Chapter 7 Golf-Based Resorts: Managing the Operation

Identify the changing trends in and demographic profiles of the golf market. Industry Trends: Golf industry leaders are concerned that the number of future golfers will decline Issues most likely to impact business: –Number of rounds –Player retention

Changing Trends (cont.) Industry Trends (cont.) Water management is the major environmental issue facing the industry –Many courses are utilizing water conservative technology Changing Demographics There are seven segments of golfers: core, seniors, women, juniors, highly skilled players, private club members, and high spending golfing households

Changing Trends (cont.) Changing Demographics (cont.) In 2002, 11 million golfers took an overnight trip that included golf There are more than three times more male golfers than there are female golfers

Changing Trends (cont.) Changing Demographics (cont.) The profile of the average golfer is: –Male –Around the age of 50 –College graduate –Household income between $100,000 and $149,999 –Plays about 60 rounds per year and has been playing for roughly 22 years –Average score of 88.4 Male golfers spend slightly more than female golfers on golfing

Identify the critical variables in determining a golf-based resort’s profit potential. Operations The Sun Belt covers the southern states and part of the coastal region –These courses are likely to be open year-round The Frost Belt consists of northern states and the mountainous parts of southern states –These courses usually shut down for a while during winter

Profit Potential (cont.) Income Statement In 1999 U.S. golf resorts reported an average operating median of: –28.9% for Frost Belt resorts –25.3% for Sun Belt resorts

Profit Potential (cont.) Revenues Most revenue comes from annual fees and green fees The second most important source of revenue is from golf cart rentals Expenses The greatest expense is the cost of merchandise sold, followed by the cost of food and beverages Payroll is usually the largest expense category

Profit Potential (cont.) Staffing Sun Belt resorts staff their facilities with 29 part-time and 34 full-time staff Frost Belt resorts staff their facilities with 60 part-time and 43 full-time staff

Identify potential solutions to financial problems faced by golf-based resorts. Tournaments and Events Business Golf –Customer Appreciation Events –Sales/Product Launches –Employee Outings –Fund-Raising events

Solutions to Financial Problems (cont.) Hole in One Contest –Companies organize the activity for the resort and provide the prizes –While many think it is virtually impossible to achieve a hole in one, in any given year in the U.S., there are over 40,000 holes in one

Solutions to Financial Problems (cont.) Women-Friendly Women friendly courses can: –Vary tee locations to allow the option of playing a harder or easier course –Feature holes in the 5,600 to 5,700 yard range –Provide holes where players do not have to carry the ball over a lot of obstacles –Where greens can be easily reached –Where forward tees are closer to the hole and allow for a better angle at the green

Solutions to Financial Problems (cont.) Banquets –Can be an excellent way to bring in additional revenue –Golf tournaments are a good market to advertise to –Pre-game lunches, box lunches, post game dinners, or cocktail parties have proven successful –Social events are the most financially profitable segments, including weddings, bar mitzvahs and anniversaries

Solutions to Financial Problems (cont.) Pro Shops Margin Enhancers include discounts, rebates, fitting fees, advertising co-ops, freight programs, or free product accounts Accessories –The key to increasing sales is in the presentation of items –Keep displays neat, use color effectively, develop a theme, cross merchandise, and avoid one level displays

Solutions to Financial Problems (cont.) Inventory Control –Controlling inventory can cut down costs –“Open-to-buy” refers to the amount of retail dollars set aside for the purchase of merchandise in the future –Old sales figures are used to project future sales –Merchandise group departments are created

Solutions to Financial Problems (cont.) Inventory Control (cont.) –To maintain control of the system the two important pieces used to determine beginning inventory levels are projected sales volume and the turnover rate desired by the shop Credit Cards –Accepting credit cards makes the purchase easier for the customer –Retailers pay a fee to credit card companies when they accept credit cards

The End!