Virginia Golfer May / Jun 2020 | Page 15

Member Clubs club’s profitability. Even though a golf course or club pays the management entity a monthly fee for its services, these companies are often able to significantly cut costs, allowing courses and clubs to achieve higher profits. Increased revenue, and ultimately higher profits, may also result from enhanced marketing campaigns that golf management companies are able to offer through their more sophisticated and comprehensive resources. Moreover, because these entities tend to manage many different golf courses and clubs, they often provide the opportunity for players at one club in the management company’s network to play at the other clubs also in that same network, either for free or at a discounted rate. This perk alone provides an opportunity for growth at membership-based clubs due to the increased access players have to a wider collection of golf courses. CONS - Although these positives are intriguing, there are numerous disadvantages associated with the use of golf management entities. One major consideration is what a golf course or country club may lose when the golf management company begins to reduce costs. Often, costs are cut by removing highly paid and popular individuals at the course or club and replacing them with less-qualified individuals. These employees may be willing to work for as little as half the salary of the person they replaced, but may also offer much less value to the golf course or club as his or her predecessor. In general, it’s extremely difficult to cut costs without sacrificing value delivered to the consumer, and the golf industry is no different. Sound strategic management frequently involves creating value for the consumer through uniqueness. Accordingly, there is no cookie-cutter management system that will lead to the success of every course or club. Just because a particular management structure works well at one establishment does not mean that the same system will thrive at another. A management structure that works well at a high-end country club + - Considering the use of a golf management company may very well be intriguing for various courses and clubs, but it is critical for the golf course or club to fully analyze the totality of the circumstances prior to taking any such action. is not necessarily going to provide the same positive impact at a struggling municipal course. This may lead to difficulties when a management company is keen on operating under one particular system and is unwilling to adapt based on its environment. Furthermore, many clubs simply aren’t in a position to afford the services of a management company. The annual fees for golf management companies often total more than $100,000. This is certainly no small annual expense for a private club, and even for an above average public course charging $75 green fees, it would take about 1,330 rounds just to cover this cost. Ultimately, at many courses, annual revenues are not high enough to justify the use of a management company. These same courses may very well be operating on a shoestring and the management company may not be able to achieve sufficient savings to offset their fees. A final issue that accompanies the use of golf management entities is one that is mostly present in the private golf and country club realm, and is likely the most controversial consideration for these types of clubs. That major issue is the extent that the members of a private club lose control of the decision-making when a management company is introduced. The day-today operations of most private golf and country clubs are run by general managers, who are heavily influenced by a governing body such as a board of directors. When golf management companies take over at these types of clubs, the members lose decision-making power, particularly in regard to major financial decisions. However, this shift in power is not always a bad thing. While many private clubs have both effective and efficient boards of directors, some clubs have power struggles at the board level. Board members often make, or certainly influence, decisions based on their personal interests, rather than focusing on what is in the best interest of the club as a whole. When important decisions are instead made by a golf management company through a more neutral lens, conflicts at the board level are likely to be reduced. CAREFUL CONSIDERATIONS Whether the use of a golf management company would work well for your course or club largely depends on a variety of considerations. Is your course public or private? Are there significant conflicts at the board level? Is the club in financial position to handle payment of the management company’s annual fees? Is the course or club one in which the potential management company might be able to combine cost management and leadership to promote increased profitability? Considering the use of a golf management company may very well be intriguing for various courses and clubs, but it is critical for the golf course or club to fully analyze the totality of the circumstances prior to taking any such action. Will MacIlwaine is an associate at the law firm Whiteford, Taylor and Preston in Richmond. vsga.org M AY/J UNE 2020 | V IRGINIA G OLFER 13