Some Golf Economics

Two years ago, Lake Forest, a local club, offered a two-year weekday pass for $200, with cart fees extra. That led me to wonder how a golf course made money, and whether it might actually be profitable for a course to almost literally give away the greens fees. My speculation at the time was that because the marginal cost of each additional player is very small, any money they made off cart fees, food, etc. was where the actual profit accumulated.

This year, Lake Forest has a new deal which I think offers some further insight into how a course makes money. There now are two different kinds of membership at Lake Forest: Must Ride and Walking.

Deal 1: Must Ride Membership – Two year membership for $228, but you must pay $13 ($7 for nine) for a cart whenever you play—even if you don’t take the cart.

Deal 2: Walking Membership – Two year membership for $895

I think it’s reasonable to assume that the $228 for a two year membership is designed to cover some basic part of daily costs for those players. If that’s the case, then the $667 difference between the Must Ride Membership and the Walking Membership represents the expected income from cart fees. At $667, expected cart fee income is three times that of expected greens fee income. With this in hand, it’s pretty easy to see why many courses insist players ride. All the money is in the carts. It’s also clear why caddies have disappeared from the landscape.

For the Must Ride Membership, the fee is $114 a year, and if you play 20 rounds annually that works out to $5.70 a round.The cost of a round with the Must Ride Membership is thus $5.70 plus $13 or $18.70.

Walkers pay $447.50 a year—and based on the 20 rounds a year standard, $22.37 a round. That’s more expensive than the Must Ride Membership.

The average actual rounds for player, however, likely is much higher than that. One guy I played with last May had twenty rounds under his belt in the spring alone. At 40 rounds a year, however, the walker pays $11.18 a round while the rider pays $15.85. Because the cart fees are constant, as more rounds are played, the advantage swings to the walker.

For my part, Lake Forest has lost my business. I was willing to give them $200 for two years, given that I expected to play ten times a summer at that location (I like variety, so I play at a number of different courses each season). That two year membership made my cost $10 a round. Ten walking rounds now would cost nearly $45 each. Given that walk-on fees last summer were $25 mid week that’s a terrible deal. My rounds at Lake Forest will plummet because there a couple of courses in the area where I can walk for under $20. They’re not quite as nice as Lake Forest, but they’re “good enough.”

I’m curious as to the effect of the new pricing structure on course use. Lake Forest was very busy the last two years. Each time I went out (always as a single), I was paired with a group and open slots were not to be found. Interestingly, nearly every group I played with had at least one fellow with a $200 two year pass. Season pass holders were giving Lake Forest quite a workout.

I’ve also decided that I’m going to change my Golf Association of Michigan membership from Lake Forest to the local off-course pro shop, Miles of Golf. I’ll essentially be a golfer without a home course, and Miles is around the corner while Lake Forest is across town.