Typical Florida golf course wildlife. This photo was taken 10-feet away from this snoozing giant behind the 10th green at The Preserve Golf Club in Bradenton, Florida.
IF YOUR HOMEOWNER ASSOCIATION IS CONSIDERING BUYING ITS NEIGHBORHOOD GOLF COURSE YOU NEED TO KNOW WHAT YOU’RE GETTING INTO.
A GOLF COURSE IS LIKE A TWO-WEEK-OLD BABY. IT NEEDS 24/7 CARE AND ATTENTION. HOWEVER, THIS BABY REMAINS A TWO-YEAR-OLD FOREVER!
Owning and operating a golf course as a business is probably one of the most difficult businesses to sustain indefinitely. However, if your HOA plans to own its neighborhood golf course it must be accomplished exactly right. Otherwise, the golf course will cycle right back where it is today - usually within five years.
I am an expert in operating and managing golf courses. The first thing your HOA must do before even considering taking ownership of the golf course is to form a special feasibility committee.
THE HOA FEASIBILITY GOLF COURSE COMMITTEE
The job of the feasibility committee needs to gather information about the golf course with the ultimate mission whether the HOA can handle ownership of the golf course.
You’ll need to know the minimum cost to maintain it.
You’ll need to know exactly how to manage it.
You must understand its marketplace.
You’ll especially need to be able to confidentially budget one-year, three-year, five-year, and ten-years ahead.
The perception of owning a golf course is often the satisfaction of seeing people come to play the course. You mow the greens and fairways, serve the golfers a beer and a sandwich and everybody is happy. If that is so, then why do endless golf courses fail as businesses?
YOUR HOA MUST UNDERSTAND WHAT IT TAKES TO MAINTAIN A GOLF COURSE - AND DON’T FOOL YOURSELVES, EITHER!
It’s foolhardy to brush over maintaining a golf course without understanding its demands thoroughly.
Most 18-hole golf courses covering anywhere from 90-acres to over 200-acres are made up of up to three grass types. For instance, a golf course near Jefferson City, Missouri, Railwood Golf Club, has bentgrass greens, Bermuda fairways, and fescue rough (second cut) areas.
An 18-hole golf course in South Georgia, Kinderlou Forest Golf Club, has an 18-man maintenance crew including a superintendent, assistant superintendent, a mechanic, an irrigation technician, a licensed spray technician, plus a ten full time labor crew, plus three part-time laborers. At least eight maintenance crew members work for at or near minimum wage.
A typical maintenance building and a full compliment of machinery and tools is a major investment. What unwary first-time golf course owners don’t realize is that most sophisticated mowing machinery has a maximum lifespan of about five years, or 5,000 hours on the job. It means the entire mowing fleet - greens mowers, fairway mowers, deck mowers, trim mowers and trap rakes are all but ready for the scrap yard in five years. At up to $1/2 million as new machinery, it means budgeting $100,000 a year alone just for machinery replacement.
Then there’s irrigation, drainage, and cart paths - all which run into problems usually beginning in about seven years.
An irrigation system’s normal lifespan varies from 10 to 30-years (United States Golf Association article). A full rebuild or refurbishment of a 25-year-old irrigation system can run from $1/2 million to over $1.5 million.
A complete irrigation replacement estimate for an over 40-years old, Daytona, Florida golf course, Indigo Lakes (now closed), was over $1.3 million in 2013.
Drainage patterns get plugged over in time causing mushy wet spots in fairways. Sand trap drainage is often plugged up in a few years and needs to be corrected - sometimes a total rebuild of its drains is required. A few years ago a top-notch Bradenton, Florida, Arnold Palmer designed golf course, Legacy Golf Club, at Lakewood Ranch, needed to budget over $250,000 for its bunker repairs.
Beware of bulkheads! I’ve never seen a bulkhead that did not eventually bulge and begin to fail. When it’s time to repair failing bulkheads the costs can be frightful - especially those beside greens (I know, because I’ve encountered that dilemma).
How do you establish a reasonable golf course maintenance budget?
Two things to keep in mind about a golf course maintenance budget (we call golf course maintenance budgets ‘WAGS’ - wild ass guesses:
Each year’s budget is different
They generally go up every year
UNDERSTAND THE IMPORTANCE AND ROLE OF A LICENSED SUPERINTENDENT
Looking after the golf course requires probably the most important professional individual you’ll need on staff - A licensed superintendent.
With fertilizers, fungicides, herbicides, and aquatic herbicides now so heavily policed, your superintendent needs to be properly trained and licensed (usually by the state or province). Without a license, critical fungicides and herbicides cannot be applied to the grounds. And it’s crucial to have certain chemicals on hand because many insect, or fungus attacks can occur overnight. Some attacks can wipe out a green in a couple of days.
A MAINTENANCE BUDGET FOR YOUR GOLF COURSE WILL NOT BE AN EXACT COPY OF ANOTHER GOLF COURSE
Of course, the finished golf course needs to reflect the demands of the golfers who play it. A high-end private country club may budget well over $1 million to maintain 18-holes and its practice range. The Missouri golf course, Railwood, mentioned above keeps its grounds well maintained for less than $350,000.
In my experience, a typical Florida 18-hole golf course cannot be properly maintained for less than $600,000 (in 2018), which does not necessarily include capital replacement of up to another $100,000 a year.
An upper New York State golf club, Ontario Country Club, a truly great 1928 historic golf course has been maintained for $300,000, more or less. However, there was no room in the budget for capital replacements.
CLUBHOUSE AND INFRASTRUCTURE
Golf course clubhouses are all different. Most are poorly designed and laid out, which tends to make them dysfunctional, and expensive to manage and maintain.
Remember, clubhouses are usually open every day. Normal traffic causes wear and tear and shortens the life span of carpeting, door closers, toilets, chairs, tables, desks, on and on.
The real clubhouse money sucker is the kitchen.
Stoves, walk-in coolers and freezers, exhaust hoods, and fire safety systems, meat slicers, dishwashers, etc. wear out or need special maintenance care. And because its food service, the county health department is always on your case. Also, because it cooks with flame, the fire department is also scrutinizing the place.
Serving prepared food restaurant style, which is what every clubhouse tries to do, is labor intensive, and cost of sales expensive. Generally speaking, few golf course restaurants make any profit. Even the very best run food and beverage operations are happy to throw off 10% of gross sales.
A typical full service golf course clubhouse food and beverage service (F&B) needs a chef, a sous chef, several line cooks, servers, bussers, dishwashers, bartenders, and cleanup crews. Normally, the goal of F&B is to keep personnel costs to less than 35% or less of total sales. The goal for cost of sales is also 35% or less. At the bar, the cost of sales target is below 30% with beer usually 35% or higher, and liquor 25% or lower.
OFFICES, RECORD KEEPING, POINT-OF-SALE
General and Administration (G&A), includes all the administrative expenses like banking, accounting, keeping licenses up to date, payroll, monthly P&L reports, accounts payable and receivable, property taxes, insurance, membership accounts, advertising and marketing, Internet and website, and other things. Most golf courses have a secretary handling accounts and payroll, normally answering directly to the general manager.
A typical golf course may deal with over 100 different vendors from course maintenance supplies and fuel, pro shop supplies and inventory for sale, food and beverage supplies and services.
A golf course administration infrastructure includes office computers and software linked with the pro shop and restaurant point-of-sale (POS) systems. Each POS will have its computer, a touch-screen showing the tee sheet and with easy touch for ringing in sales. A properly planned POS will feed directly into the back-office general ledger.
As technology moves at such a fast pace, many golf course G&A infrastructures can be out-of-date in just a few years. For a golf course to remain competitive in the marketplace it needs to use the Internet for email campaigns, networking such as Facebook and Pinterest.
All of the above G&A components cost money to support to be effective. A G&A staff may include the general manager (GM), back-office secretary, and possibly a front office secretary. If it’s a private membership, or semi-private club, it may employ a membership director.
TO BECOME HOA OWNED THE GOLF COURSE NEEDS TO BE PERMANENTLY SUSTAINABLE
The reason your HOA decides to own it neighborhood golf course is to protect the value of their residences (property). With evidence indicating golf course property values dropping from 10% to 30% due to the failure of the neighborhood golf course, it can make sense for the homeowners to own the golf course to control its destiny. That’s why the first thing the homeowners need to do is form a feasibility committee. This group must determine whether the golf course can run forever. Only then should the HOA consider owning it.
CALL UPON ON A GOLF COURSE BUSINESS EXPERT
Once the feasibility group is formed, they should call upon a golf course business expert to help the group understand all its components. The chosen expert needs to demonstrate expertise in all areas of golf course operations including golf course maintenance, pro shop operations, food and beverage operations, general administration, budgeting, and marketing and advertising for golf courses.
ME, MIKE KAHN. I AM A GOLF COURSE BUSINESS EXPERT
I’ve been in the golf course business in the USA and Canada since the mid 1950s. I was a member of the Canadian PGA, I was licensed as a golf course superintendent, I’ve been a golf course owner, general manager, designer, financier, broker, evaluator, and consultant. I am an expert in pro shop operations, food and beverage operations, general administration, marketing and advertising. I can help your feasibility group determine whether your neighborhood can own and operate the golf course permanently.
I’ll make sure you don’t pay too much for the golf course.
Here are two examples of HOA acquired golf course I advised:
I offer a complimentary conference consultation with members of your HOA to help us get acquainted with your situation and possibly some initial advice.
Call: 941-739-3990, or write: firstname.lastname@example.org.