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| Golf, unlike most businesses,
has a certain mystique about it, that has mislead many developers,
public and private, into the erroneous belief that any golf course
is profitable and or necessary for the well being of any given
community. But like most mystical situations, nothing is
further from the truth.
Golf can and should be, at the very least, a "break even" experience between the income, expenses and debt service. Of course there are extenuating circumstances that justify a golf course despite its lack of economic viability. However, a properly designed, professionally managed and expertly maintained golf course should be profitable, as well as provide a quality experience for the golfer. Determining the parameters of an economically viable golf course, is the work of an experienced, creditable and independent third party. It is important for all developers to "pencil out" their own deals, but the decision to move forward and develop a golf course, should be preceded by a Golf Course Feasibility Study, by a creditable and independent professional--with no conflict of interest. So what should be the first step of a prudent developer? A Feasibility Study. Why? Because a feasibility study that GIA produces, tells the client and the lender(s) the answers to vital questions that will ultimately lead to prudent investment. Those questions include:
A golf course feasibility study should begin with an accurate estimate of the demand in the market to be served by the proposed course. The analysis should profile all courses in the market, including those under construction and planning. Next, the market characteristics are determined including pertinent demographics like average age, household income, public and private golf course preferences. The study should also attempt to determine the viability of the proposed site--are the soils appropriate; does the property drain well; are there any environmental problems, endangered species or wetlands issues; are there sufficient water sources available; and what will it likely cost to construct the course, + or - 15%. A ten year proforma is then developed that projects the net operating income. The revenue sources are described in detail--rounds, greens fees, range income, food and beverage sales and pro shop sales. Maintenance and Administration expenses are estimated as well as those of the pro shop. Next, the net operating income is then capitalized by the interest rate that the developer believes he must achieve to continue the development. Finally, the analyst should clearly state the principle findings, conclusions and recommendations. GIA's success in the golf industry, is directly tied to its knowledge, experience and most importantly integrity, in both the golf market and sound investment practices, which assures its clients of a complete and candid economic review and ultimately the optimum development scenario. Of the 17,000 golf courses in America, not more than 3,000 are managed efficiently and those 3,000 well managed courses are predominately the result of sheer coincidence. The reasons are numerous, but the most encompassing reasons are the industry wide shortage of competent management personnel and the fact that many owners are either absent or indifferent. Accordingly, GIA has developed from its 35 years of golf course management, industrial engineering and economic experiences, an Operational Auditing division. Our comprehensive Operational Audits include:
Our fee for the complete analysis is usually 5% or less of your "bottom line" improvement. Our experience in industrial engineering provides incisive investigations, sensitive but comprehensive analysis, and our national exposure, exponentially increases our knowledge and therefore our utilitarian value to our clients. Call 772-299-4035 for more information. |