Tel: (954) 721-7710 Email: [email protected] April 23, 2013
Craig Rack, General Manager Sand Trap Management Colony West Country Club 6800 N.W. 88th Ave Tamarac, FL 33321
RE: Review of Operations for Colony West Country Club
Dear Craig:
The following letter and report comprise a summary of the National Golf Foundation’s (“NGF”) review of the City of Tamarac’s (“City”) golf program, specifically related to Colony West Country Club (“Colony West CC”). The review is based on NGF market research, visits to the property, and information gathered from Colony West staff and City officials in March and April 2013, as well as data collected from previous engagements in the area dating back to 2009. The review included a strategic look at the City’s overall municipal golf offering, with specific review of the lease in place for the operation of Colony West CC. NGF has considered the present physical condition of both golf courses and the clubhouse facility at Colony West, the market environment in which this facility operates, alternatives for continued operation, and concluding with NGF recommendations for maximizing the economic potential of municipal golf within the City.
This NGF review was managed by Richard Singer, MBA, NGF’s Director of Consulting Services, with assistance from Ed Getherall, NGF’s Director of Operations. Our activities conducted in preparation of this report included a visit and inspection of the subject Colony West CC, review of the area market, meetings with key golf course staff, phone meetings with City of Tamarac staff, and visits to several other area golf facilities that were deemed to be directly competitive with the subject Colony West CC. This executive summary letterD is presented R to provide A an “at-a-glance”F T summarization of the full NGF review, detailing the main findings and NGF recommendations for the City of Tamarac in the continued operation of Colony West CC. Additional details and support data can be found in the full body of our report and its appendix. OVERALL SUMMARY Following is a brief summary of NGF findings on Colony West Country Club in April 2013. Full detail and elaboration of these items can be found in the attached full report from 2013. Key findings include:
Colony West CC has the basic design features and location to be a successful public golf course. However, as it sits today (April 2013), the course does have several mitigating factors that prevent it from achieving its maximum economic potential, including:
NATIONAL GOLF FOUNDATION CONSULTING, INC. A Subsidiary of the National Golf Foundation 1150 SOUTH U.S. HIGHWAY ONE, SUITE 401, JUPITER, FL 33477 (561) 744-6006 FAX: (561) 744-9085 www.ngf.org . Aging infrastructure, especially related to turf conditions and the clubhouse. . Lack of adequate practice amenities (no driving range). . Burdensome lease structure that lacks flexibility to adjust payments from the lessee to the City to reflect declining market conditions. . Declining golf market regionally and nationally due to increased competition, aging population, and changing demographics. The Colony West Country Club asset is deteriorating and will need substantial investment in the coming two years to bring the facility to its highest level of condition and functionality. In this report, I have recommended and detailed $870,000 in improvements to the property, mostly related to the golf course playing area (turf, practice area, cart paths, etc.). The lease in place at Colony West CC appears to be favorable for the City in that it is providing a level of professional management and there is guaranteed income to the City ($100,000 in 2012) at a time when many other municipal golf courses are operating with negative net income. This has implications for the continued operation of the facility as the lessee has to make cuts in operating and maintenance expenses in order to meet the lease payment. The operator spent $25,000 on capital upgrades in 2012 and is required (via lease) to invest $190,000 in 2013-14. The City should understand that the external golf market is not favorable for strong economic performance of Colony West CC. The local market is crowded with golf courses, the national golf market is stagnant (or in decline), and the expense to operate golf facilities is increasing rapidly (faster than the rate of inflation). Locally, the NGF Consulting estimates for golf participation and frequency in the Tamarac market are lower than standard, mirroring a modest income demographic profile. Furthermore, most golf facility operators in this market reported a significant drop-off in rounds played between 2005 and 2012, with virtually no 18-hole golf course in this area hosting over 40,000 rounds annually, a figure that was considered a low rounds total a decade ago. The local area market shows a generally favorable household / supply ratio, indicating there may be an opportunity to stimulate more demand from local residents through an enhanced beginner / player development program at Colony West CC. Colony West CC has seen significant declines in rounds activity and revenue since 2007, with reductions in both being more severe than the overall local and national golf market. The total top-line revenue of over $2.4 million (from all sources including catering)D represents R a 48%A decline F from levelsT earned five years ago. The City has collected very little “bonus” lease income in the last year as the facility has not exceeded the $3.0 million “target” in revenue. Given the reality of the local market environment, the condition and location of facilities and the present downward pressure on golf revenues, NGF does not expect that the $3.0 million “target” in revenue is realistic for this property in the 2014-2016 timeframe. There is no “easy answer” for Colony West CC in operational structure or alterations to the lease model currently in place. The City could: . Self-Operate the facilities directly, but have to add golf management expertise to the City staff, take on the cost of labor, and absorb high capital costs to fund needed improvements. . Create a concession agreement with private vendors for golf management, pro shop, food/beverage, and/or maintenance, resulting in multiple agreements and diverging private interests.
2 . Hire a management company to run Colony West Country Club for a guaranteed fee paid to the management firm of between $100,000 and $150,000. The private company would then have to improve revenue and/or reduce expense by that amount just to retain the present position. . Continue to Lease the property outright to a private firm in exchange for a fixed annual lease payment, ceding full control of the operation. However, the City should understand that the trends in municipal golf in 2013 reflect the reality that very few municipal golf facilities are operationally profitable and a declining number of qualified vendors are willing to pay a fixed annual lease to a municipality, in addition to capital investment.
RECOMMENDED COURSE OF ACTION The NGF recommendation to the City of Tamarac for Colony West Country Club is three-fold: (1) continue to lease Colony West CC, with adjustments in terms; (2) invest in improvements to Colony West CC; and (3) enhance the overall marketing and promotion of Colony West CC, specifically targeting demographic groups with lower demonstrated golf participation, such as juniors, minorities and women.
Basic Oversight and Structure The NGF team is recommending that the City of Tamarac continue to operate Colony West Country Club through a lease agreement with a private entity. However, the NGF recommends the type and details of the lease agreement be modified to create more of a “win-win” scenario for the City and its golf lease partner. NGF recommends the following terms be incorporated into a modified lease agreement for Colony West Country Club:
Be a 10-year agreement. Include a small base management fee, perhaps as low as $10,000, plus an incentive of 10% to 30% of total revenue over $2.5 million (inflation-adjusted each year). Continue with capital program as is. Encourage an aggressive golf lesson/learning program, perhaps with assistance from the City’s Recreation Department. Physical Improvements D R A F T In addition to the basic recommendation described above, the City and Sand Trap Management should work to make physical improvements to the golf course playing area. The conditions observed by NGF during the March 2013 site visit were less than ideal and would be difficult to market aggressively. Both the Champ and Glades courses at Colony West CC are in clear need of upgrade to turf conditions and other ancillary items such as cart paths and practice amenities. Improvement in these items should lead directly to an increased rounds capacity that can be accommodated, thus potentially leading to increased revenue. While the total estimated cost of these improvements ($870,000) is high, over time, the improvements to the facility should improve the operational efficiencies of the operation and allow the golf course to improve rounds and revenue.
Operational Recommendations NGF has also prepared a list of additional recommendations that should be helpful in growing Colony West CC business and lowering expenses. These recommendations are based on the lead consultant’s experience and expertise and stem from a limited review of the operation and facilities. We also recognize that many of these items are already being enacted. Our
3 recommendations include improvements to marketing, enhancement of electronic capabilities (website, email, etc.), promotion of bilingualism, improved branding, enhanced programming (tournaments, outings, leagues), improved signage, enhanced player development programs, and an increased emphasis on improving female golf participation.
CASH FLOW RESULTS The NGF has prepared an estimate of Colony West’s performance at various rounds played totals (‘as-is,’ modest growth and best case), assuming expected 2013 inputs for revenues and expenses. The results of this review shows that if operated in the same basic structure and condition that exists at the club today, the facility would continue to produce losses on operation up to and through the 60,000 rounds per year total (11% higher than actual in 2012). Considering all expenses, the annual net income is not likely to be positive until rounds played totals reach between 65,000 and 67,000, or an amount that is 25% higher than actual 2012 rounds. Put another way, it is clear that the Colony West Country Club operation, as it currently situated, is not sustainable for the long term, as it is only capable of sustaining basic day-to-day expenses, let alone the lease to the City and other taxes. It is also certain that the Colony West CC operation will not be able to cover any large-scale capital cost reduction and it is likely that the facility will operate with continued losses for the foreseeable future. SUMMARY Colony West CC is a good quality golf facility that can be an appropriate fit with the City of Tamarac. NGF Consulting recognizes the fiscal challenges faced by Sand Trap Management in the Colony West CC operation and reminds the City that these challenges are common in the golf facility industry in 2013 and not at all unique to Colony West. As the City moves forward in creating a new plan for Colony West CC, understanding that the level of rounds activity needed to meet all club obligations AND make a fixed lease payment to the City is not likely to be achieved in the near future, and this rounds level is not being achieved by other area public golf courses. Therefore, it may be in the best interest of both the City and its golf course operating partner to adjust the terms of the lease to more of a participatory, or percentage lease that can be adjusted downward in years with lower activity and upwards in years with better performance. Of course, this should all be contingent on the lessee implementing all industry best practices and working together with the City to maximize facility revenues.
Craig, I very much appreciate your confidence in the National Golf Foundation and its consulting services, and I have enjoyed the opportunity to be a part of your planning for Colony West CC. I am hopeful that the informationD and recommendationsR A I have F provided T will assist you and City officials in your upcoming decisions on this golf property. I am happy to talk with you or any other City staff or Council member to discuss our report, or other matters related to golf facility operations or market/industry trends. I look forward to your questions and I hope you enjoy reading our consulting report.
Sincerely,
Richard B. Singer Director of Consulting Services [email protected] 561.354.1642
4 Review of Golf Operation For Colony West Country Club Tamarac, FL
Prepared For: City of Tamarac 7525 N.W. 88th Avenue Tamarac, FL 33321
And Colony West Country Club 6800 N.W. 88th Avenue Tamarac, FL 33321
D RPrepared A By: F T
1150 South U.S. Highway One, Suite 401 Jupiter, FL 33477 (561) 744-6006
April 2013 Table of Contents
INTRODUCTION ...... 1 Purpose ...... 1 Background...... 1
SUBJECT FACILITY – COLONY WEST COUNTRY CLUB...... 2 Site Overview...... 2 Championship Course ...... 2 Glades Course ...... 2 Inventory of Facilities – Colony West...... 4 Golf Course – Championship Course...... 5 Golf Course – Glades Course ...... 6 Clubhouse / Banquet Review...... 6 Colony West Country Club Upgrade Considerations ...... 7 Review of Golf Operations ...... 9 Colony West Lease Contracts in Place ...... 9 Oversight and Staffing ...... 11 Marketing and Fees...... 12 Other Operational Issues...... 14 Facility Performance and Data Analysis...... 14 Rounds Activity...... 14 Revenue Analysis – Colony West Country Club...... 15 Colony West Country Club Financial Summary...... 18 Summary – Colony West Country Club...... 19
EXTERNAL FACTORS AFFECTING THE OPERATION OF PUBLIC GOLF FACILITIES ...... 20 Basic Demographics and the Local Economy ...... 20 Demographic Analysis...... 20 Key Economic Factors...... 21 Golf Market Supply andD Demand IndicatorsR ...... 23A F T National Trends in Golf ...... 23 Local Golf Demand...... 27 Visitor Golf Demand ...... 27 Golf Supply Factors...... 28 Golf Course Market Supply / Demand Summary...... 29 Local Competitive Golf Market ...... 29 Competitive Public Access Golf Facilities Map ...... 30 Summary Information ...... 31 General Findings – Local Supply ...... 33 External Factors Summary...... 35
REVIEW OF MANAGEMENT OPTIONS ...... 36 Self-Operation by the City ...... 36 Advantages of Self-Operation...... 36 Disadvantages of Self-Operation ...... 37 Self-Operation Discussion ...... 37 Concession Agreements ...... 37 Food and Beverage Concession...... 37 Pro Shop Concession...... 38 Maintenance-Only Concession ...... 38 Advantages of Concession Agreements...... 38 Disadvantages of Concession Agreements...... 39 Discussion and Policy Implications ...... 39 Full Service Management Contract ...... 39 Advantages of Management Contracts ...... 40 Disadvantages of Management Contracts...... 40 Discussion...... 41 Operating Lease ...... 41 Advantages to Leasing ...... 41 Disadvantages to Leasing...... 42 Discussion...... 42
NGF RECOMMENDATIONS FOR CITY OF TAMARAC ...... 43 Basic Oversight and Structure...... 43 Structure Considerations ...... 43 NGF Recommendation...... 44 Specific Physical Recommendations...... 45 Operational Recommendations...... 46 Marketing Plan ...... 46 Player Development ...... 48
COLONY WEST COUNTRY CLUB BASIC OPERATIONS AND PRELIMINARY FINANCIAL PROJECTIONS ...... 49 As-Is Economic Performance...... 49D R A F T Cash Flow Results...... 51 Limiting Conditions...... 51 Market Share Conclusions ...... 52
APPENDICES...... 53 Appendix A – Golf Course Life Cycle ...... 54 Appendix B – National Rounds Played Report ...... 55 Introduction
PURPOSE NGF Consulting was retained jointly by Sand Trap Management, Inc. and the City of Tamarac, Florida to assist in evaluating the current condition and future market potential possibility of the City-owned Colony West Country Club. The City is considering options for the future of this facility and seeking to better understand the realistic economic potential of the facility given market and site realities. The results of this market and facility analysis will be used to help determine the appropriate course of action.
BACKGROUND Colony West Country Club (“Colony West CC”) is a large community golf facility that includes two separate 18-hole golf courses, maintenance barn, and a large multi-purpose clubhouse facility (pro shop, restaurant, bar, snack bar, and banquet facility). The facility is now owned by the City of Tamarac and operated via lease agreement with Sand Trap management.
Under consideration for this report are the present condition of Colony West Country Club and the status of the greater Tamarac / West Broward area public golf market. The purpose of this market and facility analysis is to provide the City and club with an evaluation of the local golf market and an estimate of the overall economic potential of Colony West CC as a City-owned municipal golf course.
The key issues evaluated in this report include:
Status of the local golf market. The present condition of Colony West Country Club and requirements for improving the facility to its optimal level. Economic potential of Colony West Country Club given its current status and market environment. Defining the optimal operating structure for the facility (City employees, contracts, leases, management agreement, etc.). The realistic net revenueD potential R of the CityA golf facilityF and estimateT of what, if any, City subsidy may be required for continued operation.
Field activities conducted in completion of this consultant’s report included meetings with key City of Tamarac staff (City Finance Director), an inspection of the subject Colony West Country Club, meetings with the on-site facility General Manager, collection of materials to aid in the understanding of the area golf market, visits to several of the area’s competing public golf facility operations, and review of other materials and records related to Colony West Country Club and the City of Tamarac.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 1 Subject Facility – Colony West Country Club
The subject property is Colony West Country Club, a 36-hole golf resort facility located in central Tamarac, but on the very western edge of populated sections of Broward County, Florida. The facility is owned by the City of Tamarac and operated via lease agreement with Sand Trap Management, Inc. Colony West CC is operated as an affordable, high-quality public-access golf course that serves year-round and seasonal residents of Tamarac, as well as tourists and visitors to the area. All of the property used by Colony West Country Club is deeded for use as an “open space,” and change in use of the site can be accomplished only through referendum.
SITE OVERVIEW Colony West Country Club is located due west of Ft. Lauderdale, approximately 10.5 miles from the Atlantic Ocean beaches. The site is bounded by McNab Rd to the north, University Dr to the east, 61st St to the south and Nob Hill Rd to the west. In addition to the two 18-hole golf courses that form Colony West CC, there are numerous residences within this rectangular property, with the golf courses and ancillaries totaling 262 acres. The two golf courses are split between the east and west sides of N. Pine Island Rd, which bisects the property with the Championship Course located east and the Glades course located west of this roadway.
Access to the site is generally convenient and provided via N. Pine Island Rd (a primary North- South roadway through Tamarac) with entrance to the golf clubhouse and parking on the east side. The property is approximately 2.5 miles from the nearest interchange with the Sawgrass Expressway at Commercial Blvd. To the east, the Florida Turnpike interchange at Commercial Blvd is approximately 4.5 miles away. In all, Colony West CC is convenient from a large section of the western Broward County area, although the basically linear East-West layout of the area places almost the entire potential customer base in areas east of the facility.
Championship Course The property has a basic rectangular configuration that is approximately 4/10 of a mile x 9/10 of a mile. The site is fixed within its boundaries and any expansion or significant renovation or alteration of the property would be impossible. The site is almost entirely bounded by residences, with only a few exceptions.D R The golf clubhouse,A F restaurant, T and parking area are located on the eastern portion of the property along with the Championship Course. The property has a total of about 200 parking spaces for both the clubhouse and golf course. This amount appears sufficient for most days of activity, but on busier weekends in season and/or during large golf events, the total can be less than is needed.
Glades Course The shorter, 18-hole Glades Course is located on the western side of the Colony West Country Club property, on a smaller parcel of property and within a section of the property with a greater density of residences. Golfers playing the Glades course are required to cross N. Pine Island Rd for beginning and ending the round. The very western edge of the Glades Course (bounded by Nob Hill Rd) is less than ¾ of a mile from the Sawgrass Expressway, or the western boundary of populated Broward County.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 2 Google Earth image showing the Championship Course and the Colony West CC clubhouse and immediate surrounding elements. The tight configuration shows the limits on options for expansion or renovation and the proximity of residences to the golf course playing area. The immediate proximity of local residences requires that Colony West CC have someD form of barrierR for separation,A eitherF fencing orT some natural barrier.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 3 Google Earth image showing the Glades Course site and its much smaller size in relation to surrounding residences. The size, configuration, and proximity to residences limit any potential re-development opportunities,D R either as golfA or other F site uses. T INVENTORY OF FACILITIES – COLONY WEST The Colony West Country Club includes the following elements:
Two separate 18-hole golf courses on 262-acres. 20,000 square foot (sf) clubhouse on two levels 6,500 sf cart storage facility 500 sf “Snack shop” kiosk 6,800 sf maintenance facility
The above mix of elements offers a good variety for a City golf course, allowing for appeal to all segments of golfers from beginners to seasoned players. The 18-hole Championship Course dates back to the 1970s and was designed to be a difficult PGA Tour golf course. The shorter,
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 4 18-hole Glades Course offers a more “beginner-friendly” golf design that is less expensive and is popular with less-skilled golfers and walkers. Colony West Country Club does not have a driving range or practice area, which places it at a competitive disadvantage in a number of areas vs. the competition.
Golf Course – Championship Course The NGF team has identified the following key elements for consideration on the Championship 18-hole golf course at Colony West Country Club:
The Championship Course at Colony West was built and designed in 1971 by Robert Von Hagge and Bruce Devlin specifically for a PGA Tournament Event - the Jackie Gleason Classic, which is now the Honda Classic. The original design was a monstrous par 72, 7,553 yards long with numerous bunkers. Before opening in 1971, the course was “softened” somewhat with a reduction in length and removal of many bunkers. The course has golf design features and conditions that are typically associated with high quality golf, capable of commanding at or above median market rates. The course has attractive and challenging features that make it desirable for golfers. The golf course is relatively flat, with many holes bounded by surrounding residential elements. Water is in play on 13 of the 18 holes and there are 66 total sand bunkers. Colony West Country Club has also been rated by the Florida State Golf Association to be the toughest and longest par 71 in Florida, and by the Florida Business Journal to be the toughest public course in South Florida. The Colony West Country Club golf course plays 7,001 yards from its longest (non- professional) tee and to a par of 71. A total of five tees are on the course, allowing for play from 7,000+ yards to 4,400 yards from the most forward tee. The course has a USGA slope rating of 142 from its Black tee, which represents that the golf course is approximately 28% “harder” than the standard slope of 111. The other shorter- length tees are also well above the “standard” for difficulty, meaning that the Championship course at Colony West is considered to be much harder for the average player. While this has some appeal to more serious golfers seeking a challenge, the overall marketability of harder courses is limited, as only about 10% of golfers can be considered as “good players.” The key defining featureD of the ColonyR West A CC Championship F T course is the numerous water holes on the course. While this adds to the aesthetics, it also contributes to the difficulty of the course for less-skilled golfers. The Championship course has several road crossings and there are also three bridges. The course does include an estimated 95% coverage with asphalt cart paths, a feature that is desirable for achieving a maximum volume of rounds. Colony West CC has adequate on-course facilities such as restrooms and drinking stations. There is a good quality men’s and women’s restroom station located proximate to 5th. 6th, 14th, and 15th holes for convenience. The Championship course possesses excellent drainage, a feature that can help to achieve the maximum rounds of golf. The lakes on property are all inter-connected and in use for both drainage and irrigation.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 5 Although the layout and design of holes is a positive for the Championship Course at Colony West Country Club, the golf course is more than 40 years old, and the City and operator should expect that upgrades will be needed in the near future. Key upgrades that are likely to be required in the coming short term (within 3 to 5 years), and are noted by NGF later in this section. NGF was told there is considerable non-golf use of the property by residents of adjacent communities. This was observed by the NGF consultant personally in the March 2013 inspection. As this use tends to interfere directly with golf play, there may be some risk of incidents and/or injury to these trespassers.
Golf Course – Glades Course The Glades Course at Colony West offers a very appealing low-fee golf experience on 18 shorter and easier golf holes with fewer hazards. However, this course has not seen much in capital investment in the last 15+ years. The NGF consultant has identified the following key elements for consideration on the 18-hole Glades Course:
The Glades Course is located on the west side of N. Pine Island Rd and requires golfers to cross this busy thoroughfare without benefit of a bridge, tunnel, or traffic light. No incidents of interaction between cars and golf carts were reported to NGF. Glades Course is an 18-hole golf course with a par of 65 (72 is “standard”). The course would be classified as “executive” by the golf industry. The course measures 4,207 yards from its longest tee and includes eight par-3 holes, nine par-4 holes and a single par-5 hole. The layout is generally open, with limited tree cover inside the property. Water is in play on eight of the 18 holes, but there are very few sand bunkers. The course has golf design features that make it appealing to mostly beginner and/or other less-skilled golfer segments, especially senior citizens. This golf course features a layout and conditions that are typically associated with a golf course expected to command lower than median market rates. The course was in generally acceptable condition, but it is expected that new investment will be required in the coming years, including improvement to greens, cart paths, and irrigation.D R A F T The layout is such that the golf course does not have “returning nines,” meaning that golfers seeking to play only nine holes will find themselves as far away from the clubhouse as can be on this site when completing the 9th hole. This may limit the appeal of the Glades Course to 9-hole players, but the site is fixed and there is nothing that owners/operators can do. The Glades Course has no on-course facilities such as restrooms and drinking stations, other than portable restrooms that are in need of replacement.
Clubhouse / Banquet Review The support structures at Colony West CC include the large 16,000 sf clubhouse facility that features two levels. The structure dates back to 1981 and is showing its age in several key areas. However, all elements appear to be fully functional with no urgent problems reported to NGF. NGF recommends that upgrades be completed to the golf course (turf, cart paths and
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 6 irrigation) in higher priority to the clubhouse. At the time of the NGF inspection in March 2013, the roof of the clubhouse facility was undergoing renovation/upgrade at the expense of the City of Tamarac. Key issues on each key functional area include: Lower Level Clubhouse – The space includes the golf pro shop, the Sand Trap Restaurant and Lounge, and two small meeting rooms. Key features: . The pro shop has adequate space but is presently under-utilized with a small inventory of items for sale. The club reports a lower-income clientele that does not support the merchandise sales operation. Still, the course has generated about $50,000 in merchandise sales, although this has declined significantly in the last five years (more later in this chapter). The location is ideal with proximity and visibility of the 1st, 9th, and 18th holes, and the cart staging area.
. The lower level also includes restrooms and two meeting rooms – the Cypress Room seats 90+ and the Fairway Room seats 45.
. The Sand Trap Restaurant and Lounge has become a popular gathering spot for golfers and non-golfers alike. The restaurant includes seating for up to 50+ at tables under the new (1998) gazebo and another 30+ at the bar. The downstairs kitchen is large and functional, with no urgent equipment needs. The club is reporting upwards of $766,000 in food and beverage revenue in 2012, a figure that is very high for a public golf course (more later in this chapter).
Upper Level Clubhouse - The upper level of the Colony West Clubhouse includes the banquet kitchen and the large Blue Heron Room, with seating for 250+ patrons. This is the main banquet space for the facility and includes large windows facing the golf course, a separate small bar, and a dance floor. This section of the clubhouse has an awkward entrance presentation, with an attractive portico and circular driveway, but an entrance directly to a very small lobby with stairway leading up to the Blue Heron room. Snack Bar Area – The snack bar area is a small (500 sf) snack window allowing golfers to purchase a small selection of F & B items outside, with convenience for the turn between the 9th and 10th holes. This setup is ideal for a public golf course and can help maximize F & B revenue. Adjacent to the snack bar is an additional catering facility and area, addedD in 1998. R A F T Colony West Country Club Upgrade Considerations At the time of the NGF inspection of Colony West CC in March 2013, the facility was observed to be in less than ideal condition despite the peak season time of year. Based on NGF observations, interviews with operators and review of reports, the City should expect that upgrades will be needed in the near future. Key upgrades that are likely to be required in the short term (within 3 to 5 years) are listed below in priority order: Turf – The turf on both courses at Colony West GC is 40+ years old and never has truly been fully renovated, especially on the Glades Course. The club reported problems with conditions, and some form of upgrade or replacement is likely to be required in the next few years. NGF Estimated cost = $250,000 to $300,000 for the Championship Course and $100,000 for the Glades Course.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 7 Cart Paths – While the Championship course does have a “wall-to-wall” cart path system, some upgrade and improvement will be helpful. A full cart path system may allow for carts to return to the course with “cart path only” service to help maximize rounds. More study should be conducted to estimate the cost to complete (NGF has observed other golf facilities spending a standard of $20 per linear foot (lf) of asphalt cart path and a ‘typical’ golf course will have 20,000 (+/-) lf for full coverage of an 18- hole golf course). NGF estimates that new cart paths at Colony West GC will cost $240,000 for the approximately 12,000 linear feet needed to complete a full upgrade to the cart path system for both golf courses. Perimeter Boundary Fence - Related to the above-noted use of the golf course property by non-golfers. NGF identifies a need to keep the golf course separated from its adjacent residences. As such, a good perimeter barrier should be installed, although it could be a more visually appealing natural barrier as opposed to a chain- link fence. The primary areas of need include the areas surrounding holes #13-15 and hole #4. NGF Estimated cost for a chain link fence in selected areas = $20,000 to $30,000. Practice Area Development – Colony West GC would benefit from adding some form of golf practice amenity to help combat the lack of a full driving range. The approximately 2-acre area just to the north of the cart storage building may offer an opportunity to add a new practice chipping and putting green. This can help attract new beginners and possibly add lesson revenue to the facility. NGF Estimated cost = $100,000 to $120,000. Clubhouse Upgrades – Colony West GC would benefit from general “face-lift” improvements to the clubhouse, including upgrades to the furniture, fixtures, and lighting, especially in the Blue Heron banquet area. Upgrades to the audio-visual- network capabilities of the Cypress and Fairway rooms can also help attract more corporate and/or tournament golf business, as well as more banquets and parties. NGF Estimated cost = $60,000 to $90,000. Irrigation – The irrigation system in place dates back to the 1970s, or well beyond the expected useful life of approximately 30 years. The club reported problems with pressure and site coverage, which is common in older systems. Further, the outdated system is not fully efficient, leading to some wasting of water that could be improved with a more modern system. NGF Estimated cost = $400,000 to $600,000. D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 8 Estimated Cost and Priority of Physical Improvements The estimated cost to complete the above noted facility improvements are detailed in the table below. The figures do not include any lost revenue that may occur due to business disruption during the period these projects are ongoing.
Colony West Country Club Needed Physical Improvements Highest Highest Priority Items Estimated Cost Turf Upgrade / Replacement $400,000 Cart Path Program 240,000 Perimeter Fencing 30,000 Practice Area Development 120,000 Clubhouse Upgrades 90,000 Sub-Total – Most Immediate $870,000
Irrigation Improvement Program 600,000
Total Colony West CC Upgrades $1,470,000
REVIEW OF GOLF OPERATIONS As noted, Colony West Country Club opened in 1971 as a private, member-owned golf club. The new clubhouse was added by members in 1981. By 1986, the club had fallen on hard times and ultimately the members sold the club to the Rack family, which owned several golf courses in the Elizabeth, Pennsylvania area (near Pittsburgh). In December 2011 the Rack family sold the golf course land to the City of Tamarac, but retained the day-to-day operation of the facility via lease agreement and under a new entity called Sand Trap Management, Inc.
The City of Tamarac does not operate a separate “Golf Division,” nor does it include the Colony West CC operation within its City parks and recreation program. As such, the golf course lease is administered by the City and its Financial Services Department. The City’s website does not mention Colony West Country Club as being one of its facilities. Colony West Lease ContractsD in PlaceR A F T Colony West Country Club is operated via contract between the City of Tamarac and the private entity Sand Trap Management, Inc. (“Sand Trap Management”). In addition, Sand Trap Management has two contracts in place for its golf course maintenance equipment and power carts. Key aspects of these agreements include:
Sand Trap Management, Inc. A Lease agreement between the City of Tamarac, Florida and Sand Trap Management, Inc. (SMI) for the purpose of conducting the day-to-day operations and maintenance of Colony West Golf Course. Term is 3 years, from December 2011 through December 31, 2014, with option to renew for one five-year term.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 9 Beginning on March 1, 2012, the Annual Lease Fee due to the City was set at $100,000, to be paid quarterly. Beginning March 1, 2013 the annual fee was raised to $125,000; and beginning March 1, 2014 to $150,000. Beginning Annual Lease Fee March 1, 2012 $100,000 March 1, 2013 $125,000 March 1, 2013 $150,000 Paid quarterly in equal installments
The City will deposit the annual lease fee into the Capital Escrow Account. In addition to the annual lease fee, annual revenue share payments will be calculated on all monies received from the use or operation of the leased premises: % of Gross Revenue Gross Revenue Range 6% $3,000,000 – $3,500,000 11% $3,500,001 – $4,000,000 15% $4,000,001 – $4,500,000 20% >$4,500,001
Monthly Capital Contribution payment is 1% of gross revenues for 2012 and 2013, and 2% of the gross revenues for 2014 and following. Year % of Gross Revenue 2012 1% 2013 1% 2014 and following 2% Due before 10th of each month; held in interest bearing account
In addition to the monthly capital contribution, Lessee to make capital improvement fund contributions to the capital escrow account: Year Amount May 1, 2013 $80,000 DMay R 1, 2014 A $110,000 F T In the first year of the lease, Lessee was to make an initial capital investment of not less than $25,000 for golf carts, signage, course supplies, irrigation/drainage upgrades, re-grassing tees and greens, bunker renovation, cart paths, clubhouse renovations. “Capital improvements” funds may be used for equipment, improvements, repairs, and replacements with useful life of at least one year and cost more than $5,000. Lessee may modify fees and pricing in its sole discretion. Lessee may offer free golf rounds as part of marketing. City designates a representative which coordinates and administers the lease. Lessee responsible for annual tax payment of $54,000. Lessee pays for utilities, trash removal.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 10 Lessee responsible to maintain the premises, repair, and replace items. City will make any structural repairs or replacements of the clubhouse, and other permanent structures. Lessee provides all necessary insurance. No assignment or sub-lease of premises.
The agreement between the City and Sand Trap management would be classified as fully “turnkey” as the lessee is responsible for all operations directly, with no City staff in operations or maintenance of the facility. The lessee controls all revenues and expenses, subject to payments to the City. The lessee is responsible for all maintenance, utilities, license fees, and labor expenses.
Greens Equipment Lease PNC Equipment Finance dated April 12, 2012: . 3 Toro Greensmaster triplex riding mowers with 11 blade kit . 1 Toro Greensmaster triplex riding mower with 8 blade kit . 1 Toro Groundmaster rotary trim mower Golf Cars Lease Between Colony West Golf Club and Yamaha Golf Car Company dated July 20, 2010 and extending to February 15, 2015. 26 cars for $8,245.30 monthly November through May; $4,947.18 June through October (“Seasonal” lease).
Oversight and Staffing All staff at the facility is employed directly by Sand Trap Management, with a full-time General Manager and additional on-site staff. Colony West CC has reported several PGA golf professionals within the ownership structure and one GCSAA Class A golf superintendent. The NGF estimates a comparative total of 31 full-time equivalent (FTE) positions in the Colony West Country Club staffing:
Pro Shop / Admin / Clubhouse Staff (10.67 Total FTE) . General Manager (FT) . Director of Golf (FT)D R A F T . Administration Manager (FT) . Other (3 positions FT) . Cart Barn manager (FT) . Additional Pro Shop staff (4 positions PT) . Cart Barn staff (7 positions PT) Golf Maintenance Staff (13.0 FTE) . Golf Superintendent (FT) . Assistant Super / Spray Tech (FT) . Additional maintenance staff (10 positions FT) . Additional maintenance staff (3 positions PT)
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 11 Food and Beverage Staff (7.33 FTE) . Catering Director (FT) . Catering Assistant (FT) . Chef (FT) . Bar Cart (FT) . Restaurant Staff (5 positions FT) . Restaurant Staff (3 positions PT) . Bar Staff (3 positions PT) . Snack Bar Attendant (PT)
The “standard” golf facility in the U.S. southern climates (12-month golf season) employed a total of 22 FTE personnel in 2012, with 12 in golf maintenance, 7 in pro shop/operations and another 3 for clubhouse/F & B. This level of staffing represents a reduction from 2009 figures as a result of declining income and the need to reduce expense. As a result, many golf operations around the country are operating with very lean staff. Based on the NGF review of the Colony West Country Club staffing, and in comparison to golf industry norms, it appears that Colony West CC is operating with a staff that is sufficient to sustain operations at a high level.
Marketing and Fees Colony West Country Club is engaged in several initiatives that are designed to increase overall sales at the facility including the MVP summer membership card and maintenance of the Club website. At present, the facility did not indicate that it is employing a dedicated marketing specialist responsible for growing all facets of the business (golf, restaurant, and banquets). The club operators also reported few activities undertaken by the City to improve awareness of the Colony West facility. It appears to NGF that operator activities related to marketing the facility are centered around the website and on-line marketing, which is generally appropriate for public golf course operations in 2013. The key activities/programs underway at Colony West Country Club are summarized below:
Website - There is no doubt that the Internet is the most cost-effective form of advertising outside of word-of-mouth. Colony West Country Club has an outstanding website (http://www.golfcolonywest.com), and it is clear that the site is receiving appropriate attention and that the site is updated appropriately. NGF Consulting notes that the well-designedD websiteR is easilyA found F when searchingT the Internet for “Colony West CC” or “golf Tamarac” or “Tamarac golf courses”, etc. The Colony West CC website also includes information on many of the most important elements of a golf course website including up-to-date fees, a map of the golf holes, pictures of the facility, directions for out-of-town golfers, notice of specials and programs (both golf and restaurant), and contact information. Golfers may book tee times on-line through the Fore! Reservations Technology. Email – NGF Consulting encourages an active email campaign. The email program should have two parts – one for locals and one for tourists. The local program would promote specials and could be used to help fill up the tee sheet at the last minute. The tourist program would be used to help book future business. This can also help in cross marketing with hotels in the area for summer/fall golf packages. Organized Events – Organized events (commonly referred to in the industry as “Tournaments” or “outings”) are a great way to enhance overall business at a golf facility. These events encourage use by golfers who otherwise may not use a facility,
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 12 and these events are typically accompanied by high ancillary spending, providing the ancillary amenities are adequate. Therefore, a high volume of organized events is desirable as long as the events are played at a fee rate comparable to, or in excess of the average play rate for no-events. Colony West CC presently lists a relatively small overall schedule of organized events, although greater attention appears to be paid in 2013 with a Thursday women’s league, Saturday scrambles, and Wednesday Night “putt off.” MVP Card – Available to Florida Residents and Tamarac Residents for $40, the MVP Card entitles the holder to the Colony West MVP Rate on both courses through September 30th 2013, plus a discount of 4.5 % on all purchases. Holders can purchase a $100 gift card for only $75 on the day of MVP purchase, and holders get one free round of golf. Fee Structure – Colony West CC utilizes several discount programs, especially on- line (pre-book) discount green fees that are becoming more common in the golf industry. The restaurant, pro shop, and golf courses all participate in various advertised specials on the club website. A summary of Colony West CC fees for the Champ and Glades courses are shown in the tables that follow. More detail on revenue generation and competitive market fees appear later in this report.
Champ Course Fees Peak Season 2013 Weekday Weekend Time Regular Internet MVP* Time Regular Internet MVP* 7-11am $64.98 $54.98 $46.98 7am-12pm $54.98 $45.98 $39.98 11am-1pm $54.98 $45.98 $39.98 12pm-2:30pm $44.98 $39.98 $34.98 1-2:30pm $44.98 $39.98 $34.98 2:20-4pm $29.98 $26.98 $24.98 2:30-4pm $29.98 $26.98 $24.98 4-5:30pm $24.98 $21.98 $19.98 4-5:30pm $24.98 $21.98 $19.98 5:30pm-close $15.98 $15.98 $15.98 5:30pm-close $15.98 $15.98 $15.98 *MVP Card $99.99 + tax All regular rates are plus tax D R A F T Glades Course Fees Peak Season 2013 Everyday Time Regular Internet MVP 7am-12pm $29.98 $25.98 $21.98 12pm-3pm $26.50 $22.50 $18.98 3pm-close $19.98 $17.98 $15.95 *MVP Card $99.99 + tax All regular rates are plus tax
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 13 Other Operational Issues Other key issues related to the Colony West Country Club operation observed by NGF Consulting in this review:
Non-Golf Use of Property – As noted previously, locals coming from adjacent residences are using the golf course property for various activities (dog walking, jogging, or just passing through), creating a hazard for golfers and danger to trespassers. Some form of perimeter fencing has been recommended. POS System – Colony West CC is using the “Fore! Reservations” point-of-sale (POS) system for the golf operation. This system is widely used in the golf industry and is adequate for this operation. Signage – The signage (directional and informational) to Colony West Country Club is poor and/or non-existent. Additional signage can help improve access for golfers from various points within the City of Tamarac.
FACILITY PERFORMANCE AND DATA ANALYSIS From the perspective of the City of Tamarac, the operations of Colony West Country Club are very simple, resulting in approximately $106,000 in lease income to the City in 2012. The gross revenues earned at the two facilities are generated for the lessee in the form of golf fees, rentals, merchandise sales, concessions, and special events. Direct expenses to operate the facility are borne by the lessee and divided into golf course, food/beverage, clubhouse, administrative, and cost of goods sold. The following paragraphs summarize the activity and revenue inputs for Colony West Country Club.
Rounds Activity At the time of the NGF Consulting review, both golf courses had been experiencing a decline in golf rounds played from a recent peak of over 100,000 total rounds in 2007. In the last six years the club has been experiencing a considerable decline in rounds activity on both courses, although the decline on the Glades Course has been more severe. Figures provided by the club show a decline of over 46% in total facility rounds between 2007 and 2012, with a 34% decline on the Champ Course and a 59% decline for the Glades Course. Average rounds per 18-hole golf course in the total U.S. now stand at about 31,000 rounds per year, with 37,000 rounds per year for golf courses in the “Sunbelt” region of the U.S. (12-month golf market). Average decline in rounds played for golf coursesD across R the U.S. A has been F around 12.5%T since 2007.
Colony West Country Club Rounds 2007-2012 2007 2008 2009 2010 2011 2012 Championship 50,403 52,281 48,473 37,824 34,187 33,128 3.7% -7.3% -22.0% -9.6% -3.1% 3.7%
Glades 50,546 42,404 41,921 31,784 26,097 20,940 -16.1% -1.1% -24.2% -17.9% -19.8% -16.1% Combined 100,949 94,685 90,394 69,608 60,284 54,068 % Change -6.2% -4.5% -23.0% -13.4% -10.3% -6.2% Source: Sand Trap Management, Inc.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 14 Capacity Issues A golf course’s theoretical capacity can be determined mathematically by multiplying the number of available tee times (utilizing only the first tee as the starting hole) by the maximum number of players in a group, usually a foursome. This measure, while not realistic for any golf course, results in a total available inventory of golf rounds of 224 rounds per day and approximately 80,000 rounds per year in a 52-week golf season. A more realistic measure, a golf course’s actual capacity takes into account the loss of tee times for weather, unplayable conditions, cancellations, no-shows, groups of less than four players, and other reasons a golf course would never actually play the theoretical capacity such as a desire to maintain course conditions and market realities. In estimating capacity, NGF Consulting has defined a “round” as one person teeing off in an authorized start, so 9-hole and 18-hole rounds are counted equally.
The actual capacity for a given course is difficult, if not impossible, to calculate because most courses differ in physical characteristics and management procedures. For example, a course that has paved cart paths and good drainage can quickly resume play after a heavy rain, whereas a course that does not have paved cart paths and/or has poor drainage may have to suspend play for several hours or the entire day. In the South Florida market golf facilities are operating with year-round golf activity, but a strongly compacted high demand golf season in December through April, with more limited activity in the May through November summer season. Based on Colony West CC’s course’s type and size, fee structure, weather conditions, and down time for maintenance, NGF Consulting has estimated an actual capacity of about 65,000 rounds per year. The Glades Course has a similar actual capacity, but NGF expects this facility will always operate with lower rounds totals.
Revenue Analysis – Colony West Country Club NGF Consulting’s review of performance shows that Colony West CC has experienced a decline of 44% in total revenue since reaching a recent peak of $4.65 million in 2007. All categories of revenue have declined, although total golf income (green and cart fees) appears to have suffered the most, declining from about $2.83 million in 2007 to just around $1.4 million in 2012. This represents a decline of 49% since 2007, with a 43% decline on the Champ course and a 59% decline on the Glades. Compared to national and local golf industry “standards,” the total income for the Champ course is higher than average for an 18-hole course, while total income for the Glades course is lower than average. However, the decline experienced by both courses and the club as a whole between 2007 and 2012 is much more severe than the industry overall, where NGF recorded a general decline in golf fee income of around 12.5% between 2007 and 2012. D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 15 Colony West Country Club Total Facility Revenue 2007-2012 Golf Fee Income 2007 2008 2009 2010 2011 2012 Championship $1,837,366 $1,813,169 $1,546,558 $1,229,690 $1,129,769 $1,044,783 Glades 996,216 883,801 736,007 631,597 506,518 405,230 Total Golf Fees $2,833,582 $2,696,969 $2,282,564 $1,861,286 $1,636,287 $1,450,013
Pro Shop Income* $359,879 $303,206 $214,897 $144,090 $49,550 $54,817 Bar 454,591 440,332 450,461 437,448 405,708 417,604 Restaurant 290,087 299,323 341,224 280,745 230,303 213,502 Snack Bar 98,843 92,394 71,308 48,107 41,618 36,689 Bar Cart 208,643 179,002 179,378 126,584 125,178 99,037 Food & Beverage $1,052,164 $1,011,051 $1,042,371 $892,884 $802,808 $766,832
Catering $410,339 $360,557 $254,162 $195,347 $215,773 $155,780 F&B Incl. Catering $1,462,503 $1,371,609 $1,296,534 $1,088,231 $1,018,581 $922,612 Total Income Incl. $4,655,963 $4,371,784 $3,793,995 $3,093,607 $2,704,417 $2,427,442 Catering Source: Sand Trap Management, Inc. *Pro shop income included MVP cards until 2011.
Average Revenue Analysis The total average revenue earned per round of golf played now stands at $59.08 for 2012, and has been relatively consistent over the last six years. This indicates that the Colony West decline in revenue is a direct result of declining activity, as average revenue per round has held steady. This bodes well as future increases in revenue will require only increased activity (rounds) and maintenance of the present average revenue earned per round. A close analysis of average golf fee revenue shows that average revenue by category has mirrored the overall revenue, with no one line item standing out as being unique. Overall, the average public golf course in the United States produces approximately $23.00 per round in golf revenue (green, cart, membership), $2.50 per round in merchandise and $6.00 per round in food and beverage.
Colony West Country Club Average Revenue per Round 2007-2012 Golf Fee IncomeD 2007R 2008A F2009 T 2010 2011 2012 Championship $36.45 $34.68 $31.91 $32.51 $33.05 $31.54 Glades $19.71 $20.84 $17.56 $19.87 $19.41 $19.35 Total Golf Fees $28.07 $28.48 $25.25 $26.74 $27.14 $26.82
Pro Shop Income* $3.56 $3.20 $2.38 $2.07 $0.82 $1.01 Bar $4.50 $4.65 $4.98 $6.28 $6.73 $7.72 Restaurant $2.87 $3.16 $3.77 $4.03 $3.82 $3.95 Snack Bar $0.98 $0.98 $0.79 $0.69 $0.69 $0.68 Bar Cart $2.07 $1.89 $1.98 $1.82 $2.08 $1.83 Total F & B $10.42 $10.68 $11.53 $12.83 $13.32 $14.18 Total Facility Income (Incl. Catering) $56.54 $56.85 $53.50 $57.27 $58.18 $59.08 Source: Sand Trap Management, Inc. *Pro shop income included MVP cards until 2011.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 16 Expense Findings Total expenses to operate Colony West Country Club were reported at $2.59 million in 2012, inclusive of all operating expenses, cost of sales, and other items. Other key NGF findings on Colony West golf expenses include:
Labor expenses for Colony West Country Club totaled $1,048,927, or roughly 52% of total operating expenses (excluding cost of sales and other items). The U.S. standard for golf course operations is 50% of total expenses (excluding cost of sales and other items) allocated to labor. The total expense for golf course maintenance of $945,867 in 2012 is lower than the U.S. industry standard of $600,000 for golf course maintenance on an 18-hole golf course in a year-round market. The total is reflective of significant economies of scale that can be present in an operation with two 18-hole golf courses. However, there is concern that the golf course maintenance budget is reflective of recent reductions in expense in reaction to declining revenue, and that the reduced maintenance budget has negatively impacted the condition of the golf course. Direct cost of sales appears to be in line for the Colony West Country Club operation. The cost of merchandise sold was approximately 62% of sales, which falls within the industry standard of 67% for direct cost of sales on pro shop merchandise. The cost of food and beverage was approximately 38% of sales, which falls within the industry standard of 40% for direct cost of sales on food and beverage.
Colony West Country Club Total Facility Expenses 2012 Direct Cost of Sales Merchandise $34,129 Total Food & Beverage 349,034 Total Cost of Sales $383,163
Operating Expenses Golf Course $945,867 Golf Shop 50,420 Food & Beverage 394,802 ClubhouseD R A F T 115,106 Admin. & General 472,327 Advertising 37,719 Total Operating Exp. $2,016,241
Other Items Real Estate Tax $54,000 Commercial Property Tax 8,623 Interest Expense 6,703 Depreciation 14,929 Lease to City 106,667 Total Other Items $190,922 Total Facility Expenses $2,590,326 Source: Sand Trap Management, Inc.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 17 Colony West Country Club Financial Summary NGF Consulting’s review of performance shows that Colony West Country Club is generating a strong level of revenue, with rapid declines in just the last five years. The total revenue earned at Colony West is higher than the national average for public golf courses of this type, a good sign for the City of Tamarac when considering ideas to enhance revenues in the coming years.
Total expenses to operate the facility are now just over $2.0 million, an amount that is comparable to the expected average for a 36-hole facility, although there have been significant reductions in recent years. While Colony West CC has been able to generate revenue sufficient to cover basic operating expenses in 2012, other items such as property taxes and the lease payment to the City are not covered by revenue. This may lead to further reductions in expenses that could result in worsening golf course conditions. The basic summary of the Colony West golf operation financial position in 2012 is shown in the table that follows:
Colony West Country Club Summary of Operations – 2012 2012 Income Total Golf Fee Income $1,450,013 Pro Shop $54,817 Total Food & Beverage $766,832 Catering $155,780 Total Income Incl. Catering $2,427,442 Direct Cost of Sales Merchandise $34,129 Total Food & Beverage 349,034 Total Cost of Sales $383,163
Gross Profit $2,044,279 Operating Expenses Golf Course $945,867 Golf Shop 50,420 Food & Beverage 394,802 Clubhouse 115,106 Admin. & GeneralD R A F T 472,327 Advertising 37,719 Total Operating Exp. $2,016,241
Operating Income $28,038 Other Items Real Estate Tax $54,000 Commercial Property Tax 8,623 Interest Expense 6,703 Depreciation 14,929 Lease to City 106,667 Total Other Items $190,922 Net Income ($162,884) Source: Sand Trap Management, Inc.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 18 SUMMARY – COLONY WEST COUNTRY CLUB Colony West Country Club is well located within the City of Tamarac, but clearly on the very western edge of the population centers of the Ft. Lauderdale MSA, thus limiting the potential market from which the facility can draw patrons. The facility does form a nice mix of recreation and open space for the City, providing both a low-fee, 18-hole “short” course, all the way to a full 18-hole championship golf course designed for professional players. The clubhouse facility offers a strong complement for both daily use by golfers and non-golf restaurant patrons, as well as use as a banquet and event center. Other findings from NGF Consulting’s review of Colony West CC: Colony West Country Club offers a mix of amenities that should be very marketable in the Tamarac market. However, it is clear that the overall condition of the golf course, clubhouse, restaurant, and banquet operation are declining due to age, and some level of renovation / upgrade is likely to be required in the coming years. NGF sees the golf course playing area, particularly the turf conditions and irrigation system, as having the highest priority for upgrade. The lease in place at Colony West Country Club appears to be favorable for the City in that it is providing a level of professional (PGA) management and there is guaranteed income to the City ($100,000+ in 2012) at a time when many other municipal golf courses are operating with negative net income. This has implications for the continued operation of the facility, as the lessee has to make cuts in operating and maintenance expenses in order to meet the lease payment to the City. Further, the lease in place is designed as short-term, with a five-year renewal occurring after the first three years (2014). While the lease does include some provisions for both the lessee and City to make small investments in capital to the property each year, the short-term nature of the agreement will likely prevent any larger-scale investment in the property to be completed as needed. The present lessee is working actively to market the property to the local community, with focus on the Internet and other electronic media, which should be the highest priority for marketing a golf course in 2013. The club reported a marketing budget of $37,000 in 2013, an amount that is equal to or higher than the expected norm for a facility of this size and type. The green and banquet fees at Colony West Country Club are generally appropriate for the market and theD overall qualityR of theA facility offering.F ColonyT West CC is priced at the upper-middle of the scale of area golf courses, with several golf courses priced lower and several priced higher than Colony West CC. The Glades Course is among the lowest priced golf courses in the entire Tamarac area market. Colony West Country Club has seen significant declines in rounds activity and revenue since 2007, with reductions in both being more severe than the overall local and national golf market (more in next section). The total top-line revenue of over $2.4 million (from all sources including catering) represents a 48% decline from levels earned five years ago. The City has collected very little “bonus” lease income in the last year as the facility has not exceeded the $3.0 million “target” in revenue. Given the reality of the local market environment, the condition and location of facilities, and the present downward pressure on golf revenues, NGF does not expect that the $3.0 million “target” in revenue is realistic for this property in the 2014-2016 timeframe.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 19 External Factors Affecting the Operation of Public Golf Facilities
The NGF team completed a thorough analysis of the local Tamarac area golf market to review the supply/demand dynamic that is driving the competitive golf market. This included an analysis of the area’s tourist/visitor and seasonal resident market. The summation to follow will identify the existing and projected supply and demand balance, helping to identify the most appropriate balance of golf facilities for the City of Tamarac. NGF also reviewed existing golf facilities in the market area to provide benchmarking data and metrics on key factors such as location, course type, relative quality, annual rounds played, fee levels, revenues and expenses (to the extent available).
BASIC DEMOGRAPHICS AND THE LOCAL ECONOMY In the following table, NGF Consulting summarizes the population, median age, and median household income trends for the local market, plus Broward County, the state of Florida, and the total United States.
Demographic Analysis
Broward Colony West Country Club 5 mi 10 mi 15 mi County Florida U.S. Summary Demographics Population 1990 Census 295,620 749,763 1,256,755 1,255,215 12,936,271 248,584,652 Population 2000 Census 356,816 941,828 1,596,718 1,622,997 15,982,261 281,399,034 CAGR 1990-2000 1.90% 2.31% 2.42% 2.60% 2.14% 1.25% Population 2010 Census 361,810 976,471 1,666,332 1,748,066 18,801,310 308,745,538 CAGR 2000-2010 0.14% 0.36% 0.43% 0.75% 1.64% 0.93% Population Projected 2012 365,795 987,354 1,685,939 1,767,365 19,173,769 314,893,068 Population 2017 Projected 374,598 1,011,377 1,729,196 1,809,933 20,001,454 328,560,041 CAGR 2010-2017 0.50% 0.50% 0.53% 0.50% 0.89% 0.89% Median HH Income (2012 Estimate)D $47,800 R $50,808 A $53,817 F $53,182T $48,900 $59,501 Median Age (2012 Estimate) 39.7 39.1 40.9 40.1 41.1 37.5 CAGR = Compound Annual Growth Rate
From the data collected for this study, NGF Consulting has made the following observations regarding the demographics of Tamarac and surrounding areas:
There are estimated to be more than 365,000 people living within five miles of Colony West CC in 2012, over 987,000 people within 10 miles, indicating dense urban / suburban neighborhoods. Broward County’s population is now almost 1.8 million. Although population growth was above the national rate through the 1990s, grow appears more moderately in the coming decade, indicating a level of stabilization in the south Florida marketplace. We note that the above figures are for
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 20 permanent residents only and do not consider the large seasonal population in the Tamarac area each winter. The Median Household Income of the local markets is about 20% lower than the corresponding national figure of $59,501. In general, higher income residents are more likely to participate in golf, and they play more frequently than lower income golfers. The above income estimates are derived from permanent resident population data, and thus do not consider transfer income that is often common with large retiree populations (i.e. those living off a ‘nest-egg’). The Median Ages in the subject markets are only slightly higher than the national median of 37.5 years, an indication that the local Tamarac area does not have as large a retiree population as other areas of Broward County and South Florida. In general, golf participation rates and frequency of play increase with age (though both decline among the elderly), making relatively older markets more attractive to golf facility operators, all other factors being equal. The overall trade area has significant and growing (as percentage of overall population) African-American and Hispanic populations. Broward County overall reports about 26% residents of Hispanic origin, while Palm Beach County is just below 20%. Research studies have revealed that the golf participation rates among African-Americans and Hispanics aged 18 and older are about 3.9% and 7.7%, respectively, compared to the overall U.S. golf participation rate of 9.6%. Therefore, NGF believes it is important that the Colony West facility cultivate player development programs aimed at stimulating latent golf demand among these communities in order to maximize utilization of the golf course in the future.
Key Economic Factors It is clear that the recent (2008-2012) recession has had a direct effect on the demand for golf both nationally and locally, as decreased discretionary income and the plunging values of many stock portfolios, retirement accounts, and homes has led to reductions in recreational / leisure spending. The restaurant industry in south Florida has certainly experienced this phenomenon, and interviews with area golf operators have borne out that this has happened to them, as golfers are shifting to less expensive rounds, and tournament and banquet business is off at many clubs. On the other hand, deep declines in asset values may result in many golfers giving up expensive memberships at private golf clubs in favor of playing at high quality public courses. D R A F T Some observations related to the local area economy at the beginning of 2013:
Greater Broward County Greater Fort Lauderdale/Tamarac’s diverse economy includes major sectors such as marine commerce, tourism, software technology, international trade, and financial services. For many decades, the visitor industry has been the largest segment of Broward’s economy, with an estimated 10.7 million visitors generating upwards of 100,000 annual and 35,000 seasonal jobs. It is estimated that the average age of overnight domestic leisure visitors – a segment that could be a prime target market for Colony West Country Club – was 50
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 21 years old, and these visitors had an average household income of $85,000. This demographic profile is strongly correlated with high golf participation rates. Centrally located Fort Lauderdale-Hollywood International Airport (FLL) is the fastest- growing passenger hub in the nation, and had a passenger volume of over 23 million in 2011. Less than a mile from the airport terminal is Port Everglades, one of the county’s strongest economic engines. More than 4,000 ships a year call at Port Everglades, which has a thriving cruise industry, a growing containerized cargo business, major petroleum storage and distribution facilities, and South Florida’s primary bulk cargo depot. The following table summarizes some of the major impacts of the tourism industry on Greater Ft. Lauderdale/Hollywood.
Greater Fort Lauderdale/Hollywood Tourism Fast Facts, 2012
Total visitors 10.7 million Total visitor expenditures $8.87 billion Tourism tax revenues $42,000,000 Hotels / motels 560 Hotel / motel rental units 34,000 Total meetings and conventions 580 Total group room nights 880,000 Total air passenger arrivals / departures Ft. Lauderdale / Tamarac International Airport 23,350,000 Source: Greater Fort Lauderdale Convention & Visitors Bureau
Marine commerce is the leading industry in Greater Fort Lauderdale and Broward County, accounting for more than 109,000 jobs and $10.78 billion in total economic impact. The City of Ft. Lauderdale annually hosts the Ft. Lauderdale International Boat Show, which attracts an estimated 125,000 visitors to the area. Tamarac Local Tamarac is a city of some 60,000 residents in western Broward County, at the western edge of the greater Miami–Fort Lauderdale–Pompano Beach Metropolitan Statistical Area, which was home to 5,564,635 people accordingD toR the 2010 census.A TheF community T was originally envisioned and developed in the 1960’s to be an active adult community of two-bedroom maintenance-free homes, and as such has a significant lack of commercial buildings. In 2013, the City is planning a new project to add lodging / hotel elements to a location proximate to the Sawgrass Mills shopping area and the Florida Turnpike, which if completed would be helpful to the Colony West CC.
The real estate market in Tamarac has been affected by the recession. The site City Data.com documented home sales falling from around 600 per quarter at an average price of about $250,000 in late 2007, to fewer than 200 per quarter at below $80,000 average price for each quarter from the first quarter of 2010 through the second quarter of 2012. Some recovery to over 200 units at an average price of over $80,000 is seen in the last two quarters of 2012 (table below).
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 22 GOLF MARKET SUPPLY AND DEMAND INDICATORS NGF made several key observations regarding the local Tamarac area golf market, including national trends, local demand/supply, and area golf facility competition.
National Trends in Golf Participation Golf participation in the U.S. has grown from 3.5% of the population in the early 1960s to about 9% of the population in 2011. NGF estimates that the number of golfers fell in 2011 to 25.7 million, essentially even with 2010. For research purposes, a golfer is defined as a person age 6 or above who plays at least one round of golf in a given year.
All U.S. Golfers (in millions)
1985 1990 1995 2000 2005 2011 All golfers age 6+ 19.5 27.4 24.7 28.8 30.0 25.7 Source: National Golf Foundation
The number of golfers remainedD essentially R steady A in 2011 F at 25.7 million.T (Compared to the 26.1 million recorded in 2010, the estimated drop of 400,000 golfers is within the range of research sampling error.) For research purposes, a golfer is defined as a person age 6 or above who played at least one round of golf in a given year. The Pacific Coast Region, which includes California, statistics are shown below:
Regional Profile (at end of 2011)
Participation Number Percent Total Annual Rate of Golfers of Golfers Rounds South Atlantic Region 8.2% 4,560,000 17.8% 103,700,000 United States 9.0% 25,682,000 100.0% 463,000,000 Source: Golf Participation in the U.S., 2012 edition, National Golf Foundation
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 23 Considering the severity of the recession and its effects on both discretionary income and time, golf has held up rather well. Multiple NGF studies of golfers since 2008 would attribute the gradual decline in golfers and rounds primarily to the impact of lower job security and concern over personal finances, not waning appeal for the game.
Preliminary Data from 2013 Participation Report (2012 Data) 2012 Rounds Played – The Largest Single-Year Jump since the Millennium The most influential factor in the golf economy in 2012 was the 5.7% increase in rounds played, through the end of the year. The resulting increase of 27 million rounds takes the national total to about 490 million. Since rounds declined approximately 11% or 55 million during the past 10 years, 2012 alone recovers half of that dip.
Nearly every state experienced a gain versus 2011. The geographic engine for the improvement has been a huge section of the northern half of the country where average year-over-year growth was 9.5%, compared to 3.8% for the rest of the country. This area from the Dakotas to Vermont (technically, the North Central, North East Central and Mid-Atlantic regions) drove up the national numbers…mainly because 44% of all U.S. golf courses and 47% of America’s public golf courses are located there.
Improved weather was the biggest influence on rounds played. PGA PerformanceTrak has reported a healthy 6.5% increase in playable days nationwide in 2012. Weather in the northern region of the country that drove up the national rounds played numbers was particularly favorable compared to 2011. Playable days in these states increased 13.6%, compared to 5.5% in the rest of the country.
It is important to note that Mother Nature probably doesn’t deserve all the credit for the increase in rounds played. National measurements of consumer confidence and spending have also been slowly and consistently edging upward from dips we saw in the Great Recession. Feelings of personal financial well-being are undoubtedly tied to an individual’s positivity toward all types of discretionary and recreational spending, including golf.
As you would expect, golf course operators have benefitted most directly from the jump in rounds played. PerformanceTrak reported that median golf fee revenues were up 6.6% at member facilities through December 2012. However, given that “all golf is local,” individual facility performance is driven largely by the nature of local competition, weather, and economic/socio-demographicD factors. R A F T Competition certainly remains fierce in many markets, and the battle for market share is illuminated by the following statistic: the national average for rounds-per-18 holes – approximately 32,000 – is more than 20% lower than it was prior to the start of the building boom in the late 1980s. Despite positive trends, golf remains a “buyer’s market.”
2012 Facility Openings and Closings - U.S. golf course openings remain at historic lows, as NGF recorded only 13.5 openings in 2012, compared to 154.5 golf course closures, measured in 18-hole equivalents (18HEQ). As in recent years, closures were disproportionately lower priced public facilities (68% of total closures).
According to NGF data, since the market correction in golf course supply began in 2006, there has been a cumulative net reduction of 499.5 golf courses (18HEQ), which represents a drop of 3.3% off the peak supply year of 2005. However, the cumulative decline over that period must
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 24 be considered in context: even with seven consecutive years of net reduction in supply, closures represent only about 500 of 16,000 total facilities. For perspective, we opened 400 courses in a single year during the heart of the building boom. And, over the 20-year period from 1986 to 2005 the U.S. saw more than 4,500 18HEQ golf courses open.
Openings Closures Net Change Total 2012 13.5 154.5 -141.0 Daily Fee 8.5 130.5 -122.0 Municipal 1.5 8.5 -7.0 Private 3.5 15.5 -12.0 Source: National Golf Foundation, 2013
18-Hole Equivalents (U.S.) as of December 31, 2012
Openings Closures Total 13.5 154.5 14,671.5 Number % of Total Number % of Total Number % of Total Public 10.0 74 139.0 90 10,696.5 73 Daily Fee 8.5 63 130.5 84 8,415.0 57 Municipal 1.5 11 8.5 6 2,281.5 16
Private 3.5 26 15.5 10 3,975.0 27
Real Estate 7.0 52 34.5 22 3,529.5 24
Public Fee <$40 4.5 33 105.5 68 4,884.0 33 Source: National Golf Foundation, 2013
NGF projects that golf course openings will remain at 20 or fewer per year for the foreseeable future, while annual closures are expected to continue in the 150-180 range. The gradual market correction is expectedD to continue R with annualA net reductionF ofT supply in the 130-160 range, helping us inch gradually closer to equilibrium.
Local Area Closed Facilities Following a nation-wide trend, there have been several golf facility closures in the Broward County area. A search of the NGF Golf Facilities database provides the following information on golf facilities that have closed in the past ten years:
5-mile Ring Monterey Golf Course Broken Woods Country Club Eagle Lakes Golf Course Sabal Palm Golf Club
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 25 10-mile Ring Oak Tree Golf Club American Golfers Club
Remainder of Broward County Raintree Golf Resort Eagle Woods Golf & Country Club Pines Par 3 Course
Map of Closed Facilities in Relation to Colony West Country Club
D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 26 Local Golf Demand The Golfing Household Index is based on Predicted Number of Golfing Households, and compares golfing household participation in a particular geography to the national base index of 100. The Rounds Index is based on Predicted Number of Rounds, and compares the propensity of rounds played per household in a particular geography to the national average rounds index of 100.
The golf demand indices for Broward County overall and the local Colony West CC indicate golf participation rates that slightly lower than the total U.S. average among permanent residents. However, because of the year-round golf market, influx of tourists and seasonal residents, and high number of golf courses, predicted rounds played per household are between 7% and 29% higher than the U.S. benchmark in these markets.
Broward SITE: Colony West CC 5 mi 10 mi 15 mi County Florida U.S. Golf Demand Indicators # of Golfing Households (HH) 19,140 57,225 105,687 106,505 1,246,397 18,334,168 Projected Golfing HH (2018) 19,779 57,225 59,316 108,994 113,216 18,902,232 Number of Rounds Played 553,287 1,640,565 3,158,316 3,120,624 42,532,596 424,452,832 Golfing Household Index 86 95 100 98 105 100 Rounds Played Index 107 118 129 124 155 100
Visitor Golf Demand Data collected by NGF (presented earlier) show a total volume of about 23 million visitors to the Greater Ft. Lauderdale/Hollywood area in 2012. These visitors have a significant impact on golf course activity in the region, especially during the peak winter/spring season when the majority of each golf course’s annual rounds are realized.
NGF research shows that roughly one-third of all golfers participate in the activity while traveling, playing 0.557 rounds per day of travel. To illustrate the potential demand from visitors, NGF has crafted the estimate for tourist demand below.
Greater Ft. Lauderdale/Hollywood Visitors 2012 Estimated OvernightD Visitors toR Ft. Lauderdale/Hollywood A F T 23,000,000 X Estimated % Adult Travelers 75% Estimated Adult Overnight Visitors to Ft. Lauderdale/Hollywood 17,250,000 X Estimated National Golf Participation Rate 9.0% = Estimated Visiting Golfers to Ft. Lauderdale/Hollywood 1,552,500 X Percent Participating in golf while traveling 33.0% X Estimated Golf Frequency Rate (Traveling Golfers) .557 rounds/trip Estimated Potential Visitor Rounds Demanded 285,365
The estimate for total tourist golf rounds in Greater Ft. Lauderdale/Hollywood, even using very conservative estimates for annual visitors, shows potential demand for golf from vacationers to the region at almost 286,000 rounds annually. These visiting golfers could be especially important for adding support to the local play levels experienced at area golf courses. We note
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 27 that traveling golfers often exhibit high incomes and are typically much less price sensitive than resident golfers.
Golf Supply Factors There are 11 total golf facilities totaling 243 holes, within five miles of Colony West CC. Of these facilities, 8 are listed as public access. The 10-mile market is home to 30 facilities (19 public), totaling 648 holes (450 public). The ratio analysis that follows puts these numbers in context, compared to national benchmarks.
Broward Colony West Country Club 5 mi 10 mi 15 mi County Florida U.S. Golf Supply Summary Total Golf Facilities 11 30 59 48 1,049 15,647 Public Golf Facilities 8 19 35 34 653 11,644 Private Golf Facilities 3 11 24 14 396 4,003
Total Golf Holes 243 648 1,314 1,017 21,546 264,627 Public Golf Holes 207 450 765 729 12,735 191,916 Private Golf Holes 36 198 549 288 8,811 72,711
Household/Supply Ratios and Indices The Household/Supply Ratios are derived by dividing the number of households by the number of 18-hole equivalent golf courses. This measure is used as a benchmark to establish the level of support (households) that is available for each 18 holes of golf in the market. A Household /Supply index is derived from these ratios and compared with the base national figure of 100.
As the table below indicates, the subject markets have a much higher proportion of households per total 18-hole golf course than the national average, an indication that the golf course supply in this part of South Florida is generally favorable to golf operators, compared to the nation as a whole. These ratios are mitigated somewhat by the lower income nature of the area’s households and the previously noted lower golf demand.
Broward Colony West Country Club 5 mi 10 mi 15 mi County Florida U.S. Demand vs. Supply D R A F T Households per 18 Holes: Total 10,773 10,923 9,438 12,525 6,475 8,149 Households per 18 Holes: Public 12,647 15,730 16,212 17,474 10,955 11,237 Households per 18 Holes: Private 72,721 35,749 22,590 44,230 15,834 29,658
Households Supply Index: Total 132 134 116 154 79 100 Households Supply Index: Public 113 140 144 156 97 100 Households Supply Index: Private 245 121 76 149 53 100
Change in Golf Course Supply The rate of new golf course construction in this part of South Florida was among the highest in the nation between 1990 and 1999, but has slowed considerably in 2000-2008 and has now seen contraction in 2008-2012. The NGF estimates that a net of 162 total holes of golf were
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 28 closed in Broward County in the last 10 years (mostly in the last 3 years), the equivalent of nine 18-hole golf courses. This is consistent with an overall trend in the industry that is seeing contraction of golf courses in all areas of the country since 2008.
Broward Colony West Country Club 5 mi 10 mi 15 mi County Florida U.S. Golf Supply Change Total holes net past 10 years -54 -108 -153 -162 -387 -2,241 Public holes net past 10 years 18 -18 -18 -54 -369 2,772 Private holes net past 10 years -72 -90 -135 -108 -18 -5,013 Percent Total Holes Net -22.20% -2.80% -1.40% -15.90% -1.80% -0.80% Percent Public Holes Net 8.70% 8.00% 10.60% -7.40% -2.90% 1.40% Percent Private Holes Net -2 -27.30% -18.00% -37.50% -0.20% -6.90%
Facilities in Planning or Under Construction The NGF has not recorded any new golf courses in planning or under construction in the Tamarac market area, although there are several renovation projects throughout Broward County that are planned, underway or recently completed.
Golf Course Market Supply / Demand Summary Using the most basic measures of golf demand and supply, the Tamarac / Broward County golf markets would appear to be stable, with a generally low per capita supply of golf courses when compared to the national benchmark, although the demand from households is much lower than the national standard. Further, these measures can be enhanced somewhat by the large seasonal resident and tourist populations that contribute significant golf demand during the winter and early spring, and will have to be a strong source of rounds volume for Colony West Country Club in the future.
Though the predictive demand model and supply ratio analysis is very useful in evaluating the relative strength of golf markets, it cannot stand on its own in determining the status or health of a golf market. Rather, these analyses must be considered in the context of what is actually happening “on the ground” in the market, in terms of price point and activity level trends at existing golf courses.D R A F T LOCAL COMPETITIVE GOLF MARKET NGF Consulting has analyzed the public access golf market in Colony West Country Club’s primary trade area, with particular emphasis on determining Colony West CC’s current market position, and prospects for sustaining and/or building market share in the future. On the following pages, we list summary operating information for a group of selected golf facilities in the greater market area for comparison to Colony West CC. This list was not meant to be totally exhaustive or to account for all of the potential competition to Colony West Country Club. Rather, NGF Consulting is presenting this information to offer a frame of reference in evaluating actual performance of the subject Colony West CC in recent years. At the end of this section, we provide our significant findings regarding the competitive market.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 29 Competitive Public Access Golf Facilities Map
D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 30 Summary Information The following tables provide summary information for Colony West Country Club and a selection of other area golf facilities.
Colony West Country Club Competitive Golf Facilities
Distance From Type / Year Back Range Colony Facility Location Holes Open Par / Slope Tee Tees West*
Colony West Country Club (Champ) Tamarac MU / 36 1970 71 / 146 7,387 0 --
1 Woodmont Country Club (Cypress) Tamarac DF / 36 1978 72 / 137 7,143 30 1.5 mi NE Seven Bridges At Springtree Golf Club Sunrise MU / 18 1972 62 / 102 4,042 0 2.5 mi SE
Woodlands Country Club (East) Tamarac DF / 36 1969 72 / 128 6,814 30 3.0 mi SE
Inverrary Country Club (East) Lauderhill DF / 36 1970 72 / 117 7,112 30 3.0 mi SE Oriole Golf & Tennis Club Margate DF / 18 1982 72 / 116 6,460 50 3.5 mi NE Country Club of Coral Springs Coral Springs DF / 18 1969 71 / 124 6,779 15 4.5 mi N Carolina Golf Club Margate DF / 18 1972 71 / 141 6,705 25 5.0 mi NE
2 Pompano Palm-Aire Country Club (Palms) DF / 18 1973 72 / 122 6,944 20 6.0 mi NE Beach Jacaranda Golf Club Plantation DF / 36 1971 71 / 130 7,247 30 6.0 mi S Plantation Preserve Golf Course Plantation MU / 18 1950 72 / -- 7,148 30 6.0 mi SE Davie Golf and Country Club Davie MU / 18 1973 70 / 135 6,347 22 8.0 mi SE Fort Bonaventure Country Club (East) DF / 36 1972 72 / 132 7,158 15 8.5 mi SW Lauderdale Source: National Golf Foundation KEY: DF = Daily Fee; MU = Municipal *Air Miles, rounded to the nearest ½ mile; driving distances will be greater 1. Pines Course at Woodmont is currently closed for renovation 2. Palm-Aire: Palms course separated from Oaks & Cypress courses because of separate pro shop; combined facilities previously closed 36 holes. D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 31 Primary Public Access Competitive Golf Facilities
Non-Peak Peak Season Season Single/ WD/WE WD/WE Family Total Type / Green + Cart Green + Cart Key Member- Rounds Golf Course Holes Fee Fee Discounts ship (2012 Est.)
Colony West Country Club Internet & MU / 36 $55 / $65 $30 / $45 DNA 33,000 (Champ) MVP
Colony West Country Club Internet & MU / 36 $26 / $30 $16 / $20 DNA 20,000 (Glades – Walk Rate) MVP
$1,600 / Woodmont Country Club (Cypress) DF / 36 $79 / $89 $30 / $30 S FL res. 33,000 NA
Seven Bridges At Springtree Golf Sunrise & MU / 18 $48 / $48 $33 / $33 $725 / NA 38,000 Club FL res.
$3,300 / Woodlands Country Club (East) DF / 36 $93 / $99 N/A N/A 30,000 $5,550
Monthly $1,995 / 1 Inverrary Country Club (East) DF / 36 $52 / $62 $25 / $28 36,000 non- res. $2,995
Oriole Oriole Golf & Tennis Club DF / 18 $44 / $49 $25 / $33 Summer DNA 40,000 Card ($39) Online Tee $4,200 / Country Club of Coral Springs DF / 18 $50 / $63 $35 / $35 33,000 Times $4,920
Various $1,995 / Carolina Golf Club DF / 18 $49 / $59 $39 / $49 36,000 Specials $2,895
$3,300/ 2 Palm-Aire Country Club (Palms) DF / 18 $89 / $89 N/A S. FL res. 30,000 $5,550
Twilight as $3,650/ 3 Jacaranda Golf ClubD DF / 36 R $100 / $130 A $75 F / $85 T 65,000 low as $46 $4,800
Plantation & $2,600 / Plantation Preserve Golf Course MU / 18 $115 / $125 $39 / $49 39,000 FL res. $3,500
Davie Golf and Country Club MU / 18 $44 / $49 $27 / $32 S. FL res. -- 36,000
Resort, S. $2,115 / 4 Bonaventure Country Club (East) DF / 36 $115 / $115 $75 / $75 FL res., 29,000 $2,500 others Source: National Golf Foundation 1. East Course rounds only (72,000 for total 36 holes). 2. Palms course only. 3. Total for all 36-holes in 2012. 4. Full 36-holes totaled 58,000 in 2012
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 32 General Findings – Local Supply NGF Consulting research indicates the following general findings regarding the supply of public golf facilities in the Tamarac / Broward County market.
The local market area offers a wide variety of golf facility types and offerings. The pricing is also varied offering the golf consumer a wide range of choices for price, quality, and facility type. Anecdotal evidence suggests that, both regionally and nationally, golfers are playing fewer rounds, as well as shifting their play to less expensive rounds, such as twilight. Additionally, large outing/tournament and banquet business is off at many golf facilities. As is the case in most markets nationally, local golf operators reported a drop-off in rounds played between about 2000 and about 2005/2006. Some markets nationally experienced declines on a per-facility basis of 25% to 30% or more. The decrease in per-course activity levels, both regionally and nationally, has been attributed to several factors, including emerging socio-economic trends and a general oversupply of public golf courses fighting for market share at a time when golf demand is flat. Total rounds activity among golf courses in this market has clearly declined since a recent peak around 2008, and the long term peak around 1999-2000. In 2012, only one of the area’s golf courses exceeded 40,000 total rounds of golf (Oriole G & T), a figure that a decade ago was a “standard” for the area. Many of the primary competitors are presently operating at a much higher price point than Colony West CC. Jacaranda is among a few facilities at the top tier of the area’s public access golf market, along with Bonaventure, Plantation Preserve, Woodlands (East) and Woodmont. NGF market research, including interviews with area golfers and golf operators, as well as golfer surveys, suggest that the maintenance condition of Colony West CC (Champ) is generally not to the standard of its competition. In addition to reduced activity, there has been significant downward pressure on green fees in this market area. Very few west Broward area golf courses are able to charge in excess of $50 or $60 per round, with cart included. As the higher quality golf courses are not able to push green fees higher, even in season; the pressure on lower-quality golf courses like Colony West (Glades especially) to reduce pricing even further becomes strong. The result is green fees getting so low that there is no room for discountingD and the onlyR avenue A to increased F revenue T is through higher activity (rounds), which is not happening. Most of the public-access golf courses reviewed by NGF have driving range facilities. Most of these driving range facilities are smaller and not able to accommodate large numbers of golfers for both pre-round warm up and lessons / clinics. NGF expects that Colony West CC should be able to generate activity in the 36,000 to 44,000 rounds per year range (each course), with highest green fees (with cart) in the $65 range and summer green fees (with cart) in the $30 range. It is also assumed that all rounds would be cart rounds (on the Champ course), except for walking rounds allowed on the Glades course.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 33 Can-Am Golf For many years, a large and growing segment of the Broward County golf market has come from north of the border: Quebec and Ontario, Canada. A more attractive currency exchange and the presence of dozens of courses have increasingly made Broward and southern Palm Beach Counties a favorite destination for the Canadian golfer. As a result, the market has created “Can-Am Golf,” a Pompano Beach-based marketing program that markets golf rounds and outings to thousands of clients, the vast majority of whom live in Canada or the Northeast. The program has been around since 1989, but now claims to have tripled business in the last 10 years, and doubled membership in the last four.
In addition to its primary market in Broward County, Can-Am reports sending golfers to 33 courses in Palm Beach County and six more in Martin and St. Lucie Counties, indicating the program is growing its appeal to other areas further north in South Florida. In Boca Raton, several courses report that rounds from Can-Am have increased by more than 100% in 2012 over 2011.
The Can-Am program affords members price discounts on rounds of golf, typically around $5 on a $60 green fee rate. The Colony West operators have resisted participation in the Can-Am program, opting instead to concentrate on their own MVP program for discount and loyalty marketing. This may have some effect on total rounds activity among this segment, but the discounts may also be too severe (see recommendations section).
D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 34 EXTERNAL FACTORS SUMMARY The local demographic and economic factors affecting the demand for public-access golf in this market tend to be mixed, in that while the local and regional West Broward area golf market tends to show characteristics unfavorable to golf participation, the area is still a mecca for large- scale tourist/visitor activity which tends to boost demand for golf. The most concerning aspect of the local Tamarac market is the modest income levels of residents in this area. Lack of growth in local market incomes is viewed by NGF Consulting to be a limiting factor in the City’s desire to grow activity and revenue at the subject Colony West Country Club.
The local Tamarac area has many attributes that tend to be unfavorable for strong golf demand, including an isolated permanent population base, generally lower-than-average incomes, and high proportion of minority populations that historically have demonstrated lower participation in golf. The positive attributes include convenient access and proximity to a large and diverse economy. The Glades Course at Colony West Country Club is also the lowest priced 18-hole golf course in the immediate market area. As such, the long term sustainability of Colony West CC will require it to capture a strong share of the market of golfers not presently residing in Tamarac, meaning the course will require a strong non-resident clientele in order to survive.
The City should understand that the external golf market is not favorable for strong economic performance of Colony West CC. The local market is crowded with golf courses, the national golf market is stagnant (or in decline), and the expense to operate golf facilities is increasing rapidly (faster than the rate of inflation). The national trends in golf facility operations show increasing expense to operate golf facilities, particularly in the public sector. Further, while our research notes a general stabilization in the growth of golf rounds demanded, considerably more golf facilities are present to divide up the total volume of play. The result is generally lower average rounds per golf course across all facilities in both the U.S. overall, and in this local market.
Locally, the NGF Consulting estimates for golf participation and frequency in the Tamarac market mirror the modest income demographic profile we noted earlier. Furthermore, the market is highly seasonal, with limited time in which premium fees can be charged. In the peak winter season, local public access golf courses such as Jacaranda and Plantation Preserve can charge $100+ for a single round of golf on a premium facility. However, during the 8-month summer off-season playing fees for golf are much lower and many area restricted (private) clubs can open up for public play, further complicating the market golf supply dynamic. As a result, most golf facility operators inD this market R reported A a significant F drop-off T in rounds played between the late 2005 and 2012, with virtually no 18-hole golf course in this area hosting over 40,000 rounds annually, a figure that was considered a low rounds total a decade ago. The local area market shows a generally favorable household / supply ratio that is generally more favorable to golf facility operators, indicating there may be an opportunity to stimulate more demand from local residents through an enhanced beginner / player development program at Colony West CC.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 35 Review of Management Options
The City of Tamarac has chosen to operate Colony West Country Club via lease agreement with the previous ownership (Sand Trap Management, Inc.) since the City’s acquisition of the property in late 2011. As another form of operation could be considered by the City, NGF has prepared a review of options that are available to the City of Tamarac should it decide to alter the operation of this facility. Following are descriptions of the most typical management options for golf courses, as well as advantages and disadvantages of each. In our experience, there is no ideal operating scenario that fits all situations, and each golf course owner must arrive at its own unique approach to operation and maintenance. The most common management options (these are not intended to be exhaustive, as there are hybrids and variations thereof) follow, presented in order from most direct City involvement to the least:
1. Self-Operation: City of Tamarac operates the golf facilities under direct control of the City, with City employees staffing all goof operation positions. 2. Concession Agreements: Similar to a lease agreements and can come in several types or combinations. The key areas of operation include Pro Shop, Food and Beverage and/or Maintenance and involve the City contracting for one, some, or all of these services. One subset of this concept includes multiple concessions, a system in which the City creates multiple contract agreements for separate entities for each facet of the golf operation 3. Full-Service Management Contract: City hires a management company to operate all aspects of the golf facility. 4. Operating Lease(s): City of Tamarac leases the golf facilities to a private operator in exchange for an annual lease payment (“status quo” at Colony West CC). Leases are typically established to include minimum requirements (green fees, policies, etc.) and capital investment in facility improvements.
Management contracts, operating leases, and concession agreements are the most commonly used terms to describe a contract between a golf course owner and a private operator. A general discussion of the common operating structures, along with key advantages and disadvantages of each, is presentedD below.R A F T SELF-OPERATION BY THE CITY Self-operation gives the City the greatest control over golf operations, including personnel, course maintenance, policies, fee schedules, and budgets. All revenues are available to pay for operating the facility, while the City must fund needed capital improvements and cover any losses on operations. It is common in the current golf economy that golf operations can suffer from a lack of resources due to low revenues, often leading to budget cuts and deteriorating facility quality, resulting in a loss of customers and a further loss of revenues.
Advantages of Self-Operation Simplest option Direct City control of the assets All workers are City employees
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 36 Full participation in upside revenue potential. Allows the option to convert program to another structure at later date.
Disadvantages of Self-Operation This option requires the highest City administrative support for the operation. Golf operation may require subsidies from the City to meet basic expenses. The City may lack necessary expertise in managing golf facilities. Employees may be subject to municipal labor policies for wages, benefits, termination policy, etc. City supplies all retail merchandise, golf maintenance equipment and other key furniture, fixtures, and supplies; may have to carry liquor license. Revenues may not cover costs (esp. labor), especially when market is in decline. When revenues and/or operating/capital reserves are down, needed improvements may not be funded (or at least deferred).
Self-Operation Discussion Any golf facility owner must consider how it views its golf facilities. If the golf facilities are seen primarily as amenities to the overall City experience like other recreation amenities that have lower cost recovery, then the City should be prepared to realize lower economic return, and self- operation may make more sense. However, if the City desires a positive economic return from its golf course, then the course must be run more like businesses, free of political considerations that place constraints on revenues and operational efficiencies. In the latter case, the self- operation option may not be tenable in the face of continued operational losses. If a golf course owner is unable to fund capital improvements, it will result in a less attractive product for golfers, leading to continued rounds and revenue decreases, and ultimately resulting in larger and larger subsidies by the City and continued deferral of needed capital upgrades. Another consideration for Tamarac is the presence of the large non-golf food and beverage / banquet component of the Colony West Country Club facility that requires the operator to have unique operational skills not typically common within City government structures.
CONCESSION AGREEMENTS This form of agreement involvesD granting R a license A to operate F a facility. T It is very common in the golf industry, especially in the pro shop and food and beverage service areas. Maintenance-only contracts are also growing in the golf industry in the last few years.
Food and Beverage Concession The most common concession agreement at public golf courses nationwide and in Florida is the food and beverage concession. This agreement typically covers all aspects of food and beverage operations and is in place in many public golf courses due to factors such as the inherent difficulty of making these operations profitable, lack of expertise, and restrictions on public sector agencies holding liquor licenses. These agreements will typically involve the concessionaire owning all revenues and paying a share to the City (typically between 5% and 10% of gross revenue, depending on the type of facility). The concessionaire is responsible for all direct expenses (cost of sales, labor, materials, etc.) and typically providing some capital investment such as kitchen equipment.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 37 Pro Shop Concession The second most typical concession agreement is for the Pro Shop, including one or more of the cart, merchandise, lesson, and driving range revenue centers. The most common pro shop concession agreements usually involve the City owning all green fees, along with varying percentages of the other revenue centers noted above. Pro shop concessionaires typically own the merchandise and lesson operations, and then receive payment from the City for a share of certain revenue centers in exchange for incurring the direct expenses related to golf operations. In some cases, there is reimbursement to the concessionaire for providing starter and marshal services. All money will typically flow in one direction with either the City collecting all revenue and paying the concessionaire, or vice-versa. Because of the short term of most pro shop concession agreements, there is little incentive for the concessionaire to make major investments.
Maintenance-Only Concession Another area of separate concessions is in maintenance-only contracts. In this case, the pro shop and food & beverage operations would operate under separate concession agreements, or one or both by the City, but the maintenance function is outsourced to a private entity. This model has become more common in certain areas of the country where labor costs for maintenance are increasing too rapidly to keep under control, are unionized, or where maintenance staffs have been reduced to the point where the overall quality of maintenance has deteriorated. Golf course maintenance, including associated labor, is almost universally the largest single line item expense on a golf course’s operating budget. This is especially true in public agency golf operations, when employee wage and benefit costs are often significantly higher than in the private sector.
There are a number of companies that specialize in fixed-fee outsourced golf course maintenance, and these companies are able to offer maintenance cost savings due to several reasons, foremost of which is the ability to employ cost-effective manpower and scheduling strategies, which most public agencies are constrained from doing. Additional savings are often achieved through the ability of the larger companies to leverage national purchasing agreements for equipment, materials, and supplies, and through other economies of scale.
Advantages of Concession Agreements The City is removed from the day-to-day operation (in a pro shop concession) in exchange for green feesD and a pre-determinedR A percentage F ofT other gross receipts. Concession agreements provide some control to the City for items such as pricing, marketing, and availability (though less control than a management contract). The term of a concession agreement is typically shorter than an operating lease. In a maintenance-only contract the vendor will typically provide all maintenance equipment. The agreement(s) will typically include a reduction in labor expense (especially maintenance labor) with comparable quality. Flexibility – the City has the option to retain one or more of the elements of the operation, or remove one or more of the elements at each renewal period. The City can participate in upside revenue potential. The term of a concession agreement is typically shorter than an operating lease.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 38 Disadvantages of Concession Agreements Absent a maintenance contract, the City would be expected to retain the very expensive course maintenance function. Concession agreements do not provide guaranteed revenue to the City and the City will still be responsible for most capital expenditures (operating risk is reduced, but still shared between vendor and City). Possible conflict between concessionaires when multiple concessions. Reduces opportunity to attract private capital. If contracts do not expire simultaneously the City may end up tied to a contractor for longer than truly desired. Contract enforcement still requires City staff time and overhead expense, although this should be reduced from the self-operation scenario. When multiple concessions are in place the City is paying multiple concession fees, each one of which includes a built-in profit for the concessionaire.
Discussion and Policy Implications The advantage to concession agreements is the City’s relief from day-to-day operational responsibilities, while still retaining control of the operation and keeping some City service benefit. The structure generally results in decreased labor costs, as employees belong to the private vendor. The structure can also result in reduction of a City’s administration / overhead expense and/or responsibility.
FULL SERVICE MANAGEMENT CONTRACT The primary goal of a management contract or management agreement is to provide a golf facility with a single experienced, professional operator to be responsible for all aspects of the golf facility, thus relieving the City of this task. In a typical management contract, the City hires a firm that is charged with all management and maintenance responsibility. The City funds all capital improvements, and the management firm hires all employees. Because employees work for the management firm and not the City, payroll costs are likely to be less than under self- operation. The management firm collects all revenue and provides accounting reports to the City. All revenues belong to the City, as well as the responsibility for all expenses. The City reimburses the management firm for all payroll and pays the firm a management fee. Typical services provided under theD management R agreement A include, F but areT not limited to: Personnel /Training /Human Resources Payroll / Benefit Administration Budgeting Marketing Accounting and Reporting Tee Sheet Management Agronomic Support
While the management company performs these functions, the City retains overall control of the operation and is the ultimate determinant of items such as fee structures, compensations,
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 39 policies, employment practices, etc. (though it receives considerable input from the management entity).
Management fees vary depending on the size of the facility and the level of responsibility of the management firm, but typical annual fees for an 18-hole regulation golf course can range from approximately 3.0% to 6.0% of total gross facility revenue, with a minimum of $80,000 or higher when including additional ancillary components such as a banquet operation. The City of Tamarac should anticipate a management fee for Colony West Country Club to be at least $80,000 per year, up to as high as $125,000 per year. The length of the typical agreement is relatively short, two to five years, and may include option periods as the typical management contract requires frequent revision.
Advantages of Management Contracts Reputable management companies generally possess experience and expertise in all facets of golf facility operations, including marketing, maintenance, tee-sheet management, merchandising, and food & beverage operations. The very nature of the agreement ensures that management company interests with respect to the golf course are aligned with the interests of the City/owner. Marketing and overall operating cohesion and effectiveness is generally maximized under this structure if a qualified company is chosen. A single entity controls every aspect of the golfer experience from the time he or she sets foot on the property. There is upside to the City when a facility is on the upswing, as the City owns all of the net revenues, minus incentives earned by the management company. Also, incremental revenues generated by capital investments belong to the City. Operating costs may be reduced because the management firm hires all employees at costs that can be less than what the City would have to pay. (This benefit accrues mostly to municipalities that manage and/or maintain their facilities with public labor). Though mutually agreed upon budgeted expenses are the responsibility of the City, the management entity provides all on-site staff and performs the management and maintenance functions. However, the City retains overall control and remains the ultimate authority on fee structures, compensation, policies, employment practices, etc. Therefore, the management contract provides the most flexibility and municipal control of any structureD short ofR self-operation. A F T Disadvantages of Management Contracts Though this option offers the City more control than with an operating lease, it offers less control than self-operation. The City still needs a person in the structure with golf course expertise who could spend sufficient time overseeing the golf operation and contract compliance. Unlike an operating lease, management contracts do not provide a guaranteed income for the City, and the fixed portion of the management fee is guaranteed as long as the contract provisions have been met. Therefore, positive net operating income to the City is not assured and operating risk remains with the City. Unlike with a lease agreement, the City would still be responsible for the capital improvements.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 40 Discussion The full-service management contract structure can result in significant positive results and is an option that is typically considered as a reaction to insufficient economic performance among municipal golf courses that are presently self-operated. The overall quality of these types of agreements rests with the City’s ability to find a qualified company, negotiate a contract that is “win-win” for both sides, and then provide proper oversight to see to it that the contract is complied with.
In conjunction with a well-constructed contract, the management contract form of operation provides the controls necessary to protect a substantial asset. A management contract, unlike a lease agreement, offers no assurance of a net profit to the City. In the case where a golf facility is experiencing, or expects to experience, an upswing in revenues due to factors such as an improved product or new capital investment, the management contract provides the greatest amount of up-side revenue potential to the City, and allows the City to reinvest in operating and capital programs. Finally, this option provides the most flexibility of any management style short of self-operation.
The large downside to the management company option for a City-owned golf course is the lack of any guarantees in terms of net revenues. In short, none of the operating risk inherent in the self-operation scenario is shifted away from the City by virtue of entering into a management agreement.
OPERATING LEASE The primary goals of an operating lease are to relieve the golf course owner (City) of all operating concerns, to ensure a minimum rent payment to the City, and to improve and/or protect the asset. An operating lease is similar to a management contract in that the lessee, like the management firm, hires and fires all employees and is responsible for the day-to-day operation of the facility. The difference between the two is that the lessee would be committed to pay all operating expenses, supply equipment, and, typically, provide some capital for investment in the golf facility. The ability of the selected private vendor to have control over the labor resource at the facility, and not have to pay “union” wages and benefits, is key to successful lease arrangements. Operating leases are typically for a longer term (typically 10+ years), especially when large lessee capital investment is involved. This program is the status quo for Colony West CC, although the lease in this case is for a shorter term and requires an escalating minimum paymentD to the City.R A F T Advantages to Leasing Burden of Risk: Leasing the facility to a private allows the City to shift the burden of operational risk to the lessee. The only expenses remaining with the City will be those associated with administering the contract, oversight, and compliance. Simplicity: The City is relieved of the day-to-day responsibility in maintaining and operating the facility, although the City does need to have a golf person monitoring the operation and enforcing contract compliance. Capital Improvements: Depending on the relative attractiveness of the business opportunity to the private entity, as well as the length of the term, the lease contract could require the lessee to make, or at least contribute significantly to, needed capital improvements (e.g., greens and cart path improvements, etc. in the case of Colony West CC).
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 41 Maintenance Equipment: The lessee is typically responsible for providing maintenance equipment and golf carts.
Disadvantages to Leasing Finding a Qualified Vendor. In the present golf economy, finding a private vendor willing to absorb the risk of a golf operation already losing money can sometimes be difficult. Control. This lease option offers the City the least amount of control over the golf course operation, especially with regard to pricing and community benefits. Revenue Constraint. As would be expected when one party shares a disproportionately low share of the risk, the City would receive less of the upside revenue potential than it would with a management contract. Long Term. Leases are typically for a long term, especially if capital improvements are required in the lease agreement. This may make it more difficult for the City to get out of the lease, should the City become displeased with the lessee’s operation of the facility. Down Market. The lessee may be forced to cut maintenance expenses and/or raise fees if revenues do not meet expectations (as present). Unexpected golf market downturns often lead to declines in property condition or the lessee seeking to renegotiate terms or even bail out.
Discussion Leasing out the golf operations shifts the burden of operating risk to the private vendor, and provides guaranteed revenue (or elimination of losses) to the owner. Although the appeal of continuing with an outside vendor has had merit for the City of Tamarac, the most successful lease agreements in municipal golf are typically those that allow for greater sharing of risk and losses. In short, the agreement must be “win-win” with both sides able to share in success. Problems tend to arise in lease agreements when one party is doing considerably better than the other. If the deal is too favorable to the City (i.e. a minimum fixed rent is required regardless of facility performance), the lessee may struggle and the condition of facilities could suffer. This appears to be the case with Colony West in 2013. Conversely, if the deal is too favorable for the vendor, the City could experience lower returns than would be appropriate and private industry can earn excess income fromD operation R of a City-owned A asset.F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 42 NGF Recommendations for City of Tamarac
Based on our evaluation of the City golf system, as well as our operations review and market analysis, NGF has formulated recommendations that the City can use to enhance or supplement its existing business and marketing plan for its golf courses. The goal of this phase of the study was to help the City identify the operating structure and business plan that will maximize rounds and net revenues for the City, while maintaining or enhancing the golfer experience at City golf facilities. The objective of our recommendations is to provide the City with a strategic vision for the future operation of its golf facilities, inclusive of operating structure and the defined mix of amenities and facilities to be offered.
NGF Consulting has prepared a schedule of specific recommendations to be considered by the City of Tamarac and Colony West Country Club. These recommendations have been organized into: (1) basic oversight and structure; (2) physical enhancements; and (3) market and operational recommendations.
BASIC OVERSIGHT AND STRUCTURE The NGF Consulting recommendation for the future operation of Colony West Country Club are based on our understanding of the economic performance of the facility and the upcoming physical improvement needs that will be required at this facility. The City must clearly establish the primary purpose and most important goals of including Colony West CC as a City asset. If the primary function of the golf course is to be an added amenity to the City, then direct City investment in the property appears most appropriate. However, if the fiscal situation is such that sustaining an economic gain on the facility is the higher priority, then some form of private funding source will be required for the needed improvements, and thus a longer-term lease arrangement that includes capital investment will be recommended.
Structure Considerations The NGF review of the various operational considerations for Colony West Country Club shows that two of the four options presented are probably not the best fit for the City of Tamarac and can be eliminated from further evaluation: Self-Operation. TheD NGF review R of the CityA of Tamarac F shows T this option to be a poor fit for the City due largely to the high cost of City labor, the lack of golf maintenance expertise, and the lack of golf and resort facility management expertise. Traditional Concession. This option will likely produce too many “working parts” that require attention and shift the City from managing golf courses to managing multiple contracts. The City will likely still be responsible for capital expenditures and thus the Management Contract alternative would be more appropriate. Thus the multiple concession option is not likely to bring the City’s golf enterprise into a more favorable economic position than it is at present.
In light of this, NGF sees the continued lease arrangement (as-is) with modifications, or some form of management agreement (traditional or hybrid) as the two most appropriate options for the City of Tamarac going forward. However, NGF must also note that if the City opts to pursue a management agreement for Colony West CC, the key issue that must be addressed prior to
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 43 making the evaluation is the City having to cover all fiscal losses and fund needed capital upgrades. To determine the best operating structure for Colony West Country Club going forward, the City of Tamarac must weigh several key considerations related to:
Economics – including need for significant capital spending, and the possibility of continued and ongoing operating deficits. Purpose of Golf Course – the City must clearly establish the primary purpose and most important goals of including Colony West CC as a City asset.
From the economic standpoint, NGF believes that Colony West Country Club has a chance to make a small operational profit under a management agreement. However, we believe this will require the City to be willing to absorb operational losses and commit to all investment required to improve the facility infrastructure (greens and irrigation).
From a policy perspective, if the City were to absorb the needed capital investment in a management contract it must decide if golf makes more sense as a City-supported activity, as opposed to a separate enterprise. If the City decides that Colony West Country Club is a “City accommodation” that can be funded, like other recreation, then this implies the City is willing to fund potential operating deficits and service the debt necessary to bring the course back to higher standard of quality.
On the other hand, the City may decide that the public benefit to the City of owning and operating Colony West CC is not enough to justify a subsidy, and therefore must be self- sustaining. In either case, NGF believes that some or all of the capital improvements identified in this report must be undertaken. Given the need for extensive capital improvements, the City will likely face another key policy decision – whether to solicit bids for a new (or existing) private entity to come in on a long-term lease basis and fund some or all of the improvements.
NGF Recommendation The NGF team is recommending that the City of Tamarac continue to operate Colony West Country Club through a lease agreement with a private entity, perhaps continuing with Sand Trap Management. NGF did not find any specific reason to replace this team based on performance or facility conditions. NGF notes that golf is a difficult business to be in right now and that the City is clearly outperforming the municipal golf market by having a lease agreement with guaranteed income to theD City. R A F T NGF Consulting recommends the type and details of the lease agreement be modified to create more of a “win-win” scenario for the City and its golf lease partner. The NGF recommends the following terms be incorporated into a modified lease agreement for Colony West CC:
Be a 10-year agreement. Include a small base management fee, perhaps as low as $10,000, plus an incentive of between 10% and 30% of total revenue over $2.5 million (inflation-adjusted each year). Continue with capital program as is. Encourage an aggressive golf lesson/learning program, perhaps with assistance from the City’s Recreation Department.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 44 SPECIFIC PHYSICAL RECOMMENDATIONS In an effort to raise the quality of the Colony West golf course and help to improve performance, NGF recommends some capital investment be made in the facility. While Colony West Country Club was reported to be in generally good overall condition, it was clear that there are some investments in infrastructure that could be made to help improve the economics of the operation. These physical upgrades are outlined below:
Turf – The turf on both courses at Colony West GC is 40+ years old and revenue would be enhanced by upgrade. NGF Estimated cost = $250,000 to $300,000 for the Championship Course and $100,000 for the Glades Course. Cart Paths – Investment in improving the cart path system on both courses would help improve the number of rounds played and revenue earned. NGF estimates that new cart paths at Colony West GC will cost $240,000 to complete a full upgrade to the cart path system for both golf courses. Perimeter Boundary Fence - The primary areas of need include the areas surrounding holes #13-15 and hole #4. NGF Estimated cost for a chain link fence in selected areas = $20,000 to $30,000. Practice Area Development – Colony West GC would benefit from adding some form of golf practice amenity to help combat the lack of a full driving range. NGF Estimated cost = $100,000 to $120,000. Clubhouse Upgrades – Colony West GC would benefit from general “face-lift” improvements to the clubhouse, including upgrades to the furniture, fixtures, and lighting, especially in the Blue Heron banquet area. NGF Estimated cost = $60,000 to $90,000. Estimated Cost and Priority of Physical Improvements The estimated cost to complete the above noted facility improvements are detailed in the table below. The figures do not include any lost revenue that may occur due to business disruption during the period these projects are ongoing.
Colony West Country Club Needed Physical Improvements D R A F THighest Highest Priority Items Estimated Cost Turf Upgrade / Replacement $400,000 Cart Path Program 240,000 Perimeter Fencing 30,000 Practice Area Development 120,000 Clubhouse Upgrades 90,000 Sub-Total – Most Immediate $870,000
Irrigation Improvement Program (lower priority) 600,000
Total Colony West CC Upgrades $1,470,000
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 45 OPERATIONAL RECOMMENDATIONS In addition to the larger management and physical recommendations, NGF Consulting offers the following list of additional recommendations that we consider to be potentially helpful in growing Colony West Country Club business and lowering expenses. These recommendations are based on the lead consultant’s experience and expertise and stem from a limited review of the operation and facilities. We also recognize that some of these items may already be enacted and that various administrative and other limitations may prevent the City from enacting some of these items. Our recommendations include:
Marketing Plan A marketing emphasis is critical to creating awareness, correcting any misperceptions in the market (e.g., Colony West will soon be closing), and increasing daily fee and tournament play. Strategies may include advertising to create a brand image (e.g., centered around themes such as Colony West’s history and high quality) and maintain awareness, developing a public relations campaign, promoting bilingualism, and increasing utilization of web, print, and yield management strategies. An effective and comprehensive marketing plan must incorporate research, planning, strategy, market identification, budget, advertising, timetable, and follow-up. Advertising should be tracked adequately to gauge its effectiveness.
Efforts to enhance golf activity at Colony West Country Club should include (in order of importance): (1) website; (2) email programs; (3) golf school / lesson programs; (4) member clubs; (5) printed promotions / advertisements and (6) improved signage. While some of these activities were ongoing under the previous ownership group in prior years, it is clear that these efforts, particularly web and email, could be enhanced in the coming years of operations.
The marketing plan that at Colony West Country Club should be revised annually and address: Market conditions Competition – including pricing and any changes in facilities or market strategy Target markets Overall Strategy / Implementation strategy Media sources, Budget, Specials / Promotions Customer feedback, research and Follow-up Measurement (a mechanismD toR gauge the A effectiveness F of theT marketing plan) Create a “Rack” brochure for hotel tourist racks, and include: . Color pictures . Be designed to fit on the tourist racks seen at various visitor centers . Have the word “GOLF” written on the top inch so that it is visible in a rack . Have facility descriptions (features, amenities, etc.) . Have a map and directions . NOT have pricing, as pricing changes too frequently
Email – Email databases are essential in today’s golf market place, as a means of staying in touch with the club’s customer base. The City should create and then aggressively market to an email database. Email marketing, with the exception of word-of-mouth and free advertising, is the most cost-effective advertising possible. In today’s market, it is essential to have and use an email database. Email addresses can be captured from customers via a sign-up sheet at the pro
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 46 shop, with a notice that people on the email list will receive notice of special promotions. The facility’s website should help Colony West Country Club build upon its existing database.
Website and Internet – The Internet is having a larger and larger impact on golf as time goes on. Golfers, especially when traveling, are using the web more and more to find places to play. The web has several key advantages over other forms of advertising:
Cost: A website is relatively inexpensive to setup and maintain. Reach: As the name “world wide web” indicates, the Internet is international in scope. Today, almost every household that contains a golfer will have access to the Internet. Information: The amount of information that can be put on the Web is virtually unlimited. At the very least, clear directions and contact information can be used to dramatically increase impact.
Of course, for a Website to be effective, people have to be able to find it. It has to be designed such that today’s Web search engines will find it based on key terms people are likely to use. It is essential that the Website be kept current for rates, hours, etc. The best sites are the ones that are constantly being updated with new promotions and news items, so that customers get in the habit of checking them regularly. The Website (or page) should continue to include:
Pictures and verbal descriptions of the facility A full scorecard Map/directions to the course Email signup: There should be a way to sign up for the email program. Information about group and individual lessons Current rates and operating hours Amenities A calendar or news of promotions and upcoming events
Branding – Colony West should strive to differentiate itself from other area public courses. Add emphasis of “Colony West” brand to all advertising, printed materials and logo on shirts, etc. NGF recommends using the “Colony West Country Club” name as much as possible on hats, shirts, balls, jackets, umbrellas,D etc. R A F T Bilingualism – Colony West should promote bilingualism as best as possible in all phases of the Colony West Country Club operation:
Incoming phone calls On-site signage and promotions Golf lessons and driving range When promoting tournaments, outings and leagues
Signage – Improve signage in and around the perimeters of Colony West, including better signage along McNabb Rd and Commercial Blvd. (if allowable under sign ordinances). A better facility sign at the entrance to the facility on Pine Island Rd is also recommended, highlighting “public always welcome” in the signage.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 47 Programming – Increase promotions of group activities such as ladies 9-hole games, leagues, events, clinics, golf schools, etc. Give people a reason to be at Colony West CC.
Player Development We note that new player development will be one of the critical elements to the long-term viability of Colony West Country Club, and this should be a point of emphasis at the facility. Direct selling, advertising, and public relations are key to any successful attempts at building market share at Colony West. However, one of the critical elements to the long-term viability of the club is player development, including a strong Junior Program. Also, because of today’s difficult climate for golf operations, tapping latent demand among groups that traditionally have shown relatively low golf participation – such as women and minorities – is more important than ever.
Increased Women’s Participation – Recently, PGA Magazine dedicated an issue to women and golf. Of the many conclusions drawn in the series of articles, two that were unanimous were that when women play golf they like to involve their families, and that women view the social aspect of the game as very important. There are common characteristics that female-friendly golf facilities exhibit, such as:
On-course restrooms (cleaned daily) at least every six holes on the golf course. Ball washers on the forward tees. Golf instruction that takes a consistent approach to all players regardless of gender. Promotion of Ladies clubs Women-only demo days.
D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 48 Colony West Country Club Basic Operations and Preliminary Financial Projections
Given its location, quality of golf course, and pricing structure, Colony West Country Club has the potential to serve a defined niche of golfers in the greater Ft. Lauderdale MSA, with specific focus on the western Broward communities. The facility can attract value-conscious golfers seeking a high quality round of golf at an affordable price from a much wider geography than presently attracted to Colony West CC. The facility is able to handle a much larger volume of golf rounds than is presently being served, with activity reduced due in part to local demographics and economic issues, but also due to a comparatively lower level of awareness (compared to some key competitors) in the broader market.
It is clear that the key issues facing the City of Tamarac and Sand Trap Management in the Colony West operation are: (1) how to maximize the desire for golfers to make the longer trip to Colony West; and (2) how to maximize the organized event schedule of tournaments, outings, charity functions, etc. as a key to improving economic performance. In short, Colony West will likely remain a modest volume producer for the foreseeable future, provided the City and Colony West staff can be successful in enhancing awareness about the facility as an excellent value for the green fees charged, especially for a place to host a large golf event or charity tournament. As the facility has a generally high amount of revenue earned per round of golf, it is expected that revenue can grow considerably with any increase in activity.
AS-IS ECONOMIC PERFORMANCE NGF Consulting has prepared an estimate of Colony West’s performance at various rounds played totals (worst case, ‘as-is,’ modest growth, and best case), assuming expected 2013 inputs for revenues and expenses. The table shows that Colony West CC needs to host in excess of 70,000 rounds annually to cover obligations, including the contracted lease to the City. With rounds totals in excess of 75,000, the facility can cover its lease obligation to the City and earn a profit after expenses. The NGF expects that expenses would also increase to maintain the facility to appropriate levels as rounds activity increases.
The result of this review shows that Colony West Country Club needs to generate a level of rounds activity that is higher than other 18-hole golf courses are achieving in this area, including some that are located closerD to the dense R populations A centers F of the T Ft. Lauderdale MSA, in order to meet its basic obligations AND make required fixed lease payments to the City. In short, this golf operation may have to generate a rounds total that is beyond its reasonable expectation in order to meet its obligation to the City. As such, the City may be putting the condition of its asset at risk in order to achieve the desired level of lease income. NGF notes that the trend in municipal golf since 2010 has been for golf leases to include lower fixed payments to the municipality with higher share percentages once a certain threshold has been met. This is part of the basis for the NGF recommendation to Tamarac as presented in this report.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 49 Colony West Country Club Estimated Economic Performance at Various Rounds Totals Championship Rounds 33,000 36,000 42,000 48,000 Glades Rounds 20,000 24,000 32,000 42,000 Total Facility Rounds 53,000 60,000 74,000 90,000
Green Fee Income Championship $1,041,000 $1,135,000 $1,325,000 $1,514,000 Glades 387,000 464,000 619,000 813,000 Total Green Fee Income $1,428,000 $1,599,000 $1,944,000 $2,327,000
Pro Shop $54,000 $61,000 $75,000 $91,000 Bar 409,000 463,000 572,000 695,000 Restaurant 209,000 237,000 292,000 355,000 Snack Bar 36,000 41,000 50,000 61,000 Bar Cart 97,000 110,000 136,000 165,000 Catering $153,000 $173,000 $213,000 $259,000 F&B Incl. Catering $904,000 $1,024,000 $1,263,000 $1,535,000
Total Income Incl. Catering $2,386,000 $2,684,000 $3,282,000 $3,953,000 Direct Cost of Sales Merchandise $34,000 $38,000 $47,000 $57,000 Total F & B 342,000 387,000 478,000 581,000 Total Cost of Sales $376,000 $425,000 $525,000 $638,000 Gross Profit $2,010,000 $2,259,000 $2,757,000 $3,315,000
Operating Expenses Golf Course $945,000 $1,000,000 $1,100,000 $1,200,000 Golf Shop 50,000 55,000 60,000 70,000 Food & Beverage 395,000 410,000 425,000 440,000 Clubhouse 115,000 125,000 135,000 150,000 Admin. & General 472,000 480,000 480,000 490,000 Advertising 38,000 43,000 53,000 63,000 Total Operating Exp.D R $2,015,000 A$2,113,000 F $2,253,000T $2,413,000 Net Operating Income ($5,000) $146,000 $504,000 $902,000
Other Items Real Estate Tax $54,000 $54,000 $54,000 $54,000 Commercial Property Tax $9,000 $9,000 $9,000 $9,000 Interest Expense $7,000 $7,000 $7,000 $7,000 Depreciation $15,000 $15,000 $15,000 $15,000 Base Lease $125,000 $125,000 $125,000 $125,000 Additional Lease $0 $0 $16,920 $107,010 Total Other Items $210,000 $210,000 $226,920 $317,010
Net Income ($215,000) ($64,000) $277,080 $584,990
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 50 Cash Flow Results The results of NGF Consulting’s preliminary cash flow projection shows that if operated in the same basic structure and condition that exists at the club today, the facility would continue to produce losses on operation up to and through the 60,000 rounds per year total (11% higher than actual in 2012). Considering all preliminary expense estimates prepared by NGF Consulting for this study, the annual net income after all expenses is not likely to be positive until rounds played totals reach between 65,000 and 67,000 total, or an amount that is 25% higher than actual 2012 rounds. Put another way, it is clear that the Colony West Country Club operation, as it currently situated, is not sustainable for the long term, as it is only capable of sustaining basic day-to-day expenses, let alone the lease to the City and other taxes. It is also certain that the Colony West CC operation will not be able to cover any large-scale capital cost reduction and it is likely that the facility will operate with continued losses, in addition to any investment made to upgrade the property.
Colony West Country Club is a good quality golf facility that can be an appropriate fit with the City of Tamarac. NGF Consulting recognizes the fiscal challenges faced by Sand Trap Management in the Colony West CC operation and reminds the City that these challenges are common in the golf facility industry in 2013 and not at all unique to Colony West. As the City moves forward in creating a new plan for Colony West CC, understanding that the level of rounds activity needed to meet all club obligations AND make a fixed lease payment to the City is not likely to be achieved in the near future, and this rounds level is not being achieved by other area public golf courses. As such, it may be in the best interest of both the City and its golf course operating partner to adjust the terms of the lease to more of a participatory, or percentage lease that can be adjusted downward in years with lower activity and upwards in years with better performance. Of course, this should all be contingent on the lessee implementing all industry best practices and maximizing effort to increase facility revenues.
LIMITING CONDITIONS The income estimates presented by NGF Consulting have been prepared based on existing and projected market conditions, the quality of the subject facility and the intended segment of the golf market toward which it is oriented. Particular focus was paid to the reality of golf supply in the immediate local market where several golf facilities have been struggling to generate enough golf rounds to meet their obligations. Proper uses of these estimates include: Establishing reasonableD parameters R for expectedA performanceF T for the subject facility Determining an appropriate level for lease obligations the facility can support Establishing the basis for financing determinations Providing guidelines for realistic expectations of income and expense
NGF Consulting is confident that some growth in activity and revenue can be achieved at the subject facility. From a practical standpoint, those managing the facility will need to respond to variable market conditions as well as unforeseen maintenance needs. NGF Consulting is confident that the facility will be able to continue to achieve similar results beyond the next five years of operation.
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 51 MARKET SHARE CONCLUSIONS When projecting a realistic market share of the subject facility, it is important to realize that the total number of rounds to be played on a golf course in any given year may be lower than the market opportunity appears to suggest. It is typical for an existing public access golf facility to achieve only a portion of its total potential. Our estimates of performance for Colony West Country Club could change should the following conditions occur:
Stronger Performance Weaker Performance
Future course closings New course openings
Faster population growth than projected Incorrect price levels
Positive regional publicity Poor customer service
Lack of loyalty to existing courses Low quality facility
Unforeseen surge in golf interest Poor yearly weather conditions
Excellent yearly weather conditions Regional economic recession
It is important to measure the performance of the City’s municipal golf asset in such a way as to help the City make financial decisions based on realistic expectations. It is obviously possible that either more or fewer rounds will be realized. We note that the NGF opinion on future performance of Colony West Country Club do anticipate significant difficulty in growing activity, and the City should adjust its lease expectations accordingly.
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National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 52 Appendices
A: Golf Course Life Cycle
B: National Rounds Played
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National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 53 APPENDIX A – GOLF COURSE LIFE CYCLE
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National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 54 APPENDIX B – NATIONAL ROUNDS PLAYED REPORT
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National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 55 D R A F T
National Golf Foundation Consulting, Inc. – City of Tamarac, FL 2013 DRAFT Report – 56