Economics 101 (for superintendents)

The state of the economy has presented a variety of challenges for the game of golf. In the last few decades, the number of golf courses being built has been greater than the demand for people to play those courses. This was realized before the current recession, but it was only exacerbated by the economic downturn.

Recent statistics show, that in the United States, we have about 50 more course closures per year than we have openings. This trend has been the case for the last several years. There are probably a few more years ahead of us with this trend as we settle out to a reasonable number of golf facilities to match the player demand. In the meantime, we have seen a variety of changes in the business of golf course operations.

Each week I see stories of private clubs that have gone into foreclosure or turned to public access to support their finances. Selling prices for many golf properties are a fraction of what they once were. It is a rare occasion that the model of “build it and they will come” is working. Instead, many golf clubs are struggling with keeping their heads above water in these rough economic seas.

Many areas of the country have seen heavy discounting for daily fee play and quite a few private clubs have lowered their initiation fees to match the current economy. In essence, the economy has forced the industry to provide affordable golf. It has been the result of supply staying on an even keel with demand. At 2011 GIS, I checked out many of the local golf rates and found it was fairly easy to line up a round of golf with cart for $30 to $35 in the Orlando market. Five years ago those rounds would have been 25 percent more expensive. Tee times are not as difficult to get and bargains can be had in most markets. The situation is not isolated to Florida; I have noticed the same thing in the Chicago and LA markets as well.

Initiation fees at some private clubs are half or less of what they were just a few years ago. Membership directors and committees are becoming very creative in offering financing and payment plans to attract new members. I have seen several ads that indicate a dues-only structure at some private clubs with no initiation fee in light of the current economy.

So what does this mean to the golf course superintendent? In a nutshell, we need to have a better understanding of what floats the financial boat of the golf facilities we work for. No longer is a superintendent judged by the quality of the turf they manage, but also by their business acumen and the overall financial success of the facility.

It is a shame for any golf course superintendent to not understand the overall financial position of the club for which they work.

There should be a clear understanding of how the golf course budget fits into the overall finances of the golf facility. Golf course operations are merely an expense item in a much larger budget. There are plenty of things that superintendents can do to positively impact the bottom line of a club if they better understand the overall finances.

What drives the revenues at your golf facility? Some courses are truly golf clubs, while at others the golf course is an amenity to the many other functions at that facility including tennis, health club, food and beverage, aquatics, etc. It is important to realize what a day without golf means to the overall revenues at your club. When one understands this, the decisions on golf cart access, course closure, aerification, etc. can surely become financial decisions as well as agronomic ones. It is understood that there are sound reasons to close the course, restrict carts and aerify, but if you owned the course would you make the same decision in a struggling economy in which most properties need every round they can get?

There are a variety of programs and improvements that can be made to any course to maximize golf rounds, but they come at an expense. Many courses in the northwest have opted to sand topdress their fairways allowing golf play and cart access during the wet periods. It doesn’t take long to figure the return on investment for a program like that.

On the expense side of a golf facility budget, there is no doubt that golf course maintenance is a fairly large item. Of course, one can argue that not many people visit the facility on a rainy day or in the middle of winter. However, golf course maintenance expenses have been reduced significantly at many facilities in the last few years. At the least, expenses are flat which really means they are less because the cost of goods, resources and supplies has risen. The cost of benefits has also gone up and with double-digit annual increases.

In a golf course budget, if you can control the labor you can control the budget; that is something that I learned early on in the business. Labor is typically 50-60 percent of most golf course maintenance budgets. No matter how much you think you can save on fertilizer, water, parts, etc. it will rarely make an impact as great as managing your labor. Forty years ago we truly made hay while the sun shined and worked long hours and long weeks on the golf course. Labor was not that expensive and readily available at affordable prices. Paying overtime and double time was just a way of doing business. Many a day the crew worked from sunrise to sunset to keep up with a labor-intensive golf course maintenance program.

Today, we have great improvements in technology and mechanization that have given way to a fewer employees and certainly fewer man hours. If standards had remained the same over all the years, then we would have seen quite a cutback in labor. However, until recently, I have seen golf courses hand-raking bunkers, rolling and double-cutting greens, mowing rough multiple times per week, etc. Now that may be fine for a few select clubs, but it will just not fit into the current economic challenges that golf faces at most facilities.

A couple of ideas for labor savings could include the hiring of part-time employees. Employees can be scheduled at times that have the least amount of interference with golfers, increasing productivity. Suffice it to say that productivity and efficiency drops by at least 50 percent during peak play hours. Mowing, syringing and irrigation repairs usually take twice as long once play catches up with the crew. Today, it might be wise to consider an early crew and a late crew to best match peak periods of productivity. The concept of overtime should be reviewed depending on labor availability. If you owned your own business, would you pay people 150 percent of their wages to work late or on weekends? Decisions like these can assist in achieving better cost controls while allowing a superintendent to still put in the right number of labor hours at the most efficient times.

In the areas of purchasing, there is no time better than the present to purchase smart. Superintendents can develop their own buying cooperatives and request volume discounts from manufacturers and distributors. Discounts can be had for early orders and early payment as well as terms for payment for those who are cash-strapped. Superintendents need to evaluate not only what fertilizers and pesticides work well but what their true cost per day of control or release are and what the cost to apply those materials may be. Smart buying programs are available on parts, supplies and uniforms. Competitive bids are appropriate on an annual basis to ensure favorable pricing. Understand the cash flow of your facility. There’s no sense looking at early order programs in which you may have to borrow on the company line of credit.

In areas like California, the cost of utilities can be the next highest expense after labor. Water, electricity and fuel are valuable resources, but they are also expensive. By analyzing water needs and efficiency of the irrigation system there are strategies that can create significant savings by watering more efficiently. Consider weather stations, variable speed pumps, replacement nozzles, sensors, reduction in irrigated turf and overall preventive maintenance on the system.

No longer are we dependent on traditional power sources only for golf course maintenance equipment. Superintendents must evaluate electric mowers, sand rakes and utility vehicles. There are some courses even using engines that run on converted vegetable oil from the kitchen.

As we have seen there is a “new normal” in golf course business these days. If we look at the example of courses that have a $35 average price for a round of golf then it will be easy to figure the number of rounds of golf required to pay the bills at that facility. When expenses exceed income then the business will fail. Some facilities have alternate income sources such as banquets but typically, golf must stand on its own.

Superintendents, together with their facilities, must develop the appropriate strategies to match the expenses with revenues. Standards must be parallel with the staffing and resources provided. It is all about the success of the facility and not just the golf course. Facilities can survive in this tough economy by developing sustainable, big-picture financial strategies. GCI

Bruce Williams, CGCS, is the head of Williams Golf Consulting and a GCI contributing editor.