Will golfing get out of the rough in 2015?


By John Rehkop. Local golf course operators are looking to create a new, more sustainable model for daily fee golf in the area after a confluence of factors left them in the rough.

Golf clubs such as Birkdale and Skybrook in Huntersville were the crown jewels of daily fee golf when they came online in the late 1990s to early 2000s. With services and conditions that rivaled private clubs, they represented a new era in public golf.  They were part of a golf bonanza, a surge in course development that paralleled baby boomer retirements, a robust economy and what some call “the Tiger effect.”

Between 1990 and 2003, developers built more than 3,000 new golf courses in the United States.  Only 14 new courses were built in 2014, while 157 closed their doors according to the National Golf Foundation.  Last year marked the eighth straight year that more courses closed than opened.

Declining interest of this magnitude was once nearly inconceivable in a business defined by decades of slow, steady growth.

According to a 2014 report from Pellucid, a consulting company that specializes in the business of golf, the number of U.S. golfers has dropped 24 percent from its peak in 2002, to about 23 million players last year. It found that in 2013 alone, the game lost 1.1 million players. One of the more troubling national statistics is the decline in the core once-a-week golfer. The number of people who play 25 times a year or more fell to 4.6 million in 2010 from 6.9 million in 2000, a loss of about a third, based on one industry report.

Both public and private clubs, rocked by this market correction, are now trying to regain their footing.  They are hoping for better days ahead against the backdrop of fewer golfers and fewer rounds being played.

However, at some clubs the issues run deeper than industry challenges. Birkdale and Skybrook were part of the troubled Carolina Trail group, owned by Jeff Silverstein.  At one time, Silverstein controlled seven courses in the Charlotte area that were either placed into receivership or foreclosed upon in late 2013. Silverstein engaged in freewheeling pricing strategies with low-ball, lifetime memberships and cut-rate bundles of rounds with front-loaded payments.  The courses became symbols of the excess of the 1990s and fire-sale mentality that has altered the market.

But, in spite of the headwinds that remain, there is some renewed optimism and a new focus as a result of the changes in management.

A pivotal year 

Skybrook is now operated by Troon Golf, a mega-player in golf course management with a portfolio of more than 130 courses across the U.S. Bill Thibeault, who came on-board as General Manager of Skybrook last April, considers 2015 a pivotal year.

From a pure numbers standpoint, Thibeault said break-even may be optimistic.  More important is how successful they are in resetting the market.  “We need to retrain this market. Charlotte may not be an $80- to $100-a-round city like Scottsdale, Arizona, but it isn’t a $15- to $20 market either.”

To that end, Troon implemented a dynamic pricing strategy last year.  A common practice in the hotel and airline industry, dynamic pricing is gaining traction in other challenged industries, including golf.

Instead of offering price breaks at one or two intervals over the course of a day, prices can change within each hour based on various supply and demand factors.  A course that was offering a $20 discount for play after 12 pm for example, might price an 11:40 am tee time at $60 and a 12:30 pm slot for $52 under a dynamic pricing model.

In addition to curbing revenue potential, a traditional pricing system tends to create an overload of demand shortly after discounted rates go into effect, says Thibeault.  By flattening the fee curve with dynamic pricing, clubs incent golfers to reserve times earlier and better spread play throughout the day.

A more balanced tee sheet can also have a positive impact on another major industry issue: Pace of play.

Furthermore, Thibeault believes the club must work harder to generate more rounds from the baby boomer market, a core group that typically has more time and discretionary income – two commodities that are part of the specter overhanging industry. “You can do things to attract women and juniors. But you really need play from that 55-to-75 age group that is nearing the end of their career or already retired (to be successful).”

The generation gap, or disinterest among the millennials generation in particular, is an area of concern for golf industry officials who are trying to figure out how to entice young players. As a sport, it doesn’t reflect the kind of values millennials like—diversity, inclusion, speed and efficiency. Raised on the Internet, they expect instant gratification.

Given the shrinking pool of players, increasing the amount of revenue generated from each player has become a key strategy. “We need to maximize the per-visit spend,” says Mike Riddle, Regional Vice President, of VA-based Traditional Golf Management, the new operator of Birkdale Golf Club.

After extensive course upgrades over the past year, Birkdale modestly raised both its daily fee rates and month-to-month memberships this year.  Fees for its popular “Bogies to Birdies” program, which restricts access to the afternoon only and comprises the large majority of Birkdale’s membership base, were increased recently from $40 to $50 per month.  But these incremental increases still lag the fees the club commanded in the early 2000s.

To help grow ancillary revenue and add value to the overall experience, Birkdale has restocked its pro shop, upgraded food and beverage offerings, and added new leagues and junior programs. While Traditional Golf Management declined to provide specific numbers, Riddle said the changes have “generated a lot of new momentum.”

However, in a market still considered overbuilt by many, the harsh reality for these clubs, and others, is that an easy fix does not exist. “Any time you’re trying to bring a course out of bankruptcy, it’s a three-to-five year project,” says Thibeault. “It takes time to rebuild a reputation.”

Contraction likely to continue 

While there are courses nationally that are seeing growth in memberships and rounds played, they are generally the minority.  Course closings are expected to continue to outnumber openings by about 100 a year for the foreseeable future.

It wasn’t that long ago that golf was considered the activity of choice for corporate bonding and the upwardly mobile aiming for success.

A change in the family dynamic has also had a profound effect.

“There is that term ‘the responsible dad,’” says Scott Knox, General Manager at Verdict Ridge in Denver. “Instead of playing 18 holes of golf on Saturday morning, dads are going to their kids’ soccer games.  What we really need is to get families back involved.  The responsible dad can bring his kids to the course on the weekends.”

While Knox says they have eschewed some of the discounting other courses engaged in, that doesn’t mean the club is immune to the challenges. Rising maintenance costs and an investment in new Champion Bermuda greens in 2012 have made it even more difficult to turn a profit, despite a slight uptick last year in total rounds played. “It’s a struggle.  There are just too many golf courses in this area.”

Many of the courses built in the past two decades were part of larger residential developments, essentially an amenity to help sell houses.  For some, that once highly marketable amenity has turned into an expensive to operate, depreciating asset. “Once the houses are sold, you still have to figure out how to turn a profit,” says Knox.

Perhaps golf course ownership these days is best suited for the Donald Trumps or Michael Jordans of the world – the latter is reportedly looking to build a course in South Florida – or those with the fortitude and wherewithal to invest with a long-term time horizon and an affinity for the game that provides an intrinsic value beyond the financial.

“We have patient money, right now,” says Knox, about family-owned Verdict Ridge. “We see the long-term future of this side of the lake. We are not willing to sacrifice quality for the almighty dollar.”


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