Thursday, July 1, 2010

All Politics is Local, so is Golf

For some of you of my vintage that remember part of the title is a quote often attributed to the late Thomas P. (Tip) O'Neill, Jr., former Speaker of the House. But Tip didn't coin the phrase ... it was passed down to him.

Tip revealed the true origin of the quote in his 1987 autobiography, Man of the House. Tip's father, Thomas O'Neill, Sr, shared this wisdom on the occasion of the only election loss in his son's lifetime, which was a run for the Cambridge City Council.

“During the campaign, my father had left me to my own devices, but when it was over, he pointed out that I had taken my own neighborhood for granted. He was right: I had received a tremendous vote in the other sections of the city, but I hadn't worked hard enough in my own backyard. 'Let me tell you something I learned years ago,' he said. 'All politics is local.'"

So what brings on this political babble? Golf club members are mostly people that live within a 30 minute drive from the club or course they play. It’s important to realize the demographics of this statement. If the club’s neighborhood is comprised $100,000 per year annual income families it would be logical not to build or operate a club that charges $800.00 monthly dues and has $100.00 food minimums and other associated fees that would cost upwards of 10% of the families total income for all inclusive club membership.

While the prices of other items seem to ebb flow and with the economy why is it different that the price of membership shouldn’t do the same? Examine the results on the big picture, if the cost of being a member is reduced by 20% then the expenses of the club must be curtailed by 20% if all things where equal. Therein lies the problem – has the management of the club been most efficient with the clubs funds in the past? How is it that clubs that hired management companies operate the club on substantially less money and still garner a profit for the companies (does Troon Golf come to mind)? When times are fruitful clubs began to compensate employees more and funneled excessive money into operating budgets and facility improvements to outdo the club across town. In golf and country club heydays the initiation fees where high, clubs had waiting lists and usage was more than adequate to support and expand operations. Did the majority of clubs save for a rainy day, I think not.

The excess of the 1990’s and early 2000’s evaporated into the rapidly expanding economy. Loans, houses, cars, club memberships, everyone wanted to live the dream. Now its time to pay and local clubs are witnessing a mass migration of members to the "Wal-Mart" public sector of golf, health clubs and restaurants. The top 10% of private clubs do not have the same problems, their well healed, old money members have the wherewithal to ink a check and move on.

The National Golf Foundation reported that private club transfers to public facilities in the last year were the largest ever recorded, 96 during 2009. There were over 15 private golf club complete closures during the year, which represents one-quarter of all such closures over the past decade. This is a multi-edged problem, more public golf available in an already saturated market and lower end private courses forced to close completely contributing to players retreating from golf altogether, lower real estate prices, unemployment and reducing the economic viability of communities through loss of major tax revenue.

Which brings me back to the lead-in, All Golf is Local. According to the Club Managers Association of America an average private club contributes to the local economy the following:
• The average club’s gross income is $5.5 million,
• Clubs spend $2.79 billion in their respective local community as a whole,
• Clubs spend $2.9 billion within their state as a whole,
• Clubs as a whole paid $351 million in real-estate taxes, $708 million in payroll taxes, $528 million in sales tax and $218 million in other taxes (i.e., liquor, excise, occupancy and school),
• That’s $1,805,000,000 in taxes alone!

What needs to take place is government to get smaller and reduce the tax burden on non-profit clubs among other cash producing - job creating entities. Clubs need to be more efficient with expenses on other resources; conspicuous consumption is out-of-style. Dues and initiations need to move with the economy to reflect a family’s expendable income. Some of the for-profit management companies need to be called out for unscrupulous practices especially in the lower end private club market.

John Easterbrook, executive vice president of operations for Troon Golf said in an article written by John Walsh, then editor of Golf Industry Magazine. “The formula for turning around facilities is the same. We go in and analyze the operation and staff, support programs that are doing well, and where there’s a challenge in the operation, we overlay our system, which includes benefits, staff sharing, national procurement, insurance, sales and marketing programs, membership programs and agronomy standards,” he says. “In most markets, golf is overbuilt, rounds are down, the cost of operation is up and workers’ compensation insurance is up. If revenues are down or flat, courses need to rejuvenate those, and that’s why people hire us.”

Easterbrook also added, “We don’t move staff out unless the people who hire us tell us to,” he says. “We look at the staff levels and where the superintendent is spending money. Most of the time, we don’t ask for more money, and we’re not blowing out a superintendent. We’re just looking over the shoulder of the superintendent.

“There are times when a course or club isn’t managed well,” he adds. “We bring a culture and enthusiasm for what we’re doing. The quickest way to get let go is to not have enthusiasm for what you’re doing. Whether you’re operating a $30-a-round golf course or a $300-a-round golf course, people in charge need to be enthusiastic.”

Peter Hill, chief executive officer and chairman of Billy Casper Golf Management said in that same GCI article, “Most superintendents are passionate and competent guys who are either real good grass growers, good course presenters, have good business sense or are good project managers,” he says. “The ideal guy has all four of these traits, but most have just two or three.” Hill also remarked that, “Part of being a good manager is recognizing the weak link and supporting that. At many courses, superintendents don’t have a sense of what they’re spending and there’s no long-term plan.”

Typically management companies remove 5% to 15% of revenue from a club, even at 10% that’s $550,000 in local money. Most local community’s report that a dollar turns 8 times in its economy in goods and services, the math is an impact of $4,400,000 in local economy.

If stand-alone club management can learn business skills to match income with expenses and manage to save funds for capital and downturns in economy maybe large management companies would seek work elsewhere and keep GOLF LOCAL.

The learned lesson is, pay attention to your local golf environment, your home course members and the economy of your local community. Your good work at your club isn’t just vital to you, your family and your members; your community is also depending on the vitality of the club. Clubs are small economic engines that support your local economy, like Tip O’Neill said, “ALL POLITICS IS LOCAL”.

No comments: