You may have noticed that golf isn’t exactly a cheap sport, and not just because good quality golf equipment is expensive.
Greens fees, memberships, and other expenses on the course can add up fast. Nowadays, even playing golf on a public course doesn’t exactly rank among the cheapest hobbies. Given these high expenses on the course, you may be wondering what type of profit a golf course can make.
In the article below, we will cover all you need to know about how much profit golf courses make. Plus, we will look at the value of golf courses based on their revenue and how golf courses can increase revenue. We have a lot to cover so let’s get started!
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How Much Profit Do Golf Courses Make?
There are several ways in which a golf course can make a profit. The most obvious is by selling green fees, cart fees, club rentals, and annual memberships. Courses that get people out on the course day in and day out have the best chance of success.
Food and drink in the bar and restaurant area are another way in which a golf course can make money. Most golf courses also have a pro-shop attached where players can buy all sorts of golf gear and equipment. Golf lessons are another money maker.
Every golf course has a licensed golf pro working on site, and it’s not uncommon for these golf pros to offer lessons, which can be lucrative for both the pro and the course.
Most golf courses also operate on-site driving ranges too, which can be a great way to bring in extra revenue.
So, how much does a golf course make? Well, it varies depending on the course. Naturally, some courses make more than others, and some even make a loss.
Due to it being an expensive sport to play, you might think that golf courses make bundles of cash. However, the reality is that they’re incredibly expensive to run, and thus the profit margins are relatively small.
Typically, golf courses, at least the ones that are profitable, run on a profit margin of between 5% and 10%.
How Do Golf Courses Stay Profitable?
The simple answer here is that not all golf courses do stay profitable. The reason for this is there simply isn’t a one size fits all model.
First and foremost, if a golf course is going to be profitable, lots of people must want to play it. This means that golf courses must be in good condition. If a course is worth playing, golfers will show up to play.
To ensure golfers want to play the course, the owners of the course must invest in it to keep in in proper shape.
The age of a golf course will also determine its profitably. Courses that were recently built will need to make the appropriate investments in the golf course for success. Whereas, older, more establish courses will not have the same start up costs as an ongoing expense.
What Is The Annual Revenue and Profit Margin of A Golf Course?
Again, there’s no answer that can be applied to all golf courses. There was a survey carried out back in 2010 looking at revenue generated by golf clubs across the US.
According to that survey, on average, a private 18-hole golf course generated a revenue of around $3.3 million. A seemingly astronomical amount. However, courses reported an average expenditure of around $3.2 million, so relatively speaking, the profit margins are slim.
As mentioned above, generally speaking, golf courses can expect to make between 5% and 10% profit margin, while some even run at a small loss.
How Much Is A Golf Course Worth?
Like the answers above, it depends on the course and a variety of other factors. Many business valuations will be based off a multiple of revenue or earnings.
Revenue multiples range from 1-1.6 times annual revenue for golf course valuations. Therefore, a course making $1M dollars per year would be worth $1M to $1.6M.
Valuing a course on revenue alone can be inaccurate. As discussed above, a course may make millions of dollars in revenue while struggling to break even.
Valuations typically will also consider the earnings of the course. Earnings multiples for golf courses range from 8 to 16 times earnings. A course making $100K will be worth between $800K and 1.6M dollars.
Another factor to think about when valuing a golf course is the land it inhabits. Golf courses located in populated areas are prime targets for real estate projects.
Golf courses are huge plots of undeveloped land and can fetch large sums of money from real estate developers.
Given the high economics of developing land for housing, golf courses can sell for millions of dollars depending on the location of the course.
What Are The Largest Expenses Of A Golf Course?
There are multiple expenses when running a golf course, mainly buying the materials and products required to keep a golf course running.
Courses are huge pieces of land that require lots of regular special attention, which means purchasing a variety of things such as seed, fertilizer, pesticides, tools, and other equipment.
The biggest expense for a golf course is, undoubtedly, its staff. No golf course can run without people.
A golf course needs greenkeepers, a general manager, golf pros, bar staff, and beverage cart workers.
There’s no getting away from it, golf courses must employ a significant number of people to function properly, and that means paying lots of salaries and hourly wages.
How Do Golf Courses Make Money In The Winter?
For golf courses to make money during the winter, they need to offer an incentive to play. The reason for this is simple. Fewer people are interested in playing golf in winter conditions.
Perhaps the biggest incentive and way in which a golf course can attract the custom necessary to remain profitable during the winter is reduced green fees.
More people are likely to play if the golf is considerably cheaper.
For many golf courses, especially ones that offer membership, the winter is the perfect time to offer promotions in the bar/restaurant, meaning that even if they’re not playing, members have a reason to attend.
What Can Golf Clubs Do To Increase Profit?
With golf course profit margins being on the slim side, and with many courses affected by less golf during the winter months, other options are being explored.
More and more, we’re seeing golf courses open up hotels on site, giving customers another reason to visit besides the golf.
Lots of courses cater for functions such as weddings and parties too, again adding an alternative revenue stream to golf.
Additional options are incentives such as happy hours or allocated times during the week, when the golf is cheaper.
For example, offering players special offers such as reduced green fees, four-ball discounts or even free items such as golf balls upon purchasing a green fee can increase the playing traffic.
Each of these things can help to increase profits in the long run.
Final Thoughts
Do golf courses make money? You bet. But there’s more than meets the eye. While many courses command a hefty green fee and are dominated by golfers carrying expensive gear, owning a golf course is by no means a get-rich-quick ticket.
Just because green fees and memberships are expensive, as are the items in the pro shop, it doesn’t mean that all golf courses are raking it in.
A golf course is an extremely expensive business to keep, and although many courses do indeed make a profit, it’s not the figure that many may assume.
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