Despite regional variations, operating benchmarks can be invaluable to golf course owners to measure whether their businesses are on track.
by Ryan Crook

As the old adage goes, data is a raw material that is difficult to decipher for decision-making purposes due to its volume and disorganization; however, information is data that is organized and presented consistently to summarize and aid the decision maker. Or, put another way: garbage in, garbage out. Without proper understanding of the key elements of the golf operation and its critical success factors (and the related means of measuring those critical success factors), the process of making informed decisions can be difficult and subject to error based on misinformation.

A strong operating reporting structure

A strong operating reporting structure is based first and foremost on reliable information systems for tracking your golf course’s transactions. However, assuming that we all realize the importance of having a computerized point of sale, accounting and tee time reservation system, the key is understanding what metrics of the operation these systems need to pay particular attention to. Incidentally, even if you prefer a manual system of reporting (or manual portions of the operation), you can still accomplish a strong reporting structure.

The following are the very basic, yet key, areas of the operation that require strong reporting and tracking.

Revenue management

Revenue management consists of tracking all relevant revenue streams of the golf course by departmental area. This includes green fees, annual dues revenue (if the course has members), power cart rental revenue, pull cart rental revenue, food and beverage revenue, merchandise revenue (hard goods and soft goods), driving range revenue and other revenue such as club rentals and advertising.

Yield management

The often publicized-yet not so often understood-area of yield management is perhaps the most critical area of tracking within the golf operation. This includes detailed tracking of rounds played and rate structures.

Departmental expenses

This straightforward area of the operation is usually tracked, but often inadequately. Expenses must be tracked appropriately by department and by cost driver in a consistent fashion.

Marketing efforts

Many golf course operators realize the benefits of a strong marketing campaign. However, many have also suffered from ineffective marketing efforts that have drained resources and hurt the bottom line. Marketing without tracking is like hunting for deer in the dark.

Customer feedback

Having back-end information regarding how your customers feel about you is as important as understanding what brought them to you in the first place.

Leveraging your system to provide detailed financial and other reporting in these areas can put your golf operation ahead of the pack. Certainly your product is key; however, if you have better information in making key operating decisions relative to your competitors, you have found an invaluable source of competitive advantage.

Using information available for decision making

Given the key areas of the operation that need attention within your reporting structure, the next logical question is how or what information should be extracted in order to effectively manage the operation. The following represents the key information that all operators should seek from their operations.

Revenue management

In order to put revenue figures into perspective, revenue must be tracked according to its most relevant driver. For a golf operation, rounds played drive many of the revenue lines. Therefore, having strong revenue tracking by source as well as the rounds played is critical to better understanding your revenue streams and how to improve them or recognize that they are exceptional or deficient.

Yield management

In order to understand greens fee- or membership revenue as well as how to deliver the available tee times each day, the golf operation must be able to relate rounds played, revenue derived and the quality of the product offered. The metrics to make this relation are net rate per round and rounds per day per hour.

Expense management

It’s important to not only departmentalize expenses but also relate expense figures to the drivers of those expenses similar to revenue streams. Therefore, operators must understand items such as maintainable acreage in the greens department, revenue derived in the food and beverage operation, total golf revenue (greens fees, carts, driving range, club rentals) in relation to outside services staff and back shop staff, amount of product sold in terms of merchandising efforts and size of the clubhouse structure and total revenue of the operation in the case of administrative costs.

Marketing efforts

Marketing costs must be related to the volumes of business generated in order to begin to understand the effectiveness of marketing programs. In addition, operational procedures must be in place to allow for the staff and management to qualitatively and quantitatively assess each marketing campaign the golf course undertakes in order to know where to best deploy limited marketing resources.

Customer feedback

Operators must intelligently decipher information provided back to them by the customers. This means not only asking for formal feedback but training your staff to bring forth subtle feedback that may or may not be documented by the customer, which means going beyond the comment card.

Managing and understanding your operation

After knowing how to track and what to track, there must be a method of benchmarking the information in order to make intelligent decisions. The following are examples of key operating statistics that are required for successful management of the golf operation and general benchmarks for the industry.

Revenue management

When it comes to revenue streams, the majority of these can be understood as a function of rounds played (this means 18-hole equivalent rounds played not total starts). For example, pro shop merchandise revenue per round is important in assessing the effectiveness of your merchandising efforts. Best practices benchmarks for the industry in terms of merchandise revenue per round range from as low as $3 per round in a budget-oriented lower-end facility to in excess of $20 per round in resort or high-end corporate golf facilities. Regardless of the type of facility you own or operate, the key is matching your merchandise to your clientele and having an attractive and identifiable logo in place (incidentally, this can be your logo or the use of name brand merchandise that are proven with consumers.)

Yield management

The key statistic in measuring the effectiveness of your yield management practices is net rate per round. Best practices benchmarks for the industry suggest that well-run golf facilities will attain a net rate per round percentage of 70 percent to 75 percent of the average posted greens fee rate.

Rounds per day per hour are also important to assess on a daily basis in order to derive a plan to “sell down” rounds. Many operators will wait until the end of each month to assess rounds played each day; however, waiting until th end of the month is too late. Tee times are a perishable commodity that can be sold only once. Therefore, daily tracking of rounds and anticipation of slack time within each day is key to administering yield management techniques to sell rounds daily.

Expense management

Many departmental expense totals can be measured as a percentage of total gross revenue as a measure of understanding and assessing expense management. However, in many cases, the best operators will invariably make such comparisons and ratios less relevant as they continually find ways to offer excellent value, drive revenue and rationalize expenses. Furthermore, certain expense categories such as the greens department are more a function of maintainable acreage than total revenue. Some of the key overall industry expense statistics and best practices benchmarks by department are listed (right).

These expense benchmarks represent a wide range due to the differing types and quality of golf facilities across the country as well as climatic considerations. These figures also can vary depending on the number of holes at the facility.

Greens department

Greens expense per maintainable acre $2,500 to $12,000

Merchandise cost of sales percentage 60% to 75%

Pro shop

Pro shop expense as a percent of gross revenue 9% to 12%

Administrative and clubhouse

Admin and clubhouse as a percent of gross revenue 20% to 30%

Food and beverage cost of sales percentage 30% to 35%

Food and beverage labor percentage 35% to 45%

Marketing efforts

Marketing costs will vary, depending on the type of facility and the setting. However, it is still helpful to understand the relationship between marketing costs and total revenues of the facility. As a general industry benchmark, effective marketing efforts will translate into a marketing budget that is in the range of 2 percent to 5 percent of total gross revenue. Again these figures vary depending on whether the golf course is new to the market, a resort or corporate event facility and the intensity of competition in the market area.

Customer feedback

Customer feedback, though usually quantified through customer comment cards, can also be obtained through the eyes and ears of the staff. Though traditional comment card programs are still relevant, the best operators ensure proper training and the creation of an upward-feedback system. This makes for a much more dynamic and proactive service team that produces consistent customer satisfaction and repeat business.

Staff training should also instill an overall consciousness of the bottom line in order to create accountability along with an appropriate bonus system based on the bottom line to align staff interests with those of management and ownership. This is critical to providing excellent service in a cost-effective manner while ensuring a proactive approach to yield management.

These are but a few of the key operating statistics and key industry benchmarks that successful operators must understand, manage and anticipate in order to maximize the bottom line. These benchmarks are also useful in answering more difficult operating questions surrounding whether the level of service and conditioning offered are appropriate for the price points charged or available in the marketplace. Remember, not all high-end, high-revenue golf courses are the most successful operations from a return-on-investment viewpoint. Issues such as inability to exercise appropriate expense control can make a high-revenue facility less profitable from a return-on-investment perspective than those that rationalize expenses and compete in more price-sensitive markets.

Though demand in many markets have caused hardship for some, it has also highlighted the need for sophistication and proper management of your golf facility. Remember, information can be one of your key sources of competitive advantage if understood and used appropriately.

Ryan Crook is a senior manager with KPMG’s Golf Industry Practice. KPMG has accumulated invaluable statistical data for the golf industry through its diagnostic benchmarking study. This study draws upon KPMG’s service of more than 1,100 golf courses across North America. For more information about KPMG, call (888) 432-9494.