“The Business of Golf: What Are You Thinking?,” the recently published book authored by James J. Keegan that focuses on how to maximize the financial return of a golf course, has been incorporated into the curriculum of a PGA Golf Management Program course this fall semester at Clemson University.

The ground-breaking book is based on hard data and extensive field experience gleaned by Keegan, who is a recognized authority on the business of golf today based on his extensive field experience that has covered more than 40 countries around the world.

One of only 20 PGA accredited programs in the country, the Clemson PGM program curriculum is built around a strong recreation management s background, while also earning the student a minor or major in business management . This fall students will be asked to create a strategic plan based on an 82-page case study, and will be asked to use and apply the eight key steps in Keegan’s textbook, according to Rick Lucas, program director.

“We are confident of one thing,” Lucas said to his students. “For those of you who diligently read the book and studiously complete this case study, the vast knowledge gained will place you significantly ahead of your peers in being able to manage the profitability of a golf course.”

Lucas went on to say that he is excited that Keegan – the visionary behind Golf Convergence, Inc. – will participate in the financial presentations by the class to provide further insights.

“I believe students learn best by doing,” Lucas said, “and the case will provide exercises and opportunity to grasp the important Golf Convergence™ formula concepts toward improved financial performance.”

Likewise, Keegan said, “I am thrilled to be affiliated with the Clemson program and especially with the enthusiasm and entrepreneurial spirit that Rick Lucas has shown.”

“This book provides an excellent complimentary tool to the PGA educational curriculum for the PGM Level 1 business planning classes and the PGM Level II golf operations sessions,” Keegan continued. “Further, we believe this book would be very beneficial to those pursuing the Certified Professional Program and Master Professional Program in golf operations, general management, ownership/leading and executive management – four of the six core PGA career paths.”

The book, available in print and on-demand electronic versions, in addition to the case study, includes class exercises and a test bank of questions. Moreover, Club Prophet Systems (Oakmont, Pa.), which helps golf shops across the globe streamline operations, is providing its software solutions to help the Clemson students grasp the importance of technology and guide them in solving the case study exercises.

Within its first 60 days of being published, “The Business of Golf” is in the top 22 percent of books sold, according to statistics published on Chris Anderson’s blog, The Long Tail (http://bit.ly/b2pnXd).

For additional information on the book, visit http://www.golfconvergence.com/textbook-on-the-business-of-golf. For more information on Golf Converage, visit www.golfconvergence.com, Twitter/golfconvergence, Facebook or call (303) 283-8880.

This is a pretty unique perspective

READ THIS BEFORE VIEWING THE VIDEO

This is a 24 hour observation of all of the large aircraft flights in the world, condensed down to 1:11. From space we look like a bee hive of activity. What you will see, is a video showing air traffic around the world for 24 hours, taken from a satellite.

You won’t believe this! The yellow dots are airplanes in the sky during a 24 hour period.

Stay with the picture. You will see the light of the day moving from the east to the west, as the Earth spins on it’s axis. Also you will see the aircraft flow of traffic leaving the North American continent and traveling at night to arrive in the UK in the morning. Then you will see the flow changing, leaving the UK in the morning and flying to the American continent in daylight.

This is something that everyone should see. For us old-timers it is really fascinating. For our children/ grandchildren it provides a superb learning moment and an opportunity to open up what could be a very interesting discussion. This is one of the coolest things I have ever seen. It surpasses the “World At Night” poster that NatGeo (I think) published about 20 years ago and my “America At Night” coffee mug. How many people do YOU think are in the sky at any given moment?

You can tell it was spring time in the north by the sun’s foot print over the planet. You could see that it didn’t set for long in the extreme north and it didn’t quite rise in the extreme south. I have never seen this before.

We are taught about the earth’s tilt and how it causes summer and winter and we have had to imagine just what is going on. With this 24 hour observation of aircraft travel on the earth’s surface we get to see the daylight pattern move as well. Remember watch the day to night….. Day is over in Australia when it starts.

Respectfully,

Steven G. Cunningham. | EOD Technology, Inc.
Project Manager | TWISS

The Alexa rankings for the primary golf trade associations as of July 16, 2010 are as follows:

As a reference, Golf Convergence is 499,385 as of this posting, up from 713,084 with the publishing of our book, “The Business of Golf”:  http://www.golfconvergence.com/textbook-on-the-business-of-golf.

Why the difference in rankings?  The leading sites are consumer v. trade industry based.

Good article by Stuart Lindsay of Edgehill that is worth the read. Stuart is one of the industry’s most forward thinking individuals.

Amid the increasing “din” of clients asking our opinion on this topic, weekly GolfNow press releases and the intensifying discussion thread on NGCOA’s Listserv on the topic, Stuart Lindsay (Principal of Edgehill Golf Advisors and an ongoing consultant to Pellucid) and I felt compelled to once again weigh in on this topic. Given the broad industry interest and what’s at stake in getting it “right” the first time (unlike the airline and hotel industries), I’m distributing this edition of Outside the Ropes free of charge to a wide range of industry stakeholders and service providers numbering roughly 15,000. My intent is twofold: 1) Inform and educate as many as possible about the pros and cons of the current trajectory of 3rd party tee time distribution programs in golf and 2) Hopefully entice some number of you to subscribe to the newsletter at some point in the future based on our rigor and balance in reporting the facts about the situation rather than the current opinions across the media and industry trade organizations that this business practice evolution is “pure evil” or “the next coming.”

In a recent conversation between myself and Stuart I mentioned to him the unattributed quote of, “If you’re playing poker at a table for 30 minutes and you haven’t figured out who the fool is, it’s probably you.” In other words, if you’re the person in the game with the least knowledge, you’re much more likely to fail. I believe that in the current environment of 3rd party tee time distributors and programs, the average facility owner/operator has less knowledge about the game than many of the parties (i.e. the 3rd party provider, the larger management companies and the software service providers) which puts them at a handicap at best and, at worst, is leading to less-than-optimal business decisions.

In an attempt to level the playing field somewhat and recognizing that we are only scratching the surface of all the nuances and complexities of the benefits and drawbacks of 3rd party tee time distribution, Stuart has compiled and presented in the below piece his first pass at establishing some basic facts and recommendations. I concur with and endorse his analysis which is why I’m sharing this information with our subscriber base and a wider audience for your consideration and intelligent feedback. As one of my colleagues recently observed about him, Stuart and me, we’re “often wrong, but never in doubt.” Enjoy this next chapter in the mini-series of The Good, the Bad and the Ugly.

We’re getting a lot of questions on 3rd Party marketing these days. People in the industry know we have commented on 3rd Party Tee Time distribution in the past and continue to ask for our opinion on the subject. Our client courses are also being bombarded with a variety of promotional proposals, many of which involve a “barter” component.

Also, there have been two rather recent press releases from GolfNow (Golf Channel Solutions) that announced results from a Survey of their golfer/users and detailed some of their 2009 results. Based on the releases and our recent field work, GolfNow has revamped some of their programs and is putting a big push on in a couple markets we have looked at recently.

As a disclaimer, we also did some work for Golf Channel Solutions in 2009; along with studies for other clients that have involved evaluating GolfNow results. Since our client work is confidential, the above disclaimer merely serves to indicate to our readers that we actually know more about this subject than we can talk about.

The recent client contacts have indicated that GolfNow is offering a variety of programs to different courses. The “standard” program has traditionally been based on one tee time per day, although they do ask for two times per day from some lower priced courses. Here are a few variations we have been told about:

1. A golf course is allowed to set a “floor price” on times bartered to GolfNow which essentially controls the discount GolfNow can offer.
2. GolfNow is promoting a program where the course gives up 2 times per day and GolfNow will split the revenues 50%/50% with the golf course for all the times sold.
3. Another course has been offered a “commission model” that simply pays GolfNow a percentage of the tee times sold by GolfNow.

We will return to these options later, but our fundamental question is whether or not these options have been made available to all courses using GolfNow?

Price and programming consistency has not been one of GolfNow’s strong suits for a long time. There is an inherent inequality in the tee time a day barter system – a course with an average $60 rate is paying 50% more for the same service than a course with a $40 rate. They may counter that with the 2 barter times for lower priced courses is an attempt to level the playing field, but we see very little evidence of that actually happening.

When we look at the press release material, we are fully aware of the truth of both positive and negative interpretations of the same data. However, when we looked at some of the data points in the recent releases, we feel that some of the conclusions went beyond the statistical semantics of whether the glass is 50% full or 50% empty.

Since GolfNow cited PerformanceTrak data in their releases, we will also use some of that data to put some of their numbers in perspective. We will also use some of Pellucid’s data from the National Sporting Goods Association and Golf Local Market Analyzer to augment our analysis. Here are a couple of standout statistics from the GolfNow releases:

• Over 730,000 Golfers used GolfNow in 2009 – That represents only 2.67% of the estimated 27.3 Million Golfers in the US.
• Over 3.8 Million rounds were booked using GolfNow in 2009 – This represents less than 1% of the estimated 390 Million Public golf rounds played in the US.
• Over 1,800 courses are using GolfNow – This represents less than 16% of the Public golf courses in the US and under 25% of the 18 Hole+ facilities in the US.
• GolfNow generated over $121 Million in incremental greens fee revenue in 2009 – With rounds flat (Golf Datatech, PerformanceTrak) and revenues down (PerformanceTrak), how can this amount be considered “incremental”?
• We would add one other point that they did not emphasize, which is that their 1,800 courses got the benefit of an average of over 2,100 rounds booked on the GolfNow system. They did allude to the benefit of fewer phone calls and more time to deal with customers on a face-to-face basis, but the 2,100 rounds does represent an average of 6.6% of the rounds at their participating courses.

In looking at the above statistics, all I can say is about the half full version is that new courses are signing up and more rounds were booked using GolfNow in 2009. The half empty interpretation would be that GolfNow is having very limited impact in actually moving the market.

Golf Course Operators Place Blame

J. J. Keegan, Managing Principal – Golf Convergence

The Gauntlet Now Thrown

At the 2010 PGA Show, the leading industry research firms, the National Golf Foundation, Golf Datatech, and the PGA of America confirmed that in 2009, rounds and revenue had decreased 1% and 6% respectively, and that up to 1,000 courses may close in five years.

In searching for answers, many cite the uncontrollable factors of the economy, our time-crunched culture, and the oversupply of golf courses as the primary reasons contributing to the malaise. Others cite software firms—particularly third-party tee time providers—as the culprits.

In a February, 2010 Golf Business article titled, “The Flip Side,” Michael Tinkey, Deputy Director of the National Golf Course Owners Association wrote,

“I have an idea for a way we can all make more money…: Let’s build additional golf courses … and charge below the market rate to drive more demand and play.Sound logical? Of course not, but that’s just what happens when multiple golf course operators in close proximity give barter rounds to third-party tee time distributors. All of those “unused rounds that cost the course nothing to give away” add up to … tee sheets full of inventory … being sold at deep discounts. It’s like constructing a competing course … and the worst part is you helped build it.”

Is Mr. Tinkey, who is a sincere, well-respected and dedicated professional, correct that third-party tee time distributors are responsible for the industry’s demise?

Economic Theory

Every business is governed by the laws of supply and demand. When the price of a product goes down, suppliers will usually produce less and consumers will usually want more. That relationship presumes that supply and demand are purely elastic.

Unfortunately, demand for golf is slightly inelastic – a change in price will impact rounds played, but only partially. It is unlikely that if the prices are decreased 10%, rounds will increase 11.1%, the percentage of growth required to generate the same total revenue. A 10% decrease in price is more likely to increase rounds only between 5% and 9%, resulting in a 1% to 6% decrease in total revenue.

What is worse is that the supply of golf courses is nearly completely inelastic. Changes in price affect only the short-term financial performance of the facility. Based on the capital reserves of a course, it could take years before its funds are depleted and the course turns to seed and/or must be sold.

The Facts

Golf is a $76 billion industry, of which golf facility operations represents a $28 billion component. It is estimated that green fees, season passes, membership initiation fees and dues account for 55% of that, or $15.4 billion in revenue.

It has been heard on the street that Golf Channel, by far the leading third-party intermediary (selling $121 million in tee times, representing four million rounds to 730,000 golfers) liquidated nearly $19 million in tee time inventory for themselves in 2009, receiving an average of $10,500 in tee times sold per course among its more than 1,800 clients. For that “fee,” the golf course receives a custom-designed Web site, an email blast tool, and access to a database of golfers within the local market. The real value of Golf Channel’s Golfnow.com solution is only realized if the golf course owner can leverage those tools to competitive advantage. Unfortunately, few owners do.

While the Golf Channel email software is difficult to use and is subject to valid criticism for not creating a true yield management tool to boost the golf course’s revenue per available round (RevPar), one must respect that the company has invested over $75 million in the belief that this system will benefit the industry. The $40 million investment in Cypress Golf Solutions to acquire 750,000 email addresses as well as the $17 million investment in Last Minute Tee Times to acquire 200,000 tee times are impressive.

While it was laughable to some who listened to Golf Channel officials on January 26, 2010, espouse that they are not in competition with the golf course owner, it is equally humorous to entertain the notion that one vendor who generated nearly $19 million in revenue cratered a $15.4 billion industry.

Who is the Villain?

First, it must be acknowledged that software firms are partially guilty of inserting their own economic interests ahead of the golf course owner.

Jeff Levine of Century Golf Group, for years, and Jim Roschek of the Alamo City Golf Trail, more recently, have sought to use the EZ Links Tee Time Reservation call center with the IBS golf management software. As recently as September, 2009, IBS declined to create the requisite interface.

Fore Reservations published a white paper in 2009 indicating that it was not in their clients’ interest to create an interface to third-party intermediaries, and that they, representing the interests of their clients, were reluctant to provide such an interface.

In December, 2009, it is rumored that Fore! Reservations was paid by Golf Channel seven figures for prepaid seat licenses and to ensure an interface to Golfnow.com. It could be debated that Fore! was advancing its own economic interests ahead of its clients if they truly believed that third-party intermediaries are detrimental. That begs the question why the other leading software vendors (Active Network, Club Prophet, EZ Links, IBS and Jonas) don’t demand similar compensation for each potential interface to Golf Channel.

Interestingly, shortly after the Fore! agreement, a letter was sent to a Florida course indicating that Fore! Reservations is a preferred software provider of the Golf Channel. That prompted a meeting with Club Prophet on January 29, 2010, at the PGA Merchandise Show in which it was indicated that their interface provided to Golfnow.com was in jeopardy, as Club Prophet viewed Golf Channel competitive to their primary business: golf management software.

Such a meeting was necessary because Golf Channel made the same mistake made in the 2000’s by both Turner Broadcasting, on behalf of the PGA, and Golf Switch, when, in attempting to create a national tee time network, they endorsed one software firm at the expense of the others. Such is a fatal flaw. A national tee time provider can’t have an interest in a golf management software company. You need the cooperative assistance of all software providers to succeed.

Then are software firms the villains? Hardly. They are merely embracing the fundamental principles of capitalism, whereby strong incentives are provided to exploit other people’s frailties.

In this case study, the frailties are those of the golf course owners.

Who Will Be the Survivor?

The formula for a successful golf course is simple; value = experience – price. To the extent that the experience equals or exceeds the price, loyal customers are developed. To the extent that the price exceeds the experience, attrition occurs.

While uncontrollable factors and software firms exerting their own self-interest contribute to the industry’s decline, perhaps 35% and 10% respectively, the lack of professional business skills among the golf course owners, management teams, and its staff are the primary factors contributing to the financial demise of golf courses.

They consistently fail to undertake and execute effective strategic planning that embraces eight key components:

1. understanding the local market, including the age, income, ethnicity, and population density within 10 miles of their facility;
2. calculating the impact of weather on year-to-year performance;
3. ensuring the proper integration of technology;
4. benchmarking their performance to Golf Datatech and PGA PerformanceTrak data;
5. assessing equipment, capital and manpower requirements properly;
6. realizing that golf courses are in the entertainment business and need to emphasize customer satisfaction at each of the 13 potential touch points;
7. measuring customer preferences, spending patterns, and identifying core, acquired, and defector golfers; and
8. constantly assessing customer loyalty.

In 2010, facilities like the City of Ann Arbor, City of Winnipeg, City of Virginia Beach, Naperville Park District, Les Bolstad GC, Merrill Hills CC, Reignwood Pine Valley, and Tartan Park will all realize opportunities to increase their by net income by a minimum of 12% by engaging in such strategic analysis. In one case, the City of Winnipeg could reverse its economic destiny by $8.5 million in the next five years.

Warren Buffet was quoted that he likes to invest in industries where average people can make a lot of money. Unfortunately, golf is a business that requires extremely smart people who have the potential to only make a little money. Thus, the average golf course operator is likely to struggle and perish, becoming an unwilling example of a fundamental lesson of capitalism, a system that creates opportunity but devours the weak.

Author: James J. Keegan, Managing Principal of Golf Convergence and author of The Business of Golf – What Are You Thinking? to be released on April 15, 2010. You can follow J.J.’s divergent views at twitter/golfconvergence.

by Curt Walker

Barter agreements (pledging a few tee times a day to a to a third-party marketing organization) have been likened to “building” another golf course in your own market area. The terrible results of a market capitulation can be seen in the experiences of Phoenix and Orlando. Under the guise of freedom to withdraw from an agreement, owners are sometimes told no contract is necessary between parties——-Nuts! An “opt out” clause is common in contracts and provides plenty of flexibility if either party wishes to leave.

“Save and hold harmless” clauses are also common, and necessary protection in contracts. Most barter tee time providers should hold owners harmless from a sales tax audit the state later claims must be paid. Can yours? In the absence of a save and hold harmless clause in a contract, as well as a written understanding of deliverables, owners could be STUCK. Some new companies have decided to help themselves to the already scant earnings of hard working and customer oriented course owners. Maybe we should just turn off the TV’s in our clubhouses.

At the beginning it seems so simple; only a few weak tee times in exchange for nationally recognized exposure and promotion. As course after course is coerced into cooperating, the strength of the third-party marketing organization tightens its grip on policies and marketing for your course and others. Many owners are forced to accept this re-marketing or face the prospect of slower demand. It’s been likened to building another course in a market area to compete with your own. This just doesn’t have to happen in Minnesota

Since Phoenix and Orlando are seasonal destinations, they may be more susceptible to barter marketing. Thankfully, Minnesota can depend on its own indigenous golfing market, often cited as one of the strongest in America. In Minnesota most owners don’t have to suffer from the delusion of profitless volume by trying to attract customers who claim price is their only consideration; It isn’t!

Airlines used to promote friendliness, perception of comfort, quality of their food service, or on-time record, and even the glamour of their flight attendants. So often consensus is regression to the mean, and airlines and hotels regressed in a vain pursuit of market share when faced with the decision to persevere or conform.

Unlike airline or hotel “commodities”, golf course owners are still able to “sell the difference”; golf is not a commoditized experience, unless we allow it to become one through pricing. We shouldn’t vacate our right to price this experience fairly, and be willing to forgo those who choose not to pay it. There is no perfect need to play golf as is the case with travel or lodging. Golf is a want. ALL the barter advertising in the world can’t bring ALL the business to our doorstep. The value of such collaboration diminishes with each additional course, while the main benefit accrues to the third-party promoter.

Enlightened self-interest is one of the most powerful motivating forces in commerce. Once informed, golfing customers can conclude that at a fair price, they’re going to be happier with a “value experience” instead of a cheap one. As a Japanese gentleman visitor to Minneapolis once said to me as he bowed when leaving my course: “Thank you; you have made our visits a beautiful memory.” They didn’t need to come back three days in a row, they wanted to!

I loved the recent big-box office supply ad about a barber suddenly faced with a cut-rate barber shop opening across the street pricing haircuts at only $6.00. Instead of folding, he went to the big-box store to save money and came up with a sign above his shop saying “We Fix $6.00 Haircuts”. The discounter closed their doors shortly thereafter. Sell the differences, or sell what your competition doesn’t have! That difference does not have to be price alone.

Call us at 303 283 8880 to discuss the implications for your golf course.

Wondering about the implications for the golf industry? Call 303 283 8880.

GPS – A Play Toy or Business Tool?
by Jeff Cline, VP of Institutional Sales

While GPS has been a fixture in the golf industry since the early 1990s, the technology has advanced remarkably since those days. Golf course GPS may have begun life as a toy, but led by ProLink Solutions, the world’s largest provider, it has evolved into a business tool that courses today find indispensable.

The early adopters of GPS took advantage of the new and exciting technology as a way to differentiate their courses. Giving golfers precise yardages to pins and hazards was a novel way to make a round more enjoyable, enhancing the playing experience and resulting in repeat business. With the increasing demands on our time, the average golfer wants to score well and play a round in about four hours; and ProLink Solutions GPS helps on both accounts.

But increasing golfer enjoyment is only part of ProLink’s value to a course. The system’s rapid evolution in recent years has seen the introduction of numerous functions. Clubs looking for marketing and information systems that can manage pace-of-play, fleet rotation, and customer-to-pro shop communications will find it all in ProLink Solutions’ GPS system.

A major recent development has been the introduction of advertising on GPS screens. The revenue-sharing program pioneered by ProLink allows courses to take full advantage of this phenomenon. Via “ProFIT,” partner courses and ProLink split ad revenues 50-50 (after a 15-percent agency fee is paid), generating significant cash flow to substantially reduce or eliminate the system cost.

How many toys can do that?

If the GPS yardage unit needs a battery, or it’s sold at Sharper Image, that’s something to play with. If the system is cart-mounted with course graphics and live yardage feeds, provides multiple revenues streams, delivers exceptional ROI, and provides robust back-end reporting, it’s clearly a business tool.