IN THIS ISSUE
2013 Golf Facility Supply Update
Number of Courses under Management Companies Still Growing
NGF’s 7th Annual Golf Business Symposium
New Members Q4-2013
Mayor's Blog: Golf’s Greatest Ever Sale?
Golf Course Sued Following Runner’s Death from Cardiac Arrest
NGF Top 5: This Month
ROUNDS PLAYED REPORT
SPONSORED BY: NGF GolfSAT

January 2014 Rounds Played Report

FEATURED VIDEO
SPONSORED BY: ClubCar
Club Car's All-New Carryall. The Legend. Reborn.
 
PAGE SPONSOR
Number of Courses under Management Companies Still Growing

The NGF’s golf facility database reveals that facility consolidation under management company umbrellas has been an emerging trend in the new millennium.  The number of U.S. facilities under third party management grew from 1,472 in 2001 to more than 2,245 in 2013, an increase of 53%*. Half of this growth has occurred since just 2008.

There are about 230 management companies that oversee these 2,245+ facilities.  Most of them have a small portfolio.  In fact, about two-thirds operate between two and five facilities, and only four – Billy Casper Golf, ClubCorp USA, Kemper Sports Management and Troon – operate more than 100 facilities in the U.S.

With a lack of growth in demand and an oversupply of golf facilities in many markets, course owners are increasingly turning to management companies to help them successfully navigate today’s hyper-competitive environment.  Third party management may not be the right solution for all facilities, but the right company can help struggling golf courses in many ways, including: more effective marketing, customer service enhancements, national purchasing programs, implementation of proven customer relationship management (CRM) programs, and overall operational efficiency. (Also, for municipal golf operations, savings in expenses can be substantial if the golf course(s) were formally operated with public labor).

Facility owners and operators need to conduct thorough due diligence before making a decision that affects the management of their course.  They must decide on not only the company that best fits their culture, but also the nature of the management relationship.  The two primary types of arrangements between owners (often municipalities) and professional management companies are operating lease and fee-based management contract.

These two options offer different risk-reward scenarios for both the owner and the management company.  Under the operating lease scenario, the management company owns most or all of the net revenues (after lease payment) in return for taking on the risk associated with the operation.  The lease payment can be a flat amount, a percentage of gross revenues, or some combination of both, often with a guaranteed minimum annual payment. In addition, the lessee may be responsible for capital improvements (amount generally varies with length of agreement). The obvious advantages for the owner are a guaranteed cash flow and reduced risk.

Under the management contract structure, the facility owner is obligated to pay a management fee to the contractor and owns all of the operating revenues and expenses. The fee is typically fixed, with potential incentives based on revenue thresholds, and the agreement usually includes a stipulation for an annual adjustment related to changes in the CPI. While the owner retains the net revenues (after management fee is paid), he or she also retains the operating risk and must continue to fund any necessary capital improvements. In some cases, often referred to as “hybrid” management contracts, the owner and management company share the profits and the risk.

Facilities under management accounted for 11% of total facilities in 2008 and now account for almost 15%, but this leaves much room for further consolidation. Given current market conditions and golf participation trends, what might we expect in the future?  “I expect the increase in the number of facilities under management to continue, although choosing the right option is key to the financial success of the facility,” says NGF Director of Consulting Richard Singer.  “Management companies have shown their worth, especially in the public sector.”

*Facilities included are part of a multiple facility operation (two or more) owned, leased or managed by a management company. 

LikeLike (0) | Share | Comment (0)
Comment
Name:

Email Address:

Comment:

Published by VCT