How Clubhouses are Sucking the Financial Life out of Golf Courses

How Clubhouses are Sucking the Financial Life out of Golf Courses21Comment5ShareShare How Clubhouses are Sucking the Financial Life out of Golf Courses1
Michael A (Mike) Kahn
Michael A (Mike) Kahn
Most Experienced Golf Course Business Authority

Pass this on if you feel your golf club can benefit.

Here are two 'generic' examples.

Golf Course Number 1 is in Missouri. Golf Course number 2 is in New York State. All numbers are rounded. Sorry, but I cannot name these examples. I'm only trying to make a point.

Both golf courses are quality 18-hole layouts with practice ranges. Each is semi-private offering daily green fees and carts. Golf course number 1 has a 3,500 square foot clubhouse with pro shop, grill room and cart storage underneath. Golf course number 2 has a 12,000 square foot clubhouse with cart storage and pro shop in two separate buildings. Properties are similar size (acreage).

Golf Course Number 1: A 3,500 square foot clubhouse and an 18-hole golf course in Missouri. Annual sales from all sources: $700,000. Net earnings after all expenses: $200,000.

Revenues
From golf activities, green fees, cart fees, range fees, membership: $500,000.
Clubhouse concession sales, burgers, beer, Titleists, etc.: $200,000
Expenses
Course maintenance expenses: $300,000
All other expenses: $200,000 (Cost of sales, Taxes, Payroll, Supplies, etc.)
Net operating income: $200,000
Golf Course Number 2: A 12,000 square foot clubhouse with an 18-hole golf course in New York State. Annual sales from all sources: $700,000. Net losses after all expenses: ($100,000).

2. Revenues

From golf activities, green fees, cart fees, range fees, membership: $500,000.
Clubhouse concession sales, burgers, beer, Titleists, etc.: $200,000
2. Expenses

Course maintenance expenses: $300,000
All other expenses: $500,000 (Cost of sales, Taxes, Payroll, Supplies, etc.)
Net operating income: ($100,000)
If golf course number 2 had only a 3,500 square foot clubhouse the $100,000 in losses would have reversed to become a $200,000 gain. Why?

The 12,000 clubhouse at golf course number 2 required more staffing, more heating and cooling, more daily maintenance, much higher taxes, larger inventory, more fuel to run the kitchen, coolers, freezers, utilities, G&A - on and on. In fact, the 8,500 additional square feet of clubhouse added over $300,000 in annual expenses to the operation compared to golf course number 1.

On any given day, golf course number 1 needs only one or two employees to sell green fees, serve burgers, and answer the phone. One a similar day, golf course number 2 needs a cart jockey, and a pro shop clerk in the pro shop. Then the main clubhouse needs a server and a kitchen cook. When the bar opens, add a bartender.

BTW: Bartenders and cooks command a much higher hourly wage than clerks and servers.

When the crew closes clubhouse number 1, they vacuum the floors, tidy the counters and tables, check the restrooms, and turn on the alarm and lock the doors. The crew in clubhouse number 2 will tidy their work areas, then a cleaning crew comes in to tend to the 8,500 square feet of wasted space (99% of the time).

I have been advising the principal of the NY golf course to level the huge clubhouse, probably at a cost of $150,000 to $200,000. I point out the annual tax saving of over $20,000 can justify the cost of demolition. I also point out he cost of a 3,500 properly designed clubhouse, which could run $1.5 million, can turn a $100,000 loss to a $200,000 profit justifies the project.

Anyway. Big beautiful golf course clubhouses. They are sucking the financial life out of golf courses. Time to get back to pure golf with a beer and a sandwich.

Mike