Management Companies Cancel The title field is required!

1. John Vice

   

   7 posts
   
   1/21/2016 1:01 PM

   We are in the process of getting information from golf management companies to help run our golf courses. Has anyone been thru this process of being 'taken over' by a management firm in order to help better run their golf course? We are a municipal that has 3 courses on 1 property. This place has been squeezed and drained to the limit over the past 4-5 years and now they are seeing the 3 courses we have as an asset and want to better it. Guys are scared already of losing their jobs because it is being discussed. No final decision has been made and we are only getting information together to see what fits us best. Thoughts/ideas/advice will help greatly.
   
   Bryan Vice
   Superintendent of The Willows
   The Golf Courses of Kenton County
   Independence, KY

   
   
   
   
2. Clay Putnam

   

   33 posts
   
   1/21/2016 2:01 PM

   Bryan,
   
   This is delicate topic and it's obviously a concern for the staff due to the unknown. This can be a very lengthy process depending on how your municipality decides to handle the "notice to bid". There are a few structures the muni can choose for your facility; Lease the entire facility, lease the F & B, hire a company to manage the entire facility, hire a company to manage specific segments of the facility, i.e., the F & B or maintenance. There are numerous details within each structure that should be considered before sending a "notice to bid" and before awarding a contract. You MUST make sure that the owner (muni) is protected while at the same time making the contract fair and equitable for all parties. The biggest mistake I see in RFPs or RFIs is the lack of detailed specifications that the contractor must adhere. This opens the door for the muni to receive numerous bids that are across the board in price and services provided thus making it impossible to make reasonable comparisons of the bids. Additionally, it is wise to provide as much information as possible to the bidding contractors to assure you are receiving accurate bids.
   
   I can go on at great length with the do's and don'ts. Feel free to IM or email me and I will be happy to give you my insight.

   
   
   
   
3. Trevor Monreal

   

   5 posts
   
   1/21/2016 2:01 PM

   John Vice said: We are in the process of getting information from golf management companies to help run our golf courses...Guys are scared already of losing their jobs because it is being discussed. No final decision has been made and we are only getting information together to see what fits us best...

   
   Based on what has been happening around here (AZ), the guys have good reason to be scared.
   Unless they are making $8 or less an hour or salaried at $35,000 or less annually.
   Good luck

   
   
   
   
4. Christopher Thuer

   

   101 posts
   
   1/21/2016 3:01 PM

   No personal experience with management companies. I am sure there are advantages to having a management company in certain situations and I have heard there are some very good ones.
   
   Our owner has brought this up in the past and he was not in favor of hiring a management company. A nearby course did so a few years ago with a company that manages several courses in the area and the fee was about $60,000. Our owner, a very successful accountant for a national firm and a former CFO of a major business, couldn't understand how his friend, the owner, could justify this extra expense when the course was already struggling to stay in the black and cutting every where that they could. The management company immediately cut expenses even more and the quality of the course went downhill as did their reputation. The management company is no longer running that course.
   
   In our situation our owner can't justify in his mind adding an extra layer of expenses when we already run a tight operation with one of the lowest operating budgets for the area.

   
   Chris Thuer, CGCS, Bear Slide Golf Club, Cicero, IN
   
   
5. Clay Putnam

   

   33 posts
   
   1/21/2016 4:01 PM

   Christopher Thuer, CGCS said: No personal experience with management companies. I am sure there are advantages to having a management company in certain situations and I have heard there are some very good ones.
   
   Our owner has brought this up in the past and he was not in favor of hiring a management company. A nearby course did so a few years ago with a company that manages several courses in the area and the fee was about $60,000. Our owner, a very successful accountant for a national firm and a former CFO of a major business, couldn't understand how his friend, the owner, could justify this extra expense when the course was already struggling to stay in the black and cutting every where that they could. The management company immediately cut expenses even more and the quality of the course went downhill as did their reputation. The management company is no longer running that course.
   
   In our situation our owner can't justify in his mind adding an extra layer of expenses when we already run a tight operation with one of the lowest operating budgets for the area.

   
   
   Chis addresses a couple good points. First, there are some very good companies out there in the golf world. Secondly, I have seen some golf courses that are on their last leg and they are so desperate that they will listen to anything that is told to them by "the experts". Most of these courses believe the management co will market and manage their course in a way the owner couldn't resulting in improved revenue and growth for the golf course. Sometimes this is true. Other times this is not the case as Chris has stated. In the end, if the golf course is running as lean as possible, marketing properly, is competitive for the local demographics, and is managed properly then a management group may not be the answer. The only way to find out is to address these items in the bid packet, which as I mentioned before is part of the needed details in the bid specifications.

   
   
   
   
6. Peter Bowman

   

   11 posts
   
   1/21/2016 6:01 PM

   John Vice said: We are in the process of getting information from golf management companies to help run our golf courses. Has anyone been thru this process of being 'taken over' by a management firm in order to help better run their golf course? .......
   
   Bryan Vice
   Superintendent of The Willows
   The Golf Courses of Kenton County
   Independence, KY

   
   
   Reads to me like you are "giving it up", rather than a management company "taking over."

   
   
   
   
7. Andy Jorgensen

   

   1 posts
   
   1/22/2016 6:01 AM

   Christopher Thuer, CGCS said: No personal experience with management companies. I am sure there are advantages to having a management company in certain situations and I have heard there are some very good ones.
   
   Our owner has brought this up in the past and he was not in favor of hiring a management company. A nearby course did so a few years ago with a company that manages several courses in the area and the fee was about $60,000. Our owner, a very successful accountant for a national firm and a former CFO of a major business, couldn't understand how his friend, the owner, could justify this extra expense when the course was already struggling to stay in the black and cutting every where that they could. The management company immediately cut expenses even more and the quality of the course went downhill as did their reputation. The management company is no longer running that course.
   
   In our situation our owner can't justify in his mind adding an extra layer of expenses when we already run a tight operation with one of the lowest operating budgets for the area.

   
   
   
   Exactly. Had this same conversation a few weeks ago with someone else who is a member at a course that is looking at a management company. We both agreed that if a club is already losing money, how is a management company going to change that without cutting expenses and deteriorating conditions in the process. Sure, short term may lead to a profit, but I bet within 3-5 years the company will be out and the owner is stuck with a cow pasture.
   
   That being said, I know of a few courses that are operated by a management company that have a "profit sharing" type program. Basically, management company operates course and covers expenses. One of them is set up so that the first $100k of profit goes back to owner, 50% of second $100k, and so on. So, for a management company to really make money, they have to make at least $200k in profits just to make $50k in their own pockets. However, owner still retains full interest in maintaining conditions and approves 100% of the capital expenses out of his own pocket.

   
   
   
   
8. Andrew Cross

   

   5 posts
   
   1/22/2016 7:01 AM

   My first superintendent position was with a management company. It wasn't all bad but we had a special setup. Very involved owner (first time owning a golf course and a non golfer) who wanted things done that would not fit in budget, so these went "below the line" (read not in the proper budget but out of owners acct). I was there 2 years the management company 3 or 4. We the staff on site daily cornered the owner and one point and explained to him we were not getting our "fees worth" to justify the management company as we had F&B, Golf Pro, GM, and Super all on site making pretty nice salaries and running the ship pretty well (at least my dept was). We were really only paying for them to keep books, which we could have done cheaper. The GM that hired me left and the new one wanted me out (she was not part of the original hiring process with the Management company), this is where I feel the management company would have been very helpful, they did not make any big decisions like firing a manager without full sit down discussions. (My owner was not even aware of the termination letter I received until I called him on my way out of the office). Has worked out much better for me in the long run but like said by guys above they can be good or bad. I would talk to Clay if you haven't I believe he has a little inside insight on this issue. Of the major companies Kemper is the only one where I've not heard guys curse them up and down, although I've never worked for them.

   
   
   
   
9. Stephen Ravenkamp

   

   1 posts
   
   1/22/2016 7:01 AM

   There are three areas where a good management company can be a real assest: economy of scale, availability of expertise, and marketing (name recognition). That being said, I echo Chris' comments about making sure you have a real tight RFP and well-defined metrics to measure their impact. Look at what you can do with your assets and what added benefits they can provide. There are only two ways a management company (or anyone) can "turn things around": either by increasing revenue or cutting expenses. Just remember, labor is frequently perceived as the "low hanging fruit" in cutting expenses.
   
   Steve Ravenkamp, CGCS
   Apache Stronghold Golf Resort
   San Carlos, AZ

   
   
   
   
10. Morozowsky Martin

    
    1/22/2016 9:01 AM

    Here is the problem in a nutshell:
    
    In the aftermath of the recession, individuals cut down discretionary spending on recreational activities, including country club visits and golfing. Because the cost of maintaining a golf course or country club remains fairly constant regardless of customer participation, a decline in the number of individuals visiting golf courses or paying club fees significantly threatens industry establishments. Moreover, large development of golf facilities in the 1990s and early 2000s created an oversupply of golf courses in the United States, further adding to industry competition and encouraging facility closure.
    
    The Golf Courses and Country Clubs industry has a moderate level of capital intensity; in 2015, the industry is expected to spend about $0.25 on capital for every dollar spent on labor. The nature of this industry requires firms to invest a significant amount of money into both capital and labor to maintain the properties they manage. Maintenance and other staffing requirements (e.g. kitchen hands, gardeners, groundskeepers, golf instructors and managerial and administrative staff) are key contributors to labor costs, which generally account for nearly 40.0% of industry revenue. Capital depreciation costs, which have historically hovered at 10.0% of industry revenue, come in the form of club house and restaurant construction, landscaping equipment, extensive irrigation systems and golf carts.
    
    Key Drivers:
    Economies of scale: Companies that operate many golf courses and country clubs can reduce average administrative and maintenance costs, which can help to increase profit.
    
    Access to highly skilled workforce: Clubs in this industry need a highly competent workforce, including greenkeepers, restaurant staff and golf professionals and instructors.
    
    Ability to pass on cost increases: Golf course and country club operators that are able to pass on cost increases are in a better position to boost profit.
    
    Economies of scope: Golf courses and country clubs that offer a wide variety of services can benefit from additional patronage.
    
    Ability to attract local support/patronage: The success of a golf course or country club is dependent on its ability to attract new members, retain existing members and maintain or increase levels of club usage by members and guests.
    
    Good Luck,
    Martin J. Morozowsky (MBA graduate student)
    Former Golf Course Superintendent

    
    
    
    
11. David Brandenburg

    

    3 posts
    
    1/23/2016 8:01 PM

    Good answer to the problem many clubs are seeing Martin. The only thing I would add is at the same time "individuals cut down discretionary spending on recreational activities" they found other things to do with their time and now by choice or by demand from other activities individuals spend less "discretionary time" on golf.
    
    We have to provide fun and enjoyment to convince current customers to play more. The challenge for clubs is what provides enjoyment for one customer annoys another.

    
    
    
    
12. John Vice

    

    7 posts
    
    1/27/2016 9:01 AM

    I appreciate everyone's comments and advice on this. A report from the National Golf Foundation was presented last night at our county meeting. During their visit, they really leaned strongly against going w/ a golf mgnt company, but last night was a different story. Rumors going that the higher up's got to him before the meeting due to this process already been in the works and all this is just formality. We are also a 54 hole facility that is being recommended to go to 36, w/ the sale of one 18 course, all profit going back into the golf course. As far as the staff is concerned, we are lost and unhappy w/ the direction of the facility. We've already lost some seasonal employees due to this uncertainty. With all this being said, I am still hopeful things will work out. Again, thanks for the advice and comments.

    
    
    
    
13. Steve Nelson

    

    0 posts
    
    1/27/2016 10:01 AM

    Hang in there. Seems like there are very few truly independent advisors out there anymore. The higher ups paying for the advice will make them tailor the report to suit their purposes.

    
    
    
    
14. Morozowsky Martin

    
    1/29/2016 10:01 AM

    Hi John,
    
    I feel your pain!
    
    Uncertainty is definitely not an easy feeling to stomach, but if you look at the external environment change is coming. My best advice is either help facilitate change so you understand your potential new role or sharpen up that resume. The reality of your situation is dictated by economics that are out of your control. It sucks!
    
    Best of Luck
    Martin J. Morozowsky (MBA graduate student)
    Former Golf Course Superintendent