Barter: How You Can Level the Playing Field Against the Bandits

Barter is an intransitive verb and is defined, “to trade by exchanging one commodity for another.”  What is wrong with that?  Nothing on the surface.  But in the golf industry, the word “barter” has taken on an extremely negative connotation.

GolfNow (Golf Channel) and Teeoff.com (PGA Tour/EZ Links) are often labeled as bandits by course owners lowering prices, providing inferior software, employing inappropriate marketing tactics and operating on an unequal playing field through near like monopoly power.  Is the criticism fair?

There is a Japanese expression, “The other side of a coin, has another side.”  Here are some insights and suggestions to leverage their services to your advantage.

It is first important to give credit to what third parties do well.

The Good – That Which Should Be Celebrated

We live in a capitalistic system in which a country’s trade and industry are controlled by private owners for profit, rather than for the State.  Through the acquisition of multiple firms over the 14 years, GolfNow dominates.  They, and EZ Links, are to be congratulated for their success as capitalists.  Click here to read a history of GolfNow on Wikipedia:

During April, Orlando Sentinel reported.

“GolfNow, which works with more than 8,000 courses worldwide, is working on a new point-of-sale tech platform to consolidate services including food orders, merchandise sales, and social-media management along with tee times. Updates to the app that will let golfers order food via GolfNow straight from a digital-based wallet are expected before this fall.”

The potpourri of products they offer is impressive as highlighted in the slide below:

Source:  GolfNow presentation to Dominican Republic Travel Exchange, October 2017

Two of my personal favorites services are Revolution Golf and Golf Advisor, whose articles I always read.  Have had the pleasure of playing golf with GolfNow writers Brandon Tucker and Jason Scott Deegan (Streamsong – Black) and Mike Bailey (Rockwood Grand Opening).  They’re really good guys and fun playing companions.  The articles they write are insightful and provide meaningful travel information.

Also, spent time with Kiel Christianson and Kelly Fulford, director of Partnerships Digital Sales at Golf Channel, in the Dominican Republic. They were equally as charming, knowledgeable and sincere in their belief that GolfNow is making a positive contribution to the golf industry.

But what they promote speaks to the focus of GolfNow.  Their customer is the golfer – it is not you – the golf course owner.

It is their internal belief, as shared with me by senior executives, that the NGCOA, NGF, PGA of America, PGA Tour and USGA are principally focused on growing their Associations with little sincere concern for increasing the number of golfers or ensuring the financial stability of the golf course owner.

That opinion is not without substance.  In speaking with a PGA Tour representative when they were beginning to research how they might enter the tee time business, his focus was founded in jealousy of the revenues being earned by GolfNow.  He felt that those revenues should be earned and accrue to the benefit of the PGA Tour.  Nowhere in the conversation did he mention a concern for the golf course owner.

Thus, all third parties, as well as Golf Associations, should be approached with caution.

Suggestion 1 – Invite the Golf Advisor writers to your golf course, especially on the grand opening of a renovation.  They are always seeking an unusual twist to cover golf, and you might get some regional or national coverage if you are doing something unique.

What Is Impressive

GolfNow, and to a lesser extent EZ Links, have created a vast marketplace in which millions flock for discounted golf.  Currently, as a result, it is nearly imperative for a golf course owner to participate or be severely disadvantaged.

To illustrate, it was reported to me that a large California municipal multi-course operation, in which numerous lessees are responsible for daily operations, elected several years ago to discontinue using GolfNow.  At that time, GolfNow would not agree to a “floor price” for the sale of their trade times.  The short-term impact over the next couple of months was that rounds fell across those courses.  However, rounds returned to normal daily volume after 90 days and revenue began to rise.  There is a lesson there.

One of the lessees was able to subsequently convince GolfNow to provide “floor pricing, i.e., 25% before the rack rate” for their trade times and resumed using GolfNow.  Those courses who did not resume GolfNow saw their play beginning to decrease and were left with no alternative but to rejoin GolfNow, much to their disdain as expressed to me.

Suggestion 2 – For the golf courses in your competitive marketplace, band together and either drop off of GolfNow totally or collectively demand floor pricing at 25% of the retail rate for the tee times sold.

There is a caveat.  To exercise leverage, the contracts of the golf course need to terminate close together.  GolfNow has a 90-day cancellation clause that we understand has been stringently enforced.  If sufficient notice isn’t provided, the contract auto-renews for another year.  We heard of one course in North Carolina that only provided a 30-day notice and was required to continue the service for another year.

Suggestion 3:  Audit the “fences,” i.e., (the tee time before twilight) created by GolfNow for the sale of barter times to ensure that they comply with the contract.   We know of two examples where the fences were violated.  To GolfNow’s credit, they wrote a check for $4,000 for the tee times that were sold in violation of the agreement, albeit it did take five months to receive the funds.  In the case of EZ Links, I was told several years ago by a multi-course municipality that their transgression exceeded six figures.  EZ Links provided, I understand, several months of free software and support as compensation.

Suggestion 4:  Test their Ethics and Integrity.  Create a unique email address that you enter into your POS database.  Monitor if you start receiving an email from GolfNow or Tee-off where they have taken your intellectual property for marketing their barter times.  I wouldn’t be surprised if they are using your proprietary customer names for their benefit.  Catching them would be fairly hard to spot unless you set up some unique emails used exclusively for this test.

With over 100 different financial arrangements with golf course operators, their lack of transparency concerns me, and realizing the effort it would require to accurately audit the relationship, it is my hunch that you are not being treated as agreed or as you intended. How do you know if you are getting a fair deal?

Suggestion 5:  Follow the lead of some Troon golf courses and schedule tournaments and outings during the trade times.  While GolfNow salespeople will want alternative tee times, there is nothing in their contracts, according to what we have heard, that precludes this practice.

Without Doubt

GolfNow are excellent marketers.  Their very smooth and polished sales people give you great confidence and assurance in their statements.

It is my experience that they also provide good customer support for their technology.  We spent four hours on the phone during the week of April 8 trying to get their GEN (eight-year-old Jencess software) to produce some meaningful reports for a client.  While Ferdinand in Edmonton knew neither the Jencess’ founder, Kurt Jensen, or their lead sales person (Matt Welliver, currently with Chronogolf), he made a concerted effort (after an 18.44 minute hold time) to ensure we were able to extract the data from this antiquated system.  Note that the client had 2,151 trade times valued at $35,125 liquidated for a system, that when purchased,  paid only $6,000 annually.

However, in my opinion, they are poor providers of technology to golf course operators.

An East Coast course I was informed has been using the same GolfNow Active Network software for six years rendering two times daily.  The software was never upgraded and was not functioning properly.  GolfNow was called for support.  Their sole response was that they would only charge the golf course owner one tee time for marketing services.  GolfNow made no attempt to fix the software.

A Denver course installed GN1 recently and can’t use it.  Unfortunately, the e-range integration and the PCI encryption of credit cards isn’t functional.  It’s sort of amazing that a product that has been in development for over a decade, as I understand it, is not ready for the market.

I asked the golf course manager last week when he thinks those items will be fixed.  He commented, “Likely not until 2019.”  When asked how much GolfNow sold in bartered tee times, he estimated $75,000 annually.

While this course manager stated he would love to get off GolfNow, he commented that he was resigned as he had a small marketing budget ($20,000) and GolfNow controlled the Denver marketplace with 28 courses.

In the past decade, we have heard of only several golf course managers who are advocates for GolfNow. Consistently, in my opinion, those operators, beyond their dubious selection of technology, implemented questionable policies and procedures in all aspects of their operation.

It is my observation that there is a correlation between how astute a golf course operator is and whether they use GolfNow.  For example, the two best golf course operators in Denver, Jim Hajek of Fossil Trace and Mark Pfingston of Golf Club at Bear Dance, don’t use GolfNow.  The revenues of both courses are reported to exceed $2.5 million.

Suggestion 6:  If you are going to continue to use one of GolfNow’s software solutions, stick with it.  The devil you know is better than the devil you don’t.  Until GolfNow GN1 has twelve months of demonstrated success, don’t believe the hype and don’t spend your time installing, loading all of your information into the system and then not be able to use it as I was told by one General Manager on April 18.

I would recommend waiting until the “kiosk” tablet is available.  Today in the golf industry, revenues are not likely to grow, but expenses will.  Astute golf course operators will begin by installing kiosks and paring their pro shop counter labor.

You Need to Ask – What Is in It for Our Course?

Golf hit its apex in the early 2000s with more than 30 million golfers enjoying the over 16,000 golf courses, playing 518.4 million rounds, according to the National Golf Foundation.

If third parties were good for the golf industry, rounds and revenue would have increased.

However, since their formation, the number of golfers has fallen to less than 24 million, and we have witnessed 11 consecutive years of more courses closing than opening, leaving less than 15,000 courses, and rounds are now estimated at 455.97 million, with a 2.7% decrease in rounds in 2016.

In the process, third parties have earned an estimated $150 million annually with accumulated earnings probably approaching $2 billion in a segment of an industry that generates only $21 billion in revenue annually.  Thus, each golf course may have been financially disadvantaged, perhaps by $200,000 or more.

Suggestion 7:  You need to thoroughly understand what is in it for your course.  You could select Clover, Club Prophet, Chronogolf or Teesnap for less than $12,000 and acquire a fabulous integrated software solution and build your database to market it proactively.

There is a caveat:  Sorry Jay Karen.  Most golf course owners don’t have the resources or interest to engage in professional marketing by building a properly segmented customer database as to age, gender, the frequency of visit and spending.

At the End of the Day

There is nothing inherently wrong with the mission statement of seeking to exclusively serve the golfer. And if access to that customer is through a golf course owner, to the extent that the financial arrangement is mutually beneficial, the concept of barter is valid.

But is the financial arrangement fair?  My answer to that is no.

One should always seek value for the price paid.  I am an accountant.  Throughout my life as a Captain in the USAF during the Vietnam War serving in Korea, as a CPA at Peat Marwick (KPMG), heading a golf software firm for 16 years (Fairway Systems) and the past 12 years as a strategist guiding golf courses to increased profitability, I have always believed that debits equal credits and in equal reciprocity.

Hence, my objection to the trade practices of barter.  The consideration received between the trade liquidated and the fair market value of the software is too great to be equitable.  In addition to GolfNow double-dipping by charging a booking fee, or offering a VIP with no booking fees for $100, the value of trade times liquidated is egregious, in my opinion.

I present the following examples that have led me to that conclusion:

·      Last month I reviewed a golf course’s financial statements in which they are providing GolfNow two trade times per day in exchange for marketing services only – no technology.  The course was able to realize $97,000 in revenue at a per round price of $17.50, compared to their rack rate of $45.00.  GolfNow liquidated an estimated $67,500 in trade times for their services.

·      A golf course in Kentucky went on GolfNow in 2014.  Rounds went up 2,500; revenue remained the same.

·      A golf course in Indiana went on GolfNow in 2014 also.  The green fees sold at the rack rate fell from 63.1% to 37.5% while trade times on their two courses represented over $150,000 in liquidated trade (barter rounds sold x rack rate x 40% discount).

·      In December 2016, we reviewed an ORCA report in 2016 in which the value of the liquidated trade on a golf course exceeded $111,000.  GolfNow sold zero tee times through their national distribution for the benefit of the golf course.  The course was using the Fore Reservations software.  Before the acquisition of Fore Reservations by GolfNow, the annual software license fee for the POS/TTRS software was $4,000.

·      Several years ago, we saw the GolfNow report for the tee times sold in Denver.  GolfNow generated just under $30,000 while providing the sophomoric Fore Reservations software.

I have often thought that the commission model would be fair to both the third-party firm and the golf course.

In late March 2018, Mike Hendrix of GolfNow was speaking about a commission arrangement with John McNair, Vice President of JC Resorts, an astute golf course management company that owns/manages 13 golf courses in the San Diego area.  Progress was being made until Mr. Hendrix stated, “We need to determine how GolfNow will be compensated when the golf course is closed for weather.”

Mr. McNair related to me that he stated (paraphrasing), “Let me understand.  You want to be compensated when my course is closed due to weather.  In that circumstance, I still have the staff to pay, cart and maintenance lease obligations and many other financial responsibilities.  Yet, you want to be compensated when your services produced no revenue for me.”

Obviously, an agreement wasn’t reached that day.  It is my understanding the GolfNow is trying to achieve $25,000 per course from the commission model.  I still like the idea of a 5% commission.

Suggestion 8:  Create an SKU in your POS system that tracks the date and time of 100% of the barter times sold.  Calculate the value of the liquidated trade and compare to the quality of the software received, asking yourself, “Am I getting value?”  If you are an astute operator, the answer is likely no.

As an independent journalist, we focus on providing insights regarding the profitability of a golf course and how you can maximize the potential of your investment. Previous articles on this subject have included:

Thus, it is my opinion, the golf course operator is not well served in using GolfNow or EZ Links.  That is my belief, what is yours?  Comment below.