Fee threshold for success of private courses.

[Doofenshmirtz]

Talking to one of the Trey Texas Ranch owners over the weekend got me thinking about what amount of fees would be required to make the investment in a private course worth it from the standpoint a prospective owner. Of course, land values differ and are going to be the determining factor, but assuming that equipment and installation costs are $20,000, for 18 holes (what a local park commission paid for 18 holes last year), free design, and rural land costs in my area (about $7,500/acre) for 20 acres for a course, I reach a course cost of $170,000. Dismissing all opportunity costs (assuming a dedicated owner that just wants the course to provide a ROI based only on the cost to put in the course) and assuming minimal maintenance costs, including mowing, at $1000/month (wild guess) for half of the year ($6,000) and a proshop that provides enough money to cover the cost of an attendant for fee collection, I get an initial investment of about $176,000.

For a 10% return on this investment, the owner would need to collect about $18,000 in fees per year even assuming no property taxes. At 50 rounds per week (let "round" mean a single player for a day). the owner woud need to charge about $7.50 per round. Given the costs that I've missed or ignored, it seems like a more realistic number is going to be between $10-$15 per round unless the number of rounds per week is significantly higher, which it certainly would not be in my area.

I'm betting that there are plenty of people who just wouldn't pay that much for even a good quality local course. But maybe I'm wrong on this. Do these numbers appear to even be in the ball park?

 

[dysmike]

I think you're about right for greens fees. For a good, well cared for, course (with basic amenities) I'd pay that.

 

[klmdg]

Personally, I think daily fees are the way to go, especially if the course is off the beaten path. It is also a lot easier to manage with limited staff. I would gladly pay 20-25 for daily usage of a nice private course.

 

[DavidSauls]

20 acres is rather small. You can build an 18-hole course there, but you'll be using every inch of land. It's got to be a better course than the free courses it's competing with. That's going to be tough.

You also need to account for the time for construction, maintenance, and oversight. It's not a return on investment if you don't. 10% on $176,000 in the stock market, where you do nothing, is different from 10% on $176,000 with 500 or 1000 hours of work.

 

[DavidSauls]

I'm betting that there are plenty of people who just wouldn't pay that much for even a good quality local course. But maybe I'm wrong on this. Do these numbers appear to even be in the ball park?

Probably. You have to consider how many people will pay that much, and how often they will. You might find a lot of people who will pay 6 times a year, but few who pay 6 times a month, or more.

The catch 22 is that the more people in your area, the better the chances of finding enough who will pay. But the more people in your area, the more land costs.

The number of people who will pay also depends on the local scene---how many courses in the area, how good they in comparison, and perhaps how crowded they are.

 

[DavidSauls]

Your maintenance costs are high, and at any rate wouldn't be part of the sum needed for return on investment since they recur every year. They are on top of the return on investment.

But you can add in equipment. Depending on the land, you're going to spend at least $5,000 for a mower and other power tools; if you need a tractor, a lot more. (If it's all in deep woods with no mowing, then less).

Add stocking a Pro shop to the investment. 1,000 discs, which isn't as impressive a total as it sounds, is going to cost $10,000 wholesale. If you don't stock it well, it's not going to generate income to pay an attendant.

All of this assumes someone liquid enough to pay cash for the land, and the other investments. If you finance it, you need a great return to cover interest.

 

[Gblambert]

We just opened our courses to the public last week and decided to go a different route. Since there's an abundance of free city park courses in our local area, we decided to charge a low greens fee to draw more customers in - $5 per day for unlimited play on both courses. Then we can sell snacks and beverages, discs, t-shirts, beer, etc in the pro shop. Disc rentals and lessons from a local pro will also be available. A stage is planned for small concerts to hopefully bring in some non-disc golf customers as well. Charging more than $5 in this area would be a tough sell, but by diversifying our revenue stream we hope to make it a profitable business. Time will tell.

 

[Doofenshmirtz]

Your maintenance costs are high . . .

Maybe, just the cost of mowing 20 acres twice per week in the South could exceed that, but it certainly might be off in cooler areas. In any event, I'm really just trying to ballpark the cost of a decent course. When talking to the TTR owner, she indicated that they have spent $200,000 to install their courses and that didn't include the cost of the land. Much of that went to the designer I'd bet, but it was also clear that they had high equipment costs due to the cost of bridges for creek crossings. They are also out in the sticks with little opportunity cost issues related to other uses for the land. She also laughed at the question of whether they were getting their money back on the course. It appeared that no more than 6-8 people played last weekend at $10 per day.

 

[RobA]

Those green fees seem very high, especially in markets where there are other playing options on public land. I wouldn't pay that much when I have plenty of excellent public courses within a 45 minute drive. I am not sure if the pay to play model is sustainable.

 

[Martin Dewgarita]

The course owners that I've talked to recently that have been able to make it work say they're about able to break even on greens fees, but are able to put the business in the black through alcohol sales. Yet none of them employ a beer cart...

 

[DavidSauls]

Maybe, just the cost of mowing 20 acres twice per week in the South could exceed that, but it certainly might be off in cooler areas. In any event, I'm really just trying to ballpark the cost of a decent course. When talking to the TTR owner, she indicated that they have spent $200,000 to install their courses and that didn't include the cost of the land. Much of that went to the designer I'd bet, but it was also clear that they had high equipment costs due to the cost of bridges for creek crossings. They are also out in the sticks with little opportunity cost issues related to other uses for the land. She also laughed at the question of whether they were getting their money back on the course. It appeared that no more than 6-8 people played last weekend at $10 per day.

I meant that your estimate was high---maintenance wouldn't cost $1,000 a month. Assuming you're not paying someone to run the mowers.

Our course is half-wooded and not well maintained in summer. But if we mowed it all at once, $20-$40 in diesel for the tractor would do it. The bigger expense is breaking equipment, and how much that costs depends on how handy you are fixing it yourself.

*

On a brighter note, you don't really need to get return on the cost of the land. The land is an appreciating asset and, assuming an owner paid cash for it, should give decent return on its own. What you need the course income to do is cover all expenses (including property tax on the land, and insurance), and pay you for your time. That's assuming you pay cash for the land; if you finance it, you need to cover interest as well.

At the very least, you can add the appreciating value of the land into your income.

 

[Doofenshmirtz]

On a brighter note, you don't really need to get return on the cost of the land. The land is an appreciating asset and, assuming an owner paid cash for it, should give decent return on its own.

I tried to ignore opportunity cost as it related to the land (rental value, other uses, etc) but it won't be the smartest investor who doesn't care about the return on money put into the purchase price. Where I live, you can make a better return by putting that money into rental properties, growing timber or even, historically speaking, just letting your money sit in an index fund.

But it seems that where property values are higher, the green fee threshold will be even higher to make a course profitable.

 

[DavidSauls]

What I mean is, if the property is appreciating at 5% a year, the smart investor will only need 5% more return, in profits from the disc golf, to reach the 10% in your example.

 

[ranger]

Talking to one of the Trey Texas Ranch owners over the weekend got me thinking about what amount of fees would be required to make the investment in a private course worth it from the standpoint a prospective owner. Of course, land values differ and are going to be the determining factor, but assuming that equipment and installation costs are $20,000, for 18 holes (what a local park commission paid for 18 holes last year), free design, and rural land costs in my area (about $7,500/acre) for 20 acres for a course, I reach a course cost of $170,000. Dismissing all opportunity costs (assuming a dedicated owner that just wants the course to provide a ROI based only on the cost to put in the course) and assuming minimal maintenance costs, including mowing, at $1000/month (wild guess) for half of the year ($6,000) and a proshop that provides enough money to cover the cost of an attendant for fee collection, I get an initial investment of about $176,000.

For a 10% return on this investment, the owner would need to collect about $18,000 in fees per year even assuming no property taxes. At 50 rounds per week (let "round" mean a single player for a day). the owner woud need to charge about $7.50 per round. Given the costs that I've missed or ignored, it seems like a more realistic number is going to be between $10-$15 per round unless the number of rounds per week is significantly higher, which it certainly would not be in my area.

I'm betting that there are plenty of people who just wouldn't pay that much for even a good quality local course. But maybe I'm wrong on this. Do these numbers appear to even be in the ball park?

I wonder if $10-15 would push some semi-serious players away. I throw with a few guys who love DG, yet will not want to pay more than $10 to play with so many decent free options in the area.

 

[Doofenshmirtz]

What I mean is, if the property is appreciating at 5% a year, the smart investor will only need 5% more return, in profits from the disc golf, to reach the 10% in your example.

OIC. True.

 

[PWaggoner]

Closest two courses are a pay to play ball golf course and tight short freebie course. I play the free course a lot more just because I prefer the shade and trees. Ya it's fun throwing max d in a field but I'd pay 5 to play a nice long course in the woods over free or riding in a golf cart any day.

The next closest course costs $8 a car to park. Cheap with friends but I'm not paying that alone. So almost always have to play the freebie because gas and $8 adds up. I have a friend with a sticker for Delaware, usually ride with him to tournaments.

But for some reason I will pay $5 but $8 seems high.. I'm frugal I guess lol. $8 for a really sweet course perhaps once or twice a month. Maybe more if it's really close and amazing.

 

[DavidSauls]

Ultimately, I think it is impossible for a disc golf course to turn a profit, if you include the land costs, and the property does not also generate income from other uses.

 

[ranger]

Closest two courses are a pay to play ball golf course and tight short freebie course. I play the free course a lot more just because I prefer the shade and trees. Ya it's fun throwing max d in a field but I'd pay 5 to play a nice long course in the woods over free or riding in a golf cart any day.

The next closest course costs $8 a car to park. Cheap with friends but I'm not paying that alone. So almost always have to play the freebie because gas and $8 adds up. I have a friend with a sticker for Delaware, usually ride with him to tournaments.

But for some reason I will pay $5 but $8 seems high.. I'm frugal I guess lol. $8 for a really sweet course perhaps once or twice a month. Maybe more if it's really close and amazing.

Most of us are spoiled by free golf, so I think $8 a round does add up pretty fast.

 

[jrawk]

Hosting periodic C-tiers and keeping the allowed 15% per player that can be withheld from payouts can be a big boost to revenue.

on a $40 registration:
withhold the $5 green fee.
and 15% of $35 ($5.25).. That's $10.25 x 72 players for $738 in one day. Then depending on how you manage payouts (paying out vouchers for your on-site store), you can increase your revenue vastly.

 

[DiscJunkie]

Hosting periodic C-tiers and keeping the allowed 15% per player that can be withheld from payouts can be a big boost to revenue.

on a $40 registration:
withhold the $5 green fee.
and 15% of $35 ($5.25).. That's $10.25 x 72 players for $738 in one day. Then depending on how you manage payouts (paying out vouchers for your on-site store), you can increase your revenue vastly.

Heresy! Blasphemy!
Bring out the Tar and Feathers!

Seriously, I have no problem with making some green on a tourney, especially on private land. Not everybody would agree. We DG'ers tend to have a sense of entitlement.