Hold That Line!
Owners Fight Inflating Fees in '99
by Tom Cleary
Contributing Editor

As the dust settled on 1998 here in Michigan, it became obvious there were two great ways to make money. One was to have purchased stock in fledgling Internet companies during their first public offerings.

The second was to own or operate a golf course.

While many people try to downplay successful years in business, Michigan course operators as a group wouldn't insult our intelligence by suggesting 1998 was anything less than a banner year. No less an authority than Boyne USA icon Everett Kircher called 1998, "the greatest summer up north we've ever seen." That sentiment is echoed by operators throughout the state. For some reason, 1998 was a harmonic convergence of weather, facilities, availability and golf interest for Michigan's players, now numbering well in excess of one million. So, what should golfers here expect in 1999? Higher prices? Worse weather? Jammed courses and jacked-up fee structures? The answers are a bit surprising.

To begin, we visit Rothbury, north of Muskegon, where the unique Thoroughbred begins its seventh season. "We're holding the line on prices for 1999," says longtime golf professional Jeff Howland. "Fees will be exactly where they were in 1998." The Thoroughbred has enjoyed its close proximity to west Michigan cities like Grand Rapids and Muskegon, but still draws from all over the state and region. Howland says he views 1998 as a welcome fluke of nature. "We've done our projections for 1999 and in May the number we're hoping for is far less than what we did last May. When you have a great year like this past one, you can't just expect to automatically do 10% more business." While daily-fee public courses and destinations like Treetops and Bay Harbor are easily categorized, the Thoroughbred is not really typical of anything. It's peak-season weekend rate is $72 (cart included), but mid-week twilight rates range from $25 to $39. "During our $25 twilight period in the summer, people can often comfortably play 18 holes," says Howland. "That offers people looking for a bargain price a great inducement to play here."

In Grand Rapids, Jeff Hoag knows a lot about that segment of the golf population. A former president of the National Association of Golf Course Owners, Hoag's family operates Scott Lake, a daily-fee facility north of town. This year Scott Lake opened its third nine to accommodate its growing business, and its customers didn't seem to mind a slight rate increase needed to cover the cost of the addition. Hoag thinks courses like his own will continue to do well in the foreseeable future, but is keeping an eye on Grand Rapids' suddenly expanding upscale market. "I always remind myself golf is just a game," he says. "I don't think it really has to evolve into a choice between everyone having Augusta National-type conditions or not playing at all." Hoag says his operation is constantly fine-tuned based on consumer needs. "Our audience has told us it doesn't need all the frills in order to be happy." That may mean no Jacuzzi in the lockerroom, but it also translates into all golf carts having tops and even a ball-washer. Says Hoag, "We try to provide service amenities that come without a big price tag."

Understandably, not every operator wants to see his name in print trumpeting a rate increase. Says one, "We'll be up about five percent next year. The biggest expense now is hiring enough qualified help. It's no different than in any other segment of the economy. Even companies that are doing great right now would like to be able to expand their work forces." Underscoring this point was the owner who said his section of the Michigan PGA had dozens of job postings for assistant professionals. Even though he was offering a compensation package near the top-end of the salary scale, his public-course facility hadn't had a single applicant in the first several weeks it advertised its opening.

"I've been saying for years the low birth-rate in this country is eventually going to hurt the golf business," says Bill Howard. Howard is a veteran of several decades in the golf business," says Bill Howard. Howard is a veteran of several decades in the golf business in Michigan, and his 36-hole Saskatoon Golf Club in Alto is almost never without players_this year he had paying customers at his course every day from mid-March into December. Howard says declining population growth hurts in two ways. "First is, there's not going to be as many golfers around," he points out. "But maybe more important is the fact we just can't fill our labor needs." Howard says lack of available works has made the minimum wage at his course non-existent. "Even though we're required to pay everyone more than five dollars an hour, the booming economy means those employees are now worth at least a couple of dollars an hour extra." And while Howard wishes the labor pool were more fully stocked, he's not looking for sympathy for his plight after a great 1998 season. On November 27th (the day after Thanksgiving) Saskatoon had more than 200 players. Laughs Howard, "I told my staff, 'By early this afternoon we've brought in 10% of the sales we did the first year I was open.' We may never have a year that compares again to 1998. Given those circumstances, you'd expect Howard to be among the group of operators looking only at the smallest of golf fee increases in 1999.

While many other owners and operators also expect minuscule to mild price increases in 1999, they're mindful of the cost which can't be controlled at all: taxes. Said one veteran operator, "My tax bill goes up a minimum of $10,000 a year," and says others in highly-populated urban areas probably have to suffer through a larger tax bite. While operators live to grow their business, when growth comes from housing starts, costs for schools and community infrastructure sky higher than a John Daly lob wedge. And in some cases, urban sprawl swallows golf courses the way it does farm land. So far, though, Michigan has more than made up for courses that have been plowed under to make way for development.

In Grandville, Rich Kitchen's Maple Hill Golf Course is known equally well for its popularity among bargain shoppers, both golfers and merchandise customers. He thinks middle-of-the-road operators are thriving more than ever, even though the new courses coming on-line in his area seem to be chasing upscale golfers. Opines Kitchen, "With costs being what they are, you just can't build (low-end) courses these days and charge people thirty dollars to play_if you try, you'll go broke." At Maple Hill, thirty dollars is at the top end of Kitchen's fee scale, and he has little room for more play. "Our niche is price," he offers. "If there's a deal to be had, we've got it." Kitchen's club features a good-sized driving range and is busy with equipment sales twelve months a year. As one of west Michigan's busiest retailers, Kitchen probably has a keener eye than most of his colleagues for just how much the public is willing to pay for its golf experience. And operators like Kitchen who have driving range and shop business year-round obviously have a leg up on competitors when it comes to keeping green fees at their most affordable levels.

So, the verdict seems to be in for 1999 golf prices: smaller increases than consumers might expect, but enough so that operators can keep the ball rolling after a year few expect to duplicate. As a group, Michigan course operators were grateful at Thanksgiving and joyous at Christmas, following an incredible year of golf activity allowed them to put an extra package or two under the tree.

Now, if they can only find a hot Internet company stock offering to start the new year.