While there are promising indicators and progressive things happening in golf that cause me to be quite bullish about the long term prospects of our industry, the business of running golf courses in America – by and large – has been a slog for the past 15 years. The supply and demand curve has been moving in the wrong direction since before the Great Recession. Most experts agree the number of course closures will continue to far outpace course openings for the next decade. If you compare the average price of a round of golf ($38 according to We Are Golf) to the change in Consumer Price Index, golf is arguably cheaper than it has ever been. Pellucid Corp reports that 39% of golf courses in America operate in the red. Despite the challenges, I do not believe there is a macro, existential crisis (there are over 14,000 golf courses generating an $84B impact on the American economy). However, this is our current climate. It’s still a great business, but it is hard to succeed.
While the economic pie of rounds and revenue seems to shrink, one can’t help but notice the prosperous rise of Online Tee Time Agencies (OTTAs). With too many courses and not enough golf being played, the supply and demand plight naturally causes downward pressure on the price of golf, thereby creating conditions incredibly challenging for the typical golf course operator. Golfers can find affordable golf in every market in the United States. It’s a buyer’s market, plain and simple.
The OTTAs in golf claim to serve both the supply side (primarily through technology and marketing services to golf courses) and the demand side (primarily through easy booking of tee times for golfers). However, from my observation, their value is heavily weighted towards the needs and desires of the golfers – the aggregation of tee time options at multiple golf courses, all on one screen. I don’t believe golf courses need the marketing services of OTTAs to meet the natural demand for golf in our marketplace, nor do I think they stimulate incremental demand for golf. But that’s me. Unfortunately, despite the positive contributions to the game of golf from the parent companies and organizations affiliated with the OTTAs, the dominating push by the OTTAs to sell the lowest priced tee times, which conditions golfers to favor those times, is an albatross around the necks of the golf courses who provide the inventory.
Why “FREE GOLF” is detrimental to the health of our industry
If you are among the audience or followers of NBC, NBC Sports or the Golf Channel, you’ve likely seen the recent launch of the new GOLFPASS program. GOLFPASS is Golf Channel’s investment in the subscription model of services for their golfing customers. Leveraging the celebrity of Rory McElroy to give it serious fuel, GOLFPASS offers golfers one free round of golf every month, access to subscriber-only golf content, 400+ hours of instruction, travel credit at golf resorts, and more – all for as little as $99 for an annual subscription, or $9.99 per month.
As a subscription service, there’s actually a lot of value packed into GOLFPASS. It reminds me of Amazon Prime. For the low fee of $12.99 per month, Prime subscribers get free, two-day shipping on over 100 million items, exclusive access to favorite moves and shows, unlimited access to millions of songs, unlimited photo storage, free online gaming, and more. Compared to when free shipping was the only benefit, it’s easy to see why consumers are so attracted to the value package. Looking at GOLFPASS, there’s a lot of value packed into the offer. It will no doubt increase engagement in golf, and that is a good thing for all of us concerned about retaining interest and involvement in the golf economy. Although GOLFPASS marketing doesn’t appear to single out the free round as the primary feature (as free shipping has been the primary feature of Amazon Prime since the beginning), I cannot help but be fixated on the free golf. But I am biased, because I represent the supply side of the industry – the golf courses around the United States. Free golf is the fatal flaw for all the golf courses now inextricably and unwittingly involved in the program.
This Tweet was removed by GOLFPASS. It’s an example of the gluttonous posture towards golf courses.
Let’s attempt to follow the dollars and see what is happening. Joe Mulligan gives his Visa card number to the Golf Channel as a new GOLFPASS subscriber, and the Golf Channel bank account increases by $10 per month – automatically (and exponentially, of course) – while Joe likely forgets over the next four years that his card is even being charged. Isn’t that the little secret of the subscription model – that the seller benefits from the “breakage”? Meaning, if Joe doesn’t actually – or frequently – use the benefits being offered, the Golf Channel still gets Joe’s regular monthly payment. Many companies – even golf courses themselves – are moving in this direction. Nevertheless, score one for the Golf Channel!
Joe gets his first monthly promo code from GolfNow and goes to GolfNow.com to book his free round of golf in the Orlando market, and claims his “Hot Deal” (free round promo codes can only be used on the bartered tee times, and only Mon-Thur after 12:00 pm). If the Golf Channel is lucky enough, Joe got his buddies to sign up for GOLFPASS, and they all sign up for the 12:08 p.m. tee time on Monday. Joe and his buddies enjoy their round of “free” golf, go home, and hope to do it again next month after GolfNow emails the next promo code. Score one for Joe and his buddies!
See how the monthly promo code reduced the price from $38 to $0. Price integrity be damned!
While incurring the costs associated with Joe’s round of golf, the golf course received no income and attracted customers whose primary motivation was to pay as little as possible. One can make an argument that the golf course scored by receiving some marketing and technology benefits (among other possibilities) from GolfNow in exchange for no-revenue, bartered tee times. And some might argue that Joe and his buddies are going to buy some hot dogs and beer while on property. But I think that is a dubious position (more on that later). So for argument’s sake, I say the golf course scored zero.
No matter the deal or the no deal between golf courses and GolfNow, the last thing our industry needs is major corporate media promoting free golf to the masses on the back of golf course owners and operators. OTTAs are already adept at peddling rounds of golf at 20-80% off the rates of adjacent tee times on the tee sheet. Do golfers now need free golf in order to play? Is it hyperbolic to think the only natural progression after free is that golf courses will one day have to pay golfers to play their courses?
GolfNow’s first Tweet after the media launch of GOLFPASS. Notice the emphasis on FREE golf.
If GOLFPASS is wildly successful, it could very well mean millions of rounds of free golf being played all across the land, while golf courses continue to bear the burden of the significant fixed and variable costs needed to keep the golf courses running. The shrinking effect on the bottom line will be harmful at best and devastating at worst, leading to greater struggles and possibly more closures of good golf courses. How would this ultimately good for the golfer? How is this good for anyone in golf, including employees that work at golf courses and vendors that partner with golf courses? What about the housing development adjacent to those courses now offering free golf? Are they looking forward to viewing fallow land out their back windows?
Why bartered golf is the kryptonite weakening our industry
We cannot separate the danger of free golf from the fact that over 6,000 golf courses willingly provide the bartered inventory to allow this to happen. Barter itself is not an evil concept. As a method of exchange, it dates back to ancient times. If bartering involves the fair trading of goods or services between two willing parties receiving comparable value in the exchange, there is no problem. However, a “haze of ambiguous value” clouds the entire barter economy in golf, thereby preventing course operators from truly understanding what they are giving up in this exchange.
OTTAs that offer barter to golf courses as a compensation option are not evil per se. OTTAs, like GolfNow, capitalized on an incredibly clever business concept that was once much more discreet in nature. Before the meteoric rise of GolfNow as we know it today, the lowest-demand tee times were once peddled only through vehicles like email, where a golfer couldn’t easily compare the discounted rounds against all the other rounds in an aggregated view.
When the bartered round of golf was made the centerpiece of the relationship in an online environment, which included handing over partial or total control of pricing to the OTTAs for those rounds of golf, the OTTAs found themselves sitting on a treasure trove of inventory over which they had partial or total price control (certainly the fatal flaw operators have made over the years in these dealings). The decade around the Great Recession only made the conditions more conducive to build this treasure trove, because they were offering services for no cash-out-of-pocket. There might be nothing more seductive to a cash-poor business that runs below 50% occupancy than free technology and marketing. Thus, the permeation and influence of the OTTAs spread like a viral infection in our weakest moments. Some argue that the bartered inventory did nothing more than create new, virtual golf courses that compete directly against the very ones that supply them with their inventory. Research from the Golf USA Tee Time Coalition reveals that 47% of golf courses participating on OTTAs believe they are in direct competition with their OTTAs (an additional 26% are on the fence). Unfortunately, Coalition data also reveals that golf courses that barter don’t appear to be ready to give it up. While more than half of golf courses do not agree that barter should be a payment option in our industry, 86% of those who barter would prefer it to continue. These relationships are complicated, to say the least, and wrangling back control of pricing and inventory is going to be its own slog.
The ORCA Report, which has approximately 700 public golf courses sharing performance data every month, yields one of the most important data points in our industry and helps to remove the haze: Barter Opportunity Cost. BOC indicates what income a golf course might expect to earn had they sold those bartered rounds on their own (at an average price based on the price sold of adjacent tee times). Early insight into ORCA data coming from nearly 400 golf courses engaging in barter reveals an average of $37,000 in BOC for 2018. I recognize that golf courses participating in barter might not sell all of those tee times on their own, and OTTAs are not getting full price for those rounds. But this certainly gives you an indication of what the recapture could be if golf courses employed better marketing and price controls.
One real course example of Barter Opportunity Cost in 2018 – nearly $90K.
OTTAs do anything they can to monetize those bartered rounds, including the use of discount codes, gift cards, and now subscription. They’ve moved from gluttony (who remembers the rap video at the GolfNow sales meeting about selling boatloads of trade time?) to desperation (free): both deadly sins in business. All this on the backs of golf course owners and operators. I am gravely concerned that price abdication by golf courses and the prolific offering of heavily-discounted and free golf will grease the already-slippery slope towards struggle and possibly more course failure. What the golf industry desperately needs are these OTTAs to emulate the restaurant industry’s OpenTable, which facilitates no discounts or free meals. The OTTAs should have no influence on price. Let the courses compete on their own merits, and just give the world frictionless, beautiful aggregation and ease of booking – and get out of the way.
Each bartered round sold that strengthens the OTTA simultaneously weakens the golf course. The parasite-host relationship is not symbiotic.
Later this season, NGCOA will publish a guide for course operators interested in understanding the details of barter. This resource will take a comprehensive look at the economics of barter in our industry, services offered in exchange for barter, prices that can be paid for such services, tips for negotiating healthy contracts, and more tools and knowledge to help course operators calculate the cost-benefit equation. The manifestation of GOLFPASS and marketing of free golf should cause course operators everywhere to take a fresh look at their dealings. At the very least, explore what the pay-to-play options are, and calculate your BOC. Talk with your neighbors. Have you gone on and off barter and have a positive story to tell? Please share it with us. Course owners and operators: we have to stop whistling past the graveyard and end this race to the bottom.
Chief Executive Officer
National Golf Course Owners Association
I love a good metaphor. As someone who gets to tell the story of our industry to the media and other audiences, I love a well-placed, well-delivered metaphor.
Each January in this column, I like to pause and share what the recent 12 months have been like for NGCOA, and allude to what’s coming. Metaphorically speaking, what’s in our rear view mirror, and what do we see in our windshield? And I love that clever piece of optimism about why the rear view mirror is small and the windshield so big. I feel the same about NGCOA and the golf industry in general. Good stuff in the rear view, but so much more in the view ahead of us.
But just because we have a big windshield doesn’t mean we need to drive in every direction. See what I did there? I kept the metaphor going.
The view in the rear view mirror is excellent:
We hosted three valuable events for our members: the Golf Business Conference, MCOR (executive retreat for multi-course owners and resort operators) and the Golf Business TechCon. Collectively, nearly 2,000 courses were represented at these functions, all aimed at improving, growing and succeeding.
The Golf Business Podcast launched in the spring, and we are producing episodes every two weeks.
The Smart Buy program experienced a large expansion of vendor relationships through our engagement with International Club Suppliers and entegra. In addition, we launched member-benefit offerings with Yamaha, Rain Bird, GM/Cadillac and more.
Our Advocacy staff produced important resources on critical topics, such as the new tax legislation and disabled-compliant websites.
We welcomed over 300 new members into NGCOA, demonstrating increasing value in membership and strong partnerships with our local affiliates and corporate partners.
Our research partnership with ORCA topped 700 participating golf courses, accelerating this amazing benchmarking and insights tool for course operators.
What’s in the windshield?
A fantastic Golf Business Conference will be held next month in San Diego, and the 2019 MCOR will be back in Monterey, California, in July. We are giving TechCon a two-year break, and it will be back in the fall of 2020.
We plan to publish the popular Compensation and Benefits study, so operators can benchmark their HR investments and make informed decisions.
A new ngcoa.org will be launched, which will allow members to find much-needed resources and communities at the tips of your fingers.
And we have much more up our sleeve in the areas of technology, hospitality and employment leadership and management.
If you’re reading this and not a member of NGCOA, there’s been no better time to join. Value is ever-increasing, the ranks are growing and 2019 is going to be a great year. Join today at ngcoa.org/join
The 2018 Golf Business TechCon recently wrapped up, and naturally my mind is on the future of the industry. At the event, we had an evening of fun at Las Vegas Topgolf. It was a typical Thursday night, and the place was jam-packed. NGCOA member Debbie Jeffries, owner of RiverRidge Golf Complex in Eugene, Oregon, shared an interesting observation with me about the patrons at Topgolf. She noticed all the “golfers” playing in the bays were deeply engaged in the metrics and data being captured, such as swing speed, ball flight, distance to the targets, etc.; while the “non-golfers” couldn’t care less about that info, and were just having fun swinging hard at an inanimate object. But, both crowds were imbibing, eating and spending money just the same.
At the Las Vegas Topgolf with Mike Zisman, CEO of Golf Genius Software.
Pivoting back to our conference, we had many technology companies in attendance, offering their expertise and services with the aim of helping course owners solve problems and unlock opportunities. In most cases, their solutions promise to improve operations in many ways, small and large. But “large” is a relative concept when thinking about change and improvement. To one operator, a large improvement could simply be having easier software to work with. To another, large could mean unlocking $80,000 in net income through dynamic pricing technology.
But, when I think “large,” I’m thinking transformative. I think most small businesses would appreciate finding new net income in the margins and tweaking of operations and strategy — $10K here or $5K there. But what would it take for the $1.2M revenue facility to realize $1.8M? Or the $2.5M facility to realize $3.4M? We are an industry that’s just hanging on to 23M customers and one that is continually beat up by weather, all the while Topgolf reigns as the darling of the golf industry. Let’s connect the dots, folks!
Some may call me obsessed with the concept, but I believe the key to transformation will be to create the golf course that is open for business under the sun or the moon, and when the weather is fantastic or terrible. I believe the golf course of the future will be indoor and outdoor, if only we can find ways to embrace virtual reality and gamification of golf, which includes simulators (like GOLFZON) and other high-tech concepts (like NextLinks and Toptracer Range). A business case has to be made more clearly for the value of installing multiple simulators at a typical golf course and the ongoing costs must be presented in a way to lower the risks borne by a typical course. The business plan for revenue must be simple to apply. We must find a way to make this ubiquitous among the existing 14,000+ golf facilities around the United States. If we don’t, mark my words, we will see it pop up in retail and other non-golf locations all across the nation. If that happens, we will have lost the opportunity to be the center of gravity for this transformation. And no, we shouldn’t wait around to see how many “Topgolfers” will migrate to the green grass.
In 2001, with the introduction of the iPod and iTunes, I’m sure many people looked at Steve Jobs and thought, “What the hell are you doing getting into the music business?” But had Apple not sought transformation, they might have disappeared into oblivion long ago. I like the looks of the golf course of the future.
THIS is what golf is about for me. Playing and smiling with my son. Away from his iPad. Teaching him about etiquette and respect.
The Charleston Post & Courier recently ran an article about issues in the golf industry, and the role NGCOA plays in telling the story of golf, especially to our friends in Washington. Shortly after the article appeared online, someone Tweeted a reply that golf should do a better job telling our story. I couldn’t disagree. But then again, who is “golf” in this context?
When speaking to the press or those outside of golf about the issues we face in the industry and the opportunities we have to grow the sport, I often use this same comparison. When describing the range of experiences we have in golf, I like to say how golf is like dining out at restaurants. If someone asked you, “Tell me about eating out? What’s it like?” It would be hard to pigeonhole the dining out experience with one, quick description. Likely, you would reply with something like, “Well, what are you in the mood for? What do you want?”
You can really get just about anything at a restaurant. Do you want a casual, greasy spoon or a white-glove, fine-dining experience? Fast food or attentive service? Family-style and boisterous or intimate and quiet? As you can see, the “image” of dining out is polychromatic, and that is a very good thing if you want to appeal to all types of people with the widest range of budgets.
Now, if we look at the image of golf, many of the fence-sitters, latent-demanders and skeptics alike think of golf as relatively monochromatic. I won’t belabor the point, because all of us inside golf know about those perceptions, and we also know how polychromatic golf truly is, and how it’s getting more so by the season. We know the golf experience truly runs the gamut: from the casual, cheap-beer, no dress code, push-up-green operation (which is awesome, by the way) to the highest-end resorts and clubs, with the longest list of rules and restrictions (which are awesome, by the way), and everything in between. If you believe “playing golf” also incorporates what millions are doing at TopGolf and in simulator bays (and I do, by the way), then the color palate is getting even more diverse. [See the cover story on page 36 in the new issue of Golf Business magazine about the rise of simulators.]
We have serious work to do in golf to become better storytellers about what we have in our industry; that we are as egalitarian as dining out. That’s not the story many like to lead with, and we need to flip the script. People come to golf on so many different pathways — from being inspired by what they see on television to being introduced to the game through a family member or friend, and that’s great. But if we are going to curate the value proposition and message for the highest level of latent demand, the story has to be compelling, real and reflect the product we have today.
Most of us in the industry are decent at selling our golf courses, at offering lessons, at pushing discounted play, but not enough of us are adept at really selling what causes people to fall in love with our game. We can all be storytellers about golf and do more in that respect. This certainly has me thinking about NGCOA’s role in all this. Should we become the Storyteller in Chief, or can we make you the Storytellers in Chief?
What story are you telling about golf?
For the second year in a row, I survived the “buddies golf trip” to the Pinehurst area of North Carolina with 11 other guys looking to have fun and spend money. What could go wrong?
I’m happy to report that nothing did. We had a wonderful time, and I am compelled to share two things from my experience. The 12 of us played three traditional rounds of golf at some of the wonderful public courses in the area. Then we squeezed in some late afternoon play at the new short course at Pinehurst Resort called “The Cradle.” Hopefully you’ve read about this new project at Pinehurst. (golfbusiness.com, April 2018) The day we played, the Wall Street Journal had an extensive piece on how the short-course experience may be a key to the golf trip of the future.
Yours truly, third from the left, with a bunch of good guys (with interesting fashion choices) at The Cradle at Pinehurst Resort.
The two takeaways both have to do with The Cradle, and both were validation of matters we’ve been talking about in golf for a long time now. One has to do with hospitality, and the other with the relaxation of the golfer experience.
When I look back on the four distinct golfing experiences we had, only one staff person created a memorable one. It was Ed, the starter at The Cradle. He was jovial, humorous and accommodating. The perfect blend of hospitality. Ed was the only one in three solid days who seemed to understand it was his job to facilitate good cheer – and he delivered. His masterful engagement of our group set the tone for the next couple of hours. It’s a lesson that good hospitality trumps just about any other element of the customer experience in golf – or anywhere else, for that matter. I encourage course operators to find the most laid back, jovial, fun-loving people you can, and put them on the front line of your operation.
The other takeaway was simply experiencing a fun, relaxed format of golf, provided by one of the most traditional golf destinations in the world. One could stand at the Pinehurst clubhouse, look in one direction to see lawn tennis being played, croquet in another direction and the short course in another. But at The Cradle, where the holes range from around 50 to 125 yards, you could also see a mobile bar set up by the third tee, and you could hear classic rock music amplified from the trees. Go put on your whites to play croquet, but come over here to let your hair down. We had so much fun in the two loops we made around The Cradle, I don’t have enough column inches here to go into great detail.
Why is takeaway number two so important? My hope is that the doubling-down on fun happening at Pinehurst gives permission (so to speak) to the rest of the golf industry to let your hair down, take risks and invest in the fun side of our game. Turn your driving range into an entertainment venue with some of the new technology available. Bring those simulators inside and get people swinging, eating, drinking and playing games. Offer more fun formats for your golf events.
I’ve long said that I never tell a business owner what they must do. Those who prefer to deliver the formal experience can find success in that. But my hope is we will see a serious movement towards the loosening up and diversification of what it means to go out and play golf. Traditional golf and new formats are not mutually exclusive. We can have both, as evidenced by Pinehurst. Kudos to the Dedman family and to general manager, Tom Pashley.