a point to provide it.

[Stan Dodd]

Rich
In Scotland there are no carts (or very few) hence no cart paths and expenditures for a fleet of carts.
My personal opinion is that Scottish golfers are  more pure and do not seem to need the "amenities" like somebody to unload the clubs from your car or wipe your clubs when you finish or my pet peeve drive the drink cart up  and now make the 5 hour round even longer because  some yahoo can't wait for a couple of hours to have his drink and cigar.
My experience with Scots are when you ask them about where to play they talk about the course not that there was somebody holding your hand while you took a crap. This idea of "service" at the golf course is quite distasteful to me.  American golf needs to look closely at itself or it willkill the goose that laid the golden egg and price it self out of the market of  the everyman.  How bout the egalitarian club for a day where we don't do anything for you but provide a great course for you  and make sure you can get around in under four hours.  Sorry about the rant

[ian andrew (Guest)]

Because private golf courses are developed as country clubs insted of being strictly golf clubs.

[Chip Royce]

It seems that the thread is moving to isolate various components of the problems we see... on the economics end, here's part of the problem:

1) Developers / Club Founders have to pay enormous sums for any quality land near a population base. Sure you can buy in North Dakota or Nebraska...  but that's not always economically viable.  

Real Estate prices here in the US have skyrocketed, so the raw material, land, is also a precious commodity. Not only would a club have to purchase the land, thus generating sufficient cash flow for paying the 30 year mortgage, but also needs to generate funds neccesary to service the taxes on the high-priced land.

2) Do build a good, or better course, that the GCA folks would approve (or disapprove at their leisure) of, a reliable golf architect needs to be found. Between the engineering studies, design consults, etc... the cost of building of a course today has skyrocketed. I imagine that any Architect worth their salt will cost at least $250K for a project with Fazio, Rees Jones, Nicklaus, Palmer, etc... going for $500k+ (please add info here as known)

At this point in the equation... we're talking $2.5MM for the land and a modest clubhouse, $1.5 MM at a minimum to design and build the course and let's say $1.35MM ($75K per hole) per year to maintain a firm and brown course with less maintenance than the "augusta" styled conditions. Also, club staff, etc...will run approx. $500K per year (very modest staff - no rangers, etc..)

As a result, a club needs to generate $1.85MM in cash flow a year to pay for maintenance, plus $400K plus a year to service debt - a total of $2.25MM a year.

So... doing the math... if the course is public:
 at $50 per round: needs to sell 45,000 rounds to break-even

If the course were private, each member (assume 300) needs to ante up $7,500 in fees a year to break-even. (could be a combination of dues + interest from initiation fees)

If the course were semi-private, and assuming the members (300) made 50% of the tee-times available to the public (let's say that rounds go down to 40K), then:
 - Public contribution ($50 per round) = $1MM
 - Private contrib = $1.25MM = $4,160 per member.

So... to wrap this up... if my numbers are anywhere near accurate... the debt servicing on the land doesn't break a club's back. Its the cost of maintaining a course, capital expenditures to maintain the physical plant (clubhouse, lockers, restaurant, pro-shop) and the people neccesary to staff the club operations and amenties.

I don't think we're far off here at GCA:
 1) we propose courses in their more natural state = lower maintenance costs

 2) who needs mansions for a clubhouse? Set up a trailer or small building with a small bar run by a consessionaire, a small locker with showers and a basic pro-shop so the Club Pro (if neccesary) can ply his trade. The less amenties for feeling like a millionaire, the lower the member or greens fees to break-even.

 3) Open up the courses! Folks... in my equation, if you open up 1/2 your tee times to the public, your member outlay can be decreased at least 30% if not more! WIth strict dress code, ettiquite requiirements and the threat of never being allowed on premisis, your GUESTS / VISITORS may actually treat the club as well as the members! I can't mention how many times in Scotland that I was warmly welcomed by club members.

[Lou Duran]

Why is U.S. golf so expensive? Because many people can affort it and will pay for it.  Initiation fees at Colonial CC & Brookhollow in D/FW are over $50,000 and there is a 10+ year waiting list.  Preston Trails is over $100,000 and good luck getting in.  Dallas National has sold over half of its non-equity memberships at $100,000 - $125,000 each and it won't be open till this Summer.  The CCFADs and some private clubs are in trouble today because the high demand for this product was greatly exceeded by new supply.  Perhaps the current troubles and the financial restructuring of the industry (to a lower basis) will lead to a boon for the daily-fee player and provide future growth in the game.  Then we'll build some more courses and probably repeat the cycle again.  

[Chip Royce]

$100K for a non-equity membership at an club is crazy, not to mention one that's not a top 50.
To me... that's just pissing away money for one or more of a couple reasons:

1) Its corporate dollars: As a perk or marketing expense its expected by clients (the most justifyable outlay - assuming some kind of ROI)

2) Need to rub elbows for business: Perhaps some folks will find new job opportunties or deals from fellow members that will recover the cost of the membership.

3) Folks want to feel like nobility: Just crazy from my perspective, but what do I know.

[Adam Smith]

Tom Huckaby:

A year or so ago a Los Altos C.C. membership exchanged hands for $350,000.00, they have an open bidding there. Corde Valle was in the $250-$300M range. Tehama is still around $150,000 and MPCC is $200,000.00 with a five year waiting list. Pasadera is something close to $100,000.00 but I understand are having their troubles, curtailing services and opening the course to the public, but at astronomical green fees. The Preserve gets even pricier as they did, at one time, require members to be property owners. The cheapest lots sold for about a million and went up from there.

You are right about Nor Cal, it's prohibitively expensive to join a private club and the public ones are not cheap.

[THuckaby2]

Adam, I live in San Jose.  I am PAINFULLY aware of all these figures.  But thanks for making me cry all over again!

 

For the rest of you, I am here to attest that he's not making this up, as unbelievable as it sounds.  That's NorCal reality, yes indeed!

See why I bitch all the time?

TH

[Tom Doak]

Note to Justin:  Royal Melbourne is about to start building a whole new clubhouse.  American golf is seeping in Down Under.

U.S. golf is more expensive because of who owns the golf courses.  Single owners or corporations have no compunction about charging whatever the market will bear.  

In the U.K., the clubs are run by the members and for the members, and the members don't want to pay more than they have to.  U.S. clubs are much more worried about keeping ahead of the Joneses, and have inflated the costs accordingly.

Question for Ed Baker:  the chowder and the bisque have indeed gone up, but $1.3 million maintenance in New England?  What % increase is that from ten years ago?

[Ed_Baker]

TD,

The maintence budget has more than doubled in the last ten years,so have the dues and minimums. The initiation fee has tripled! We still have a seven to ten year waiting list.

The Augusta Syndrome is alive and well in Boston.Ugh!

Rich,

That was exactly my question to the current Board of Governors, "How the hell do you spend four million dollars on nonsense?" The reponse, "that's what the members want."

The ironic part of all this is that if you asked our membership what the main focus of the club is,the vast majority would answer golf and the golf course. We have 300 members and 110 of those with a handicap index less than 10,very serious golfers that play a ton of rounds. Unfortunately they now demand striped fairways,fifty dollar cigars,and two hundred dollar bottles of wine served by a young fluffy in a goddamn tuxedo!

[John_Conley]

Initiation fees at Colonial CC & Brookhollow in D/FW are over $50,000 and there is a 10+ year waiting list.  Preston Trails is over $100,000 and good luck getting in.  Dallas National has sold over half of its non-equity memberships at $100,000 - $125,000 each and it won't be open till this Summer.  

Lou:  

You know as well as I do that "waiting lists" don't work like that.  A person on it isn't assured of becoming a member by a certain time and many of those the club will come back to will decline, having already joined another club.

Just because 200 people are on it and the club admitted 20 new members last year does not make it a 10 year wait.

Waiting lists are the result of that cycle you talk about.  One new club in the market - which sounds like it is coming soon - will absorb much of the demand.  A shock to the amount of demand, possible if you consider economic events (think a Houston membership roster in light of the Enron collapse), can alter the way things look overnight.

I do get your point that clubs in your market are unable to fill present demand.  Assigning a time limit to the wait, acceptable at theme parks when you can accurately gauge flow, is inherently flawed.  Yet they do it anyway.

Did the last person accepted into those two clubs wait more than a decade?  Probably not.

[Lou Duran]

John:

No the last person in did not wait 10 years, but supposedly it will take that long for the next person on the list to get in.  A friend of mine who has outstanding contacts and more money than he knows what to do with has been on the waiting list at Colonial for six years.  He doesn't know that he'll get in by this time next year, and the list behind him has grown at a much faster pace than the new openings.  Those on the list pay dues that are not much less than the full golf membership rate.  Colonial and Brookhollow seem to be pretty recession proof, and unless the old members start dying off in unusual numbers, the years wait they quote is probably in the ballpark.  I suspect that many of the historic classic courses are extremely difficult to get in in terms of time and money.  

[John_Conley]

Thanks, Lou.

My point is that at a club like Colonial, when there is runoff they may be able to go through a bunch of the list.  Think of a big assessment that it more than some existing members want to pay.

Of course, Colonial may be so esteemed that it is not indicative of "the market".  I make a point of not using outliers to illustrate my arguments and assume your examples to be representative of a normal, upscale, private club.

Obviously Cypress Point and Shinnecock have much different factors.

A side note... I know someone on three waiting lists for the garish Benz sport-utility.  If they get one, they'll obviously not need the other two.  Your example cites paying dues while waiting, which I assume means they are members of the club already - without golf privileges.

[Lou Duran]

John:

When it comes to the top of the market courses, most are "outliers".  In our neck of the woods, there is only one Colonial.  At this level and also with many private clubs, golf is not a commodity and market forces do not work as expected.  Going back to the original question, golf is so expensive because it is important enough to a lot of people who are willing to pay whatever price.  We are blessed in this country to have large wealthy and upper-middle classes.  Many of these folks will pay nearly a $1000 to play and stay at Pebble Beach and $315 for a Fujikura driver shaft.  This is nuts to me.  The game in this country began as a sport of the wealthy; hopefully, in this aspect at least, it is not returning to its roots.  Just driving around throughout Florida and marveling at all the gated golf communities with million $ houses, one senses that the core of frequent golfers, some 12mm in number, must have all the money in the world.    

[Bill_Spellman]

   Ed this is a good question. Actually there are a number of sub-questions aring from your points.

    I spent 28 years in the private club sector as a golf professional (out now, happliy) at different clubs from modest, low level private clubs to one of the courses that are a favorite topic on GCA, Merion, and at another,one of the largest clubs in the country.

    IMVHO private clubs that are "middle class" are dinosaurs and are going to die out. Clubs at the top end will survive very well, and clubs at the lower end(cost wise) will survive.

    As has been stated here previously, the amenities offered are often unneccessary and crewate payroll and expenses that aren't covered by the dues. Clubs have tried to be all things to all people and most of them can't afford it. Rising amenity costs mean rising dues, and depending on the local economy, may be out of reach for too many people.

    When you analyze the reasons that people join private golf
clubs they fall into a small number of catagories.

1. good golf course
2. that is where the friends play or business associates play.
3. Social exposure - Snobbery.

    Have you ever heard of anyone joining a club because their towels are fluffier or they have the best pool? How many tennis programs are viable? Another problem is that once these programs are in place, how do get rid of the? One of the clubs served breakfast in the grill room, every day. The club spent more in payroll to staff it and food costs than they took in. It was cut and you should have heard the noise. The board decided to reinstate it, but the revenues did not increase. At most private clubs, 20% of the members are doing 80% of the business.

    This may suprise some of you, but I am in favor of the club owning every concession, including the golf shop. The mistaken impression is that services will suffer, but that is a matter of the pro's attitude. It only makes sense when you consider that if the shop and concessions in the golf operation are owned by the pro, Where is the main focus of the pro- protecting their interests. Now compare income package to the superintendant. Does he get a piece of the green fees? Does the club manager get a piece of the dining revenues? Most likely not. So why would you create a situation where there is an independant businessman allowed to set up shop inside the parameters of what is probably a non-profit organization? After 28 years of that, I still don't have an answer.

4.

[John_Conley]

Lou:

Thanks for clearing that up.  Not being in DFW often, I assume there are other clubs on the order of Colonial.  Minneapolis has several clubs that would be as nice to be a member of as Interlachen, but those don't share the same stature either.

In Florida, there is such a dis-incentive to join a private club because of the abundance of terrific daily-fee courses statewide (and converse dearth of truly special private ones).  May not be the same everywhere.

Bill Spellman - AWESOME points.  Great insight!!  And thanks for sharing.  That encapsules what I try to say, but you do it much better.

My final thought.  It seems like the easiest way to open a new club would be to target GOLF ONLY and just the essential F&B to go along with it, rather than taking everything down to the lowest levels of everyone's interest.

(I don't know if you'd describe it as boiling down to the Least Common Denominator, but I think it might be the Highest.)

If you add tennis to attract ten more and a big clubhouse to attract 20 and provide Sunday brunch for another 15 and so on, it seems like you run into the problems Bill mentions by design.

Target families who want an accessible place to play quality golf and you may draw in even more, because they don't have to pay for everyone else's stuff.  Just a thought.