News
Strength in Numbers PART 1
9/1/2005
The leaders of America's top 50 golf course management companies gathered in Monterey, Calif., this summer to discuss pressing issues affecting the business of golf.
The golf industry should soon have sorely needed financial benchmarks thanks to efforts of the National Golf Course Owners Association and the leadership of America's largest golf course operators.
"This is critical financial information that all courses in the United States-from the largest operators to the single course owner-desperately need to more effectively run their businesses," said Hud Hinton, COO of Troon Golf, at the 10th Annual NGCOA Multi-Course Owners Retreat, held in Monterey, Calif., in late June. The three-day retreat of multi-course owners and operators aimed at exchanging ideas and providing leadership for the golf industry.
"The golf industry has just not had a good reliable set of performance data about which we can all make good decisions, like the hotel and airline industries currently have," Hinton continued.
"The travel industry came together more than 10 years ago to support the efforts of Smith Travel (now Smith Analytics) to create industry reporting and standards on national and regional hotel revenues, vacancy rates and other critical financial data. The NGCOA, along with the nation's largest course operators, is taking the lead to create a similar model for the golf industry."
Accurate industry financial benchmarks could have a wide-sweeping impact on the golf ownership business, including opening up more favorable interest rates for course owners, as well as giving them insight into how they are doing financially compared to their competitors in any given market.
"Besides providing actionable data for course owners for how they operate their facilities and their current financial situations versus their competitors, the goal is to provide accurate industry data to buyers sellers, lenders and developers as well provide a single national source of credible data to the public," said Henry DeLozier, vice president for golf with Pulte Homes.
"Existing numbers from other sources simply don't match what many owners are seeing at their courses around the country."
Without detailed national and regional financial benchmarks, course owners and investors have had a more difficult time gaining access to capital for course purchases and improvements. Often, golf courses are paying 3 or more percentage points higher interest rates on their businesses than more traditional commercial real estate.
"Bankers and other lenders just see golf as a more risky proposition without the financials to back up the deal," said Ray Munoz, Textron Financial's division president. "The corresponding interest rates on loans (currently averaging 9 percent APR versus 6 percent for commercial real estate) reflect in part the lack of solid industry financial data for golf."
"The golf industry needs this information desperately," said Tom Stine, president of Golf Datatech, the company that was chosen by the NGCOA to supervise the collection and analysis of data. Primarily rounds, revenues and available tee times will be gathered from participating courses monthly.
The NGCOA's benchmarking effort began in 2001 with a steering committee of some of the largest golf operators. "We've made an awful lot of progress with the financial benchmarking initiative and we are ready for a national rollout," Hinton explained to the group in Monterey. "The benchmarking effort has the support of all of the major multi-course owners and operators."
The NGCOA Financial Benchmarks Program was tested as a pilot program in three major markets in March 2005 including Phoenix, Atlanta and Las Vegas. "The ultimate goal is to give golf course owners and operators current performance metrics they can use to measure how they are doing against their market as well as a competitive local set chosen by the owner," Stine said. "This will mirror what the other major industries have already done in the United States."
The cost to participate in the benchmarking program is low-free for first six months, then $200 per course the first year and $100 thereafter, with a cap of $2,000 for the largest golf operators. Participation is open to all U.S. course owners and operators, regardless of whether they are members of the NGCOA.
"We realize there are other financial benchmarking efforts underway from other golf organizations (including one announced recently by the PGA)," DeLozier said. "We feel strongly that the owners and operators should be supplying and owning this sensitive financial data, not our employees."
Though the data will be compiled for national and local analysis, the individual course numbers are confidential, explained Stine. "Only you the owner know your own numbers, but you can compare your numbers against five or more competing courses in your area and see how you rank in that set." Instant online reporting and report viewing will be used to make the process real-time. The online reports will provide rankings for the various metrics among the courses in a competitive set, including revenue per utilized round and revenue per available tee time as well as ongoing financial history such as year-to-date comparisons and rolling 12 comparisons, Stine said.
An owner of a course in Myrtle Beach or Cleveland will be able to see how his operation stacks up against similar courses in his local market. Of course, the key to making the benchmarking initiative a success is participation from course owners across the nation. "The more participation we can get in each marketplace and set, the better the numbers will be," Stine said. "We need at least 35 percent participation by courses in any given marketplace or set. The beauty is that as more courses continue to submit their numbers, the report is automatically recalculated and updated."
Stine admits the benchmarking initiative is a long-term effort to make financial sense of the highly fragmented golf industry. "We know it is going to take time for people to get used to putting in their numbers monthly and using the reports," he said. "The great thing is this effort is not just for big cities. A small market in Iowa or the N.C. Sandhills with enough participation can generate a report as easily as a large market like Orlando. The key again is participation by individual owners and operators to get a representative sample in their area."
Reports can also be broken out specifically for private courses, including rounds available, rounds played and maximum number of memberships available as well as unsold memberships.
The first priority of the initiative was to get the word out. This began with a national rollout in mid-August to get information for the top 10 golf Metropolitan Statistical Areas in the United States, including Orlando, Dallas, Houston, Riverside/San Bernardino, Tampa, Chicago, Los Angeles, Washington D.C., Ft. Myers and San Diego.
Courses in those areas were encouraged to begin submitting data so that a national financial snapshot of the golf industry could be formulated. For more information on the effort or to sign your course up, visit www.ngcoa.org/benchmark.
