Here are some scary statistics:
Only 45% of the over 14,000 golf facilities in the U.S. are “profitable.” Put another way, 55% are not. Even with an average spike in play of 6% in this COVID year, this means that most golf courses are selling their inventory at or below cost.
We were reminded of this by our smart friends at Pellucid, thought leaders in the industry and a group who is often a provocative reality check for all of us in the business. In their most recent newsletter, they encourage “as pricing strategies rise to the top of the discussion heap, it might be time for a refresher course in cost accounting and how you can calculate what it costs for you to produce a round of golf.”
We’ve simplified their formula, but try this exercise at your club. Divide total annual expenses by total annual rounds. That number is your cost-per-round. Say you have $1.2 million in expenses and play 40,000 rounds. Your breakeven cost is $30 per round.
Now compare it to what you actually yield per round. Divide your club’s total revenue by your total rounds. That’s your yield. Which is greater? Your breakeven cost per round or your yield per round? Are you upside down or right side up?
This analysis illustrates the paramount importance of the correct rate structure and program mix at a golf course. Resident vs. non-resident rates, season passes, league rates, and other discounts have a profound effect. As Pellucid states, “Any combinations that result in revenue per round for a program that is below your cost of production sets you up for potential problems.” Like “minor things” such as not being profitable and not having enough cash flow to pay for future capital repairs and improvements. Not good.
Bobby Jones Links is constantly adjusting our rates and programs and doing this cost analysis at our clubs. Add our dynamic pricing models into the mix and these tools along with our expertise becomes available to you to avoid selling golf for less than cost.
That is what professional management can do, among many other things.
Let us show you how.