The Business Side of Golf – Part 1: Managing Golf Courses for Profitability
By Donna White, Keiser University College of Golf Professor, PGA and LPGA Member and Winner of Three LPGA Tour Events
Good news for private, public, and semi-private golf course owners and operators: The COVID pandemic heightened interest in the game while changing the business of golf in many aspects. In 2022, the National Golf Foundation (NGF) reported that only 14% of private clubs and 8% of public courses faced financial struggles. Let us reflect on a few key industry definitions and positions before reviewing strategies to “keep the ball rolling” toward managing a profitable golf course.
Types of Golf Facilities
Private, public, semi-private, municipal, military, or resort? There are two types of private golf clubs: equity and non-equity. A private equity club is member-owned, and a non-equity is owned by an outside stakeholder such as a company, management company, or single owner. Note that private clubs structured as non-profit business entities must invest all profits back into club operations, not their members or board.
A public golf course does not sell memberships and is open for anyone to play. Similarly, public golf course ownership varies from single owners to companies. Courses owned by a government entity are defined as municipal and military. A public course that sells membership is a semi-private golf course. Resort courses typically offer lodging, and many also sell memberships.
Pre-Covid
The industry faced an unhealthy imbalance in supply (number of courses) and demand (number of golfers). Overbuilding during real estate booms, followed by multiple recessions, led to course closures of all facility types as club profits and participation stalled. The 2023 NGF Facility Report shows 15,963 golf courses in the United States, of which 70 percent are now public. Since 2006, there have been 2200 course closures and a substantial drop in the private golf course market share. A 2024 NGF golf supply reports the lowest number of 18-hole golf course closings in the past two decades in 2023, approximately ninety. A closure number of almost one-third of that pre-COVID in 2019 launched a more stable and competitive supply/demand environment.
The COVID Surge
Golf was one of the few sports that met the social distancing mandates of the pandemic. Increased demand with fewer courses to play has driven course utilization rates and revenues. Many private clubs boast long waiting lists. Pre-pandemic utilization at public facilities was below 50% and is currently up to 69% and a few new courses are being built. Increased demand enables golf courses to raise rates, realize more revenue per round, and increase contributions to capital improvement accounts.
The Golfers
Golf course participation increased from 24.8 million in 2020 to 26.6 million people in 2023, playing 531,000 rounds. While 50% of the rounds played are by people over the age of 50, the 2023 golfer’s average age dropped from 44.6 to 43.5, with a golfer household income over $103,000. Though 73.7% of golfers are male, women and junior participation is up. The game has become more diverse, showing participation surges among Black, Hispanic, and Asian ethnicities. All trends lead toward sustainable possibilities.
Participation and revenues are up, as are costs and inflation. Regardless of facility type, reaching financial potential requires sound operational and business practices. This blog will look at golf course management practices required to attain and sustain profitability in an evolving, complex, and competitive industry.
More than a Golf Course: A Multifaceted Business
Profitability for any business requires controlling expenses and effective asset management. Golf course management entails several internal business centers. They include golf operations, retail, food and beverage, instruction, event management, marketing, membership sales, other sports, fitness to pool-spa amenities, and for resort facilities – lodging revenue management. Earnings and activities in these areas correlate to the overall quality and maintenance of the golf course and facility.
Be it a platinum, gold, silver, bronze, or steel facility, pricing and service-product levels must align with a golf course’s mission and target market segment. Platinum facilities offer the highest fees, memberships, exemplary products, services, and amenities, while steel facilities are more price-sensitive and have lower-level conditions and service. Industry consultant companies Golf Convergence, Inc. and Global Golf Advisors purport a comprehensive strategic plan integrating all business centers of a golf course, which is the key to long-term financial success for all facility types.
Strategic Planning: Your Roadmap Towards Golf Course Profitability
Internal operations, marketing, customer, and financial strategies to attract and retain golfers or members are essential for financial sustainability for both public and private facilities. According to Global Golf Advisors, many golf courses operate without a strategic plan. Operating without a sharp vision of the future and simply moving year-end budget numbers and projections based on “gut feelings” with no guidance or discipline threatens the ability of the golf course to thrive and grow.
The creation of a strategic plan entails assessing the current state of the club and conducting a SWOT (strengths, weaknesses, opportunities, and threats) analysis of the facility. This leads to the revision or creation of the club’s core values, mission, vision, market position, customer experience, human resources, and financial potential.
Defining clear goals, objectives, and action items to implement a strategic plan requires frequent monitoring and measuring. Astute managers understand the time, commitment, and follow-up involved. The outcome is a decision-making roadmap to maximize revenues, control expenses, recognize challenges, and optimize facility resources, personnel, market position, customer retention, and acquisition.
Know your local market: Location, Supply and Demand
The financial potential of a facility boils down to its location and market. A clear mission and vision supported with tactical steps to deliver the expected customer/member experience is essential. Knowing and understanding the demographics (demand) and number of courses (supply) in the area is vital. Supply and demand leveling leads to a more competitive market.
The demographic and socioeconomics of a community, such as population, household income, age, ethnicity, and proximity to a larger metro area, help identify the type of golfer, pricing, and facility type best suited for the area. If the golf course is in the sunbelt or frost belt, it affects seasonal challenges. JJ Keegan (2024) purports knowing how to leverage the “uncontrollable” factors critical to managing a profitable golf course.
Pricing
Golf Convergence, Inc. purports that management should consider location, demographics, demand, and the value of the customer experience when setting golf fees and memberships. Does the golfer’s experience exceed the price paid? Maximizing revenue requires balancing pricing strategies, and rounds played while exceeding golfer expectations.
Dynamic (Demand) Pricing
The strategy to optimize revenues by adjusting rates based on demand, day, week, weather, maintenance schedules, season, etc., has become a popular option over the years. Maximizing revenues by charging higher fees during high demand intervals and lower rates during slower. A tier versus static price structure, sophisticated data-driven tee-time management systems allow operators to set pricing and golfers to select a time of day and price they wish to play. Sagacity Golf software notifies management when the course has reached demand goals and can raise rates. Notify offers golfers an option to log a request to receive notifications when their desired time becomes open.
Bundled Packages
Courses can combine several services and products for a single fee. For example, a single rate includes the golf fee, cart fee, lunch, and range balls. Or, a golf lesson can be included with the purchase of a set of clubs.
Loyalty Programs
These programs should be based on dollars spent and participation, not discounting. Loyal customers should be the ones receiving the reduced pricing email. Rewards, rebates, and incentives encourage repeat participation and spending. Ultimately, enhancing customer retention.
Membership Fees/Dues
Private and semi-private club membership dues and initiation fees give the club consistent revenue streams. Pricing of member fees and dues must align with the facility type, mission, and vision of the club. Private clubs in high-demand markets like South Florida charge a fee to get on the waitlist. Strategies in the frost belt include club access year-round for dining, social, weddings, indoor training, and other events. Hampton Golf offers tiered membership pricing; members can select a preferred participation level.
Merchandise
Merchandise sales contribute to the overall profit of a golf course. Many golf courses opt to lease the retail operation of the golf shop to a third party. Danyella Waddel, from ForeUp, states, “Keeping your golf shop fully stocked and in the black is a fine art.” The size of the golf shop, quality of inventory, staffing, and customer profile influence the cost of goods sold. The Association of Golf Retailers reports the average golf shop merchandise sales to be $200,000 – $300,000. Pricing markups for golf equipment are 20-30% and at least 52% for apparel. The markup for some golf accessories exceeds 100%. Merchandise needs to have a buying plan, a way to monitor point-of-sale data, and an understanding that items popular today may not be tomorrow to be successful. Timely marketing and merchandising promotions help “sell-through” merchandise and control inventory levels. Hampton Golf purports to offer logoed items, promoting the brand image of the facility and adding value to the product.
Covid drove many public and private golf shop owners to establish online golf shops as retail sales plummeted. An e-commerce presence stimulates sell-through rates and gives frost-belt shop owners the opportunity to generate revenues year-round. A sound buying plan and monitoring of sales, inventory levels, markup, and mark data enable golf course shop owners to leverage profits and understand customer spending profiles.
Food and Beverage
A golf course may offer a variety of food and beverage services, from casual to formal dining, catering, snack bars, beverage carts, and vending. Meals, outside catering options, and menu pricing at golf courses vary. Food quality, size portions, alcohol pour sizes, hours of operation, and staffing influence costs and profit margins. Public facility food and beverage costs of goods run around 40%. Typically, quality might exceed costs and pricing at a private club. Members expect higher quality food, larger portion sizes, and beverage pours. According to the Club Managers Association of America, many private clubs charge an annual food and beverage minimum. Point Venture Golf Club offers member and non-member menu pricing. Golfers playing a municipal course in the city of Melbourne, Florida can purchase a bundled pricing package that includes golf fees, food, and drinks.
In Part 2 of this blog, we will explore cost management strategies to solidify the golf course’s competitive edge and profitability.
Learn more!
Want more tips? If you want to take your game to the next level, contact our team at Keiser University’s College of Golf & Sport Management today. With our dedication and experience, we can elevate your game to new heights together. Give us a call today at 888-355-4465.
