We do a telephone survey of every golf course in the world every year. This survey repeated each year gives price trends and development trends. Each course is precisely located in our computer mapping system. This database is summarised for the continent to provide an elegant overview of the market.
US Golf Real Estate
A survey of every new golf real estate development. The past five years have seen over 300,000 new fairway lots created of which 95,000 have been sold. Sale prices are up 35% and rates of sale are way up. The next five years may be more challenging due to high inventory levels.
The US Golf Car Report
We maintain a database of every golf car fleet in the world with number of cars, make of cars including mixed fleets, age of fleet, owned or leased, gas or electric. The survey is repeated every year to give up to the minute information and trend data. This report summarises the data for the continent.
The map on the following page shows the variation in green fee prices over Europe. The most expensive areas appear to be Austria, Switzerland, northern Italy and the coasts of France, Spain and Portugal, Cheaper golf can be found all over Scandinavia, the Netherlands and Eire.
US Driving Range Workshop
This report is a step by step guide, or working brief, for anyone thinking of building a driving range. For many this is the most feasible and economic entry into the golf industry.
This workbook is a prerequisite. Avoid wasting time and money – create authoritative facts and figures for your own individual set of circumstances.
The workbook will:-
- This workbook takes you step by step through every part of creating a business plan for a new driving range. This plan will be good enough to show to an investor or bank.
- The book takes someone on the outside of the range business and puts them on the inside. It gives the insiders secrets on how the business works.
- 15% of ranges make good money, 85% don’t. This business plan will help you be one of the 15% that make money.
- Ranges can be an amazing business. We have clients who have recovered all their development cost within the first year of operation. Year after year the range then delivered 100% return on investment. Not everyone does this but find the right location and – who knows.
- The workbook provides a complete example of a business plan created for the Sacramento market in the US. Every stage of putting this plan together is shown.
- A detailed spreadsheet is provided with the workbook enabling the step by step development of the business model from construction estimates to ten year business projections all the way to rate of return estimates and what if modelling. Plug in the key numbers and the software model does most of the hard work for you.
This workbook enables one to develop a complete business plan for a driving range. This plan will let you see if your range will make money and what the expected rate of return will be. The plan will be good enough to present to an investor or bank.
This business plan will be complete with market analysis, construction budget, a ten year profit and loss projection, analysis of return on investment and a what if analysis examining differing operating assumptions.
We get a great many inquiries from people all over the world thinking of building a driving range. A range is an attractive way into the golf business. Ranges are much faster to build and less expensive to build than a golf course.
Most people asking us about building ranges are experienced business people, they know about business but not the range business. It’s hard to get the inside knowledge of the range business as existing operators are secretive about how it works. This workbook sets out to remove the veil of mystery from developing a range – it gives the inside knowledge.
The contents of this workbook are the distillation of 20 years of experience talking with range developers and operators and advising people in the range business. Some of this distillation comes out as simple maxims such as: 80% of your customers live within 15 minutes drive of the range your range balls won’t get stolen if they are all picked up at night lights increase your business by 40% – think carefully before building without lights
These simple maxims are worth a fortune. It’s taken others years, and many mistakes to learn them.
A great advantage of ranges is they are a low expectation business. The customers don’t expect much – if the range balls and mats are in good condition they are happy. A golf course is a high expectation business. Customers expect perfection and complain a lot. Running a driving range is a lot more relaxing than running a golf course.
The location of the range is the thing to watch. Our research shows that 85% or ranges in North America make poor returns, 15% of ranges make great returns. The difference is the location. This workbook will help you be one of the 15% that make money – it shows you how to know a good location.
Working very very hard to find the right location is the secret to many years of good profit from a range. Getting the location is hard work and frustrating work. It’s a lot of driving the streets. It’s a lot of disappointment when deals fall through. In the range business the location is everything. It’s worth sweating to get that good location.
Defining the Market
The first priority is to get a clear idea of the market area for the range. The golden rule is that 80% of the range customers will come from within 15 minutes drive time of the range.
Finding The 15 Minute Market Catchment
Call ESRI on 1 800 292 2224. Ask for the 15 minute and 25 minute drive time areas around the location that you have selected to develop the range. ESRI will need the zip code and the street address to properly locate your site. Ask for the “Demographic and Income Forecast” report for the 15 minute drive time area.
When talking with ESRI make sure you ask for the 15 minute and 25 minute drive times to be included on the map that is sent to you. An example of one of these maps from ESRI is shown on the next page.
The map, along with some simple demographics, should cost around $100. ESRI take credit cards and they should fax, or email, the map and demographic report within a couple of hours.
The larger 25 minute drive time is used later in the analysis. It is important to look at all the range competition within 25 minutes of the proposed new range.
Before making the call to ESRI read the next section on demographics so that you get the right demographic numbers and don’t get oversold.
This table summarises the results of the “what if” analysis. The base assumptions deliver a 13.7% rate of return (ROI). Should construction costs rise 10% the ROI drops to 13.1%; if construction costs fall 10% ROI rises to 14.4%
It is very clear from the table below that the return from the future business is not that sensitive to changes in construction budget or construction period or even the period to mature operation. The business is however very sensitive to reduction in ball sales. A 10% reduction in ball sales takes the return from 13.7% to 9.9%. If ball sales come in 20% below the estimate the business is only making 6% return. While staff costs are the biggest single cost item, even a 15% rise in staff costs only drops the investment return by 2.3%
The US Golf Development Report
An astonishing 3,851 new golf courses have been opened in North America since 1990 – a 27% increase in golf supply. A survey of every new development that has occurred including course expansions and renovations. A complete inventory of a multi-billion dollar golf development boom.
Openings have been running steady at around 240 per year in the 1990’s with a small upward step in 1991.
While this research surveyed 202 new courses for this year it is estimated that around 260 courses opened in that year. Recent year openings are difficult to locate and survey, a proportion are not picked up until the survey is repeated in the succeeding year.
Expansions as a proportion of all development have doubled rising from 9% of development in 1989 to 18% currently.
A key reason for the rise in expansion activity is that it is easier to raise finance for an expansion than a virgin build. Financiers are more comfortable lending to a business with a few years operating figures than a greenfield start up.
Note: The above graph includes eighteen hole expansions the preceding graph only includes nine hole expansions.
The Value of US Golf Architects
These are our most famous numbers – they put a hard number of what a golf architect is worth and ranks the top names by value. The numbers are widely used by banks and developers when selecting an Architect. The numbers show the effect of an architect’s name on real estate prices and rate of sale.
The major message coming out of the table below is that it is well worth using an architect. The architect’s fee, whatever it may be, shrinks into insignificance when compared with the uplift in pricing and rates of sale that their projects achieve.
Given the obvious value of using an architect it is astonishing that 41% of golf developments continue to use no architect. These developers either design the course themselves or use a local pro. The phrase is heard again and again, “I’ve played golf for twenty years, I can design the course myself”.
The leading 41 architects shown on the next page account for 30% of the development that has taken place. The two tables that follow measure the commercial performance of projects designed by these architects. This analysis presents average performance figures for all the projects by a specific architect. For example, Arthur Hills opened 59 projects in the period, the average initiation fee across his 59 projects was $18,000.
Financial Modelling Assesses the Value of Each Architect
The previous tables provide a number of separate statistics that measure the performance of architects’ projects. This research developed a net present value (NPV) model to draw all the various statistics into a single measure to value the projects. This model enables one to compare the value of the Nicklaus name versus Fazio or any other architect.
The NPV calculates the present value of the future income streams that flow from the golf development. The three key income streams are initiation fees, member dues, and green fees. The rate of sale of memberships is also taken into account as the sales curve has a significant effect on the NPV.
The golf NPV model provides a single measure for the value flowing from the golf course. Table A shows the golf NPV to average $7.9 million for developments that don’t use architects, $17.5 million for developments with architects and $28.9 million for projects designed by the top 41 names. The statistics speak convincingly as to the value of an architect.
Table B gives a league table of architect values, showing changes since our previous research back in 1997. It shows that Nicklaus Design held onto their No. 1 spot, with nearly all architects increasing their overall value, if not their position. Four new entrants have appeared this time around – these architects did not have the 10 projects required for statistical analysis in 1997.