March 2024 | Are Price Changes Brewing at Your Business?

   As seen in Golf Business March/April 2024   

jk.jpgBy Jay Karen, NGCOA CEO

Seven dollars and twenty two cents. Let’s put that in number form: $7.22. I just paid $7.22 for a cup of coffee, and I froze for a moment at the Starbucks counter. There’s a lot going on in my head during this pause –– first and foremost of which is “What the hell?” But it’s quickly followed by some consideration and questioning. Wait a moment.  Why does it cost so much? It probably has something to do with that extra shot of espresso. Then I thought: are people experiencing this same customer reaction much in golf, since the price increases we’ve seen across the industry over the past four years?
In the case of paying a lot for a cup of coffee (which I often do in local coffee shops all around America), I don’t mind. As someone who has represented small businesses in one sector or another since 1997, I don’t need reminding about the investments made in order to make that little cup of coffee happen. The land and building purchase. The wages and benefits paid up and down the line from managers to baristas. The software systems. Merchant processing costs. Furniture and fixtures. Costs of goods sold (oy vey!). Music licensing. Taxes. Profit pressure to pay investors or stockholders. And the list goes on. And here I stand, thinking about the $7 and the two hours I’m about to spend catching up on work and perhaps writing this column. And guess what? I’m feeling grateful that this place is here, that they hired and have to manage good people, that they sourced the milk and coffee in my cup, provided free wifi and a comfortable, air-conditioned place to hang for a while.
How are customers feeling about the price of golf these days? I’m not proposing we ask them in any official NGCOA survey, because it won’t really be helpful. Most people would wish for lower pricing on anything they buy, and impressions of value (experience received for price paid) will be a bell curve. 
I, for one, have been grateful that the supply-demand changes since the summer of 2020 have injected confidence in course owners and operators to make the pricing changes they’ve (long) needed for the health and sustainability of their businesses. We went through, what I call, an “industry recession” for fifteen years, during which the consumer price index rose sharply, but the price of golf generally stayed flat or declined. This meant that golf became CHEAPER (relatively speaking) for golfers over that period of time.
As we continue to step into the 2024 breach, where we may or may not encounter a softening of demand, I encourage owners and operators to remember everything it takes to open those doors for the golfer about to pay $25, $50, $75 or $100 or more for that round of golf. You’ve risked a lot. You do a lot. You spend a lot. I’m reminded of the time a board member of NGCOA told me about the incessant complaining he got at the counter, when he raised prices by $1 (this was twenty years ago). He had just spent $30,000 on a new fairway mower, and parked that mower near the first tee with a price sign attached to it. He felt the need to politely and not-so-subtly remind golfers how much it costs to run what appears (to the untrained eye) to be a simple business. A bold move made under some frustrating circumstances, but I do think golfers don’t pause (like I did at the coffee counter) to consider EVERYTHING that goes into creating a golf experience.
If the booking patterns for the coming weeks or months do not look as strong as last year, or if customers start expressing their displeasure with your pricing, just remember there are more levers than just price that you can pull to keep the business strong. I’ve seen many business owners make the mistake of dropping rates to increase demand. Here’s a little secret: golf doesn’t follow the old price elasticity of demand formula. This doesn’t mean you can’t flex on some rates at some times for some targeted customers.
What I’m trying to say is this: when it’s time to consider your price, remember all the things it takes to make your business work. Remember that the loudest complainer about price doesn’t usually represent your entire customer base (remember that bell curve). Deliver that goodness that you do, and charge what you can or what you need in order to keep it going strong. I’m not worried about the affordability of golf –– the market forces will ensure golf will remain a game for the masses.
Best of luck this season. Now, back to my cup of coffee.