THIS month, there are two key articles to which every golf club and Board should pay close attention. The first, “Report: major challenges ahead for clubs“, details the participation trends of today’s golfer. The second article, “Changing landscapes: courses on the move“ explores how some clubs are planning (or failing) to adapt to these trends.
The articles go hand-in-hand. Over the last few years, due in part to the trends shown in the first article, we’ve seen a large number of golf course/club closures, mergers and moves (second article). For many clubs, a change has become the only option, as all other alternatives may have been exhausted.
But what many clubs fail to realise is just how much time and effort (and money) is involved with a move of this magnitude.
Take the new Gardiners Run Golf Course in Victoria, for example, which just opened last month. With planning, approvals and construction, the project took over 10 years to complete. The Eastern Golf Club, which will open their new course in 2015, began considering their strategic options eight years ago, in 2006. Recently, Peninsula Kingswood and many other clubs have all made moves that will take many years to come to fruition.
So it’s no longer a relatively short exercise to manage a relocation. And if the decision isn’t made ‘in advance’ of when the club faces difficulties, then the results can be severe (i.e. rash decisions could be made, which can lead to a “fire sale” of the land, extra costs due to the rush, poor business choices due to panic, etc).
The forward-thinking clubs above had the foresight to anticipate the trends and adapt accordingly. And they made tough decisions (which may not have been popular with members) in the best interests of the club.
There are many clubs out there, however, that are either in denial or procrastinating. Unfortunately, when the time comes for them to make the decision to move, it will likely be too late.
It also may be too expensive.
Consider the fact that the cost of relocation (to build a new course and facilities) is getting higher and higher every day. It could soon be at a point where a club’s land value (if they choose to sell) may not be enough to finance a brand-new course with any reasonable buffer or surplus funds left over. With any unexpected changes in the market, they could very easily be back up against the wall immediately after relocation.
And this is just for a standard golf course and clubhouse. But when you consider that today’s golfer is looking for additional “add-ons”—be it a gymnasium, childcare, swimming pool etc.—a standard golf club may not be enough in this market. As for the course itself, what style should you build to get the best result? These can be radically different in terms of cost, time and planning. What do the punters want in a golf course? Do they want a member-friendly course, or a challenging, championship style? Should you go down the Real Estate Development path?
The current trend in golf residential developments may be seen as an answer, but as one GM told me recently, the Real Estate cartpaths aren’t necessarily paved in gold:
“When a developer completes a golf residential development, the golf course/operations is often losing significant sums each year – what chance does the club stand when it takes it over? There is often a conflicting interest in this market of what the developer wants/does, and what long-term the club needs to just survive when handed over. Why isn’t it aligned from the start?”
There is also the question of membership fees. A common thought is that the club could just increase the subs to make up for a shortfall. But just how much will the average golfer pay in the future? In reality, golfers are likely to be looking to pay LESS for their golf, as household budgets and disposable income could come under even more pressure. And with social golf continually on the rise, member numbers are likely to continually decline.
Some clubs have reported a 10%/year decrease in members. How will these clubs cope if the number goes to 15%? 20%? More?
Indeed, there are a lot of things to consider (and plan) before making your long-term strategic decisions. The key is to make your decision quickly, before it’s too late.
As the old maxim tells us: failing to plan is planning to fail.
See you on the fairways