Survival Of The Fittest (7 Of 7 In A Series) – Rounding The Economic Corner, Looking Back At Golf In 2011

This is seventh article in a 7-part series – “Survival of the Fittest” – encompassing the golf industry in the state of Minnesota. The other six articles are available in prior issues of Tee Times Press or online by navigating to www.TeeTimesPress.com; “Fairways & Greens”, “Course News”. Prior segments covered: Public Courses-The Experience; Resort Courses; Private Clubs; Superintendent Challenges; The Debate of Golf Being Overbuilt; and Discounting.

The last few years of escalating expenses and price wars have put a number of golf courses in a near bleak fiscal position. 2011 was predicted to be the year that the golf course industry was due to start recovering, but it still could be a “make or break” season for some courses. Anticipating that fact, courses have almost unilaterally developed evolving strategies that adjusted the manner in which they conducted business.

Minnesota golf courses were down 15% in rounds through July according to the National Golf Foundation and are predicted to finish the year at 10% -12% lower than 2010 albeit revenues should end up generally “flat”. There are a number of reasons for fewer rounds in 2011 – primarily weather. However, some courses are doing better than the average while others are decidedly struggling. At many Twin Cities courses it has been very easy to find a tee time regardless of day-of-week or time-of-day as more and more golfers are making course selection based on “value” not just price. The courses that are ahead of the pack appear to be the courses that have adjusted to improving the “experience” at their courses rather than just price cutting.

THE THREE PART CHALLENGE
Each year golf course operators must deal with a 3-part challenge of:
1. Weather
2. Economy
3. Competition

Weather: The variable of weather was the story of this season. In 2011 weather became a crucial factor for the survival of the golf course industry. The bottom line for weather was that the spring was lousy but mid-season was almost terrific. The industry had hoped for an upswing in the rounds-played following years of economic downturn. Most of the 2011 decline, YTD, can be attributed to poor weather in April and May. The year will finish approximately 10%-12% down in rounds. Luckily, for course operators, the lost rounds were during the spring when prices are down. Performance for late-May, June, July, August and September have helped course owners recoup much of the lost revenue with full tee sheets at prime time revenues albeit rounds won’t be recouped.

Mid-summer was not without notable weather incidents. Most courses around the Twin Cities area have been victim of extreme rain, serious heat and crazy high dew points. We had an unusual year with a streak of hot weather that produced a wide spread fungal disease known as Pythium on hundreds of fairways as a result of the excessive rain, heat and high humidity. Still, our golf courses are in terrific condition with Superintendents rebounding against the disease and have most courses playing beautifully.

Economy: Golf represents $2.4 billion to the state’s economy, according to “The Minnesota Golf Economy,” a study commissioned by the MGA a few years ago. Golf is big business! The economy has taken a swing at Minnesota’s golf industry in the last few years. Although Minnesota is No. 1 in the nation in the number of public golf courses per capita, the golf industry has realized it needs to develop creative approaches to keep golfers on the links. Golfers have encountered some of those creative approaches as they ventured out to their favorite area course in 2011. In an attempt to rebound against the slack economy courses have introduced new concepts including value-pricing, creative marketing and other innovations to keep their clubhouses humming.

“Success in this market will require good value for the price and effective marketing campaigns to get the word out there to golfers around the state and beyond,” said Lisa Overom, Assistant Executive Director at the Minnesota Golf Association. She admits the poor economy is a challenge to golf courses throughout the state. “There is no question that the economic recession has affected golf like it is affecting everything else but things are getting better.”

Competition: Competition, in the form of more courses, was static with less than 50 new golf facilities coming on-line during 2011 in all of North America – none in Minnesota. There is a debate as to the golf industry being overbuilt already. However, the minimal number of new courses combined with a bit of a rebound in golfer participation makes it a moot point. Regardless, competition in the form of price and value-offerings, among existing courses, remains fierce. This fact is well understood by both operators and patrons.

So, What Happened to Minnesota’s Golf Industry in 2011?

Public Courses
Minnesota public golf is experiencing a significant concentration in value-offerings that run parallel to price-cutting. More and more course operators are realizing that providing value, and even better, added-value, for a fair price is a far better position for any business than to simply cut fees to stay afloat. When price becomes the driving force, everyone loses! It is a far stronger and a superbly defensible position to be the provider of quality, customer friendly service and hospitality along with a well-conditioned course to earn the golfers business than just a cheap price. In 2011 the successful golf course operators concentrated on a balance of the highest level of the “Experience” i.e. location, setting, amenities, quality, hospitality and service while offering guests the best possible rates.

Quotes from the Courses:
Jeff Kennedy, Marketing Director/Golf Professional-Legends Club, Prior Lake notes that weather was an issue with some winter carryover turf issues and mid-summer heat induced damage (this occurred at dozens of greater Twin Cities courses), however conditions going into the fall are fantastic. “Rounds are generally flat, year-over-year, but it was hard to beat 2010, which was Legends premier season for golf rounds. All things considered, we had a solid season. Also, we continue to see a very high customer utilization of online booking.”

Bill Block, Owner-White Eagle Golf Club, North Hudson, WI indicates that his course steadily overcame the very slow start of the season. “Rounds are almost to the 2010 level and, with a busy mid and late season, we’ll come even. Additionally, our revenues look to eclipse the budget.” Bill says his staff concentrated on repeat business. “I know for a fact that it’s seven times more expensive to get a new customer than to retain an old one,” he said.

Private Clubs
It was a good year to join, clubs are filling up. With more private clubs making the competitive adjustments to fees, especially initiation fees, and delivering the “experience” that best fits the changing trends dictated by today’s demographics, family activities and economics it was prime time for those golfers (and non-golfers) to capture the value being offered by members-only private golf clubs. Clubs experienced many prospects evaluating membership decisions in joining a private club before the business cycle governed by supply and demand changes. Not surprisingly, it was the mid-tier clubs like Brackett’s Crossing CC and Minnesota Valley CC that gained the most traction.

Quotes from Private Clubs:
Steve Allen, General Manager-Brackett’s Crossing is enthusiastic about all phases of his club’s performance in 2011. “A good year…. VERY GOOD YEAR,” was GM Allen’s first reaction to 2011’s activity. “We started off a little behind in rounds but that quickly turned around. Our golf membership is now full with a waiting list – unheard of! Even golf shop sales and guest play are up along with banquets and weddings,” he commented. Brackett’s Crossing is planning upgrade projects that have been on hold.

Resort Golf
The early advice for 2011 from resort owners was to book vacations early. The consensus of the Resort Owner/General Manager group was that golfers and vacationers to resort areas could expect that prices, fees and packages would be similar to 2010 resulting in renewed demand for summer getaways. This combined with an outlook that there would be seasonal marketing initiatives along with a general approach to upgraded service and amenities appears to have resulted in a rebounded demand for prime time room bookings and tee times.

For 2011, with increased advanced bookings (particularly during peak times), the consumer made commitments earlier to ensure they were able to secure the dates that fit their expectations for both room availability in the desired accommodation category and course tee times. The pricing timeline was best for early bookings. Not only did the economy rebound a bit but also consumer confidence returned.

Quotes from Resort Owners:
Brian Thuringer, Owner-Maddens Resort, Brainerd states that 2011 appears to have been a good year for golf resorts. “I’d say that performance improvement was anticipated, but it is the degree of increases here at Maddens that was unexpected,” Mr. Thuringer stated. “While the participation of local golfers did not increase, it was the traveler and vacation golfer that carried the increases, particularly at the Classic GC. Corporate golf outings have clearly rebounded. I can’t wait for 2012!” Brian enthusiastically announced.

Bruce McIntosh, Owner-Golden Eagle GC, Fifty Lakes had predicted a golfer rebound for 2011. “I see the economy improving but our business model has always been very dependent on weather. We were a bit worried through May but prime season has been fantastic with excellent course conditions and weather. July and August were robust especially at high-season rates,” were Bruce’s observation. “Weekend weather patterns were a bonus. We had a great season,” McIntosh continued.

HARD TO BELIEVE THAT THE 2011 GOLF SEASON IS ABOUT OVER

The facts tell us that golf’s sky is not falling, and that the interest and participation in golf is rebounding. Golf course development has slowed with the new supply of courses which was evident in the early 2000’s being absorbed with rounds-played recovering gradually – this should continue, albeit at a frustratingly slow pace.

Tougher economic times have led to cheaper golf in the form of discount green fees, value-added offers, great deals on membership fees and more. The downturn in the economy has turned out to be golf’s silver lining, at least for a while, with golfers the short-term beneficiaries. Many posh country clubs and other private clubs are lowered or eliminated initiation fees altogether, and daily-fee golf courses are coming up with all kinds of creative ways to get you to come out to their courses. This may actually be growing the participation in the game i.e. more golfers.

Informed golfing customers are concluding that at a fair price they’re going to be happier with a “value experience” instead of a cheap one. Golfers today have a broader choice of places to play than ever before. While adverse conditions have plagued the industry in recent years, demand for golf courses and country clubs is returning with resurgence, albeit so slight, as participation increases.

Suffice to say that all CHALLENGES of a golf season were present in 2011 with volumes written on WEATHER, THE ECONOMY and COMPETITION. Regardless, it is significantly clear that most signs point to the fact that the growth of golf in Minnesota is finally rebounding!