I interviewed a pubic golf course operator in Massachusetts a month ago.  I asked him what he charged for green fees.  "Depends," he answered.  "On what?" I asked.  "On which of our 30 discounts they [golfers] use," he said.  I stopped at another course where the owner told me, "We love [to use] discount coupons."  It occured to neither of them that they, in essence, were auctioning off green fees.  And that someday, someone might be auctioning off their golf course.

        When a business begins to suffer lost revenues, it has a couple of choices; it can either cut costs or lower prices, or some

combination of the two.  No one likes to lay off their employees, even to save precious dollars, but in a tight-knit operation like a golf course, it is especially hard to do so.  Most golf course operators do not hold MBAs and have a tough time making tough business decisions.  Some are first or second-generation owners; for them, terminating one or two of the guys who work on the course or one of the folks in the snack bar is like firing a brother or sister. 

        During the golf industry recession, which actually began before the overall economic recession, public courses have opted mostly to cut prices, which is actually the last thing they should do.  Offer enough discounts and pretty soon your "standard rate" is meaningless.  Although discounts may build traffic, at least for the near term, gnawing off your hindquarters to feed yourself is not a strategy for long-term survival.

        "The trend of downward rates in the golf industry has been the real cause for many courses failing," said Mark Tansey, president of Palm Desert-based Sunrise Golf Inc., in a recent L.A. Times article about golf course defaults.  "Too many inexperienced operators are using price as a blunt instrument to generate activity."

        Private clubs are also suffering, but they have resorted more to haircuts than to cannibalization.  Some have reduced their

initiation fees drastically in an attempt to staunch the bleeding of lost memberships; some have eliminated initiation fees altogether.  This doesn't sit well with members who might have paid $15,000 just a few years ago, but the alternatives are more dire than having to deal with a few angry members.  Owners of a few private clubs, faced with closing, have done the unthinkable and opened for public play.  Others have put themselves up for sale (see example below).

        More than 100 golf courses have closed nationwide this year, but a relative few of them are member owned.  Member-owned clubs have more wiggle room in this economy than do other types of clubs.  Members can opt to assess themselves increased dues for a time in order to keep maintenance standards up even as their fellow members depart.  They can decide, as a body, to cut back on course maintenance until they can re-grow membership.  They can reduce or eliminate initiation fees; many northern U.S. clubs do this on a seasonal basis, offering promotional membership drives during the winter and early spring months when few are thinking about golf.  They can even open to the public for a day or two a week as a way to introduce the course to potential new members.

The Reserve at Litchfield Beach (SC) came close to being added to the McConnell Group's portfolio of private courses before angry former members brought suit to be paid back their equity investments.  McConnell walked away from the deal.

 

        As the number of golf courses shrink, one emerging trend is worth keeping an eye on.  Private clubs that are within reasaonable drive time of each other are beginning to affiliate, offering a single membership that provides the opportunity to play at multiple private clubs.  John McConnell, a software millionaire in Raleigh, NC, has stitched together a portfolio of five excellent private clubs in north central North Carolina that include The Cardinal Golf and Country Club (Pete Dye), Musgrove Mill Golf Club (Arnold Palmer), Raleigh Country Club (Donald Ross), Treyburn Country Club (Tom Fazio) and, McConnell's most recent acquisition, and probably the best of them all, the Old North State Club (Fazio) in the community of Uwharrie Point in Badin Lake, NC.

        Uwharrie, which is a good 90 minutes from Charlotte and Greensboro, is located in central North Carolina.

Homes in the community range up into the millions, but one current listing indicates just $395,000 for a 3 bedroom, 3 ½ bath cottage style home on the 2nd fairway of the Old North State course, perennially ranked one of the top courses in North Carolina.  The price of the home includes a $25,500 initiation deposit for the golf club.  (If you would like more information about Uwharrie Point real estate and the golf club, please contact me.)

         Late last year, McConnell made a play for The Reserve at Litchfield Beach, just a mile from the Atlantic Ocean south of Myrtle Beach.  The private Reserve's members had invited him to make an offer, which he did for just $1 and a promise not only to pour a few million back into the course, but also to keep the club private for 10 years.  Members voted overwhelmingly to accept the offer.  However, a few former members brought a lawsuit to stop the sale unless they received a refund of their equity shares (per the club's by-laws).  That suit is still pending, but McConnell has reportedly walked away from the deal.

         McConnell's strategy is to add a near-ocean course to his portfolio to give his Raleigh area members a place to spend a long weekend of golf by the beach and to entice new members to sign on.  As more clubs face uncertain futures, golf moguls like John McConnell should find enough bargains to pad their golf course portfolios with cheap purchases.  The emergence of these new private golf club empires signals a change in the industry that club owners, members and potential members should watch closely.

          Should I live long enough to hit the Power Ball lottery and build my own golf course, I would do well to build it around a creek.  Or at least include the word "creek" in the club's name.  The names on Golfweek magazine's list of top 100 residential golf courses for 2010 include more creeks than oceans, ranches, valleys or even lakes.

         The Rock Creek Cattle Company in Deer Lodge, MT, tops the list this year, supplanting the perennial top-two Wade Hampton in Cashiers, NC (#3 this year).  Even though hot designer Tom Doak had a stunning 350 acres to work with, the close proximity of greens and tees encourages walking.  Home sites on the 85,000-acre property range in size from 2 to 110 acres and in prices from $350,000 to $1.2 million.

         Tom Fazio's Diamond Creek course in Banner Elk, NC, holds down the 16th spot on the list, with another Fazio layout, Bright's Creek in Mill Spring, NC, ranking #23.  In all, 13 "Creek" courses are ranked in the top 100.

Tom Fazio's Bright's Creek made the Golfweek list at #23.

 

         Bright's Creek (Fazio), which I visited in 2008, has been struggling to sell real estate after completing its golf course and warm and inviting lodge.  Its owner developed Forest Creek in Pinehurst; the two Fazio courses there both made the top 100 list.  Prices in Bright's Creek, which is nearly an hour from both Greenville and Asheville, range from the high six figures to the low millions and will appeal to those looking for most of their pampering on site.

         I was pleased to see the Golf Club at Briar's Creek make the list at #55.  Things have been slow to evolve at the 900-acre community on Johns Island, near Charleston, but the Rees Jones course and the low density approach to living along the marsh will appeal to those who want both a secluded setting and proximity to a major, interesting city.  Not too far away, and even closer to Charleston, Daniel Island's Rees Jones Ralston Creek course just squeaked onto the list at #99.  Daniel Island includes neighborhoods of high-end single-family homes (near the Jones golf course) as well as Charleston-style town homes that abut the Tom Fazio course.

Golf Club at Briar's Creek (Rees Jones), #55

 

         Other clubs I have visited and recommend made this year's list.  The Golf Club at Cuscowilla in Eatonton, GA, on the edge of Lake Oconee, dropped to #13 after a few years in the top five.  The Coore & Crenshaw course, a little over an hour from Atlanta, is 10 years old and open to the public.  One of my favorite courses, and certainly the best Arnold Palmer layout I have played, hits the list at #40.  Old Tabby Links on Spring Island, near Beaufort, SC, is about as carefully tended as any course can be; when I played it, workers were hand picking offending blades of poa annua from the first green.  The layout, which meanders through marsh, wildlife refuges and a forest of live oaks, lives up to the standards of conditioning as well.

         I haven't played Bull's Bay just north of Charleston, SC, but I have watched it grow since it opened in 2002.  To get a strong taste of what the late Mike Strantz had in mind for Bull's Bay, just stand on the front porch of the clubhouse and look out to a layout that appears to have been designed by tracking the flights of swallows.  It dips, it swerves and it swirls around signature Strantz waste areas.  Lots are currently available from $275,000 to $550,000, most with views of the course.

Old Tabby Links at Spring Island, SC (Palmer), #40

 

         A couple of Bluffton, SC communities I visited made the list, barely.  The Nicklaus course at Colleton River, which will have its 20-year anniversary in 2012, tipped in at #85 while its companion Pete Dye course is not on the list.  Belfair, another Tom Fazio-designed layout, as are many in the Bluffton area, anchored the bottom of the list at 100. 

         For all the publicity and advertising behind them, you would think more than just one of the Cliffs Community's six courses would be on the list.  But if Golfweek could tap only one, they chose the right one with Fazio's Keowee Vineyards layout weighing in at #97.  It will be interesting to see how Golfweek ranks the Cliffs at High Mountain sometime two or three years from now when Tiger Woods -- whom we hope is okay after his car accident early yesterday -- completes his work there.

         Bottom line:  With any of these courses, you will not be up a creek.  If you are interested in learning more about any course on the list, contact me and I will provide you with more information and arrange for a visit.

Belfair (Fazio), Bluffton, SC, #100