Golfonomics 2020
If you’re a course operator in my neck of the woods, the snow is on the ground and 2019 is in the books… no one will be putting a peg in the ground on your first tee until well into 2020.
It’s that time of the year to sit back and THINK for a bit and formulate your plans for 2020 so you’ll have time to implement your changes before spring. Some would argue that December is the most important month of your year… good planning now could make a substantial difference in your results next year.
One decision that every Upper Midwest golf course operator faces this time of year is whether and how to adjust prices for the coming year. Having watched the behavior in the Minnesota and Wisconsin markets for the past eight years now, I’ve noticed that overall pricing in the industry has been relatively flat compared to most other forms of discretionary entertainment. I don’t have a controlled study… it just feels that way. While some operators consistently bump their prices up by $0.50 or $1 per round, others change price only every few years and many have been standing pat or even reducing prices during the past several years.
What changes will you make on your rate sheet in 2020?
While it’s been a long time since I took my last Economics class, I remember enough to know that pricing decisions should consider the laws of supply and demand so here are a few things for Twin Cities area course operators to consider:
#1 – Supply of green grass golf continues to slowly decrease
2019 was the first year in a long time where no Minneapolis-St. Paul Metro courses permanently closed, although several courses were down temporarily as a result of the turf damage inflicted by wonky winter weather last year. In 2020, it it looks like we’ll resume the steady reduction in golf supply. Hollydale (Plymouth – 18 holes) is slated for housing development, although some citizens are lobbying with the city to deny the rezoning. The Apple Valley Golf Course (9 holes) is being offered for sale to developers (also contingent on some zoning changes). Are there any other changes that you’ve heard about? Even our recent “new” courses have represented a reduction in supply, with both Royal Golf Club in Lake Elmo and Braemar in Edina representing downsizing from 27 holes to 18. People living in the core of the Metro have borne the brunt of this decrease… there are literally ZERO public access courses that are not municipally owned in Minneapolis, St. Paul and the first two rings of suburbs… and rumblings of some potential muni closures are beginning to circulate.
#2 – People have more money in their pockets
Employment is up. Salaries are up. Tax rates are down… sort of (because Minnesota and Wisconsin are relatively high tax states, the Fed reductions had less of an impact here). The market is up. Consumer confidence is up. People have a little more spending capacity and may not be quite as price sensitive as they were a few years ago. Have you checked the menu prices in all of those trendy new restaurants popping up all over the Metro?
#3 – Demand for golf is through the roof (!?)
Recent surveys of Millennials indicate that the younger generation is in love with golf… almost 90% say they plan to play more golf in the future. Oh, wait… I just made that up. As an industry, we have some work to do with that younger generation.
But, here’s a stunning quote from a Pioneer Press article of a few years ago by Tad Vezner that indicates all may not be lost for the golf industry…
“The ‘Roaring Twenties’ of the 20th century will become the ‘Retiring Twenties’ of the 21st. Starting in 2020 and lasting through 2030, for every one person of ‘working age’ added to the Twin Cities metro area population, there will be 21 people added over the age of 65, according to Metropolitan Council data”.
And what do retired people have in common? They have a lot of time on their hands and they like to golf. This data would indicate that there may be a demographic uptick in the demand for golf for the next decade. Golf course operators have important work to do to convince the next generation that golf is the greatest game ever invented, but the boom in retirees provides some breathing room to figure that out.
So… what does all that mean for your 2020 pricing policies? That’s your job to figure out, but if I were in your shoes the macro level indicators would embolden me to be a little more aggressive in raising prices over the next few years.
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