Golf course profitability has been improving, for some more than others. As a generalized observation for our area: About 25% of courses are doing rather well. 25% are in a revenue growth and improvement mode. 25% are flat-lined, neither doing better or worse. And the remaining 25% continue to ward off decline.
In the hey-days of golf growth almost all courses were making money and opening a new course was considered a no-brainer. Since 2000, and especially after the 2008 recession, making money owning a golf course has become problematic. Nothing new about all that and everyone who owns or operates a golf course is well aware of the challenges.
The golf environment has changed this year. Better weather and slowly improving economic conditions have lead to a growth in rounds played. For example, Golf Datatech reports rounds played in Ohio through June 2012 is up 24.5% and Kentucky is up 13.1%.
Nationally rounds are up 9.2%. Interestingly, public courses up 10.5% while private courses are only up 4.8%. If the velocity holds through yearend then play will almost be as much as the 25 year high achieved in year 2000. Could it be the golf economy has bottomed and is now in a growth mode? Several factors influence the financial conditions of a course.
Location
If easy to get to from where a large number of golfers live or work, then a course has an advantage. If not, a difficult hurdle exists. Because it is exceptionally difficult to move a golf course, owners are stuck where they are planted. Somehow golfers need to be given reasons to journey a little farther to play rounds.
Question: how can golfers be enticed to make the trip?
Competitor Density
Where many courses are located close together, golfers have lots of choices and courses often find themselves in a margin reducing competition to pull them in. Golfers select favorite courses for many reasons.
Question: what reasons can be employed to attract additional golfers?
Product Quality
A golf course offers a leisure or entertainment product and service. Lower quality facilities, unwilling or unable to improve, can only attract golfers with an equally low price. Such an environment typically means the course struggles to make suitable profit for much investment into course quality.
Should a course desire to break free from the low quality conundrum these questions need answered;
- Will investment in quality improvements actually elevate revenues?
- If so, how will the quality improvements be capitalized?
The Uncontrollable
Two other factors are often stated; economy and weather. Both can be devastating factors, but both are temporary conditions that cannot be controlled. Weather is difficult to forecast while the economy always gives indicators months in advance. Good management decisions and quick actions are necessary when one or both go bad. The goal is to have a balance sheet strong enough to get through a bad weather or economic period.
Professional Management
No, this doesn’t mean utilizing a professional management company. It refers to the capabilities of the management team. Somebody with knowledge and skill must operate the golf course as a business.
Observation would support those courses with good management teams appear to be doing very nicely. Management knows what questions to ask, how to determine where they want to take the business, how to make a plan to get there, and how to implement their plan.
The management team does not need to be MBAs and corporate titans, some of the best have no such pedigree. They just work hard at learning, planning, and implementing. The key is they run the course as a business using good business practices.
