Point: The case for hiring a management company / Counterpoint: Management companies: A necessary expense?

Golf Course News, Jul 2002 by Kahn, Michale A

Golf Management companies are an increasingly needed resource for the success of many golf operations.

The golf industry has changed dramatically in the last five years and particularly the last two years. Many golf courses have been built without attention to a focused business model, supply exceeds demand in many markets, and courses have been opened as amenities to residential developments, office parks or as a personal investment for individuals who had success in other industries. Today, with intense competition for players' participation, cash flows are strained, expenses reduced and the golfer experience is eroded, resulting in a downward spiral of a failing business.

The future of golf will be driven 100 percent by factors such as first quality course conditions, marketing, packaging, innovative services and attention to hospitality.

Historically, many golf course management people grew in the industry from the golfing side, as a player or instructor with an absence of focused marketing and business system training. Business suicide is doing things the way you always did them and expecting different results. Future golf operational success is avery sophisticated business requiring disciplined well-developed management systems. A focus on yield management, technology driven marketing, human resource management and business systems training are critical and mandatory. The golf management company is the ideal solution for many golf courses, as they provide a resource base and complexity that is very difficult to create at a single golf course.

Every golf course is not a candidate for a management company. There are a number of wellrun, financially successful courses that have developed effective management systems and leadership. The fact is an increasing number of owners feel that they are ill equipped to effectively compete in the current aggressive, oversupplied golf marketplace. Recent changes in the golf industry drive golf course owners to seek outside management partners to help a course capitalize on strengths, while mitigating and eliminating weaknesses.

The cost for a management company solution is an ongoing fee structure tied to the economics of the course and the competitive market. However, a fee should include two components: a set fee and a performance driven incentive, both the management company and owner must be in the same canoe with shared risk. Agood management company will base their fee on the course's performance while working with the owner to evaluate the objectives and design an array of services that fit the business needs and owners' goals.

Management companies can bring strategic relationships for services, products and equipment that serve as a continuous competitive advantage. This includes co-op advertising and extended marketing opportunities that the single course owner is not able to develop.

The golf industry today has become totally marketingdriven. With the oversupplied environment, overall rounds have stayed constant while individual course rounds have dropped 10 to 15 percent in the last two years. To offset this competitive environment a good management company will analyze each property and develop a marketing plan that addresses these issues that will be executed and tracked daily.

In addition to marketing and communication support come a number of services that assist with day-to-day operations. Management companies take on the responsibility of marketing, accounting, human resources, agronomics and management through talented, trained people that a single course could not justify from an expense standpoint. Management companies equip owners with the tools needed to make sound business decisions and ensure that the right person is in place to execute the most efficient business plan. A detailed course analysis facilitates this plan that provides:

* Sound reporting and financial practices including budget/ forecast models.

* Ensured quality control at each course resulting in the best greens, tees and landscaping throughout the golfing season.

* Sophisticated technology, marketing and public relations plans to increase property awareness-neighborhood marketing.

* Timely monthly and quarterly business reviews of course operations.

* Profitability reports, trend analysis, competitive set review.

A management company will offer consistent and personal onsite visitation and consultation in order to be effective.

At Meadowbrook Golf, for example, any course, whether it be owned, managed, leased or maintained, receives monthly visits from marketing and operations executives and weekly visits from regional managers. In addition, the company works closely with the owner to assure that the course is staffed with professional and knowledgeable local individuals that understand the market.

Hiring a management company should be about partnership, not about relinquishing control. In the end, a good management partner will be a valuable tool that is part consultant and part onsite manager that shares proven ideas while helping to achieve common goals. Whether it is current food and beverage developments, the latest technological advances orthe most current agronomic practices, the course will be on the cutting edge and receive the benefits of the latest available practices in all areas of operation. Management companies will play an increasingly stronger role in the successful recovery future of golf operations.