Tag: cost

Labor, Capital Spending Top 2022 Budgets

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Budgeting for 2022 is complicated by rapidly changing circumstances and market conditions. GGA Partner Henry DeLozier offers insight into areas where budgetary impact will be greatest. 

Budgeting for 2022 is complicated by rapidly changing circumstances and market conditions. For most experienced hands, anticipating changes within their industry and business is far easier than predicting the breadth and depth of the impact the changes will have on their budgets. Here are two significant categories where budgetary impact will be greatest:

1. Labor costs

Historically, the cost of labor and employee benefits represent the largest line item in a golf course’s operational budget. A trend toward a $15-plus per hour minimum wage and desperately low labor supply conditions will only increase the budgetary impact of labor and benefits. In the wake of the COVID-19 pandemic, and the resulting impacts on labor, two truths are becoming evident:

  • Those clubs and courses that kept staff on the payroll and continued long-term relationships with their employees are being rewarded in two ways. First, those courses are not having to search a tight labor market for replacements. Second, course care and upkeep have been sustained by committed and knowledgeable employees who have a running head start on those clubs that have been forced practically to start over.
  • Working knowledge of your specific course and conditioning expectations promotes a more cost-effective recovery process.

But what if circumstances and decisions beyond your control have forced you into a game of agronomic catch-up? Here are some remedial actions to consider:

  • Update your agronomic plan to state your expectations for course conditioning. New employees need (and want) to understand what is expected of them. Be thorough. Be enthusiastic. Show how much you care.
  • Plan for robust new hire training. Pair experienced hands with newcomers. See that the veterans describe the values and standards of the work to be done with the same clarity and as enthusiastically as teaching the job’s “how to” components. Train the trainers to ensure across-the-board engagement and understanding. Plan daily technical training for your round-up sessions to bring new hires up to speed and promote consistency.
  • Hire veterans. There are approximately 19 million veterans in the United States, according to the U.S. Department of Veterans Affairs. As the increasing number of veterans mustering out of service expands, many trained and mature workers are searching for jobs. Some three-quarters of these veterans saw wartime service. Take the steps to learn more about those who have given so much and see how much they can give to your operation.

2. Capital maintenance

Capital spending for most golf facilities has expanded decidedly as an improving economy loosened purse strings and made more money available for deferred capital maintenance spending. Financial analysts at our firm note that capital spending is up by more than 55 percent at U.S. golf facilities, with most projects focusing on course renovations and restorations of historic designs, greens reconstruction and new bunker projects.

With the upsurge in golf’s popularity in the wake of the pandemic, many facilities have experienced growth in rounds played and membership enrollments. According to Golf Datatech, rounds played in 2020 increased by 13.9 percent over 2019 and through the first quarter of 2021 are up another 24 percent. The increased demand for tee times has given owners and managers new confidence to expand facility spending.

What are the smart moves being made by superintendents? They’re updating capital project rosters and renewing long-awaited requests for capital to upgrade facilities. And they’re not waiting. They’re describing the features and benefits of the intended projects and supporting financial projections with trustworthy third-party analysis.

In these uncommon times, it is important for turf pros to remember the sun does not shine on the same dog’s back every day. Market demand will shift. Access to labor will change. But the self-imposed high standards for most superintendents will remain and the expectations of enthusiastic golfers will expand. Prepare your 2022 budget carefully and with a broader understanding of social, economic and market conditions.

This article was authored by Henry DeLozier for Golf Course Industry magazine.

Breaking Down Muni Misconceptions

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The profile of the typical municipal course golfer isn’t flattering: outfit from Goodwill, handicap (if he has one) well into double figures and frugal to a fault, especially when it comes to green fees.

To use a term made popular by former vice president Joe Biden, conventional wisdom is a “bunch of malarkey” — at least the part that paints the muni golfer willing to play any available goat track as long as it’s cheap.

“Loyal muni golfers will surprise you,” says Derek Johnston, a fellow partner at Global Golf Advisors Partners, who oversaw a research project our firm conducted for the city and county of Los Angeles. “Our research showed that municipal golfers can be not only extremely proud of the courses they play, but also extremely loyal.”

The common thinking among public course administrators and operators is that keeping prices low is the key to golfer satisfaction, loyalty and engagement. However, the GGA Partners study of several thousand L.A.-area municipal course golfers revealed that most are not as price-conscious as their reputation suggests. In fact, most say they would pay a higher green fee if certain important criteria are achieved.

The first of those criteria is course conditioning. Specifically, golfers referenced improved putting surfaces — more consistent roll and green speed — and teeing areas. Whether their home course was one of the premier muni courses within the city and county system or one of the more modest, these golfers cited golf course conditions as a top priority and worthy of a few more bucks.

But what do they consider “higher prices?” Seventy percent of those surveyed said they would be willing to pay a 5 percent to 15 percent higher green fee for improved course conditions.

“For most of these courses, a 10 percent increase on average in green fee revenue is significant, given the high volume of rounds played,” Johnston says. “Revenue growth of this proportion recommends serious consideration for investing the resources required to produce improved playing surfaces.”

The second surprising finding from GGA Partners’ research in Los Angeles was the importance golfers placed on pace of play in relation to the value they received for their green fee. Fifty-five percent of muni course golfers expressed a willingness to pay more per round for improved pace of play. “Teaming with USGA analysts, who conducted on-site golfer tests, we learned that pace of play and the sense of ‘getting one’s money’s worth’ were closely aligned,” Johnston says.

GGA Partners’ research of L.A.-area muni golf courses identified solutions that are available to administrators and operators of muni courses nationwide. While some of these findings fly in the face of conventional wisdom, they bring focus to several important demographic facts that should be considered when putting together a strategic plan and again during the budgeting process.

  • Muni golfers are a mixed socioeconomic bag. Many muni course players are not “belongers” and have little interest in joining a private club. In many cases, they are part of an increasingly mobile workforce and are reluctant to establish roots within a club community because they don’t want financial obligations limiting or influencing their next career move.
  • Muni golfers are not necessarily “cheap” and unwilling to pay for an enjoyable round of golf. In fact, many are like most golfers in that they will pay more for aspects of their round that they feel provide value and enjoyment.
  • Capacity for more golf rounds exists at many muni courses, which gives avid golfers opportunities to play more rounds in less-congested conditions.
  • The fastest growing segments of new golfers – women and kids – have easy access with very little friction, as in no joining fees or monthly dues, when playing at muni golf courses.

The potential for increased revenues when pace of play and course conditions are improved is a business model that deserves careful evaluation in most markets today. We certainly know that golf course superintendents at most municipal facilities could provide improved conditions given an increase in their agronomy and maintenance budgets. But what is the potential in your market for increased participation incremental green fees? The best way to know the answer to that question is to ask your golfers. Their answers might be a pleasant surprise.

This article with authored by Henry DeLozier for Golf Course Industry magazine.

Plotting for Budgetary Triumphs

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GGA Partner Henry DeLozier offers 5 tips to help golf course superintendents obtain the resources they need to meet expectations.

The budget cycle is complete at most golf facilities for the 2020 calendar year. If your budget was approved and you received the allocation you hoped for, congratulations. But if you feel a lack of funding puts your plan for staffing, course conditioning and maintenance in jeopardy, you might need a different approach to the next budget cycle. Here are five steps to consider when planning your budget.

1. Identify the Gatekeeper.

There is often one person who sets the tone for the next year’s budget. It’s normally the controller or accounting manager; in private clubs, it may be the chair of the finance committee. This person sets the minimum standards for the budget, and he or she must be educated and kept informed regarding your priorities and needs. Research the background experience of the gatekeeper so you understand the perspective from which he or she considers budget requests. Take the time well ahead of the budgeting period to ensure that this key player understands what is needed and the extent to which you have gone to manage costs.

2. Understand the Budgeting Process.

Many golf courses and clubs use different budgeting processes, sequences and schedules for development, planning and decision-making. Make sure you understand the expectations for your role, and then work diligently to exceed them by providing background and support information ahead of schedule. Understand how your club handles budgeting and who the decision-makers are. Meet with them to explain your needs and priorities. Explore and learn their viewpoints concerning your budget needs and how they evaluate your problem-solving. Help them to know how much thought and planning you have given their viewpoints.

3. Plan Ahead of the Process.

Schedule quarterly budget-planning meetings with the gatekeeper and key influencers of your budget submittal. Inform them fully of your needs for the next budget year, answer their questions and demonstrate your commitment to their preferences and needs. Invite them into your operation so they may judge for themselves your organization and methods of management. They need to understand that you are efficient and diligent with the funds for which you are responsible.

4. Organize Your Roster of Priorities.

Knowing the viewpoints of the gatekeeper and influencers involved in your budget helps you prepare your list of your priorities. Be concise in stating your game plan and the rationale behind your requests. Support each proposed budget line item with incremental details for costs per unit of measure and the number of units required. Show all the facts and figures that support your needs. Your objective is to ensure that the gatekeeper understands the due diligence and conscientious approach that went into your request, which will increase their confidence in the validity of your request.

5. Educate the Influencers.

Prepare individualized budget discussions with influencers. Schedule one-on-one meetings with each person who will have a voice in approving your budget. Persuade one influencer at a time until you have met with each of them and gotten their buy-in. See that you understand their viewpoints and biases. Once you fully understand the individuals, evaluate the group thinking to which you must respond.

By understanding the budget influencers’ priorities and then presenting your credentials in an organized and well-researched fashion, you’re well on your way to getting the decision you want and the budget that will help you do your job more effectively.

This article was authored by GGA Partner Henry DeLozier for Golf Course Industry Magazine. 

Avoiding a Category Overload

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When was the last time you conducted a thorough review into your membership categories?

GGA’s Bennett DeLozier explains how a streamlining process can help to slim down the number of categories and keep them relevant in today’s marketplace.

“Confusion and clutter are failures of design, not attributes of information” – Edward Tufte

Across North America and Europe a competitive landscape for membership has emerged, with more leisure pursuits competing with one another than ever.

Naturally, club leaders across the world are not sitting back and watching the evolution of customer needs and wants without acting. But while a great deal of this action is well-placed – from the introduction of intermediate and family memberships in North America to flexible membership schemes in Europe – in other instances it is leading to an uninformed inflation of membership categories, creating confusion for customers and an administrative headache for club leaders.

A trail of memberships

It is common for categories to emerge at a particular point in time, often as a reaction to an event, as an attempt to appease a vocal minority, or in an effort to attract a specific new member cohort.

Many clubs react to changes in the market by adding or creating a new membership category to appeal to specific segments. When structured properly, this can be an effective way to cast a wider net and appeal to different audiences. However, when this happens in an unstructured way over a number of years, a club may end up administering upwards of 15 to 20 categories at a time.

More categories mean more discounting, different access, and different privileges. Membership samples per category get smaller, and it becomes too much to administer and too confusing for existing and prospective members alike.

Top-performing clubs have fewer membership categories, largely because they enjoy demand such that members are attracted to them versus the other way around. For others, what should be a set of simple, straightforward membership categories becomes a patchwork quilt, absent of any tangible strategy or current solution to underpin its creation.

Naturally, tackling this issue has its challenges. How do you begin to evaluate and streamline so many categories? How do you negotiate shifting members from one category to another?

Streamlining your categories

Current market intelligence and supporting research is essential to guide this process. Once you understand the current market circumstances and positioning of your club, you can identify where membership categories may need to be realigned to attract future members.

The key is to study internal membership utilization rigorously so you can understand where your club has the capacity to grow. The adjustment of existing categories or development of new ones should be based on creating access and privileges in areas where the club has room to grow, not necessarily where prospective members desire it.

To illustrate the importance of proportionate categories, think about one which has emerged in recent years particularly: the intermediate or young professional category.

Typically offered to those between the ages of 25-35 (with a great deal of variance depending on the club and location), its origins are rooted in the issue of affordability both in dues and initiation fees. This has given way to lower dues, waived initiation fees, or a tiered system based on a particular age bracket.

While the introduction of such a category has been, in most cases, an appropriate tactic, it is one in need of constant analysis. As young intermediate members age into their mid-thirties their lifestyles begin to evolve, so does what they need, want and expect from their club experience.

This poses a challenge to clubs: do you change the existing intermediate category or create a new one to meet evolving demands?

The answer comes back to robust intelligence – intelligence which enables club leaders to get ahead of this challenge long before it makes its way to the doorstep. Intelligence allows you to measure and monitor utilization, enabling category adjustments which match lifestyle changes and market trends.

Moving members

Whether you’re dealing with category overload, wrangling legacy categories that you are looking to streamline, or have members moving up an age category where there are implications to their dues or privileges, at a certain point in time it is necessary to change.

But it’s difficult to change members from one category to another.

Legacy categories can be contentious, as members are unlikely to welcome category change – especially if this means an increase in dues. Club leaders should enter the process with the primary aim of growing where the club has the capacity to grow and a secondary aim of establishing a fair playing field across the membership base.

The best practice approach is to identify categories that have become irrelevant and essentially ‘grandfather’ those members into new categories which fit the room-to-grow bill, allowing them the opportunity to transition into new categories under advantageous terms.

If we look back to our young professional categories, when the time comes for them to move up the ranks to full membership, invest time and attention into the process. Why? Because these members have reached a pinch point, a ‘fight or flight’ moment in their membership tenure. If they decide to progress through to full membership now, the likelihood that they will stay for the long-term increases substantially.

Communicating your product

Before communicating your streamlined categories, club leaders should have answers to the following: Are the current categories relevant? Are they performing financially? Are category offerings causing issues with facility accessibility or compaction of activities? How do they situate within the local market and relative to competitor offerings? What benefits will category changes provide existing members? What benefits will they provide the club?

Once in position to communicate the changes internally, preempt what members will think. The primary concern for them will be, naturally, “How does this impact me?”. But the club’s agenda should also form part of the equation. Communicate how the changes will make the club more attractive to future generations and how they will support the club’s financial sustainability. Although it may feel self-serving, it will help to mitigate any ill-feeling among members by giving clarity and a sense of purpose to the changes.

For the change itself, successful clubs provide the option to transition into a new category that has similar access under favorable terms (such as a lateral move into a new category at no cost; or, upgrading to a higher privilege category at a lower incremental entrance fee compared to that of a new member off the street).

Externally, the focus should be on competitive advantage through value. It’s easy to compete with local competitors on price, but it’s not necessarily advantageous to the club. The best clubs look at ways to establish their competitive advantages by adding new programming and subtle category elements that make the value proposition more attractive. Injecting value is preferable to cutting costs.

Clarity over confusion

A proactive and streamlined approach to membership categories has much to offer: an easy-to-manage administrative process and clarity for existing members, prospective members and the Board.

A review of your membership categories also offers the opportunity to view each through the lens of the future and under the guidance of current research. With membership dues representing a hugely significant revenue component for any club, this process is time well spent.

For guidance on how to revise your club’s membership categories, connect with
Bennett DeLozier.

The Club for Millennials

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On the back of GGA’s largest piece of millennial research to date, Michael Gregory answers your questions, revealing how the findings paint a clear picture of who clubs need to target in order to build the next generation of members and customers.

For 3 years GGA and Nextgengolf have analyzed the behavior and attitudes of golfing millennials. Armed with the findings of this research, GGA have engaged with clubs and resorts on how to connect with this audience. Unfortunately, for many clubs, this generation still proves elusive. However, with the latest round of research now complete, we have the clearest ever picture of the untapped potential of millennials.

Below is a selection of questions that have been posed to me in recent months from managers and board members across North America. The answers may help you dispel millennial myths, consider your club’s actions in appealing to this generation, and, in some small way, future-proof the core of your membership.

What do you know now that you didn’t know before about millennials?

This centers around 3 areas: the trigger point for deciding to join a private club, the influence of family in decision-making, and interest in non-golf amenities.

Trigger point: 72% of millennials move to private club membership as the result of a new job or promotion, making way for more disposable income and leisure dollars.

We already know millennials are a highly cost-conscious group. However, an event relating to their work status which sees them earning more is the most powerful trigger point or motivation for them to decide to join a private club. When does this happen? Last year’s research indicated the ‘sweet spot’ for joining a private club was 33 years of age, and this remains the case.

Family: findings suggest a millennial audience is highly influenced by benefits for the whole family and gaining spousal approval when joining.

Millennials increasingly assess the value of club membership not just in individual terms, but in how their loved ones will benefit too. If club membership becomes a gateway to spending more time with those close to them, this will be key to influencing their decision to join.

Non-golf amenities: interest in non-golf amenities is on the increase, with 76% of respondents stating a desire for fitness pursuits and 71% looking for pool facilities.

This increased desire for non-golfing amenities is significant. More and more, millennials are viewing the value proposition offered by private club membership as a lifestyle choice. They may well have gym or health club memberships elsewhere, but if a private club offers those facilities too along with its numerous other attributes, it is more effectively positioned to win out in the millennial mind.

Do I need to create a millennial membership or reduce the cost of membership to appeal to this group?

2019’s findings reaffirm the issue of cost for millennials. Both dues and initiation fees continue to be barriers, and it is a reality that clubs will need to compete on price to appeal to this group (how much depends on the club’s location and market position).

But there’s also a bigger picture at play. While price is (and likely always will be) important, the best performing clubs are focused on creating an experience that enhances millennials lifestyles and develops a sense of emotional connection and belonging. An experience that also enhances the lifestyles of their family strengthens this connection, elevates the value proposition and paves the way for greater price elasticity.

Are there clubs out there who are successful in attracting and retaining millennial members? What can I learn from them?

Most definitely. We’re witnessing clubs roll out a number of effective initiatives to attract and integrate millennial members.

My advice?

  • Welcome millennials into the governance structure. They want a voice and the overall membership benefits from fresh, younger ideas at the committee level.
  • Encourage them to get involved with events. Some older members may be reluctant at first, but, actually, most will love the injection of youth into events.
  • Find ways to get the family involved, even if you only offer golf. Socialization is key, as is spousal approval. Need some inspiration?
    • Offer periodic child care (for a fee) so couples can enjoy time together at the club
    • Host live music outdoors where young couples can socialize
    • Increase service levels when spouses are on property (call them by name, remember their drink, be ready for them)

Any interesting developments or emerging trends from this year’s findings?

We know that millennials are a time-strapped generation. Between work and family life they don’t have a great deal of time left to dedicate to leisure interests. It’s for that reason, in recent years, we’ve witnessed the convergence of leisure and family, with more and more clubs becoming family-friendly and a place for families to spend time together.

Now, we’re starting to see work come into the equation, which is no great surprise as 74% of respondents stated work commitments prevent them from playing more. Clubs are capitalizing on the trend by creating an environment that makes the transition from work to golf and club easier. This could involve investing in modern business facilities with shared workstations, calling booths and private meeting rooms to accommodate their needs.

As there appears to be no letup in time pressures on this generation, we’d expect to see an increasingly closer union between work, family and leisure time.

 

Is your club in need of a shift in focus to appeal to a wider and younger audience of prospective members?

Connect with Michael Gregory to see how GGA’s expertise and insights
in this area can help your club.

Useful links:

Millennial Golf Industry Survey 2019
The Truth About Millennial Golfers 2018
The Truth About Millennial Golfers 2017

Change Shows No Sign of Slowing

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If your time to you is worth saving
Then you better start swimmin’ or you’ll sink like a stone
For the times they are a-changin’
– The Times They Are A Changin’, Bob Dylan

The songwriter, poet and social observer Bob Dylan warned us about change.  Back in 1964, he said it was a-coming.  Forty-five years later, we are reminded of his prescience.

In private clubs, change has arrived in full force and shows no signs of slowing.  As a new year reveals itself, private club leaders should be alert to change in five key areas affecting their operations.

1.  Economy – A surging economy has helped a number of clubs in North America add members in the last two years. But many experts are forecasting a softer economy in 2019.  According to the Conference Board’s November 2018 report, “Higher interest rates, and the intention of the Federal Reserve to keep raising them into 2019, will create a more challenging environment for business next year.”  That means membership recruitment and retention are still top priorities at most clubs.

Global Golf Advisors estimates that less than seven percent of the 4,400 private clubs in North America are full and working from a waiting list for admission.  Anticipating that the economy may soften, private club leaders must intensify their efforts to recruit new members while giving focused attention to retaining existing ones.

Often the solution is not a price change, but something more creative, such as ones that make the club more personal and relevant to today’s lifestyles.

What are the right moves for your club?  The answers start with knowing your members as well as your prospects and knowing what they value most in a club relationship.  If you don’t know how they define value, ask them.

2.  Delay no longer a strategy – In the heat of the recession, many businesses, including many private clubs, decided to forego capital improvements until times got better. Times got better, but many continued to delay investment.

Now many clubs are playing catch-up on deferred capital improvements. In the process, they’re discovering that new members are attracted to standards of quality that match their personal lifestyles.

That means that improvements to club facilities, programs and staff must reflect a long-term commitment to sustained quality.  Most members want their clubs to be better five years from now and club leaders are obliged to fulfill that expectation.

Club leaders do well to establish a broad standard of excellence for the club.  This is where clubs can truly be “unique,” as everyone like to profess.  The standard of excellence dictates the qualities of fit and finish for the facilities, the style and level of services and the types of recreational programs offered members.

3.  Brand takes on added significance – Private clubs are brands, and just as a particular soft drink, computer or automobile stands for something in consumers’ eyes, so does your club stand for something in the eyes of your members and prospects. Club leaders must develop an intentional branding strategy that sustains the promises on which the club has built its reputation, including course conditions, levels of service and culture.

 For brand planning in a private club, several keys apply:

  • Confirm the club’s potential tax-exempt status to ensure conformity with the U.S. Tax Code;
  • Develop and implement a proactive communications plan that reinforces primary brand pillars, and
  • Remember that the club’s brand is reflected in everything it does . . . and fails to do. Everything communicates.

When making any key decisions about the future of the club, make sure you’re staying true to your brand promise.

4.  Security and privacy concerns are increasing.  In a world rife with cyber threats, private clubs are highly vulnerable targets.  People of means gathered in one easy-to-access vault of names, addresses and possibly financial information constitute an attractive target for those ill-intentioned among us.

Members place their trust in their club to safeguard their privacy.  Break that bond and the consequences could be irreparable.  Club leaders must contract with companies expert in securing their club’s sizeable data storehouse and secure this information.  This threat will expand in 2019 at clubs that are unprepared

5.  Access and affordability of labor is changing clubs. Most clubs surveyed by GGA report increasing direct and indirect labor costs.  Many clubs are outsourcing work through contract-labor arrangements.  Some clubs are securing overseas workers for seasonal needs.  All clubs are evaluating steps to reduce the reliance on accessible labor for routine club services.

In some clubs, self-service is taking hold.  In progressive clubs, new solutions including F&B orders entered on tablets, are reducing head-count.  Some clubs are exploring making the golf halfway house and the tennis and pool snack shacks honor-system facilities, where losses are likely to be less than the labor costs to secure them.

On the flip side of Dylan’s ballad that promised change was a song titled “Honey, Just Allow Me One More Chance.”  A new year gives us revived opportunities – one more chance – to get ahead of change.  We better start swimmin’.

This piece was authored by GGA Partner Henry DeLozier for BoardRoom Magazine.

Key Benchmarking Standards in the Golf Industry

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How to Leverage the Information to Improve Operations

Benchmarking standards are commonplace in most industries. These standards are set and updated based on defined and evolving business models and shared information. The core objectives for creating and using benchmark standards are performance measurement and improvement. The golf industry has lagged other industries in the widespread adoption and use of benchmark standards.

The good news is that change has been brewing for years and is picking up speed. The NGCOA Canada is helping to lead the charge through its various benchmarking and performance tracking initiatives, including the Revenue Tracker and Rounds Played & Weather Reports, which provide comparisons of an individual course’s results to their competitive set, provincial and national averages along with Performance Intelligence which provides course specific benchmarks and feedback.

With the various categories of courses, and corresponding operating models (private, semi-private, resort, public, and municipal courses), executing benchmarking and performance tracking initiatives is no small feat.

In order to effectively use benchmarks, there needs to be standardization. This typically requires the use of Key Performance Indicators (“KPIs”) that enable meaningful comparison from business to business and across markets. The KPIs for each type of course are different.

As an owner or operator, this means you need to be recording, tracking and updating KPIs in a manner consistent with the industry (category) standard as a baseline starting point. Therein lies the greatest challenge the golf industry is set to overcome.

In recent years, it has become evident that benchmarks and KPIs have significantly helped golf course owners and operators measure and modify their operations to improve financial performance. Financial performance is not just net income, it includes managing the balance sheet (working capital and debt) and ensuring the maintenance of physical assets.

PUBLIC, SEMI-PRIVATE AND RESORT FACILITIES

Public and semi-private golf course operations have a singular focus – maximizing the yield on a finite inventory of available tee times. As the market for golf continues to evolve, a focus on maximizing gross margin from non-golf related revenues will also become more important.

Some of the most important benchmarking standards for public and semi-private courses relate to rounds of golf, revenues per round, and labour and other expense ratios.

The following are a few examples of important KPIs by category:

Rounds and Revenue

Naturally, a key measure of performance is rounds played. Beyond revenue, rounds played, and average revenue per round, critical indicators required to understand performance include:

  1. Tee time utilization: rounds played compared to rounds available; and,
  2. Rounds played yield variance: how much does each round yield, on average, compared to the highest yielding round.

These indicators allow operators to quickly understand if their pricing model is effective, or if it needs to be adjusted to drive utilization and yield simultaneously higher. While each course and market are different, if your tee time utilization is below 40% and your average revenue per round yield is below 70% of your highest yielding round, significant adjustments should be considered to improve performance. A healthy course will typically run at a utilization rate of 50% to 65% of weather adjusted available tee times and average revenue per round as a percentage of peak revenue per round between 70% and 80%.

Other helpful metrics include utilization and yield statistics measured on a per round basis for other ancillary revenue sources such as carts, driving range, food and beverage, and merchandise. Resort properties will also measure green fee revenue per room, after adjusting for occupancy sales; and total rounds played by guests of the resort versus non-guest play.

Cost of Sales

The cost of sales metrics are generally more straightforward and easy to come by, with costs more consistently recorded and tracked. Generally, food and beverage cost of sales as a percentage of food and beverage revenue average between 26% and 36%, while merchandise cost of sales as a percentage of merchandise revenue average between 65% and 75%, depending on the mix of hard and soft goods sold.

Labour and Other Expenses

Labour expenses are the largest category of expenses for golf courses, generally ranging from 52% to 58% of total expenses.

Expense metrics which go beyond simple dollars and cents, are generally harder to come by due to the wide variety of operating models, departmental structures, and local market conditions for labour and other products and services.

That said, typical labour metrics include the following:

  1. Labour related costs as a percentage of revenues and costs. For instance, food and beverage labour expense as a percentage of food and beverage revenue generally averages between 38% and 50%.
  2. Full-time equivalents by department. According to the most recent NGCOA Canada Compensation & Benefits Report, the average full-time equivalent head count at public and semi-private facilities in Canada is 18.2.
  3. Actual key employee payroll and benefit costs. Public and semi-private facilities employ an average of 52 employees, with significant variances in the mix of staff (permanent, seasonal, full-time, and part-time) by region and type of facility – you are encouraged to consult the report for a detailed breakdown of compensation by key position.

Other operating expenses are typically evaluated against a unit of measure. For example, greens expense per maintainable acre and clubhouse expense per square foot.

Advertising expense is measured as a percentage of total revenue, as are other variable expenses such as bank charges and credit card fees. From a capital expenditure standpoint, public and semi-private golf courses should on average spend between 3% and 5% of total revenue on maintaining existing capital items.

PRIVATE MEMBER CLUBS

Private clubs sell and market more than just golf, they promote a lifestyle and social hub. Instinctively, not-for-profit private clubs focus on break-even operations, member satisfaction and maintaining assets.

In order for a private club to be successful, all aspects of the operation must meet members’ expectations, and as a result, measuring utilization and service levels of all club facilities is quite important. In addition, most people do not want to belong to a club that appears run down; as such, an important KPI is expected capital maintenance costs and the funding of those costs through entrance and capital maintenance fees. Below are a few examples of private club KPIs:

Revenue

The key focus from a revenue perspective is annual dues, maintaining a stable membership count, guest fees, power cart revenue, and food and beverage revenue. An example of important revenue KPIs for a private club are shown below:

  1. Full Member Equivalent: total annual dues divided by a full member’s annual due.
  2. Satisfaction, participation and utilization: critical statistics to measure and benchmark.
  3. Natural attrition rate from existing membership: typically average between 5% and 8% of total memberships.
  4. Membership Conversion Rate from Inquiries: generally average between 8% and 12% of qualified inquiries.
  5. Revenue per membership by department, source and membership type.
  6. Average guest rate (achieved) compared to the peak guest rate, typically averages between 65% and 75%.
  7. Average number of guest rounds per membership, typically ranges from 5 to 12.
  8. Average tournament patron rates, typically ranging from 80% to 90% of the peak guest rate.
  9. Rounds per membership, typically ranges from 35 to 48.
  10. Utilization of tee times by membership category.
  11. Golf Cart Utilization: golf cart usage as a percentage of total rounds, which typically ranges from 35% to 50% depending on walkability of the golf course.

Cost of Sales

Similar to public golf courses, cost of sales as a percentage of revenues are some of the more readily available metrics. Typically, food and beverage cost of sales run higher for private clubs, between 35% and 42% of food and beverage revenue, while merchandise cost of sales typically average 75% of merchandise revenue.

Labour and Other Expenses

From an expense perspective, most private clubs have excellent controls in place to keep expenses in line with the approved budget.

  1. Labour expense ratios as a percentage of total expenses are usually slightly higher at private clubs ranging from 55% to 62%.
  2. Full-time equivalents and headcounts are also typically higher at private clubs, averaging 48.3 FTEs and 101.9 employees.

All other KPIs related to expenses are generally based on a unit of measure of as a percentage of revenue. For most operations, controlling expenses is important; however, for private clubs this may not be as important as meeting member satisfaction. Defining what is important needs to be a ‘first step’ for each operator.

HOW DO YOU LEVERAGE KPIs?

A requirement for effectively using benchmark standards to improve your specific circumstances is the application of experience to compare and contrast your results with that of the standard, investigate discrepancies and develop focused improvement plans.

Most owners and operators want to be as efficient as possible without lowering their expected standard of excellence. The use of benchmarks allows operators to both measure performance and adjust operating procedures to improve performance and meet the goals of the club.

Although benchmarks are typically used to measure historical performance, they can be used to make alterations on a timely basis if reviewed appropriately and to provide direction for adjustments moving forward.

For example, certain utilization KPIs can be evaluated daily, weekly or monthly. For a public course operator, it is essential that their information system be ‘real time’, so KPIs can be calculated, and if needed, communication to the general public adjusted in a timely manner (yield management). The use of KPIs and benchmarks need to be part of the toolkit for management and the owner.

Furthermore, more sophisticated operators have set up specific dashboards with differing KPIs for different levels of management and/or ownership. The dashboards are produced on a periodic basis, either daily, weekly or monthly depending on the audience.

This information is then used to adjust operations on a timely basis or adjust marketing and communications to patrons in order to enhance utilization of the facility.

From a management perspective, KPIs and utilization statistics can be used to align labour costs with activity. In addition, some operators use KPIs to evaluate staff performance and determine bonus calculations.

The most important are KPIs that allow for timely revenue enhancement and service improvements that improve patron/member enjoyment. If you are not using KPIs, you are at a disadvantage and are missing a key tool in your management toolbelt.

STAY COMPETITIVE

In summary, benchmarking standards help each operator remain competitive within their market segment. KPIs can also become a motivating influence for staff and management. Simply tracking your results compared to budget is not good enough. Operators need more dynamic information which allow for the development and implementation of timely tactical solutions.

Industry benchmarks are key to a successful operation – without them your operation is at risk.

This article was penned by Derek Johnston for NGCOA Golf Business Canada. 

Budgeting 2019

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Budgeting for 2019 requires a broader-than-usual alertness to changing times and impacts on golf-oriented businesses. Newfound elasticity on revenue sources, such as dues and fees, will allow many to plan for revenue increases. That’s the good news. More sobering is the fact that most courses and clubs will strain to cover the rapidly accelerating costs of operations.

While it’s helpful to know that costs are rising, budget planners benefit even more from understanding the factors driving cost increases. Here are five cost areas where knowledge of underlying trends and timing will lead to accurate projections.

Labor

The U.S. Department of Labor’s Employment Cost Index notes that wages and salaries for U.S. businesses increased 2.9 percent for the 12-month period ending in June 2018, following a 2.4 percent increase in June 2017. The cost of benefits rose 2.8 percent for the 12-month period ending in June 2018, after increasing 2.2 percent in June 2017. Employer costs for health benefits increased 1.6 percent for the same 12-month period.

Insurance

The costs associated with insuring golf facilities are increasing. Willis Towers Watson’s insurance industry semi-annual report (2018 Insurance Marketplace Realities) projects increases in insured categories more vulnerable to natural catastrophe impacts.

  • Property: Previous-loss history more than doubles premiums in most markets. Clubs located in markets exposed to catastrophic claims will increase as much as three times those of non-exposed clubs, while those clubs with catastrophic experience with losses may see increases from 15 to 20 percent.
  • Casualty: WTW projections indicate that rates for casualty insurance will increase less than 4 percent.
  • Auto Liability: For clubs with automobile insurance premiums, rates are expected to rise from 5 to 9 percent. Ongoing market challenges exist in this space, and two years of steady price increases have not kept pace with loss trends and adverse developments. Rates are expected to rise more steeply.
  • Cyber: Golf clubs are vulnerable to cyber-risk. The WTW study notes a 15-fold increase in two years with claims near $5 billion. Organizations without claims can forecast increase of 5 percent or less.

Healthcare

“Over the past nine years, employee out-of-pocket spending for a family of four increased 69 percent in the form of higher co-pays and higher deductibles, along with 105 percent employee premium contribution growth,” Keith Lemer, CEO of WellNet Healthcare, said in an interview with CNBC earlier this year, noting that over the same period a year earlier employer premium contributions increased 62 percent.” Lemer added, “In 2008 more than 8 percent of a family’s income was spent on health care. In 2015 (last available data) it rose to 12 percent. This means people are making less money today as a direct result of the cost of health care.”

Food

The costs of food consumed at home diverged a few years ago from the costs of food served away from home – in restaurants and clubs. The U.S. Department of Agriculture predicted grocery store price increases from 1 to 2 percent. Food consumed away from home is expected to increase from 2 to 3 percent. For menu planning purposes, be aware that beef and veal are projected to rise 2 to 3 percent, egg prices will increase 4 to 5 percent, while cereal and bakery prices will go up 3 to 4 percent. The USDA expects prices for fats, fruits and vegetables to drop.

Fuel

Large consumers of fuel and oil by-products, including golf courses, will see some relief in fuel-related costs in 2019, according to an August 2018 J.P. Morgan forecast. “While geopolitical tensions and lingering risks of large supply disruptions remain an upside risk, we think that prices will be corrected downwards towards end of the year and remain capped in 2019,” J.P. Morgan analyst Abhishek Deshpande wrote in the note reported by CNBC. This is important for golf where oil prices and those of oil by-products, including fertilizer, have direct budgetary impacts. For budgeting purposes, managers should watch oil futures. One can expect higher gas prices about six weeks after an increase in oil futures.

GGA’s Henry DeLozier penned this article for Golf Course Industry Magazine.

The Revenue Menu

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At a typical golf club, who should be involved in building revenue for the club?

Building revenue is a part of everyone’s job at a club.

If you are a leader, it’s important that everyone under you shares your vision to increase sales.  That necessitates good communication, as with any efficient team, but if all areas of the club are on the same page when thinking about how best to benefit the bottom line, the results will speak for themselves.

They say no man is an island, and no part of your club operation is either.  If you want to build revenue, it needs to happen at all levels of your business.

How can a club encourage all levels of the operation to be thinking about revenue growth?

Attitude always reflects leadership.  If the leader’s attitude is demonstrated in a commitment to increase revenue, most subordinates will embrace the importance of the task.

Therefore, it is incumbent on team leaders to teach staff, not just what to sell – which goods and services yield the most profit margin for the Club – but also how to sell it.

Often staff members are enthusiastic about developing new skills and all they need is guidance.  The truth is, few among us are natural-born salesmen, but selling is a skill that can be learned.  Think about investing in a professional selling skills program to train the club’s staff, and the selling strength of the club will expand immensely.

How should the operations team decide on which revenue sources to focus their energies?

A great way to get the ball rolling is to create and use a ‘Revenue Menu’.  Think about all of your available revenue sources, list them out, and leave no stone unturned.

You will want your team to focus on what yields the most to the club and sell high-yield items as much as is reasonable; however, it is also important that each staff member knows all of the products and services that they can offer a customer.  This way, when the high-yield items are not appropriate they can move down that list.  It all adds up: if you don’t get the little money, you won’t get the big money.

Membership dues and guest fees are high-yield segments, as are fees for motor carts and range balls, and these are usually the best place to focus first.

However, one notable exception to the notion of focusing on high-yield products is instruction.  When people commit to becoming better golfers, they use the club more often, feel more loyalty towards it, and make it a priority in their thinking.  Helping others to enjoy golf more through instruction is a sound business approach.

What are some of the key tactics that should come from any “Revenue Menu”?

  • Membership dues and fees will be the primary source of revenue for most clubs, and should always be a priority.
  • Items that have little cost of sales attached to them such as motor carts and range balls.
  • Increase rounds played through non-dues golf rounds (guest play) and events.  This should be a priority for every pro.
  • Win the kids and you win the moms; win the moms and you win the game.  Treat children well – it’s good business.
  • Reward customer loyalty, but reward it only when you get what you want (e.g. buy 10 buckets of balls, get one free, etc.).
  • Cause customers to earn discounts.  When you do a points program at your club, be sure it doesn’t become a problem with customers looking for more.
  • Make instruction a priority.  Revenue comes in different ways, not only directly.

The key is that your Revenue Menu needs to be a living document, not just a one-time event.  It’s important to follow and map the items on your menu to see how they are performing.  This allows you to adjust your tactics as you move forward and discover which items are more fruitful investments at your club.

This article featured insights from GGA Principal and Partner Henry DeLozier. 

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