The Bridge Over Troubled Water: The Huge Dividend from an Investment In Rental Clubs For Your Facility and the Long-Term Health of the Industry

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DIVERGENCE OF FACTS vs. OPINION

There seems to be a divergence between the economic data being reported about rounds and the health in the golf industry vs. a prevailing sentiment amongst golf course operators.

During July, we heard these positive comments:

  • “One really interesting thing that I have noted in my conversations with golf course operators across both the US and Canada (and believe me I am now talking to a LOT of them!) is an almost universal “feel” that 2019 is showing much stronger support for golf than in recent years.  Golfers are more readily accepting price increases, when the weather is good, the interest levels are high, and I have had very few conversations where the operators themselves believe the future is bright rather doom and gloom.”
  • “We are seeing an increase in people taking private lessons, participating in our “new to golf” programs, etc.  We have seen growth in our men’s and ladies clubs, and all of our leagues have increased in participation over prior years.”
  • “The Welcome2Golf campaign has been going well for us, as it was good motivation to create some new deals and initiatives for beginner golfers!  Since launching in June 10, we’ve had over 60 people register as beginner members and have had steady participation in our Wednesday night outings, Saturday clinics, and discounted rounds and buckets. Most of the participants have been women, and if men have opted in, it’s been with their spouse.

What appears to be documented is that though golf rounds are down 1.0% through June 2019 compared to 2018 which witnessed a 4.8% decline in play for the year, various segments are surging based on the numerous introductory programs to golf:  Get Golf Ready, Welcome2Golf, PGA Junior League, Schools in Golf Program, etc.  The segment of participation between those 6 to 18 years of age is nearly double than that from 20 years as reported by the National Golf Foundation.  Those over 70, because of advances in medical practices, are playing longer in life.

All will agree that if growth if golf will come, it is not from having existing golfers playing more frequently, but rather from attracting and retaining new entrants to the game.

How can we accomplish that?  The hurdles can be high.

Here is an illustration of the challenge.  One golf owner stated to me that for a “Women’s Golf Day” two new players sat in their cars at the clubhouse texting each other as to whether they were properly dressed, whether the course would have clubs and how comfortable they would be made to feel.

Beyond the additional bromides that golf takes too long, is too expensive, and too difficult, one of those hurdles can be softened, there are only two barriers to attracting a new customer to the game:  fear of embarrassment and equipment.

It is my thought that the cost and access to proper equipment is a significant barrier to the game.

A CHANGE IN CULTURE

Here is an idea for your consideration.

Seventy-five percent (75%) of all customers rent snow skis or snowboards.  Eighty percent (85%) of all bowlers use a ball provided by the facility.  However, at most courses, if they have rental sets, and many don’t, the clubs are such inferior quality almost ensures the customer has a bad experience.  Also, what beginner is going to invest over $2,500 in a new set of clubs and golf bag after a few lessons?  Not many.

We need to change the culture in golf to where courses around the country offer new quality rental sets consistent with the brand experience of their facility, i.e., high-end resorts (Callaway, Taylormade, Titleist), mid-tier (Cleveland, Cobra, Ping),

FINANCIAL MODEL

Think about it.  First, the financial model makes sense as it generates a positive return on investment, as shown below:

Cash Outflow Investment for a Municipal or Standard Daily Fee Course

Components

 Subtotal

 Total

1 Number of Sets Purchase

40

Costs Per Set (1,3, Hybrid, eight irons, 2 Wedges, Putter, Bag

$1,000

$40,000

Cash Inflow
1 Rental Club Sales
Playable Golf Days

260

Rentals Per Day

5

Cost Per Rental

$25

Income from Rental Sets

32,500

2 Sales of Rental Sets
Sales of Golf at Year-End

40

Liquidation Price of Used Clubs

$500

Income from

20,000

3 Increase in Rounds from those that otherwise would not play
Rounds Played Annual

30,000

Increase in Rounds from Quality Rental Available

1%

Green Fee + Cart + Merchandise + F&B

45

13,500

Total Revenue

66,000

Net Income

$26,000

In our research, we learned of resorts that offer rental clubs for $65 – $85 per round, which includes a complimentary two sleeves of balls and view rental clubs as a nice profit center.

THE STIMULUS TO GROWTH THE GAME

More importantly than the financial benefits is the quality aspects of improving the culture surrounding golf.

While golfers rotate drivers, wedges, and putters on some varying frequency, the average life of a golfer’s clubs, in a July 2019 flash poll we conducted, is shown below:

Ask yourself how many of those golfers would like to upgrade their equipment if they could buy a one-year set of quality rental clubs for your wholesale cost at the end of the year.  My thought.  A lot.  Also, as golfers utilize the rental clubs throughout the year, I would surmise some will ask, can I buy these clubs now?  What a perfect problem to have.

If every lesson was taught to an entrant to the game with new equipment, ask yourself would not that increase their probability of them seeking to play golf based on increased enjoyment and success in using the proper equipment?

Ask yourself, if it was well known that all golf clubs carried new rental equipment, how many more new would be enticed to try the game and how many recreational golfers would be enticed to play more?  My thought.  A lot.

Ask yourself, do you think the equipment manufacturers would be clamoring for your business?  If 3,000 golf clubs bought 50 sets a piece of golf clubs at wholesale, it would generate $150 million in revenue for the equipment manufacturers. This would provide club manufacturers great exposure for their business and increase word-of-mouth sales from golfers hailing their new equipment.

HOW THEN DO WE EXECUTE THE CONCEPT

Our research indicates that the number of rental sets required varies by the type of facility and the number of holes as illustrated below:

Number of Holes

Green Fee and Cart

Ideal Number of Rental Sets

18

<40

15

18

40 – <80

20

18

>80

40

Variables that would influence the number of rental clubs would include the number of holes, lessons offered, tournaments and tourists.  Because of the permutations of left and right-handed, women vs. men and juniors, the composite of one’s equipment order might likely be:

Category

Type Shaft 100 Sets

36 Hole Golf Course

50 Sets – 

18 Hole Golf Course

Junior Right-Handed Regular

8

4

Ladies Left-Handed Regular

4

2

Right-Handed Regular

8

4

Men Left-Handed Regular

12

6

Right-Handed Regular

60

30

  Left-Handed Stiff

2

1

  Right-Handed Stiff

12

4

The chart above is representative for a  high-end Daily Fee golf course, Resort or private club that sponsors lots of large tournaments.  In the middle tier, a balance between premium and standard sets with varying prices might be advised. On the low end of the spectrum, for those lacking capital, it is suggested that entry-level facilities could pool their capital and rotate rental clubs between their facilities based on the scheduling of events and tournaments.

The most common rental is a traveling golfer, someone who doesn’t have access to clubs currently or less frequent the novice or very occasion golfer who hasn’t invested in clubs.  To me, this last group is the ideal customer to market to focus on the ease of getting premium equipment might induce the incremental rounds. The novice has a tough time embracing the fact that the club rental is typically as high or HIGHER than the fees they pay to play the game, but that is also the very real incentive for them to purchase a set that they rent at the course – they have tried the clubs, liked them and typically get a really good deal on them.  This is the person that we should look to target with a focused marketing plan and strategy to not only get them to use the clubs but maybe even buy them.

What should be expected is that additional revenue will be generated for same-day purchases.  It was reported that it was not uncommon to have a guest request a particular set of irons, drive, or putter after using it for a day.  Those clubs can be sold for full wholesale or even cost plus 10-15% is typical,

There is a caution.   There is a definite need for a staff member to monitor the sets daily and report missing or broken clubs. Charging a set replacement cost of for irons/putters and hybrids/metals generates additional revenue.  The standard set price is cost plus a 15% administrative fee that guests are informed of such when they signed off the rental agreements.

To stimulate a point of purchase “rentals,” if it were I, I would hang the pictures of the LPGA and PGA Tour players that are using that equipment with a simple moniker, “These Clubs Are Good Enough for These Players, How About You?  Make your game to life with a rental set of the finest clubs.”  That slogan defeats the argument that the rental clubs selected isn’t of sufficient quality for the player.

Lao Tze, said, “The journey of a 1,000 miles begin with a single step.” For the golf industry to grow the game it must be with a single step of each golf course expanding their club rental program for that will create a bridge over troubled water than the industry now finds itself immersed.

Credits:  This blog was made possible by the experience, insights, and perspective of three of the smartest golf course operators in the United States:  Mr. Steve Friedlander, PGA – former Director of Golf at Doral, Whistling Straits, Pelican Hills and Big Cedar Lodge; Ms. Cathy Harbin, PGA/LPGA – former Director of Golf at World Golf Village, Vice-President of Club Corp and currently owner of Pine Ridge Golf Course in Paris, TX and a member of the NGCOA Board of Directors; and Mr. Del Ratcliffe, President of Ratcliffe Golf Services, managing partner of the Mecklenburg County, NC golf courses.

 

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