Too many golf courses?

[Lou_Duran]

EdM,

Did they sneak in some outside play just ahead of you at your club recently?  Surely you jest.  I know that you know better.

Nearly every sport that I am aware of has a serious problem maintaining equilibrium for any extended period of time.  This is also true for businesses, be it manufacturing or services, automobiles or real estate, computers or health care, aerospace or travel, etc.  At the micro level, the imbalances can be extremely difficult for those directly affected on the wrong side of the equation.  However, the necessary adjustments and readjustments for the affected industry and economy are most often beneficial.

Take the golf industry as an example.  As supply increased faster than demand in many areas, green fees dropped and the game became more affordable for many.  With the "# of rounds played" relatively flat for several years, the lower pricing should have a positive effect.  More people with more money who play golf is a good thing for all segments of the industry in the long-run.

Who gets hurt?  The relative numbers are much fewer, primarily the investors who were seeking a very high return in an inherently risky enterprise.  Some club members are harmed in that their club may not be as well conditioned, or clubhouses finished, or that they have to tolerate some outside play to make ends meet.  A few contractors and suppliers may not get paid, but I suspect that as prices were bid up during the boom, their healthy margins allowed them to pull out serious sums of money (and who knows bankruptcy laws better than these guys?).  Finally, some banks and other lenders may have to write-off bad debt during a time when their spreads and capital are at very high levels.

For those who call for government intervention, you only have to look at those areas of the economy which are heavily regulated to gain a dose of reality.  In CA and NY, does the average person have access to reasonably priced housing?  How about golf?  Through heavy environmental regulation, zoning, and high taxes, government there has erected huge barriers to entry.  Who benefits from this?  Primarily the people who have owned property for a long time and the bureaucracy which runs what is little more than a protection racket.  Smart, successful people like Tom Huckaby can't justify joining a mid-level private club with a six-figure initiation fee, and guys like TommyN and DMoriarty drive an hour plus for the privilidge of paying $45+ for a quality golf course (and with the high demand for rounds at Rustic Canyon, one has to wonder how long they will enjoy that bargain).

My friend Dick Daley and I have gone around and around on health care and government's role in controlling its supply and demand.  While golf and health care may not be analogous (judging by the number of cart riders and their relative girth, it appears that for many the former is much more important than the latter), I firmly believe that government's increasing influence in this area is taking the best medical system this world has ever known and making it progressively mediocre.  I can't think of a worse idea than setting up a government bureaucracy at any level which would determine the need for golf courses, or tiddly-winks for that matter-  not even if Ed Morrissett and Dick Daley were named co-benign dictators in perpetuity.

Personally, I welcome the restructure of the industry where the lawyers and corporate types leave with their tails between their legs (but their pockets still flush with personal wealth), and leave it to the competent owner-operators like Don Mahaffey.  Golf, like most real estate, is a very local business.  A steep pyramid corporate structure does not seem to work well.  Year-to-year or quarterly profit growth should not be driving the business.   In my opinion, improving the asset base over a long period of time and being responsive to your client base are really the keys for successful operations.  With lower capitalizations resulting from the restructuring that has been in procees for a couple of years, low interest rates, favorable demographic trends, and, hopefully, a change away from corporate golf, I am optimistic about the future of the industry.


 

[RJ_Daley]

Lou, Lou, Lou,

How is it I can agree with you 90% of the time, usually about golf matters, and find you so off base on bringing into these equations matters of national socio-economic security and quality of life, which you see as some Darwinian struggle of the most fit to survive rather than a basic fabric of our society and a service/comodity need that everyone shares as a united people in a so-called resource/capital wealthy country.  If golf disappeared from the American scene completely, we would all survive just fine.  If the corrupt, have and have-not unbalanced, administratively bloated, dwindling resource of a health care system continues to become even less available and more economically devestating to individuals and companies that try to provide it to workers, we are going down baby, down, down, down... to third world status.

[Lou_Duran]

Dick, my friend, at least 90% of the time,

I only bring up health care as one prime example of where heavy government intervention has resulted in precisely the opposite consequence- worse, astronomically more expensive services.  It is not a matter of Darwinism or survival of the fittest; in this country ANYONE, including people here illegaly, have access to health care.  The so-called "40 million uninsured" refered to by the socialists is arguable at a minimum, and it does not mean that these folks go without medical care.  Medicaid, county hospitals and clinics, and even the finest medical facilities in the country routinely provide services to these folks.  My objection to having the government command resources is that it replaces an imperfect, but far superior supply and demand system.  Personally, I would argue that if we hard serious tort reform, defanged the AMA, opened up the insurance industry, and lower taxes, the problem with medical care would be alleviated.  But as long as you have a buffet of services paid by someone else, it is inevitable that the quantity and price of these will go up, while the quality will go down.  Socialists keep trying to change human nature and thousands of years of experience.  They feel temporarily enlightened, and "special", but ultimately savage the very people that they profess to care for.  That is not to say that we should not seek to improve things.  But turning health care OR golf to the government is not the way.

BTW, how dare you blaspheme the game.  There are 100+ years of experience where government had relatively minor direct influence on health care, and most of our ancestors did just fine.  Can you imagine the horror to some 30 MM Americans if golf was taken away?  For God's sake, do you know the impact it would have on the health care system?

[RJ_Daley]

Laughing at the last, but shaking my head at the rest...

[Jim_Kennedy]

Actually, Ed's premise is a bit off to begin with. Housing development courses are doing fine for the most part and there are over 100 in the works in Fla. as i write this.

[Don_Mahaffey]

Lou,
Thanks for the compliment. I'd like to believe I'm competent, but the proof is in the pudding. Right now, it's looking like we may do well. I believe your spot on with your comments about the owner/operator model. At least at the lower end daily fees like my course. I liken it to the family restaurant down the street that has done well due to constant and intense vigilance. In golf the margins are often thinner then most think and there's little room for the management fees that the lawyers and corporate types often attach to projects.
I think the correction that's occurring in our industry will be good for the long run. For a while there it seemed like common sense business rules didn't apply to golf and that has certainly changed recently.

Forrest,
You piqued my curiosity with the mention of the course your office did in the desert for 2.2 mil. Would you mind sharing the name, here or offline? donmahaff@wmconnect.com

[A_Clay_Man]

Had to share this with this thread.

If reading about Pleasanton's $35mil wasn't bad enough, I tremble at the impetus for this supposedly "for da folks" project. Thanx to whoever linked cybergolf.

Palmer Design Lands La Quinta Project
Culminating an international design competition, Palmer Course Design Company of Ponte Vedra, Florida, prevailed over three other finalists to secure the right to negotiate with the city of La Quinta for the design of the highly touted municipal golf course located at SilverRock Ranch.  
 
A total of 38 RFP's were circulated worldwide by the city; initial interviews narrowed the candidates to 16 and, in late May 2003, it was time for the 'final four' to put their best foot forward to the Redevelopment Agency, whose $42.5-million purchase of the 525-acre site gave this project high visibility within the golf development community.  
 
Adjacent to two private golf communities, PGA West and the Tradition Golf Club, both of which feature Arnold Palmer course designs, SilverRock Ranch is regarded as one of the most significant golf resort developments in the U.S. Erik Larsen, senior designer with Palmer Design, made an impassioned presentation to the Redevelopment Agency on behalf of the “King of Golf” for this 45-hole municipal facility:  
 
"Mr. Palmer has not only been visiting La Quinta since before the town was incorporated (1980), but as a resident of The Tradition, he is literally your neighbor. He believes in providing beautiful courses that are fun to play and inspire golfers to come back time after time because they've had such a good experience. By the same token, (Palmer Design) is experienced at designing a challenging course for the more accomplished golfer. I can assure you that Arnold Palmer will be a personal ambassador for the city's success with this spectacular property."  
 
GMA International, master planners from Newport Beach, Calif., prepared the conceptual design plan, which was unanimously adopted by La Quinta’s Redevelopment Agency last month. The GMA Plan proposes a championship course parallel to the Santa Rosa Mountain backdrop, accented with lakes and water features.  
 
Other SilverRock facilities include multiple hotel sites, including a boutique hotel and spa, a clubhouse and community center, a resort retail complex, recreational amenities and residential villas around the two-and-one-half golf courses.  
 
Thematic influences considered by GMA and the city include an international village emphasizing the 'ultimate' golf experience, which might include a Q School, a Golf Hall of Fame, as well as teaching and conditioning facilities. The Dave Pelz School currently occupies the site of the old Ahmanson ranch house and leases the facility from the city on a year-by-year basis.  
 
When questioned, Larsen identified the SilverRock team as the same designers who created The Tradition: Palmer, Larsen, and David Chapman. GMA was also the master planner for The Tradition and has an extended contract with the city for on-going master-planning services at SilverRock. Contract negotiations with Palmer Design will commence immediately as grading of the first course is slated for this fall.  
 
The possibility of the new golf facility becoming a permanent home of the Bob Hope Chrysler Classic may have contributed to the favorable impression of Palmer's organization. Palmer has contributed to the success of the Hope Classic for many years and is credited with assisting in the positive financial impact the Classic has had on the community through his personal involvement and the international resources of his organization.  
 
For more information on this golf project and hundreds of others around the U.S., go to www.golfconstructionnews.com.

[Forrest Richardson]

Don't get me started on La Quinta!

Don, the course we did for $2.2 million is Grande Valley in Eloy. The original developer was the City. The current owner bought the course once the City had had enough. I suspect he's put at least $2 million in it by way of a clubhouse, trees (lots of trees) and other "improvements". He also got adjoining property which is now being developed into homes. I'd say quite the deal at the expense of bad planning.

[A_Clay_Man]

C'mon, get started!

Did it really say 42.5 mil for the property?

This project smells of the political boondoggles that makes golf look like a prison yard pastime.

As long as the game associates itself with these types of "deals" it will never breakout of it's mold and that mold is getting blacker, save for the bottomline. HA HA.

Good luck La Quinta. YOU WILL NEED IT, morons!

[edmorrissett]

A lot of well thought out responses.  I know more than I did.

The question of a "certificate of need" was tongue in cheek of course.  We obviously don't need more government regulation.  As has been pointed out there is already enough by way of zoning, environmental, etc.

Economics will win out in the long run.  The problem is, and it is most true in housing development courses, is that it often takes a long time (5-10 years) to determine whether a new course/club will make it.  A lot depends on the contractual arrangements with the developer.

The main reason for my post initially is that if any of you were considering moving due to business or retirement reasons, wanted to live on a golf course and be a member of a club, could you rationally consider a development that is less than 10 to 15 years old and had already been "shaken down" financially?

Oversupply of golf courses does nothing but help the daily fee golfer.  Very, very few new courses are torn up even if they go bankrupt.

[Forrest Richardson]

Of course there is the "exit strategy" — Pulte Homes, the world's largest home builder recently purchased an older golf course in the east and — yes — turned it into a housing development. They now look very carefully at their golf developments to see of a core routing/configuration might be better as this layout can be developed, if necessary. How about them apples!?

[A_Clay_Man]

Of the many houses bunched up lined fairways i've seen, I am always shocked that the owners of these homes seem to never be home and don't seem to be on the golf course, either.

Palm Springs is an amazing sight. The same townhouse look, row after row. I tried not to choke on what KSL was expecting for compensation for some of these tasteless tracts.

SHEESH

[Forrest Richardson]

We might all take a deep breath and realize two things about housing and golf:

1. MacKenzie lived on a golf course; in fact, very close (too close) to the line of play.

2. It is quite remarkable that, of all the sports and games, people actually wish to live on golf courses — their beauty, therefore, apparently a mainstream appeal and quite a compliment to the game.

[Steve Lang]

 

Never too many.. just too much time and money and priviledged access required to play them all.  Eventually that will change one way or the other and life will go on.

When we moved to the Woodlands, my bride said we could live on one of the courses, or belong to them.   The latter was a much better option, and I can't imagine someone wanting to only play or inverst in one course in their retirement!