December 3, 2021
Significant headwinds facing Golf Club Committees and Managers
As Clubs begin preparing for AGMs over the coming weeks, it is critical that Committee members and Club Managers understand some of the headwinds facing them, and in particular the cost implications around the maintenance of their golf courses.
It’s no secret that golf participation has been soaring throughout the pandemic. A European Golf Participation Report, just published by the R&A and the European Golf Association (EGA), indicated that there are over 10.6 million golfers now enjoying the sport across Europe, a healthy increase from the 7.9 million last monitored for 2016.
In Ireland, playing numbers jumped by 219,000 to 540,000 in 2020, and while this growth is continuing, and welcomed by the industry, it also creates new challenges for Clubs, not least meeting the expectation of this increased footfall in terms of course conditioning and the all-round golf experience; neither of which has been made easy given ongoing logistical issues around the world.
“Supply-chain” has become a buzz word in 2021 and is much higher in everyone’s consciousness. Many articles in recent weeks and months have reported the significant challenges facing Ireland’s economy and businesses over the short to medium term; transportation costs, labour availability, wage inflation, rising energy costs and higher raw material prices, much of it relating to the perfect storm created by the pandemic and Brexit.
So, what is the likely impact for Golf Clubs in Ireland?
Firstly, machinery and equipment; the major manufacturers are warning of delays in shipping, whilst prices across the board have jumped by an average of 20% in 2021; with further increases likely to follow over the coming months. One manufacturer recently notified the market of a 9-month lead time for any new orders so clubs need to be well developed in determining their requirements for new equipment operating next season.
The availability of spare parts has also been an issue which has resulted in more down time for equipment. While difficult to do, it is sensible for Course Managers to keep a stock of parts on hand or work with suppliers that have such a facility in place.
As any motorist will know, the price of both diesel and petrol has soared in recent months. Golf courses will typically consume 8,500 – 11,000 litres of fuel per annum and it is critical to shop around now rather than going to the same supplier the Club has used for years.
Clubs rarely do this and pay a significant premium as a result. While it is difficult to lock in a specific price due to the volatile nature of the value of petrol and diesel, by requesting quotes from several companies, Clubs can be assured they are securing best available rates.
The same challenges are being experienced when it comes to obtaining inputs and fertilisers essential for maintaining golf courses. The most dramatic examples of rapid inflationary pressure are borne out with the cost of urea, the most commonly used form of nitrogen in summer. The below graph demonstrates the rise in prices with no easing expected. This level of increase is driven by many factors including the rising cost of gas, used in the production of urea and transport costs.
To offset these increases and minimise wastage, Course Managers need to consider their treatment plans for 2022 and calculate their product requirements with precision. It is prudent that Clubs place orders now to meet their requirements so that the chemicals and fertilisers they require are available when they need them, and the financial impact of the inflation pressure is minimised. This may place a significant cash burden on the business so exploring all financing options is important.
While the measures outlined above can help mitigate some of the impact Golf Clubs and businesses will face in 2022, disruption is completely unavoidable. The reality facing the industry is that Golf Clubs are going to have to pay more to employ staff, heat and light clubhouses, purchase equipment and maintain their golf courses.
If Clubs and their members want to maintain the standards they have enjoyed in recent years, the cost is going to increase substantially. The price charged for membership and green fees is one lever at the Committees disposal, which can help offset some of this impact.
When preparing for upcoming AGMs, Committees will likely need to consider its revenue mix and the potential for increasing prices to provide the Club with the financial resources it needs to cope with the inflationary pressure across the organisation. The alternative is a dilution of standards which is a slippery slope that inevitably leads to dissatisfaction amongst members and a bigger threat to the Club’s main source of income.