The Pellucid Perspective - February 2013 - (Page 14)

MARKET FOCUS which shows a dramatically different picture. Since 2000, for some reason, demand has eroded significantly in this market, off 24% cumulatively or 2.4% annually which, combined with the continued 2% annual supply growth, results in cumulative supply dilution of nearly 40%! (-2% annual rounds decline, above the national average of -1%, coupled with +2% annual continued supply growth). The net effect is a huge amount of dilution since 2000, due to equal measures of too much supply and too little demand. It means that the average facility in Kansas City has suffered a 50% reduction in revenue, driven by some combination of rounds or rate decay when compared to the 1990 baseline (chosen semi-arbitrarily by Pellucid as a period of economic health for the majority of US golf facilities). The average facility has throughput of roughly 23K rds/yr, well below the national average before factoring in climate and daylight influences. The more accurate measure is the market’s 42% utilization rate, which is significantly below the national average. This means that, after factoring out the weather impact of a less-than-12 month season, the market’s average golf “factory” runs at 20% lower throughput efficiency vs. the average US course. On the revenue productivity side, the market generates just over $0.7M per public regulation length EHE, which is 26% lower than the Top 25 Markets average (driven by a blend of both lower absolute annual rounds coupled with very affordable Greens Fees). After factoring that for weather influence, the market’s Greens Fee Revenue per Available Round (RevpAR = Greens Fee Revenue/Available (Capacity) Rounds) registers at $13 or slightly below the Top 25 Markets’ average of $16. As we field questions from operators in this market and potential investors alike, the unanswered question to date is, “What’s driving the dramatic decline in rounds?” While we don’t yet know the answer to that question (but we have a few surveys lined up for people who want to know why from the consumer’s mouth), the other variables in the equation appear to be more easily solvable. The supply build is correcting itself (and several operators like Great Life & Fitness are aggressively taking interest in this geography), there is a golfer base which is healthy and affordability doesn’t appear to be the issue. If participants could figure out what is driving the golfer base away (losing golfers or losing frequency or both?), then programs to address the rounds decline could be instituted and a path back to prosperity plotted. In the meantime, I don’t know how so many operators have held on this long in the face of what the numbers say and that dramatic 50% dilution factor since 1990. From my perspective, this geography is either a golden opportunity for investors with financing or it’s kryptonite. For those already in the market, all you can possibly do at this point is hang on. Given the scale and time horizon for any type of meaningful correction, however, were I a gambling man, I’d look for the door at the earliest available opportunity. n GOlF ClUb liCEnSinG Movie time: License required A s private golf clubs continue to search for social programming that will increase members’ use of the club, movie nights are an increasingly popular way to draw families to the facility and increase the club membership value. Clubs which offer child care also frequently include videos as a more passive element in the day’s activities. What clubs may not know or may choose to ignore, however, is that there is a license required for such showings, and clubs ignore it at their own peril. At its booth during the recent Club Managers Association of America convention in San Diego, Motion Picture Licensing Corporation (MPLC) representatives made attendees aware of the need to comply with motion picture copyright regulations. Whether clubs are showing movies to the entire club membership during Family Movies Nights, Dive-in Poolside Movies, Screen on the Green or other venues, or providing children’s videos in a child care setting, a license is required. And, while it is possible that a club might escape the MPLC’s vigilance, once they have been made aware of the licensing requirement, penalties for continuing to ignore it can range anywhere from $750 14 The Pellucid PersPecTive for an “inadvertent” violation to $150,000 for what a court might term an “egregious” violation of the copyright regulation. MPLC Licensing Manager Eileen Korte said that upon becoming aware of a violation, either through their own investigation, one of their independent field representatives, or occasionally through a tip from a club member or member of the public, MPLC will advise the club that they are in violation and provide them with an opportunity to purchase licensing from MPLC for movie or video showings. MPLC offers a reduced licensing fee to CMAA member clubs of either $275 per year for a child care only license or $825 per year for club-wide coverage. Non-CMAA member clubs pay $330 for child care licensing and $930 for club-wide coverage. Homeowners associations in golf course communities which do not require club membership by all homeowners may also need a license if their members are eligible to attend movie showings at the club. Clubs with questions about the policy can either visit the MPLC web site at or contact them at 800462-8855. Forewarned is forearmed. —Jim Dunlap February 2013

Table of Contents for the Digital Edition of The Pellucid Perspective - February 2013

The Pellucid Perspective - February 2013
Part-time golf courses: A concept worth trying?
Bankruptcy courts protect course revenues from lenders
Show notes from 35,000 feet
Volunteers may not be free
January golf weather impact: Down...but not unexpected
Golfers not goin’ to Kansas City
Movie time: License required
Concert Golf Partners buys CC at Woodmore in D.C. Area
Bishop’s tenure as PGA President promises deep breaths of fresh air

The Pellucid Perspective - February 2013