Golfers Need a Little Less Green

When Talega Golf Course opened this month in San Clemente sporting a peak green fee of $225, the reviews were typical.

Beautiful course.

Challenging holes.

Outrageous cost.

So it goes for Southern California golfers, who have grown numb to skyrocketing fees at seemingly every new opening.

Their choices, until lately, have been few. Crowded courses made it a sellers’ market--especially at the top end. So course operators hired world-class course architects and promised upscale, well-manicured courses with a “country club for a day” experience for anyone willing to pay $100 or more for a peak-hours tee time.

Golfers have either paid the going rate or headed to a municipal course, where convenient tee times are rare and a round can take up to six hours.

But the golf market is changing, thanks to 23 new Southern California courses that have opened in the past two years. Another 75 have been proposed.

So now, amid concerns about a drop-off in play, a slowing economy and increased competition, high-end public courses are introducing cleverly disguised rate reductions in an attempt to entice players.

Prices aren’t being slashed, exactly--green fees are, after all, a status symbol--but there is little doubt that the high-end golf industry is hurting and the average cost of a round of golf is on the downswing.

Courses such as Aliso Viejo Golf Club, which a year ago cost $125, can be played now for $20. Frequent-player cards are becoming commonplace, as are memberships to public courses--where golfers pay up-front fees and monthly dues.

Even Talega is scrambling to put together a package only 10 days after opening.

“The golf courses had the upper hand for a number of years,” said Mike Lichty, general manager of Tustin Ranch Golf Club, one of the first high-end courses in Southern California when it opened in 1989.

“Some people might have considered it price gouging, but it was just taking advantage of the supply and demand advantage while it was there. . . . Southern California was starved for more courses and a number of developers jumped on that thought, thinking they were all going to strike it rich.”

It takes eight to 10 years to plan and build a new course, which is why the glut is just hitting now. New courses are fighting for the same clientele, and scrambling to keep their tee sheets full.

“There’s a definite concern with the amount of competition,” said Scott Hoyt, California chapter president of the Golf Course Owners Assn. of America. “There are too many courses being built now and there’s too much competition. It’s impossible for them to survive. At the prices they are charging, I’ll bet some of them are really hurting.”

Privately owned courses are protective of their finances, but according to Ted Robinson Jr., co-designer and co-owner of newly opened Robinson Ranch in Santa Clarita, the annual budget of a high-end course is between $4 million and $5 million.

Gene Krekorian, a golf analyst for Los Angeles-based Economics Research Associates, estimates that the number of rounds at high-end courses averaged about 45,000 last year, down about 20% from the industry’s mid-1990s peak. That dip would push those courses uncomfortably close to the break-even point.

If Krekorian is correct, new courses will have to reduce rates to survive, or the owners will have to sell.

“I think there will be effective price reductions and golfers are going to benefit,” Krekorian said. “There are going to be some failures and when there are some failures, the new owners are going to come in at a lower basis and they are going to be able to discount further.”

For now, courses are trying to avoid cutting rates across the board. But it’s no longer enough to offer golfers a strong course with a reputable designer. There are plenty of those to choose from, with more on the way.

“It’s become a matter of how creative you can be to sell your product,” said Rick Smith, head professional at Robinson Ranch, which opened in early 2000 with green fees topping out at $125. “You’ve got to do things to get people in.”

Robinson Ranch has introduced memberships that allow players unlimited access during off-peak times. Coyote Hills in Fullerton and Hidden Valley in Norco are among others offering similar programs. Members make a one-time down payment and pay monthly dues.

Ocean Trails in Rancho Palos Verdes, the course that had its 18th hole destroyed by a landslide, is offering a play-all-day rate of $195 because only 15 holes are open.

Other marketing tactics include changing rates based on the time of day, a strategy known as “yield pricing” that is common in the travel industry, where airline tickets, hotel rooms and rental cars are cheaper at off-peak times.

Many high-end courses have introduced Internet specials on their web sites. Some courses are using e-mail lists to promote special offers. Rarely are these rates announced to the public, though they are available to anyone who calls the pro shop and asks about the specials.

“Today’s golfers, if they are astute enough, have plenty of opportunity to play a golf course for something other than the rack rate,” said Lichty, the Tustin Ranch GM. “Every course has programs that give those opportunities.”

All this comes as good news to golfers, many of whom have boycotted the high-end niche either out of principle or because they couldn’t afford it.

Ken Taylor, a retired aviation salesman from Tustin who considers himself an avid golfer, plays high-end courses only at twilight on weekdays, when it’s more affordable.

“I wouldn’t even consider paying $100 or more for a round of golf unless it was for an exceptional reason,” Taylor said. “I think price is a big factor for most golfers. If prices came down to around $50, [golfers] would be clamoring to play where they could get that rate.”

Prime-time rates, however, are unlikely to change, for several reasons.

Costly green fees are still seen as a status symbol in the industry. If you cut your rates, you risk losing face.

“You don’t ever want to have to lower your rates because that’s a sign of weakness,” said Hoyt, of the Golf Course Owners Assn. “It’s a sign that you are in trouble. The way the courses are doing it now, it’s not perceived as a rate reduction. There is definitely some ego involved.”

Another factor is that most high-end courses were built for lower traffic, with smaller tee boxes and longer distances between tee and green. Rate reductions would undermine the very advantages these courses provide: course quality and quick pace of play.

Popular municipal courses such as Mile Square in Fountain Valley and Rancho Park in Los Angeles can handle more than 100,000 rounds a year, but upscale courses are designed for 60,000 to 75,000.

“They’re built in a way that they’re not thinking they need to do a lot of play,” said Scott Chaffin, general manager at Mile Square who formerly held the same position at upscale Strawberry Farms in Irvine. “They’re thinking cost over numbers.”

Of the 75 Southern California courses currently in the planning stages, 14 are under construction. With the average cost of building a course in the $20-million range and owners looking to recoup those costs as fast as possible, it’s no secret why courses seek to join the $100-green-fee group.

But some are destined to fail unless the industry finds a way to attract more players. The National Golf Foundation reports the number of players has stagnated over the last two years.

“It is a concern,” said Bob Thomas, spokesman for the Southern California Golf Assn. “Everyone is certainly betting that there are enough people willing to pay those fees to make it work. The challenge of the industry is to make the game accessible and affordable enough so that it does work.”

In the strong economy of the late 1990s, many courses were able to turn large profits despite the increase in competition. But as the stock market falls off, Thomas expects the number of rounds at high-end facilities to follow suit.

“An incredible economic boom made it all work because everyone had more money,” Thomas said. “The real test will come when the economy turns south. I’m sure that’s going to have some impact.”

The downside to course failures is that new owners could make the courses private or, worse, make way for housing. That would shift the advantage back to public golf course owners, and deprive golfers of choices.

“The thing that’s great right now is that if you want to play a good, solid golf course, there are a lot of places to do it,” Robinson said. “The opportunities are there. Those things weren’t there 10 years ago.”

Heritage Golf Group, which owns Talega, is not planning a rate cut, but Heritage President Bob Husband said discussions are underway to offer repeat customers free return rounds and frequent-player cards.

“We understand that some people are not going to support Talega because it’s too expensive,” Husband said. “We are coming up with programs that allow play at greatly reduced rates so we can appeal to the widest variety of people.”

Some strategists say Talega, and others that follow, might want to consider going after another niche: the $50-$75 range. That’s the going rate at several new courses and golfers have responded favorably.

The PGA of Southern California Golf Club in Beaumont, a 36-hole facility that opened in July with a peak rate of $75, is on pace for 50,000 rounds per course in its first year. Goose Creek in Mira Loma, with $60 peak rates; Sterling Hills in Camarillo, with $55 rates, and Westridge in La Habra, which charges $75 on weekends, are on track for similar numbers.

“I think a major reason for our success is our pricing,” said Jeff Johnson, director of golf at the PGA of Southern California Golf Club. “We benefit the Los Angeles and Orange County golfer who is used to a different price point.”

Many golfers simply do not want to pay top dollar. Los Angeles City courses, which charge peak rates of $25, have not seen the drop-off that high-end courses have.

Wilson Golf Course in Griffith Park had 109,282 players in 2000 and 112,034 in 1999.

Rancho Park resumed its position as one of the most-played courses in the world by drawing 111,081 players despite having temporary greens for half the year. Rancho Park had 116,688 rounds in 1998, its last full year with regular greens.

Chaffin, who recently opened a second course at Mile Square with a peak rate of $55, said if the economy continues to slow, lower-end courses may remain unaffected.

“All those corporate credit cards used to entertain clients will stay in the wallets,” Chaffin said. “I wouldn’t feel comfortable [as a high-end course] because the guy making $300,000 a year is still playing Mile Square, but the guy who is making $35,000 isn’t playing any [high-end] courses. There’s no way they could all survive a bad economy.”

But it might not take a bad economy. The abundance of competition might drive some courses into the ground, unless the industry and course owners and operators can foster new ideas to drum up business.

“For the longest time, course owners could do what they wanted to do and charge what they wanted to,” Robinson said. “That’s not the way it will be in the next 10 years. If we continue to approach this industry as different than others, that’s a mistake.”

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Staff writer Martin Beck contributed to this story.

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Seeing Green

When Talega Golf Club opened in San Clemente earlier this month it immediately became one of the most expensive courses in Orange County--and Southern California. Prime-time rates at Orange County’s public golf courses:

Source: Courses listed, National Golf Foundation, Times reports