Three Steps to Maximize the Value of your Golf Asset

The landscape of golf-related asset ownership has changed significantly since the financial crisis started in 2008.

Many multi-venue owners have consolidated their portfolios. Savvy, well capitalized developers and homebuilders have sought to both strategically dispose of and acquire lands and properties in preparation for the inevitable upswing in growth markets. There have also been new entrants to the sector, both single and multi-property buyers, identifying the significant opportunities presented as a result of years of acquisition and development debt default.

While some such opportunities continue to present themselves, and developers again look to breathe new life into stalled projects, the new economic order dictates that today’s transaction activity is ever more considered, diligent and strategic than in those years leading up to the crisis.

Each ownership category is now focused on implementing their operational and capital plans aimed at achieving their respective investment and lifestyle growth objectives while meeting their commitments to stakeholders.

At GGA, our Asset Management team counsel our owner and investor clients to pursue three steps in their search to maximize the value of their assets;

Step One. Understand what you’ve got.

  • Asset Evaluation – The two key questions to be answered should be firstly “what needs to be done to maintain the capital” and secondly, “what can be done to enhance the value of the asset”? To address these, start with testing the previously determined values of the assets (golf and real estate), complete a capital review to conclusively measure deferred capital (include the golf course infrastructure and machinery, buildings, clubhouse – including furniture and fittings – and real estate), and finally develop a capital investment plan which will support the business plan and contribute to improving the value of the asset.
  • Operations Review – perform a detailed operations review working with existing management to prepare a tactical plan for efficiencies and bottom line growth. This plan should address each department individually and utilise industry benchmarks and best practices to identify priorities.
  • Management Capability – evaluating the capabilities of the management team to implement your improvement plans will ensure you have the required skillset and resources for success. This will inform ongoing performance measurement and management outsourcing evaluation.
  • Real Estate Relationship – if applicable, review the relationships between the real estate and club/golf activities/memberships to increase the overall value of both assets.
  • Information Systems – The operation and management of your club or facility will involve thousands of processes every day. Managing reservations and enquiries, applications, invoicing and billing, cash and credit transactions, events and communications may be just a few. When processes aren’t functioning effectively it often results in dissatisfied members or customers, frustrated staff, an expense in time and money and a question over the reliability of reported information. evaluate an operations’ internal controls and business processes with the objective of improving efficiency, trust, and customer satisfaction while reducing the risk of duplicity or fraud.
  • Market Study – complete a detailed market study which identifies improvements for revenue growth and increased values for the club and real estate. The market study should examine both the internal and external influences over the business including;
    • Member / Customer Survey – We consider such surveys to be the cornerstone of a successful strategic business plan because it helps to uncover expectations, how your users define value, their tolerance for dues and fees increases and informs a capital plan which can target areas of greatest impact.
    • Competitive Analysis – Savvy travelers and members have greater choice than ever before when it comes to investing their money and more importantly time in a golf destination. The asset manager should evaluate the local and destination-area markets thoroughly to understand the competition and how they price and package to attract your target market.
    • Demand Analysis – measuring the potential demand for your facility requires a thorough analysis of your immediate and source of origin markets. This includes demographic, psychographic and participation studies. This process may expose gaps in market coverage that could become advantageous.

Step Two. Develop your plan.

  • Strategic Business Plan – the strategic planning process and the plan that results from that rigorous exercise are critical to the short-and long-term success of any business. It will support the investment objectives of the fund/owner, identifies what success looks like and provides a roadmap to how it will be achieved and the resources and investments required to do so. The strategic business plan will include;
    • Vision and Strategic Goals
    • Operating & Financial Plan
    • Sales & Communications Plan
    • Membership Strategy
    • Financial Plan
    • Organizational Plan
  • Capital Enhancement Plan – the capital investment strategy for a golf asset must be informed by the strategic business plan and the research that informs it. It must support business growth and exploit opportunities for inherent value or in proximity of the property.
  • Exit Strategy – As the Wall Street saying goes “they don’t ring the bell at the top” and so for owners of golf assets, it is vital to determine what the optimum conditions for an exit from the asset are and the most appropriate strategies to either liquidate assets (including consummating the sales transaction) or transfer property to family members.

Step Three. Monitor the progress and results of your plan.

  • Performance Evaluation – On a periodic basis (monthly, quarterly, annually) review both the performance of the management team and the business plan based upon the determined metrics and best practices. Apply industry benchmark data to all your key metrics including those for revenue, cost, yield, margins, headcounts, satisfaction, and utilization. This is done effectively by applying the appropriate information systems, such as GGA’s Performance Intelligence Platform.
  • Keep Informed – While it is not advisable to continuously change strategy, the fast-paced world in which we live in requires tactics to remain flexible and adaptable to changing conditions. Asset managers must engage a method to measure current and actionable market, operational and financial intelligence to support management in their quest to successfully achieve the club’s strategic goals and objectives.

For savvy investors and owners, these steps facilitate a thorough understanding of your asset and the market in which it operates, they encourage informed business planning and enable the setting and monitoring of appropriate performance metrics. Each are key if you are to maximise the performance of your asset, driving its value and critically, determine the most appropriate time at which to exit.

This article was authored by GGA Partner Rob Hill for Golf Business Monitor.

Noteworthy European Golf Club Trends

Through our numerous assignments and research initiatives at GGA over the last twelve months, we have encountered both unique challenges and consistent trends at golf facilities throughout the EMEA territory. Here, I have identified five that are particularly noteworthy for their influence on current golf facility performance at European Clubs

One. Capital Maintenance Trends

Capital maintenance, capital improvements and the funding of both are amongst the greatest challenge facing golf facilities now and are expected to continue to be so into the immediate future. 40% of clubs are reporting that they have more than three-year’s worth of deferred capital maintenance and expenditure, largely a consequence of economic recession/stagnancy between 2009 and 2015.

Long-term capital planning is rare, with most clubs lacking a formal plan to fund capital requirements, using whatever cash is available each year to fund their reserves. Less than 50% have a capital reserve study in place informing long-term capital requirements. Of those that are investing in capital, almost 6 in 10 are using a combination of debt and membership levy to fund their programs.

Clubs spend on average 7.6% of gross annual revenue on capital maintenance but estimate they need to spend 9.6% to keep pace with capital maintenance.

Two. Women make the ‘buy’ decision

Historically golf clubs have been institutions that served male viewpoints, wants and needs. New programs and services are changing membership structures, methods of club governance and the feasibility of many clubs.

In her book, “Marketing to women” Martha Barletta indicates that 91% of home purchase decisions are made by a woman. Typically, the club membership decision is a part of the home-choice decision due to location, psychographic and demographic profile. As such, clubs must reset membership programs to address the primary push/pull factors that influence the buy decision. Women prize their clubs as a platform for socialisation. Clubs must demonstrate in clear and appealing ways that the lifestyle of the club is diverse, active and accessible for busy women and their families.

Sales and marketing tactics in forward- thinking clubs are seeking to address schedule flexibility, interesting and current programs and the opportunities for meeting and keeping friends.

Three. Business Intelligence

There is increasing adoption amongst clubs of more sophisticated business intelligence for decision-making. This includes the tracking and analysis of financial and operational performance trends, market pricing trends and positioning, member satisfaction and net promoter score, comparable club benchmarking, and targeted market segmentation.

Club Boards/Management have an increasing need for quantitative, interfaced data to afford informed decision-making about the club.

Club Managers continue to report feeling pressure due to performance comparisons to benchmarks and competitors in all areas, especially as they relate to dues, fees, compensation, benefits, pricing, and staff levels. Other leaders struggle to meet their Board’s demand for data which has led to an increase in staff hours to track, monitor, analyze, and produce data. Some GMs have found traditional sources of data to be insufficient in providing the data their Board/Owner wants.

Top-performers are tracking specific internal and external market KPIs and act upon them to sustain market position. Many clubs – which lack the comfort of capital or staff resources to execute their own intelligence program – rely on frequent, concise surveys that monitor customer satisfaction, such as the secret shopper program provided so effectively by 59Cub. Some have even tied staff bonus incentives to member/customer satisfaction ratings.

More recently many clubs have turned to subscription-based services such GGA’s Strategic Intelligence Platform to track operating performance, customer satisfaction, and competitive market data all in one central portal.

Four. Sustainability

Last July, London’s new Mayor Sadiq Khan announced a ‘crackdown’ on pollutants. His goal is to “Make London one of the World’s most environmentally friendly cities”. His plan to achieve this goal includes amongst other things creating an ‘Ultra-Low Emission Zone in central London by 2019 and beyond central London by 2020. The fact that Mr. Khan has placed this issue near the very top of his agenda, is a great indicator of just how much influence sustainability and environmentalism has on the public mind-set – politicians don’t tend to tackle issues unless they are going to improve their popularity.

Many clubs are now rightly keen to present their sustainability credentials, but to have resonance, consumers want to know the details/specifics and the outcomes. For clubs this means their efforts in this space should be measured and proactively reported, with the support of a trusted third party.

The Golf Environment Organization is doing extraordinary work in supporting clubs achieve exactly this. Their club tools are not just providing vital guidance on best practice for sustainable performance, but are now also providing measurement and reporting tools to aid in effective communication of the results of such performance.

Five. Membership

Gone are the days when most clubs were operating with waitlists and a pipeline full of members lined up to join the club. The reality is that most clubs must now aggressively seek and find new members. Successful clubs are adopting a more data-driven approach to membership recruitment/retention and are adjusting membership and amenity offerings to be more competitive in their business space.

61% of clubs map the location of their members to identify trends and areas for new member growth. GGA recommends that clubs do this annually to maximize membership sales effectiveness.

Six in ten clubs have encountered challenges with an aging membership or growing senior member category. Two-thirds of this group has adopted a set of tactics to address these challenges, among which adjustments to age bands and entry fees are most common solutions.

More than one in four (28%) clubs have experienced a decline in their total number of members in the last 5 years. The annual attrition rate of clubs in the UK is 3.5% while in the rest of Europe that rate is 4.7%.

The top three factors for creating a sustainable membership strategy include (1) improve overall amenity quality, (2) embracing modern technologies to complement modern lifestyles, and (3) further enhancing the club’s platform for connecting its membership.

Trends such as these, although not universally applicable, are highly valuable indicators of change. The capacity to be prepared for change and take advantage of the opportunities that come with it, is what marks a successful club. Best put by Darwin, “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change”.

This article was authored by GGA Partner Rob Hill for Golf Business Monitor.