Favorite Golf Course

Stephen R Burns asked:




Unfortunately, when building new golf courses, sometimes the egos of golf course developers and golf course architects get in the way of sound business practices and common sense. In their quest to build the next “Top 100,” or “Best New” course, developers often end up spending way too much money to build their course. As a result, they end up only temporarily owning a course that can’t possibly generate enough revenue to service its huge debt. After a season or two, the developer is often forced to sell the course, at a loss. Usually, by the second or third owner, the course has been discounted enough, from its original cost, to turn a profit.

It’s not uncommon to hear of daily fee courses that cost $7-10 million to build, not including the clubhouse or other facilities. If this is in Las Vegas, or a similar area, where year-round play and/or green fees of $150 or more are common, this may be a good investment, but these construction numbers are often found in areas where the average green fee may only be $20-30. If the developer borrowed $10 million at 10%, the course has to play 40,000 rounds at $59, for green and cart fee, just to break even, let alone make any money. In the Midwest, with roughly a 200 day golf season, that’s a very expensive, very busy course. If the course only plays 30,000 rounds, which is more typical, he has to charge $78 to break even. No matter how nice the course is, it is just too tough to generate enough rounds, at a high enough cost, to make any money when the course cost this much to build. Following the same pattern of overspending, courses in the high green fee areas sometimes cost $20 million or more to build. The overspending is sometimes offset by the hotel or casino revenue and/or the expensive real estate developed in conjunction with the courses, but they still aren’t as profitable as they could be.

As the golf magazines generally don’t consider construction cost, when evaluating courses, many of these courses do win a lot of the awards and recognition. It only makes sense that a $10 million course will be nicer than a $3 million course, all other things being equal, but is it really that much nicer? Generally, these high-priced courses also have very high advertising budgets, as the owners desperately need to attract enough golfers to pay the bills. The awards, however, serve as little consolation to the developer, who is losing money, and is forced to sell the course at a loss.

Golf is a strange business, sometimes based too much in emotion, rather than common sense. Quite often, architects don’t discourage this over-spending, and oftentimes they even encourage it. An architect that follows this practice hasn’t really done his client any favors. In fact, one should really say that the architect was doing a poor job. Unfortunately, as the profitability of the course isn’t one of the award criteria, the architect wins praise from the magazines. This favorable publicity leads more clients to the architect’s door, where they will ask for a course just as good or better than the architect’s last award winner, and the whole overspending process is repeated again.

Fortunately, for the less emotional, this foolishness doesn’t have to occur. There are many architects in practice that do their jobs properly, building high quality courses that are inexpensive enough to succeed. With a good feasibility study, good management, and no major changes in external conditions, there is no reason for a course to not be profitable. A well-built golf course, with nice lakes and bunkers, USGA greens construction, full cart paths, generous irrigation and drainage, and a decent amount of earthwork, can be built in most areas of the country for $2.5-3.5 million, not including non-course items like buildings, etc. This basically holds true anywhere but in the desert and similar areas where the extremely complex irrigation systems alone often cost well over $1 million dollars. Quite often, given a decent construction site, these courses can even win some awards.

For example, our Cobblestone course, near Fort Wayne, Indiana, was built for less than $2.5 million, yet Golf Digest ranked it the “8th Best New Affordable Public Course of 1999.” This category includes all the public courses, opened that year, that cost less than $50 to play. The first place winner that year was built on an ideal site in Central Florida. With the natural hills and sand, they built the course for under $2 million. Our Fox Meadow course, in Medina, Ohio, was built for $3.4 million, including $240,000 of trees for the mostly open site. They only missed making the Golf Digest list of the “Ten Best New Private Courses of 1996″ because they didn’t allow walking. The two bonus points this cost them put them 1.8 points behind the tenth place finisher. Regardless, Fox Meadow is successfully selling homes from $350,000 to over $1 million, and outselling a couple other similarly priced developments that have $9 or $10 million “Signature” courses. Our Hawks Nest course, near Wooster, Ohio, is on several lists of the top public courses in the country. It cost $3 million, including $100,000 for on-course restrooms and a waste treatment plant.

The conscientious architect will determine what the client’s real motives are, when establishing a construction budget. Although the client may say that he wants a top ten course, at whatever cost, it still should be the architect’s job to help the client understand what that really means. The client should know that the “whatever cost” construction budget may mean that his top ten course will not be profitable. Some clients, with nearly unlimited money, or some other motive, may truly not care what the course costs. If this is the case, it’s fine to spend the big money, but, in most cases, some sort of budget should be set and adhered to, even if it’s a fairly generous one. It’s not right for the architect to take advantage of a client’s emotions by building a monument that will bring praise to the architect and bankruptcy to the client.

The ’90s was a decade of strong growth in golf course construction, particularly of upscale daily-fee courses. Much of this construction was in response to the growth in golfers, and rounds played, in the ’80s and early ’90s. However, as rounds have leveled off, many market areas are now over-saturated with courses, and course owners are having a harder time making a profit. In some markets, particularly resort areas, all green fees have gone up, in reaction to the many new expensive courses being built. One of the reasons for this leveling off of rounds may be the fact that these expensive courses only appeal to a limited portion of the population. While the resort guests can afford the high fees, some of the local residents can no longer afford to play as often. As the average cost of a round of golf goes up, fewer golfers can afford to play. Although there is a definite place for high-end courses, there also is a need for more mid-range and inexpensive courses to develop the new golfers that are needed to keep the golf business growing.

Note that this article was originally published in the early 2000′s, but the math still applies. Golf course construction costs have increased, but courses are now worth less. Currently (2010) more courses are being plowed under than built.