I drove through the parking lot on Sunday at about 10:30 A.M. There were about ten cars, I think maybe one, or two golf carts.
I saw no one playing as I drove down the boulevard.
Sunday is a big day for outsiders to come to play so the lack of traffic was disappointing. We shouldn’t be operating to host non-residents and subsidize their golf. Management seems to believe it is a viable strategy. As residents, we are subsidizing complete strangers. Not what most people would regard as a sound business strategy.
Green fees were raised recently to $52. This is the posted rate but no telling what residents really pay. Though I applaud the move since it better reflects the actual costs of providing a round of golf, given the well-established reputation of our courses, it will destroy demand. As one active golfer said to me, “These are not $52 a round golf courses.”
But it has to happen, how else do you break the cycle? There is perceived value, and information in pricing especially when dealing with retail consumers. When confronted with selection and pricing, a consumer immediately goes into analysis mode in an attempt to get the greatest utility for dollar spent.
I agree that higher prices were necessary, but as of now, the product is not worth the price. Can the product be improved? Can we change the market perception of our product? An old adage, “It takes a lot of hard work to develop a reputation, it takes only one bad decision to ruin it.”
Now, here is the key point, at what cost do we burden the community with, and what does it ultimately get us? It will undoubtedly cost millions to change perception and what incremental demand will we capture with so much local competition? Will we ever be able to price competitively and earn a profit, or will these courses always be nothing but a drain on our modest community’s financial resources?
Furthermore, the question begs to be asked, if we can not deliver a round of golf profitably, why are we in the golfing business? Why are we even trying?
Do we want golf to permanently burden our community? Given the declining demand for golf, it is likely, highly probable, that the courses will always be a drain on our community. They will always require a subsidy. Are we willing to pay that subsidy?
Let's take a test. Let’s say, you the reader, are a businessman. You have a lower-quality product with a much-deserved, mediocre reputation. To attract demand and generate sales, you are required to sell far below cost, realizing a substantial loss on each item sold. Losses increase over time, requiring you to inject increasing amounts of capital, to stay solvent.
Your attempts to improve the quality of your product continuously fail. Primarily because of the lack of expertise. Funds are provided but are poorly invested due to a lack of controls and fiscal discipline.
You have more capacity than you will ever need and much of the excess capacity is substandard making it nothing more than inefficient and costly overhead.
You are in a highly competitive market with an uncompetitive product and even your distribution is substandard.
1) How long will you keep this up before you make adjustments to reduce overhead in an attempt to lower your break-even point?
2) How long before you reduce capacity to again try to reduce the cost of your product, making it more competitive in this highly competitive marketplace?
3) How long before you realize the market is saturated and further spending is wasteful and the capital is better deployed for other purposes?
4) How long before you realize that anything more than a token, minimal presence in the market is unwarranted, given superior local alternatives?
5) How long before you realize others can produce and deliver a product more efficiently and profitably, therefore your scarce resources are best utilized in other pursuits?
How many times has management changed, with each manager proclaiming, “This time it’s different.” With the end result being shareholders (residents) footing the bill for management’s inept, naïve, and costly decision-making?
Did you pass the test?
Comments