The biggest dilemma of most businesses is the pricing of their product and services. There is the cost of production that needs to be considered, certainly, competition and market conditions must be factored in, and finally, the price has to be set to provide an acceptable rate of return on assets and invested capital.
Recent announcements indicate management is focusing on generating a level of activity, specifically rounds. The only marketing tool management has is incentive pricing. This is very dangerous because currently, pricing does not cover costs. So reducing price further to generate volume, could easily backfire, as volume is achieved but revenue declines and financial losses increase.
Taking Greens Fee data from recent Financial Statements and Rounds statistics provided by management, we can easily derive the average pricing obtained during the four months of the year.
Even though posted rates were substantially higher, the actual "paid" rate appears to be quite low and started weakening as soon as March. The first quarter is typically the strongest period in terms of demand and yet despite this, the average price paid did not reach the historical "Blended Rate" of $33 - $35 a round during the season.
The softness in pricing during March shows the season was over early and to keep volume up, pricing had to be adjusted or did it?
Another observation can also be made. Notice the consistency of REVENUE PER ROUND. Every month, residents are bombarded with email after email, announcing incentive after incentive to play golf. It seems every week there is a tournament or two. The courses are aggressively competing on price. Despite all of these pricing incentives, the monthly average pricing per round has remained remarkably steady, within pennies of each other. March is the exception.
To experience 4,717 rounds of non-member play in February, at an average price of $31.75, then in April to experience 2,675 rounds with an average price of $31.45 -- just $0.30 less despite a difference of 2,042 less rounds, is a monumental achievement.
Financial data is known as random data. Everyone knows you can't beat the financial markets because they are purely random. With this in mind, to see this much consistency in a financial series (pricing), comprised of average pricing over 30-day periods, indicates, this is not random data.
In my opinion, either the NON-MEMBER ROUNDS or the GREEN FEES REVENUE data has been tampered with and altered to achieve the desired result, which appears to be an average price of approximately $31.50 per round.
Given the evidence of manipulation, why was March so much less? I believe March was an error. Perhaps this outlier coincides with when a key individual in this pricing scheme, was unavailable. Perhaps ill or hospitalized?
Readers should also note that given the $65 cost of a round of golf, and current pricing, residents are paying more than half the cost of a round of golf.
Residents are subsidizing golf, providing over one-half the cost of golf. This is an unsustainable business. The courses are not being run to be a self-sustaining business, but are being run to provide recreation for a select few, at a tremendous cost to the whole community.
The previous is my opinion based on my evaluation of the data provided to me by management. Residents are encouraged to do their own analysis and form their own opinions.
Thank you. Keep the faith and keep your eye on the ball.
ED
residents are extremely lucky to have someone as knowledgeable as you to monitor how fianaces are being handled.