Golf Course Maintenance BudgetsThe industry debate over how much a club should budget to maintain its golf course seems never-ending, and that’s understandable. The course consumes a significant portion of the cash required to run a club and it is also one of the most visible and member-impacting amenities, so a high degree of focus is justified.  

As a start, let’s consider the following scenario: While the median club in the country spends close to $1.2M on course maintenance, two clubs within a few miles of each other spend $700K and $1.75M respectively on their 18-hole courses. We all know, and have probably played at, clubs on both ends of this spectrum.

The Usual Discussion
Since we began working in the club industry in 2010, we’ve had the opportunity to interact with leaders of hundreds of clubs across the country. Typically, the discussions we hear about course maintenance budgets involve benchmarks such as cost per hole or cost per acre and a variety of specific characteristics ranging from type of grass to geographic location. To understand the way in which these factors might be used determine how much money a club spends on course maintenance, we undertook extensive analysis of club industry data, studying clubs that range in annual revenue from $1M to $40M, exist in nearly every state in the country, have nine through 108 holes, grow every type of grass and see variation of seasonality, weather conditions and rainfall.  

The Business Model View
The data revealed that while traditional benchmarks (cost per hole, cost per acre, cost per member, type of grass or geographic location) may represent the actual spending of an individual club, the simple fact that the club up the road is spending more on their course than you are is not enough to justify a decision to beef up the budget. So, how much should you be spending? Contrary to conventional wisdom, our research clearly shows that the answer is ultimately not determined by some combination of physical characteristics. The reality is that clubs spend what they can afford to spend.

Before you dismiss this idea as random or arbitrary, consider this: The amount a club can afford to spend is eminently quantifiable and can be easily and accurately benchmarked. The proportionality of spending in clubs is highly consistent and represents the foundation of the common club business model. See the pie chart below for the proportionate distribution of gross profit (the money a club has for funding fixed operating expenses) including the portion spent on course maintenance, across all clubs. It is important to note that the proportions shown, +/- a few percentage points, are consistent across the entire industry, independent of club size (based on total operating revenue) or geographic location.The business model of clubs, as defined by data from the industry itself, defines these proportions as the benchmark. So roughly one-third of a club’s gross profit (don’t think revenue) is the affordability at the average club.

Golf Course Maintenance Spending.png

Course Maintenance + Sports/Recreation Spending = About 40 Percent of Fixed Operating Expenses
We also studied the range of club types among those with golf— from pure golf clubs to full-service country clubs with more diverse amenity sets. What we discovered is that for a diverse club, like the one on the right in the chart below, the combination of course maintenance spending and other sports/recreation spending uses about 40 percent of a club's gross profit. With no other sports amenities to fund, a club with only golf like the one on the left in the chart below, typically spends a little more on course maintenance—around 40 percent of its gross profit. That pattern has proven to be consistent across the industry.

Golf Maintenance Spending.png

Different but the Same
Going back to the range of course maintenance spending referenced at the beginning of this article (from $700K to $1.75M), would you conclude that one club is spending $1M too much or that the other spent $1M too little? Of course not. We know each course can be beautiful and a pleasure for its members. In fact, those examples are from real clubs located just a few miles from each other. They are spending 32 percent and 34 percent of their gross profit respectively on their course—nearly identical spending from the business model and affordability perspective. Any of the traditional measures, cost per hole, cost per acre, geographic location, etc., would have led to a very different, and incorrect, conclusion. The broad value of this model is further realized when one understands that it doesn’t matter whether a club has 18, 36 or more holes. The affordability, a.k.a. the proportionate spending on course maintenance, doesn’t vary based on hole count, number of acres, type of grass, etc. As supported by industry-wide data, the only driver of a club’s course maintenance budget is affordability. Clubs spend what they can afford! 

On the margin, there is naturally some variation. Golf-only clubs, with less competition for cash resources going to other amenities tend to spend a higher proportion of their gross profit (into the low 40 percent range) on their course, while very large clubs, or clubs with significant non-golf sports facilities tend to spend in the high 20 percent range. The national median is 30 percent of gross profit going to course maintenance. The split between course spending and non-golf sports spending is actually an indicator of the "golf club vs. family club" strategy of the club. Geographically, there is variation on the margin, but only a few percentage points from the national median, as per the data map below. 

Course Maintenance Map.pngConclusion
So, what does all this mean? We now know that individual data points, without the context of the bigger picture, can be misleading and are not an appropriate source of guidance and support in the decision-making process. Next time you’re in one of these discussions, remember that your club, like all clubs, is subject to the common industry business model and your budget is driven by your gross profit. Having a clear understanding of what has been revealed by the study of industry data will help you have strategic fact-based discussions about your own course maintenance budget.

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blue_golferKnow Your Club's Golf Experience Index

The experience of a round of golf can take on endless dimensions. Some days you may struggle through four hours of intense frustration and end up wondering why you play the game at all. Other times, you find yourself enjoying the Zen-like experience of being "in the zone." The mental experience is only one aspect of a golf round, but it’s undoubtedly the one that keeps us all coming back for more.

One perspective that a player typically does not consider, but those of us in the club management business should be aware of, is the value of the golf experience. What does it really cost to deliver that four-hour slice of club life? And if members are bringing guests out to experience the course, how does the cost of that experience compare to the price they actually pay for it—aka green fees?

Of course we all understand that there is no incremental, or variable, cost associated with a guest coming out to play. That's why guest green fee revenue is so valuable. It flows directly to the bottom line of the club. From that perspective, we are happy to collect whatever fee we charge. But is there a way to gauge the cost, or value of a round for either a member or a guest? And further, in the case of the guest fee, is there a way to compare the actual cost with the fee we charge. We believe there is and we created an index in Club Benchmarking called the Golf Experience Index as a way to measure it. The index is available to Club Benchmarking members in the Golf Operations Report View a Sample Report

Calculating the Golf Experience Index

STEP 1:  We start by calculating the Golf Experience Cost...
(Annual Course Maintenance Expense + Golf Operations Labor) ÷ Annual Rounds of Golf

This provides the delivery cost of a round of golf at the club. The median cost-per-round for the industry is $74, but as you can see in the chart below, the range is very wide—from about $40 per round up to nearly $200 per round. Click the chart to enlarge.

Golf_Experience_COST

STEP 2: To calculate the Golf Experience Index, we simply divide the Golf Experience Cost by the guest green fee, so Golf Experience Cost ÷ Guest Green Fee = Golf Experience Index

A value greater than 100% means you are "covering your cost" and achieving experience margin over and above the cost.  A value below 100% means your guest green fee is at a discount to the cost of delivering the experience. The median value for the industry is 120%. The chart below shows that again, the range is wide, varying from 50% to 250%. It is important to note that about 70% of the clubs have an index greater than 100%. That may be food for thought  for clubs with an index of less than 100%. Click the chart to enlarge.

Golf_Experience_INDEX

Certainly many factors influence a club’s Golf Experience Index; perception of the club’s brand, the quality of the course, course activity levels, recognition of the bottom line value of guest play, etc. As is true of many Club Benchmarking metrics, we want to emphasize that there is really no “right” or “wrong” number when it comes to the Golf Experience Index. What we offer is an established benchmark which can serve as a point of reference in discussions about the club's priorities and as a guidepost for the decision-making process. Because it relates so directly to the bottom line, we encourage clubs that subscribe to Club Benchmarking to login and review their own club Golf Experience Index. Understanding your position on that curve will help you determine whether an adjustment might be beneficial to your club. 

CB MEMBER NOTE:

  • Login to your CB account
  • Click on Finance & Operations
  • Click on the My Reports tab near the top of the page
  • Scroll down to run the Golf Operations Report
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What Spending on Golf versus Other Sports Says About Your Club’s Identity

AC_PLAIN

Dividing the Pie 
In the club world, much like in our private lives, the need for funds is often greater than the supply. As individuals, we prioritize competing interests on a regular basis—a new car, college tuition, family vacation, etc. For the club manager and board member, the struggle manifests itself in the budget process, where the true tribal nature of clubs comes to the surface. One group of members may be focused on golf while another contingent is keen on non-golf athletic amenities such as tennis, aquatics, fitness, squash, croquet, etc. Some golf-focused clubs may be feeling the pull to add non-golf facilities in order to re-connect with existing members or win over less golf-centric prospects.

While the money to build non-golf amenities (fitness centers, tennis courts, etc.) most often comes out of capital funding sources, sustaining the new amenity requires operational dollars from dues or other surplus generating departments. Simply building a tennis court or fitness center does not necessarily mean it will generate incremental operational funds, which raises an important question: "How much will it cost to operate the new facility and where will that money come from?"

Patterns in the Pie
The Available Cash Model (ACM) is a strategic framework for understanding a club’s proportionate sources and uses of cash. Early on in our study of industry data, it became clear that clubs typically spend about one-third of their Available Cash (think gross profit) on course maintenance. That number has proven consistent across the industry. Recently, another very interesting pattern has emerged from the data—a direct relationship between course maintenance spending and the spending for non-golf sports amenities.

Over the last 12 months, we’ve brought more than 150 new members on board in Club Benchmarking, a process which includes a one-on-one walkthrough to review and analyze their data. What we noticed was a marked consistency across the industry where the combined percentage of Available Cash going to course maintenance and the operation of non-golf amenities typically totals 40%. Golf-only clubs spent about 40% of their AC on the course and nothing on non-golf sports amenities, while clubs that have very significant non-golf sports/spa facilities are spending an average of about 15% on those facilities and 25% on the course. Within the spectrum, we find clubs allocating 30% course/10% non-golf, 36% course/4% non-golf, etc. This is one of the most clearly-defined patterns we have seen emerge from club industry data over the course of the last three years. The image below uses actual data from three different clubs to illustrate the remarkable consistency of the pattern.

course_maintenance_vs_other_sports_3_piesWalk the Talk
Does your club’s allocation of operational dollars align with its goals? Does your spending reflect that of a dedicated golf club, a diverse country club with a family focus, or some variation on those themes? There is no right and wrong here. Just the revelation that a club can instantly see and understand if its actual spending is in line with its stated strategy. If you claim to be a family-friendly club with amenities for the whole family and you are allocating 30% to the course and 10% to non-golf sports, you are staying pretty true to that objective in your proportionate spending. If the balance is 37% to course maintenance and 3% to non-golf sports, your spending is inconsistent with the family-friendly claim.  When it comes to facilities and club culture, you can't be all things to all people. You have to make a strategic decision about what kind of club you want to be and then target spending in a manner that supports those goals.

Additionally, with this new-found understanding, a club thinking about expanding its offerings can extrapolate and estimate the impact of those changes on their budgets and funding needs. Most often we see golf clubs attempting to build and offer non-golf activities. The net result could mean a reduction of course maintenance spending to support the new operations, or it could have no impact on the course budget if the new amenities succeed in attracting new members and the associated increase in dues revenue (resulting in more Available Cash).

Conclusion
The club business model is defined by the relative uses of operational funds. One of the relations made clear by actual industry data is that 40% of a club's Available Cash is allocated to the combination of course maintenance spending and non-golf sports spending. Understanding the direct connection between course maintenance spending and non-golf sports spending as it relates to the club’s strategic goals is pivotal for managers, boards and members. The AC Uses pie chart provides a graphic illustration of this relationship that can serve as a catalyst for meaningful discussions and help align disparate tribes (e.g. golfers vs. tennis players) around a common goal.

CB Member Note:
Login to your CB account and run the Available Cash report from the My Reports tab to check your Golf/Non-Golf spending pattern.

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