(313) 455-7311
Plymouth, Michigan




INFLUENCES ON DECISION

Regardless of who made the decision, 11 different sources were referred to in making the decision. However, only two - past knowledge of the course or courses, and the recommendations of a friend, associate, or relative - seem to have any meaningful impact on the decision. None of the other sources come into play a role more than five percent of the time. Relatively speaking, the most frequently mentioned of these additional sources were the Michigan Golf Guide (4.5 percent), brochures (3.0 percent), and magazine advertising (2.5 percent).

Influence on DecisionPercent
Past knowledge32.9
Friend, Associate, Relative32.3
Michigan Golf Guide4.5
Brochure3.0
Magazine Advertising2.5
Magazine Article1.3
Newspaper Advertising1.3
TV Advertising1.1
Internet1.1
Golf Show1.0
Phone Book1.0

Reviewing the various sources, it is obvious that interpersonal sources rather than mass media are relied upon in making a decision as to what course or courses are to be played. This would seem to indicate the desirability of offering "get acquainted" golf packages to develop familiarly with the product through media which afford the opportunity for individualization. It also lends credence to having course personnel reinforce a favorable image in every contact with golfers so as to better establish and maintain mutually beneficial relationships which enhance golfer satisfaction and increase the likelihood of repeat patronage.

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ECONOMIC IMPACT

The second component of the project involved the development of an estimate of the economic impact of golf in the State of Michigan. An initial estimate was prepared based upon available secondary data and developed using the multiplier model which was formulated by the National Golf Foundation. This section of the report highlights the key issues in arriving at this preliminary estimate along with the revised estimate.

Operations of Daily Fee Golf Courses

Data on golf course operations were extracted from the National Golf Foundation's 1995 Edition of Daily Fee Facilities - Operating & Financial Performance Profiles of 18-hole Golf Facilities in the U.S. The report provides data drawn from representative golf facilities in nine climate regions developed for NGF by the Geography Department of Oklahoma State University. These regions are based on similarities in climate, turf grass, facility density, and cultural factors. Golf facilities in Michigan fall into two regions. In one region are the 184 daily-fee facilities located north of a parallel drawn through Bay City in Northern Michigan and the Upper Peninsula. The other region includes the 402 daily-fee facilities located south of the Bay City, parallel.

Revenues accrued from golf fees, cart rental expenditures for merchandise, and food and beverages. The cost of playing golf (green fees, cart fees, membership dues) was reported to represent 70.1 percent of total revenues for Northern courses and 65.9 percent for Southern courses. Merchandise sales (principally clothing, equipment, bags, and shoes) are 10.5 percent of total revenue for Northern courses and slightly more (11.7 percent) for Southern courses. Comparison of original estimates with confidential data on golf course operations revealed insignificant variations. Food and beverage sales are relatively greater for courses in Southern portion of the state as compared with their counterparts located in the region north of Bay City.

These figures were validated using confidential financial information provided the research associates by daily fee operations throughout the State of Michigan. Incorporation of actual operational data into the total estimates for the state resulted in a deviation of less than 0.05 percent and therefore deemed insignificant. One noted difference is that payroll expenses, notably for clubhouse personnel, are comparatively less as a proportion of revenue when a golf complex incorporates two or more courses at a single site.

The economic impact is estimated to be $506,598,400 for the economic activity represented by the annual revenues of daily fee facilities in Michigan. Direct economic impact was shown to be $327,007,600 while the indirect impact using NGF multipliers was estimated to be $179,590,800.

The predicted economic impact is not a comprehensive measure of the total economic impact of daily-fee operations in Michigan. As it does not include expenditures for lodging, food, transportation, and other purchases made off the course by golfers. Using data collected from the survey of golfers, in combination with the information obtained directly from golf courses on their operations, the range of off-course economic impact of golfers patronizing daily-fee courses in Michigan was estimated to be between $434.4 million and $1.2 billion. Thus, the total economic impact is estimated to range from over $950 million to approximately $1.7 billion annually.

In addition, the total property taxes paid annually by daily-fee golf operations is nearly $33 million. Employment at the 586 daily-fee golf facilities produced a total compensation of $184,160,000. Another significant economic contribution emanates from capital expenditures which could total as much as $200 million in the period 1996 to 2000. Daily-fee course operations produce approximately 10,000 year-round jobs and 15,000 seasonal positions.

Division of Golf Facility Revenues Typical Facility

Type of RevenueNorthernSouthern
Green fees, cart fees, membership dues70.1%65.9%
Merchandise Sales10.511.7
Food and Beverage14.017.9
Other (range fees, etc.)5.44.5

The typical facility in the Northern region, with $902,000 in revenue, operated on a net margin of 23.3 percent. The average total revenue for a Southern facility was $990,000 with a 25.9 percent net operating margin.

Major Cost Items
(000's of Dollars)
Typical Facility

Expense ItemNorthernSouthern
Payroll
Clubhouse$ 128$ 101
Maintenance132128
General/Administrative7267
Total$ 332$ 306

Purchases
Fertilizer$27$32
Merchandise7176
Food and Beverage10089
Water54
Leases (carts, equipment)109132
Advertising2114
Utilities4039
Insurance2222
Property Taxes$58$55
Other4745



Impact Analysis - Payroll
(000's of Dollars)
Typical Facility

PayrollNorthernSouthern
Total Payroll$ 332.0$ 306.0
40% spent in local area132.8122.4
Multiplier (1.9)252.32232.56



Purchases and Other Expenses
(000's of Dollars)
Typical Facility

Purchase CategoryNorthernSouthern
Advertising$ 21.0$ 14.0
50% spent in local area$ 10.5
70% spent in local area$ 9.8
Insurance22.022.0
50% spent in local area11.011.0
Other Purchases352.0372.0
Total$373.5$392.8
Multiplier (1.5)560.25589.2
Other Expenses47.0045.00
$ 607.25$ 634.2

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SUMMARY

A number of questions have been answered by this research project. The first is how can we characterize the typical golfer at a daily-fee operation.

The typical golfer at a daily-fee operation:

  • is a male aged 35 to 54, with an income of $75,000 or more who makes his home in Michigan.
  • mirrors the avid golfer as described by NGF. He will probably play 40 or more rounds of golf a year and is considerably more likely to have a USGA handicap than the average golfer across the United States.
  • will probably take at least one golfing vacation a year.
  • will play for pleasure as part of a foursome or group of foursomes composed of friends and/or business associates.
  • will drive to the daily-fee course.
  • will appreciate the natural beauty of the golf course as well as, comment favorably on the upkeep, challenge, and availability of tee times despite the universal criticism of slow play.
  • will tend to make the decision on where to play based on past experience or the advice of a friend, associate, or relative.

This research suggests several marketing-related considerations or opportunities.

The decision as to which daily-fee golf course to play is an individual one based largely on interpersonal communications with friends and associates. To take advantage of this:

  • More emphasis should be placed on customer satisfaction and developing relationships with customers. Loyal customers yield higher profits in that it is less costly to keep a customer than it is to acquire a new one; loyal customers tend to spend more; and loyal customers are positive sources of promotion.
  • More emphasis needs to be placed on planning golf vacations and organizing competitive outings.
  • More consideration needs to be given to making courses more playable.
  • Greater use of media such as direct mail that permit more of a one-on-one approach is a key strategy.

The Michigan golf market is literally and figuratively "driven" by the automobile. To expand the market, it would seem appropriate that:

  • Golf vacations be planned in terms of days available and the location of the prospective customer.
  • Developing arrangements with alternative forms of transportation - airlines, cruise ships and shuttle buses be employed.

Finally this study revealed three market segments that might be exploited. The first is those golfers in the lower income categories. As suggested in the report it might be wise to develop special pricing packages for periods of low pay. The second segment is those golfers below the age of 35. It would seem that the customer base could be expanded by perhaps special promotions directed at this target. The same can be said for the third segment, namely golfers in their sixties. Seemingly golf-vacation packages involving shopping, sightseeing, and golf would have some appeal.

The project included development of an estimate of the economic impact of golf in the State of Michigan. Using NGF data, results of the market study dealing with economic considerations, and confidential reports from daily-fee operations on operational revenue and costs, total economic impact was estimated to be between $950 million and $1.7 billion annually. This represents a significant increase in the original estimate of dollars which was developed using the NGF model. As such it indicates the tremendous economic contribution that golf makes to the state's economy. Dollars spent effectively with the intent of increasing play, especially among non-Michigan residents, should be viewed as an investment rather than an expense. Both the private and the public sectors will benefit accordingly.

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