Last week, I was privileged to attend and participate in two presentations at the Golf, Inc. conference in San Diego. As a consultant/appraiser, I’m always interested to hear the thoughts and comments of those in roles with direct consumer contact in the golf and club industry. I came away this year (maybe even a bit more than in past years) with two words in my head – FUN and EXPERIENCE.
As one lucky enough to grow up at a private club, I’ve always been somewhat puzzled by why those fortunate enough to frequent (in most cases) the best golf has to offer did so in an environment laden with rules and restrictions that often seem to interfere with the “fun factor”. Many of the private clubs I’ve observed through the years strove to make the course tougher, the rules more restrictive and the atmosphere more subdued. As we are often retained by clubs in some form of distress, one question I always ask addresses the age and diversity of the membership.
The experts last week referred to things like the “social moment” experienced on Instagram, the concept of golf as a “game” rather than a competition and what many refer to as the “experience economy”. This is defined as: “an economy in which many goods or services are sold by emphasizing the effect they can have on people’s lives.” The experience economy is the phenomenon observed since the 1990’s of consumers recognizing that there’s more to life than just having stuff. The internet and information age make so many of our most valuable “things” freely available – music, movies, art, communication, education and more. Researchers have noted a trend: material goods are simply not as valued.
It used to be that membership in a club was a status symbol. No longer. Now, club members seek a recreational experience similar to that found in the other “outdoor recreation” sports like skiing, hiking, cycling and others. The modern club needs to be family friendly, welcoming to kids and offer diversity in both membership and activities.
With all the recent course closures, it is apparent that golf needs millennials and more and to attract those groups golf facilities need to offer the right experience. That experience has to be FUN. The “fun golf” culture, often rejected by private clubs includes things like shorter (less than 18-hole) rounds with music, food & beverage, maybe the family dog along for a walk and playing from shorter tees.
Golf has always been known as a traditional game. To some, those traditions are precious. However, it is clear that golf is heading in a slightly different direction. It was noted in San Diego that the Pinehurst Resort’s new “Cradle” course, (a 9-hole, 789 yard offering with holes ranging from 56 to 127 yards) was its most popular offering. That seems to speak volumes about how to broaden golf’s reach.
Of particular interest was the seminar on the Golf Course of the Future, presented by golf course architect Forrest Richardson, Mark Jackson of Davey Golf, Robert McElreath of Club Car and Dana Lonn of Toro. They explored the marriage of design and high tech. Among the topics were automation of repetitive tasks, including autonomous (robotic) mowers, the use of drones and specialty mapping. Neat stuff!
Of course, wherever the state of the golf industry is discussed, the issue of course conditions and the cost of maintenance comes up. The USGA has collected mountains of data and has a tool available to help courses determine what they should be spending on golf course maintenance. Always to be considered on this topic is the level of conditioning and the types of turfgrass used. Given the cost and availability of water in many places, it is safe to assume that turfgrass varieties with high heat tolerance and drought resistance will become more prominent in the future, including in areas heretofore not sensitive to water issues.
As one might expect, the appraiser in me was particularly interested in how buyers are underwriting their investments. It was estimated that approximately 20% of courses/clubs in the US are owned/operated by management firms, which are growing. The panelists in this discussion Bobby Silva of Escalante Golf and Andy Crosson of Arcis suggested desired yields in the low to mid-teens (12%-15%, presumed) and Gross Revenue Multipliers in the 1.0 to 1.5 range.
The panels I participated in included one about developing an exit strategy, along with fellow broker Ken Arimitsu and attorney Van Tengberg of Foley & Lardner and a discussion on rethinking a business plan with Mark Mattingly, John Brown and Phil Green. The slides for the business plan presentation can be seen HERE.