For several years we’ve been tracking the cost of golf course maintenance on a per round and per member basis. Last week, while on an assignment in California I ran across a course manager who shared with me his course’s total cost per round, including not only golf course maintenance but also all the other operating costs like salaries for golf and food staff, building operating costs, real estate and other taxes, insurance, admin and other expenses typical of a golf or club operation.
In the recent golf world of competitive pricing it often seems as though many clubs sell their product (a round of golf) for less than it costs to produce it out of fear for losing market share. Since we’re all aware of the pressures of a competitive environment, this discussion will focus on how to calculate the cost to produce a round of golf, both at private and daily-fee facilities. While there is no applicable “rule of thumb” because each facility has a variety of differences, understanding the cost of producing the product (a round of golf) will clearly illustrate what fees need to be.
In order to keep it simple, we’ll leave Food & Beverage out of the discussion and address that in a later column. The first step is identifying the elements that make up a round of golf. These include:
- Golf Course Maintenance
- Capital Reserves
- Golf Staffing (Professionals, Shop and Bag Attendants, Building Maintenance
- General & Administrative
- Professional Fees
- Reserves for Replacement
In some instances, these add up (on a cost per round basis) to more than the average green fee paid. It doesn’t take rocket science to see that doesn’t work. Now, I know there are some who will say that increasing rounds will solve the problem. That’s true, if there are more rounds to be had. For sure, in the past year+ COVID has brought more participation and many golf courses have enjoyed increased play. However, this also increases costs, requires more maintenance and staffing and accelerates the need for replacing property components.
As an example, one signature designed daily-fee golf course in a major metro area in the Northeast US we appraised earlier this year generated nearly 36,000 rounds an average green fee of $38.01, after discounts loyalty rounds, etc. Their average cost of providing each round was $42.77. It doesn’t take long to realize something needs to change. The same analysis can be done for private clubs, especially those that seek to control the cost of dues by artificially suppressing dues and deferring maintenance and capital costs to balance the budget.
In order to truly understand any club’s (daily-fee or private) economics it’s not only important to understand that particular club’s culture and economics but also the club’s competitive market, especially market depth (how many rounds/members can be realistically expected). A pricing race to the bottom doesn’t help anyone. A business can’t continue indefinitely spending a dollar for every 90 cents it takes in. Do the analysis for your club and see if your pricing is both potentially profitable and realistic. Remember, this analysis doesn’t even address the cost of developing/building the course.