The Discount Dilemma – Part 1

We had this discussion some years ago, but given that the ‘free ride’ in terms of the interest in golf as a result of the COVID pandemic has proven to be a bubble for many clubs, I thought it worth looking at again.

The Business Dictionary defines a perishable as an ‘article that can lose its usefulness and value if not appropriately stored or transported, or if not utilised within a certain period’. Wikipedia defines distressed inventory as ‘inventory (goods and products) whose potential to be sold at a normal cost has passed or will soon pass’. The terms are mostly associated with fresh produce (the product’s sell-by date), the hotel industry in terms of bed nights, and the airline industry for seats on planes.

However, it can equally be applied to any product that will ‘go off’ and lose its value if it is not sold by a specific time, and into which category the golf tee-off time fits perfectly. One of any golf club’s most valuable resources will be its time sheets. Each individual time slot is just as prone to the ravages of time as fresh fruit, a hotel bed night and an airline seat, in that it will ‘go off’ in revenue-generating terms, and become of no value, if not sold on or before its due date. The rules of supply and demand have as much effect on the business of golf as in any other commercial environment.

The general consensus of opinion is that a standard golf course of 18 holes can accommodate just over 56,000 rounds per annum, assuming a six-day week and 180 rounds per day. Allowing for events, that will block off access to the golf course, but not result in a full field, and when the course experiences closed days due to external factors, i.e. unexpected maintenance, inclement or extreme weather conditions, this figure could be trimmed to a more conservative 42,000.

Standing on a clubhouse terrace quite recently, and looking across the beautiful late afternoon vistas presented by the golf course, which was sadly completely untroubled by any human presence, I was subjected to a ‘funny look’ by my much younger companion when I mused that, until quite recently, this club had had a waiting list for membership.

The good old days! (Punch magazine)

If we are to be even more conservative, then we could further reduce this figure to 36,000 rounds, because of longer intervals between tee-off times, or perhaps a club’s need to adopt a selectively commercial approach to visitor rounds and external events, such as corporate golf days and nonmembers’ tournaments, and restrict the numbers of these, so as to allow better access to the course for its members.

Whatever the annual benchmark chosen, the difference between the number of rounds that a course actually handles per annum and its benchmark figure will become rounds that are potentially distressed inventory. This phenomenon was largely unheard of, until about a two decades ago. Up to that point almost every golf course, including newly opened venues, had a queue of players lining up to play, or trying to join the club as members.

The reaction, in many cases, to this drop in membership and lower revenues from green fees was, and still often is, a knee-jerk one, involving panic measures and the offer of discounted rounds and creative membership options to ‘get the numbers up’.

If ‘going to the mattresses’ is the go-to reaction to trouble in the movie The Godfather, then its equivalent in golf terms often appears to be to discount the prices of rounds. Given that the revenues of most golf clubs are already built on the dangerously narrow base of rounds and membership income, ‘discounting’ or meddling with either of these core revenue streams will be at best a ‘quick fix’.

It is also an option that cannot hope to address the core reasons for the downturn, and will most likely initiate a lot of ill feeling and ultimately a price war with other golf clubs in the area. Often the result, over time (often a much shorter time than one might think), will be a degradation of the club’s image, and the inevitable cycle of now not having enough revenues, as a result of the reduced green fees and memberships, to maintain the course and its facilities, which in turn will see the numbers and revenues of rounds drop again, which will result in further discounting, and the downward spiral is then continued, compounded and accelerated.

There are a number of potential solutions to this challenge, which can come in various forms, including partnerships with other golf courses in the region, reciprocity agreements, working to generate better revenue yields per round, and more effective packaging.

All of these types of initiatives, in conjunction with creative and innovative thinking around the development of new and fresh promotional and marketing products and programmes, should enable clubs to find new sources of revenues, without resorting to the cul-de-sac of discounting and price-cutting.

To be continued …