Recently, golf course executives gathered at the office of Holland & Hart, LLP to discuss the current landscape of both public and private golf courses. The discussions ranged from surviving the drastic decline in discretionary incomes to water rates and the intense competition that golf courses currently face. Connie Brennan, publisher of Nevada Business, served as moderator for this monthly event that brings leaders together to discuss issues pertinent to their professions. Following is a condensed version of the roundtable discussion.
Economic Impact
Golfing is considered to be a discretionary expense and with consumer confidence numbers at historical lows, Nevada’s golf course industry, both public and private, faces some of its toughest challenges. They are competing with each other, as well as trying aggressively to differentiate themselves.
Jason Cheney: We’re not only battling other golf facilities in this competitive environment, we’re also going up against all entertainment as a whole.
Chuck Bombard: We are trying to figure out how you carve up the pie as far as people that are available for membership. We are working on how you attract new members and differentiate the products against the high-end product already out there.
Dominic Guzzo: My biggest issue is member attrition. When a member leaves the club, it is equivalent to a $20,000 loss. Trying to attract new members in a down economy, where rounds of golf make a difference in discretionary income, is tough.
Stephen Goldstein: We are really focusing on increasing revenue generation as opposed to cutting more expenses. That means we have to figure out a different mix which means transplanting some of your lower-paying rounds to higher-paying rounds.
Mary Grover: We had to cut a lot of expenses and the challenge becomes how you lessen the impact on local small business owners. We tap into them for services and products and we are unfortunately hurting our community people because we’re saying, ‘No, we need to find a better way to make that process work and/or eliminate it completely.’
Lee Sullivan: With respect to how do we get out of this mess? The biggest challenge I think we have is maintaining consistency. We have that obligation to our customers, whether it’s a private entity or if it’s tourism, to make sure that we deliver on product conditioning and customer service. If we don’t remain consistent on these fronts, it’s inevitably going to hurt our industry.
Water & Overseeding
Water usage and rates are one of the biggest expenses when operating and maintaining a golf facility. The participants discussed the recent activity of the Southern Nevada Water Authority as well as the tradition of overseeding, which is the laying of grass seed on top of existing grass to promote new growth or to replace the existing grass with a new strain for the season.
Dan Hammel: Escalating water rates and water restrictions are really placing a burden on our course, and probably on all of us as well.
Guzzo: First of all, a big change in our industry was on November 20th, 2008 when the Water Authority changed the turf rights. Per their annual calendar, which is July 1st through June 30th, there is a maximum award of $300,000 per property for replacing grass with desert landscaping. The Water Authority says that they’re going to increase fees in 2009. They haven’t said how much, but they’ve prewarned us. At our club, we use a combination of potable and reclaimed water. Most of us are doing turf removal due to the changes and the rate increases, which always affect the golf courses much more than homeowners because we are in the higher usage tier.
Hammel: For the high-end daily fees, not overseeding is going to significantly reduce your green fee structure and your rates. By eliminating overseeding you’re going to save, but then your revenue stream is going to significantly drop because you just can’t charge the same rates to play a brown golf course.
Guzzo: I think that in the future golf courses won’t overseed as they do now. You’ll be forced into not overseeding due to the amount of water they’ll allow us to use.
Goldstein: Though we’re the largest users [of water], we are far and away the most efficient. We use computerized programs for our watering cycles and we typically only water at night for evaporative rates. The golf courses sometimes get a bad rap about the amount of water they use. First of all, most of us use affluent water for reclaim and then potable mostly for our greens. We probably spend in excess of $70,000 a year for overseeding our golf course and we don’t do it wall-to-wall, we do greens, tees and fairways. Because people come from other parts of the country, they’re expecting to see pretty and green, and they’ve seen that for years and years, for us to move away from that is going to be a huge decline for us revenue wise.
Bombard: We use 8 to 11 percent of the total water in Las Vegas. Residents see the sprinklers going, and they think we are wasting water and we’re really not. The superintendents are watching it and managing it every single hour of the day and saving where we can to make sure we’re under the threshold and not watering where we don’t need to. One of the things that we can agree on, is that we would like to have some comparable water rates where it is not 30 cents at one side of town and $2.30 at another side of the town.
Fee Reduction
The group debated the pros and cons of cost cutting measures as a means of survival in lean economic times.
Thom Blinkinsop: One thing that is scary is if somebody starts discounting their rounds so much that I have to follow suit. If I don’t my course is going to be empty. Let’s say I run a special, have 80 players playing golf, and make the same amount of money as if I get 40 players playing golf at my regular rate. To be honest, I’d rather have the 40, because those are the people spending money. If they’re paying the $60-$80 to play golf, they might actually go into the restaurant. However, if the guy is paying $35 or $40, he’s got his own pack of beer and he ate before he came here. The main product that we’re selling, customer service, is not going to be supported because we can’t make enough money to support it.
Hammel: You have to do it [reduce the rates]. If we keep our rate where we’re supposed to be, we might as well lock the door because there’s no one coming.
Blinkinsop: But if we run specials for a week or two weeks and it’s not a constant thing, then it might not be as dangerous. The thing you have to watch out for though, is when one guy drops his rates, now he comes into my set and I have another direct competitor. Whereas before I would have never competed with that course, I do now because our rates are the same. It has a trickle down affect.
Customer Service
Perhaps the silver lining to the challenging economy is an increase in customer service. The participants agree that their organizations are placing a greater emphasis on customer satisfaction.
Bombard: You have to make sure that every single day every person on your staff is onboard and focused on customer service and making sure that the golfers don’t want to go anywhere else.
Tommy Darland: It costs nothing for your employees to come with a smile on their face, do their job and do it well, and be very excited that they’re there. My goal is to create an atmosphere where if the golfer had not read the paper that morning they might forget about all the bad news in the economy. If we can have an attitude such that it causes people to ask, “Why are they so happy?” then we’ll have a real chance at surviving.