"A Snapshot" Look at Our Industry - Year End Progress Reports - December 2011
Year End Progress Reports - How are you really doing?
Running a golf course is a very difficult task. Your time is usually required to run four very distinct businesses:1. An agricultural enterprise – essentially a large acreage sod farm with several varieties of crops and specialized equipment.
2. A commercial real estate business with a finite and weather variable amount of space to sell – think hotel rooms, apartments or commercial square footage in a mall.
3. A bar and restaurant.
4. A general retail store selling both soft and durable goods ranging from sunscreen to shirts to titanium drivers.
As I have outlined in many previous articles, you are now expected to add a fifth area of expertise; you need to become an Information Technology expert. I have also outlined how many of these IT solutions actually cost too much and are not that easy to use because integration capability is often lacking between vendors. Our services at Pellucid and Edgehill are not perfect either, but I can tell you that we are dedicated to helping you unlock the valuable information in your customer database and so are the people at Fore! Reservations. And at this time of year, when you are evaluating the 2011 season and making decisions for 2012, you should really appreciate the gift of information contained in your Fore! Reservations database.
When I look at a golf course in order to evaluate performance, I generally analyze three major components by reviewing the current year and then comparing that data with the previous two years.
Step 1 – Rounds and Revenue
I break down both Rounds and Revenue by month and day of the week. The above chart is a 3 Year comparison of Rounds by Month, and below is a comparison of Revenue by Day of Week.
Step 2 – Weather Impact Analysis
I believe that it is impossible to truly evaluate a golf course’s performance without first calculating the positive or negative impact of the weather in establishing how many rounds are available for sale. Take a look below to see how bad the start of 2011 (through July) was in Chicago:
2011 was not just bad in Chicago, but also in the Northeast, entire Upper Midwest and other areas as well and it is important for course owners and managers alike to know the actual impact weather has had. For owners, you need to be able to fairly assess your course’s results. For managers, it is really the only way to realistically measure your performance and, in many cases, cover your $%#.
As of this past November, Pellucid and Edgehill have made this weather data available for web based delivery through http://www.cognilogic.com/PEAnalytics. Please feel free to This e-mail address is being protected from spambots. You need JavaScript enabled to view it directly if you would like to learn more about our reporting services.
Step 3 – Combine Rounds, Revenue and Weather to create “neutral” analyses of Course Utilization and Revenue per Available Round (REVPAR)
When hotels and other commercial real estate businesses measure performance, their most important benchmark is based on their utilization of their available inventory and is a combination of both occupancy and rate. This is expressed using terms such as Revenue per Available Room or per Available Square Foot.
Golf has traditionally based most of its analysis on Rounds Played – such as Average Greens Fee per Round, Merchandise per Round, etc. This methodology does not always provide an accurate picture due to weather variances, changes in tee sheet configuration and many other factors. You also have to further calculate whether your rounds went up by a higher percentage than any discount you offered, or your rounds went down by a lower percentage than the percentage of any price increase you may have taken.
As you know from my earlier articles, every golf course operator needs to fundamentally understand that there is a cost to produce every round you have available. By giving you the ability to calculate the impact of weather on your available inventory, you are then able to evaluate your true performance based on a combination of occupancy and rate.
The first thing I tell my clients is to notice the relatively narrow spread of Course Utilization over the 3 Year period. I often ask clients, when you develop promotions or offer significant discounts, do you really think you can change historical behavior by more than the amount of your incentive?
If you look at the Day of Week chart above, you will see that I did have a client that successfully changed behavior on Mondays; but you will also note that it was not simply the rate – he made Mondays more fun, and Thursdays, too. What I’m telling you is that this type of data is incredibly valuable and you need to spend time getting it out of your Fore! Reservations database and using it. And remember, it can be used to both measure success and identify problems – we did great on changing Mondays and Thursdays, now what can we do on Wednesday and Sunday?
I could go on forever about the importance of using this data, but here are a few key things that you can do once you get familiar with it:
• Identify changes in play patterns – as more golfers age, more golf is being played on weekdays.
• Course Utilization is generally higher in the Spring than the Fall – should we really be running Spring discounts when golfers come out of hibernation in the northern climates?
• Measure Results – if we reacted with promotions, did those incentives really move our Revenue needle?
• Weather Neutral Data – before we push the panic button, are we sure about our performance? Is it really our market or did we actually get slammed like the Northeast and Midwest did in 2011?
Customer Contact Information
Fore! Reservations also excels in giving you the best customer specific data available on any POS system. In fact, you have a major advantage because most of the other POS vendors cannot easily tie customers to their transactions. In several of my previous articles you have heard me harp on counter staff training and collecting other customer information such as e-mail addresses.
I’ve often wondered how we can measure the effectiveness of e-mail marketing efforts beyond the usual parameters of open rate and promotional redemptions. After reading the latest Fore! Reservations newsletter that outlined the success of the Fore! Reservations Marketing Assistance Program and a recent conversation with CEO Harry Ipema, I decided to use our Customer Franchise Analysis tools to see if I could try to answer a basic question – If a course has customers’ e-mail addresses, do you get more revenue from them?
The results (from one of my client courses) were actually very enlightening. Here are the highlights:
Unique Customers 2010 and 2011: 11,428
E-mail Addresses: 8,612 (3,196 from 2010, 3,816 from 2011 and 1,599 for golfers who played both years)
I then looked at the Average Customer Value for all customers in 2010. What I found was that the 4,795 E-mail Customers spent $5.56 more on average than the whole unique customer base of 6,257. On a basic level, it would appear the E-mail Customers spent $26,660.20 more than the average customer, and that’s a pretty good value add. But, if you’re into higher complex math, you will actually find that because the total Average Customer Value includes the E-mail Customers; the actual spending differential is higher than $5.56 – it is actually $23.28.
Once I found that there really was a quantifiable “revenue added value” for the 2010 E-mail Customers, I looked at 2011 after helping this client course implement a more systematic e-mail marketing program including regular newsletters and customer segmented e-mails. The results were even more remarkable. The basic difference between the spending of the 5,415 E-mail Customers and the total unique customer base of 7,082 grew to $33.40. When I applied the same more complex adjustment I used on the 2010 data, I found that E-mail Customers spent a whopping $141.89 more than customers for whom the golf course did not have an e-mail address.
The results found are eye-opening. Even when I factor in the fact that this is a very well managed facility and that their e-mail collection rate is over 75%, these are still impressive results. The simple method Average Customer Value differential was over $180,000 in 2011. The more complex method was significantly higher than that.
Just for fun, I tried the same exercise for two other clients and got essentially the same results. Although the amounts varied, it looks pretty certain that a well executed E-Mail program will result in your E-mail Customers spending more than your non-E-mail Customers.
Conclusion – Happy New Year!
It has been enjoyable to write these articles for the past year and I am greatly appreciative of the positive feedback I have received. I hope that more of you now better understand the wealth of information contained in your Fore! Reservations database and how it can effectively be used to improve your operation.
When I was in Minneapolis last month speaking to the Midwest Golf Course Owners Association, I asked the audience how many of them were happy with this year’s revenues and only a couple operators raised their hands. I then asked how many of them were planning on re-opening in 2012 hoping for better results and everyone raised their hands.
I almost always get the “I don’t have enough time” excuse when I see golf course operators making poor use of their information or not utilizing the tools they have for good customer communication. I suggested to the audience that in order to improve their 2012 results maybe they should consider some “time re-allocation”. Make your New Year’s resolution now to use your Fore! Reservations system and services better in 2012. By leveraging the information in Fore! Reservations, all of my clients beat the weather and their respective markets in 2011 – it can do the same for you in 2012.
Stuart Lindsay
"Lindsay, a lifelong Milwaukeean, has made a career of a seemingly thankless task: Helping businesses and individuals understand the inner workings of the golf industry. He began delving into golf course economics while with Deere & Co., and continued after founding Edgehill Golf Advisors in 1989. The work combines his naturally analytical mind with his passion for golf." - Golfweek, April 2008
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Edgehill Golf Advisors
10134 N. Port Washington Road
Mequon, WI 53092
Telephone: 262.241.7088
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