Has the golf industry found its groove?

A member is browsing through the drivers and irons in his club’s pro shop. The pro spots him and says: “Why would you want new clubs? You can’t hit the ones you’ve got.”

That’s a true story, believe it or not, and not exactly what they’re teaching in Building Customer Relationships 101. But even if he had no use for a potential sale, the pro did have a point.

Golfers for the most part are just as interested in the journey as they are the destination. Sure they may want to lower their handicap, but why not have some fun along the way. If that means sticking some handsome new blades in the bag when really what’s needed are not-so-handsome game improvement irons, so be it.

Almost every golfer I know is like a kid in a candy shop when it comes to new golf equipment. We love to look at it, love to touch it, and love to buy it. Some of us, for whatever reason, love to hoard it. It doesn’t matter if it’s simply last year’s model with a new coat of paint. If it looks good in our hands, we want it.

Is it any wonder manufacturers continue to cater to our sweet tooth? We’re a whimsical bunch, yet easy to please. With us, there’s no need to reinvent the wheel. Just give us a little higher MOI, a little lower CG, and a snazzy shaft. We’re good to go.

That brings us to another year and another batch of new equipment. That in itself is good news. Not so long ago, when it was revealed that Eldrick had been a bad little boy, it seemed that the industry was doomed. Courses would close. Manufacturers would fold. Golf Channel would be silenced. And golfers worldwide would roam the wasteland, muttering “Tiger, please come back, we need you.”

Well, the golf world seemed to survive quite nicely without Tiger. A timely diversion has been this whole grooves issue. In a nutshell, a 2008 USGA ruling banned square-grooved clubs. As of January 1, 2010, manufacturers could no longer make them and PGA players could no longer play them.

Reactions from both camps have been mixed. Some companies and players have been nonchalant about the change or even welcomed it. For others, the “v” in the now-mandatory V-grooves stands for anything but victory.

Titleist, for example, felt the ruling was quite penal after conducting some tests last year with non-conforming wedges and new prototypes. Some tour players have

reacted as if they’ve been confronted with a game-altering, life-changing, this-is-worse-than-going-back-to-hickory shafts decision.

Life would go on, it appeared, until a pretty much forgotten club wedged its way into the issue. Pre-1990 Ping Eye 2 irons, it turns out, aren’t affected by the USGA rule. In 1993 Ping challenged the USGA and won a lawsuit that in essence “grandfathered” all Ping Eye 2 irons manufactured before 1990. In other words, tour players who can get their hands on them can play them.

The can of worms officially opened when Phil Mickelson put a Ping Eye 2 wedge from the late-‘80s in his bag at the Farmers Insurance Open in January. He took advantage of the loophole, and why not. He wasn’t breaking a rule; he was taking advantage of it. His intention more than anything else was to make a statement, which he certainly did. And what he did should have received a lot less scrutiny than Stewart Cink’s waste bunker antics at the 2004 MCI Heritage.

The chain of events that followed brought the issue to a head. On the Friday of the Farmers Insurance Open, Scott McCarron said that “it’s cheating, and I’m appalled Phil has put it in play.” Phil, of course, didn’t see it that way and threatened legal action. Ping then stepped into the ring to remind everyone that what Phil did was okay.

Finally, on the following Tuesday, McCarron apologized to Mickelson. In a classic bit of backpedaling, he said that he didn’t really say what he apparently said – or something to that effect – and that things were blown out of proportion. In other words, how stupid could I have been to lock horns with one of the two untouchables on the tour.

And so this grooves saga has rattled what the PGA Tour values almost as much as Tiger – peace in the family. Silly, really, that a microscopic groove change could cause such a kerfuffle. But we probably haven’t heard the last of it.

Anyway you spin it, the grooves debate seems to have overshadowed any excitement there may be for this year’s new equipment. For those making it, it’s been more of a headache than anything.

Though manufacturers can continue to produce and distribute previously conforming club components through the end of 2010, any new wedge or iron made after January 1 must meet the new groove standards. Companies have had to come up with clubs that conform to USGA standards, meet the demands of finicky staff players, and don’t unduly punish the average player. Those of us in that category can continue to use U-grooved clubs until 2024, which makes it pretty much a non-issue.

So what can we expect to see in 2010? Given the diminishing life expectancy for new clubs in recent years, you would think by now that those mad scientists in product development have unturned every stone. I mean, can the sweet spot get any sweeter, heads any more forgiving? Can MOI and COR go any higher, or CG any lower?

Well, apparently they can. A look at this year’s lineup of drivers, irons and hybrids suggests that the clubmakers still have plenty of tricks up their sleeves to help us hit the ball straighter, higher and longer.

Over the next few pages you can read about aerodynamic drivers, irons with elastomer, softer, multi-layered balls to accommodate the new grooves, shoes that do much more than just hold cleats, and so on.

Finally, we survived 2009, coped with the loss of Tiger, and have started to come to grips with the groove change. Now let’s hope the golf industry can find its own groove in 2010.

Pricing Rounds in a Rebuilding Economy

Okay, so those greedy Wall St. types brought down that comfortable little world we once knew. But let’s give credit where it’s due. It’s sure a lot easier – and cheaper – to get a tee time. The doors are open and the deals are flying, even at clubs where it once seemed that the only times ever available were 7 a.m. or 5 p.m.

It’s the same story on the private front. Clubs that previously didn’t take kindly to strangers have opened the ivy-covered gates to their exclusive little kingdoms. One can enjoy the private experience at a relatively bargain-basement price.

None of this, of course, is good news for the golf industry. Discounts and improved access mean more people are playing less or leaving the game for good. We’ve gone from growing the game to trying to save it.

Have we pulled a Y2K and left it too late? Will the cloud of uncertainty burst and drive the game into a prolonged rain delay? Do we simply have a fixer-upper on our hands or are we talking about building Rome in a day?

One thing seems certain – the golf business likely won’t return to the halcyon days it once enjoyed. The consensus is that it will remain flat at best. But even to maintain that status, it will need to change its ways.

A club’s success is built on the basics – knowing your customers and satisfying them, utilizing tee times, focusing on the bottom-line, etc. Lose sight of those basics and the struggles begin. It’s why consultants are a lot busier than course architects these days.

One, Global Golf Advisors of Phoenix, Arizona, and Markham, Ontario, helps clubs get back to the basics. At the core should be a pricing strategy, said company principals Henry DeLozier and Stephen Johnston at the PGA Merchandise Show in Orlando. It’s critical to appropriately price fees and services, with a focus on those that contribute most to the bottom-line – green fees, membership dues and the driving range.

To do that, course operators need to get a clear picture of demand at their course. They need to estimate market support in their area, know their customers and their expectations, and determine whether those expectations are being met. “Measure what matters,” said DeLozier, who puts customer satisfaction at the top of the list, followed by key performance indicators, market demand, dues and fees, labour and cost of sales.

Practice makes perfect

Other best practices recommended by Global Golf Advisors:

· Be open with competitors to find out what and how they’re doing.

· Grow membership counts and balance the demand for tee times.

· Always give people a reason to come back (e.g. play 10 rounds, get one free)

· Offer packages (e.g. golf and lunch) or “bring a best friend” promotions.

· Upgrade, not downgrade, operations during tough times

· Ask people for their business – it works!

It all boils down to meeting customers’ needs, the lifeline for any organization. Ensuring that customers receive what they expect is fundamental to any pricing decision. The good news is that in this current economic climate, customers will expect to only receive what they pay for.

In recent years most operators have gone out of their way to create service levels in excess of the price paid. But delivering more than what customers expect can be as tough on the bottom-line as not delivering enough.

Getting to know customers’ expectations is a little easier when most of those customers are members. The Westfield Golf and Country Club in Grand Bay, New Brunswick, has over 700 members who account for 85 per cent of play. But to keep those members it’s important to deliver what they expect for the dues they pay.

“When setting all prices we’re not looking to get fancy,” says associate golf professional Steve Leblanc. “We look at what is standard for our area and courses of equal value, and set our rates appropriately.

Leblanc feels that all clubs should strive to fill their course with as many members as possible. “Members tend to be great ambassadors for their own course,” says Leblanc, adding that satisfying their needs is the best way to keep them. “We need to stay up to date with the newest technologies and be constantly changing. We have to be sure that we are providing a product that can attract them and make them feel like joining our course and playing it is a wise investment of their money.”

At the Cambridge Golf Club, a public facility in Cambridge, Ontario, Director of Golf Chris Miranda admits that they’re probably not doing enough to monitor customer expectations. But he does feel that their fee structure is in line with not only what the local market will bear, but also with the experience they deliver and what customers expect to receive for those fees.

“We allow the market threshold to determine green-fee prices,” says Miranda. “All other pricing follows suit. You can’t stock $150 shirts and serve $30 steaks if green fees are $40. That type of customer isn’t the regular player or member.”

The club is doing many of the right things to maintain a share of a pie that, according to Global Golf Advisors, hasn’t changed and likely won’t. For example, while the number of rounds played annually at Cambridge in the last three years hasn’t changed, the club wants to keep it that way. So to make sure tee times are utilized during quiet times, they’re partnering with 39 area courses to offer reciprocal playing privileges for reduced fees.

Reducing operating costs is also a priority, though not at the expense of quality. To do that, Miranda says, they focus on “better practices, staffing, online payments to reduce bank fees, job sharing to ensure quality staff maintains hours, and sourcing products more effectively.”

Leblanc says Westfield has found ways to reduce costs without sacrificing member satisfaction. “Getting both CPGA pros to work the shop a few shifts a week will help reduce some expenses. We also went with electric power carts. The cost of fuel was becoming way too high over the past few years.”

It’s all part of doing the right things right, which is critical, says Global Golf Advisors, along with putting customers first, knowing and measuring what matters, and monitoring customer response daily.

And “think differently,” says DeLozier. “For example, a club in Phoenix had absolutely no rounds on Mondays. They decided to offer free golf and let customers pay whatever they thought it was worth. And you now what? Mondays actually became more profitable than Saturdays.”

The Impact of the Great Recession on Golf

Larry Hirsh is neither a Mixed Martial Arts advocate nor a fan of World Wrestling Entertainment (WWE).

But in grappling terms the president of Harrisburg, Pennsylvania-based Golf Property Analysts sees himself as someone with a “ringside seat” for this current global recession. He has a vantage point from where the blows being inflicted on the disposable income-dependent golf industry are not choreographed or staged.

“A recession rarely discriminates,” Hirsh says, “and it’s clear the effects of this recession have been devastating to the point where golf courses and their operations are under pressures without past precedent. It’s been something this time around beyond the classic trickle down effect.”

Hirsh, one of North America’s best known golf property appraisers and brokers, acknowledges while few points of reference exist for this current recession the upside is there’s been no decisive knockout of the game. The damage done the past 12-16 months reminds him more of a series of standing eight counts. Those who have left the game are bruised and bloodied but not beaten.

“Golf course openings are, as you might expect in this environment, way down and course closures are way up,” he says. “What I’m seeing now is a situation where people are offering golf for less than what it costs to produce it. That’s a slow death. You can’t give golf away without a return. If your operation needs means for getting through this turbulent time, discounting won’t get the job done. One of the best things golf has going for it is the game itself. This is a great, great game. The demographic potential is huge. Anyone can play. Not enough golf people explain to non golf people the benefits the game offers.”

Hirsh pulled no punches with professionals, managers and owners during his “Impact of the Great Recession on Golf – where are we now and where are we going” seminar, one of the PGA’s educational tutorials at this year’s Merchandise Show in Orlando.

In his day to day analysis of golf courses throughout the United States and Canada he sees the recession’s impact affecting a number of key business platforms: quality of the consumer golf experience; who’s playing the game and who’s not; operational revenues and expenses, and a golf course’s current market value. Corner cutting is no longer the exception but rather the rule.

“It’s the perceived value of the experience spiralling downward,” Hirsh says. “I visited one major client pre-recession and post recession. The on course conditioning change, for example, was dramatic. Conditioning appears to be going down and that’s likely more for the long term than short term. At that same course service standards had been compromised. Why? Not as many people anymore. Trying to turn 3 people’s responsibilities into 2, or 2 into 1 is becoming the easy fix. Along those same lines the quality of F & B overall had fallen off. The selection and the service wasn’t where it had been. Remember this was at one course. But I’m seeing things trending at many courses this way.”

As revenue streams dry up Hirsh told the assembled audience you either respond to the situation or be prepared to fall deeper into the financial abyss. Taking a step back, then objectively looking at both your business and the state of the economy can often lead to sound decision making.

“Golf is just one of many industries fighting for consumer confidence,” he says, “but many of the headwinds coming into 2010 are not optimistic signs for turnaround. There are predicted rising interest rates, we continue to have high unemployment, declining income, high national debt and, from that, an expected increase in personal tax rates. Analyzing this means being honest about things. If you need to cut costs, if you need to defer capital projects or extend seasonal shutdowns, look at each one carefully. Think about how each of your decisions affects perceived value for your members or customers.”

Specific to Hirsh’s areas of expertise with Golf Property Analysts the recession’s impact on golf course values raises some interesting points. With cash flow down and financing more difficult to obtain, it’s reasonable to assume (depending on where you are) golf course values are not what they were. Both those financial realities have increased the number of available golf courses in North America through short sale.

“Banks do not want to be in the golf industry. They do not want to own golf courses and will do whatever they can to make sure they don’t,” Hirsh says.

While signs of an easing recession are showing up on Wall Street and Bay Street, economic forecasts continue to suggest 2010 will continue as a bumpy ride. With courses dependent on full tee time sheets for financial stability, social media tools Facebook and Twitter are being touted more and more as primary operational marketing tools.

“The solution to this recession for golf is simple right? We have to get more people to play again. But while I see clubs desperately wanting and needing new members I also see them not doing nearly enough to generate them. There are cost effective ways available through social media networking to get your message out with just a bit of extra effort. This is a new era. Websites in many cases need to be better. They need to be refreshed and updated more often. Think about it: your website might be the first thing in an operation making a first impression with consumers.

Looking long term the global recession will ease, Hirsh says, and growth of the industry will once again take a foothold. Until that turnaround is complete the Golf Property Analysts president is advocating owners and operators be pro-active.

“Recession or not,” he says, “the golf industry can’t be afraid to change.”

POISED TO DO BATTLE

“All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.”

Sun Tzu

Ah yes, strategy. In Sun Tzu’s Art of War, it’s all about preparation.

Jeff Calderwood is a master of it. He prepares for business meetings like he’s going into battle. He’s been doing it for years as founder and executive director of the National Golf Course Owners’ Association (NGCOA), which oversees about 1300 courses in Canada.

He’s argued and cajoled and seen victory and defeat over issues such as course development, water usage, taxation, and over building.

Late last summer at Glen Abbey Golf Club in Oakville, Ontario, he showed up at the official announcement of the Golf Economic Impact Study released by the National Allied Golf Associations (NAGA).

Calderwood was also a former president of NAGA, and people weren’t surprised when he showed up at the Glen Abbey presser with his briefcase stuffed with 28 issues that needed addressing by local, provincial or federal officials.

Calderwood has always been bullish on golf in Canada. What he needed to make him even more bullish was some scientific data.

The NAGA study gave it to him. No wonder Calderwood will head up the charge to be the advocate for the industry this summer.

At press time, it wasn’t clear if he would be the official spokesperson for both NAGA and the NGCOA in meetings with politicos, but you can almost bank on it. Calderwood seemed to agree when interviewed at the Toronto Golf & Travel Show held earlier this year.

Whether Calderwood would speak for NAGA would be made official at a March 31^st meeting, but whatever, he will carry NGCOA’s voice to the table for a number of “Lobby Days.” These are being organized by the golf industry to advocate their causes in front of politicians – at all three levels.

The details were still to be worked out as Calderwood was being interviewed in Toronto, but it’s clear that golf is going to be aggressive – thanks to the NAGA numbers.

Calderwood’s aggressive personality could help the game make some serious inroads in changing the way golf is perceived by the lawmakers across the land. “We want to get to the decision makers and show them that we’re a credible industry,” said Calderwood.

The NAGA study suggests exactly that. Golf is an $11.3 billion industry nation-wide, and creates nearly 350,000 jobs and nearly $8 billion in household income. As well, $1.9 billion in income taxes and $1.2 billion in property and other indirect taxes are pouring out of the game and into government coffers.

In a slumping economy, that’s pretty heady stuff, and Calderwood, no shrinking violet, will sing from the NAGA songbook. “We want to come to the table with a consistent and scripted message,” he said.

To the Ministry of Finance, Calderwood can talk about the economics of golf, and how 43 per cent of all golf industry employees are students. Over $439 million (a conservative estimate) is raised for charity each year, as well.

To the tourism people he can talk about 1 million golf trips being made inside Canada in one year and how that generated $1.9 billion in revenues.

To the environmental people, he can argue golf course owners manage over 200,000 hectares of green space and 41,000 hectares of unmanaged wildlife habitat.

What the industry wants is a better deal for golf. The NAGA study is a benchmarking tool and allows the industry “to talk from the same page.” Calderwood will ask government officials to treat golf “as an industry, not a pastime.”

The advocacy strategy hopes to establish relationships, perhaps find a champion to run with the sport’s causes, and in the short term, “create awareness.”

“An industry wide effort is needed,” said Calderwood. That means being pro-active in solving issues that will affect the industry in the future. The 28 issues that Calderwood had in his briefcase at Glen Abbey would have elicited a reactive response.

Calderwood did have some victories to brag about at the Toronto interview. The City of Calgary had turned down a pesticide bylaw that would have negatively impacted on the golf clubs in the area.

On the flipside, the issue of golf cart licenses being mandatory at B.C. courses is costing club owners thousands.

These laws and bylaws were harder to deflect because golf wasn’t fighting its battles as a united force. Calderwood hopes to give the industry some oomph.

At a meeting with him earlier this year, he said he was getting nowhere with those on the other side until he brought out the NAGA study. Suddenly, the point he was making took on added credence.

At the federal level, Calderwood wants to tackle the contentious entertainment tax issue. Why can some sports be written off as expenses, but not golf? Calderwood also says golf is being treated unfairly when it comes to property taxes.

Calderwood brings experience and a clear understanding of what’s needed from the politicos at the three levels of government to help the golf industry flourish in Canada over the next decade.

With a sophisticated document in his hand, and some telling numbers to back him up, his chances of scoring brownie points with decision makers have been heightened considerably.

Nothing Mickey Mouse about Disney Golf’s business model

The Disney brand is indelibly imprinted into the collective consciousness of young and old throughout North America.

But Disney World in Orlando, Florida, is more than theme parks and wild rides and mouse ears.

Four championship courses dot the landscape, and they were front and centre at the PGA Merchandise Show held in Orlando earlier this year.

Steve Harker, manager of sales and performance for Disney Golf, held a seminar room spellbound as he painted a dollar and sense picture of the state-of-the-art revenue and profit management system – a system Harker helped develop.

Harker said Disney’s golfing success is driven by its founder’s philosophy that “quality will out.”

That means giving people (golfers) what they want.

And what they want are good tee times at its four championship layouts – Magnolia, Palm, Lake Buena Vista and Osprey Ridge.

Golf is a standalone business at Disney World.

Harker, a graduate of the University of Southern California, envisioned and led a Disney project team working with a software company to implement a new Golf Reservations, Revenue/Profit Management and Event Management System.

This technology has directly provided incremental revenue of $2-$4-million annually for the company.

Not bad when the golf industry is reeling from the recession.

Disney Golf’s online tee time booking process looks to sell as many prime-time tee times as it can, while filling in the blanks – the off-prime tee times.

Some might look at this and see a Mesopotamian board game, but not Harker. It all makes perfect sense.

The problem, he said, is that tee times are perishable, like lettuce. “If they aren’t eaten up they go bad – and can’t be resold.”

These opportunities lost are being eliminated at Disney Golf. “Never miss the opportunity to sell a tee time for a profit,” said Harker to his audience made up of club pros.

How does Disney Golf do it? “Smart discounting,” explained Harker. Once the prime-time tee times are sold, everything else is up for evaluation.

Everything from “multi-player passes” to special golf packages for those residing in the park’s 28,000 hotel rooms, are part of the deal.

Other discounts go to theme park visitors, AAA members, VISA cardholders, Disney Vacation club members, and Marriott and Hilton Vacation Club members.

There are deeper discounts for members of the military, while Disney employees are also offered inexpensive spots in off hours.

It’s all profit-managed and runs the gamut from full rate, to slight discount (AAA members) to the deeper discounts – including some comps (giveaways to charitable groups).

“Everyone goes into “pricing buckets,” said Harker, who notes that all this is done online via the “Reservations Wizard.”

The Disney way isn’t exactly new. Harker told his audience that airlines offer different fare packages, as do other businesses.

So why not golf? The Disney numbers have multiplied since implementing its profit management system.

“It grew from 1,600 to 20,000 rounds in one year,” said Harker, and that meant an extra $1 million in the till.

The deep discount to Disney employees ($38 per round, compared to top rates of over $200) resulted in an extra $1 million in revenue last year.

Harker said the Disney model means, “I can always do a deal.”

From special rates for children, and a women’s day special, everything can be “profit managed.”

That means a 20 per cent increase in revenue across the board, said Harker.

Disney is getting better at maximizing its golf business, and like all Disney Golf initiatives, it always prepares for the future – even if that future is bleak, like 2008 and 2009.

It might be trite, but it’s true to say there’s nothing Goofy about the Disney Golf way of doing business. By putting golfers into a sales funnel, you get people – all kinds of people – playing the courses – whatever season or hour of day.

“We’ve made millions of dollars and added tens of thousands of golfers to our courses,” said Harker.

While others groan from this recession, Disney Golf has gone from fallow to full.

It’s all about being pro-active, not reactive.