In part 3, I wrap up my discussion of the golf course community and suggest alternate approaches.
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What should the Industry do to Survive?
First, let’s decide which industry we are – Homebuilders? Golf Course Managers? Hospitality? The remains of companies that tried to expand too far outside their core business litter the history of commerce.
Regardless of how we define ourselves, community residents will continue to spend a large portion of their discretionary income outside the gates of their communities and look for a variety of activities that do not get
stale. Recognize and accept it. The opportunity to increase resident spending inside the gates is limited – people simply do not want to spend all their time and money in one place. Instead, look for opportunities to capture more of the residents’ “discretionary wallet” by providing services to residents outside the gates and maintain flexibility with respect to the offerings inside the gates.
For example, assume the typical couple eats out twice a week. It is highly unlikely they will want to eat at their club twice a week, every week. Accept it and move on; after you have done all you can with special events, dinner specials, and the like residents will still want to go downtown to stroll around and sample other fare. What to do? Establish a dining program with some of the better restaurants in town. Develop value-added
programs that cost you little-to-nothing but are highly valued by club members like preferred reservations and other special services. In return for directing traffic their way, ask the restaurants for a finder’s fee or an in-kind exchange.
A big, luxurious clubhouse can be a major trophy and selling point, but it is also a money pit requiring a tremendous upfront capital expenditure as well as ongoing maintenance costs (Typically in order to sell the community the clubhouse has to be built prior to most of the homes being built and memberships sold. Thus it operates saturated by red ink in the first few years. One option among others is to provide a temporary clubhouse until a certain home sales goal is reached). They often have highly specialized spaces that cannot be easily reconfigured such as commercial kitchens, theatres, locker rooms and spas. And once spent, that money is, for all intents-and-purposes, illiquid. It is locked up tight by more than just the physical
gates surrounding it.
There is an option to spend just as much, or maybe less, on hard amenities like this albeit in a somewhat more liquid fashion. Purchase existing “one-off” facilities in various locations for use by members when they vacation and travel outside of the community.
For example, instead of building a large clubhouse buy
- An apartment in NYC
- A flat in London
- A chalet in Vail
- A cabin in the Smoky Mountains, and
- A beachfront home on the Outer Banks.
Should any particular property not prove popular, it is far easier to sell a single ski chalet in Vail than an entire gated community….and it would seem far easier to sell (to the homebuyer) a community with an international presence over one with only what is right in front of them. There are of course operational challenges to overcome with respect to maintenance, guest services and how reservation priorities are set. Companies that
provide this type of service are out there, like Abercrombie & Kent, so a model to deal with these operational issues exists.
However, there is a basic level of facilities your buyer will expect, depending on your target market. A modest clubhouse with flex space is a minimum with a well-equipped fitness center (and not the afterthought, hotel-type that no one really seems to use). A pool helps too but save money and go for a standard shape without all the bells and whistles like waterfalls and fountains (and a regularly shaped pool can be covered at
night, resulting in tremendous savings in water, heating and chemical costs).
Forego the theatre (most people have large-screen flat TV’s with surround sound at home anyway), the billiards room, luxury spa, business center, and other highly specialized spaces unless you are trying to offer a particular angle for your community. Do not offer them simply because everyone else is…it only becomes an expense that does not set you apart from your competition. Think very hard before providing a full-blown restaurant as opposed to a grill room or even snack bar. The kitchen equipment alone can cost $500,000 or more, not to mention the headaches involved with maintenance and inspections. Also not cheap is the cost of an executive chef whose salary (excluding benefits) will run close to $100,000/year.
Look to build space which can be used for a variety of activities and provide plenty of storage to put away equipment and furniture not used at the moment. Operable folding partitions offer a sound way to easily reconfigure a large space into multiple smaller rooms or vice versa.
The big-ticket item to reconsider is what, during the Boom, seemed to be almost sacrosanct – the golf course. The outlook for golf has already been discussed and plenty of those course-side homebuyers spent their extra funds on a lot premium for a view of open space instead of a golf membership. An 18-hole golf course at the low end is going to cost at least $10 million to build and $500,000 a year to maintain (in warm-weather climates). Move up the scale in quality and bump the construction price to $20 million and annual maintenance easily to $1 million +. Even an executive course takes a significant amount of capital and land to build and operate.
If you open up the course to semi-public play to help with revenues, the ability to market it as a private course goes out the window. And despite their lush, green look, golf courses are an environmental challenge due to the amount of fertilizers, pesticides, fungicides, herbicides and huge quantities of water they require. Finally, you purchased a large amount of land that is only actively useable by a relatively small portion of the community.
What do you offer your community members instead? Simply preserve multiple-use open space with pathways, water features, and other amenities that take up far less space like tennis and basketball courts. Even a driving range is an option since it does not require that much land or maintenance relative to 18-
holes. Consider “soft amenities” like travel clubs or a cooperative agreement with a local university so residents can take non-matriculated classes, bring in guest speakers on a wide variety of topics. Bringing in a full-time coordinator to keep things lively and their finger on the pulse of the community is far less costly than a golf pro, assistant pro and the pro shop staff. Should a particular program be more popular than planned for, it is easy enough to scale it up – or eliminate it altogether if necessary. Taking advantage of the latest trend is also simple with a soft amenity program. And because people like to stay involved, having members organize and run many of the clubs is another way to keep operating costs down.
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Long story short...the gated golf course community crowd (i.e. Boomers), while they may still retire to FL, NC or wherever, have a lot more options at their fingertips when it comes to how they will spend their discretionary income. This is why the gated highly amenitized, golf course community as we now know is
doomed to go the way of the dinosaur. A few will continue to exist for those that want that lifestyle, but expect their number to be far fewer than has been planned for. In order to compete, country club-style gated communities are going to need to start thinking very creatively with respect to the amenities and services they offer.
Sources:
National Golf Foundation. Golf Participation in the United States, 2010 Edition.
National Golf Foundation, Minority Golf Participation in the United States, 2010 Edition.
National Golf Foundation, Minority Golf Participation in the United States, 2010 Edition.
National Golf Foundation – Golf Participation in America, 2010-2020.
US Census – Table 4. Projections of the Population by Sex, Race and Hispanic Origin for the United
States: 2010 to 2050 (population numbers have been used by author to calculate %).
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