The following is a guest editorial by Eric Pierce, who is an independent business consultant and an avid Sumner Newscow reader…

by Eric Pierce, an independent consultant —  First the Wellington Golf Irrigation System investment although seems staggering to many is actually quite a sound and intelligent investment. Sticker shock has people wondering why we are doing this when so much turmoil remains in the majority of the city. I have created an “Impact Analysis” of the new irrigation system. I am basing this solely on round cost and rounds played and projecting general modest increases and decreases in certain areas. I will breakdown the reasoning behind those later. Look at my following figure here.

In 2015, according to WGC figures, there were 18,000 rounds played at the Wellington Golf Course — 6,000 rounds of the 18,000 are from out of town golfers. The basis for this analysis is to not only retain that current rate of out of town rounds but slightly increase them through a more efficient/more manicured course. Another reason for this analysis is to prove that it is a sound investment. Because of the cost of the new irrigation system the cost of a round needs to increase roughly $2 a round to begin to offset the cost. It will only be a fraction of the cost but we have to start somewhere! Also inflation needs to be addressed so increasing the dollars per round only generates additional revenues as the price for a round of golf is generally fairly elastic as long as your course is maintained.

By having a new irrigation system and thus a more monitored course it will start to look better which I believe will generate an additional 200 rounds of golf in 2016. The impact would raise food/beverage/pro shop sales slightly. The anticipated profit for 2016 is a large negative in part because of the purchase of the irrigation system. I know there will most likely be a bank loan so it might not look exactly like my figures depending on the interest rates etc that we get.  It is during this time that I would discuss implementing a broader food and beverage program to generate additional sales in that department.

My recommendation would be to sell liquor and use your staff to drive carts around the course and sell beer and other consumables as you are limiting yourself to before a round, ninth hole and after a round.

For the reasons above, I would estimate that your food and beverage sales would conservatively increase 5 percent over the last year. All of my figures are based on very conservative figures in order to make them more realistic and achievable.  2017 would gain another 100 rounds and the price per round would stay the same as 2016.

Food and beverage income would increase an additional 5 percent as compared to 2016. We are still not profitable on the books yet but we have reduced our expenses 25 percent over the last year due to having to purchase less fertilizer, utilities dropping because of new irrigation and reduced maintenance costs in regards to irrigation.

In 2018 I predict to be the turning point and where we start to really see a prosperous asset to the city. Due to inflation we increase the cost per round an additional dollar to $33 which the market isn’t as responsive too but none the less rounds has decreased by 100. Food and beverage continue to grow increasing another 5 percent. Our expenses decrease another 15 percent due to efficiency as well as a much longer and harsher winter. This renders the irrigation system, utilities, labor etc to end the year at a lower expense than normal.

2019 rounds increased due to better weather than normal and the cost per round stays at $33. Event spaces are now being utilized more due to the weather. This increases the food and beverage sales by 25 percent as people are well familiarized with what the Wellington Golf Course has to offer.  Expenses increase 3 percent due to unforeseen issues and the fact that event spaces need additional equipment and supplies.

2020 will be one of the best year profit wise over the 10 year time span. The investment for the irrigation system should be very close to being paid off if not completely paid off by year’s end. This frees up a lot of the courses cash flow. This is truly where the Golf Course becomes profitable. Management is now experienced on how to generate additional sales through all revenue streams. Food and beverage increases another 15 percent over the previous year.

Expenses increase another 3 percent due to the fact that supplies are also subject to inflation when purchasing as well as increased detail of course quality. We have also increased our price per round to $35 as our course is now of higher quality course with attractive amenities much like a lot of country clubs may have but at a public golf course experience cost. Rounds are down slightly in 2020 compared to the year before but the additional revenue from food and beverage as well as increasing price per round dwarfs the reduction in rounds impact.

2021 is much like 2020 only there is a lot more unrestricted cash flow. Not only that the course has attracted an additional 300 rounds this year over last due to the course quality in comparison with other municipal courses in the area. Expenses increase 3 percent over the previous year in order to maintain quality of course. Year end gross profit is $114,372.81. Pretty good for an asset people wanted to sell off 5 years ago.

2022 I project the rounds to drop significantly due to another bad weather year. Compile that with another general inflation increase in the price per round your gross profit drops about 16 percent over the last year but it happens. Beverage sales decrease due to less rounds played and it is a year you just have to suck up and move on to the next one. You still maintain a good profit although unforeseen events potentially restricted the year’s ability to perpetuate further into the black.

2023 rounds increase slightly over the last year but the market isn’t doing as well due to less disposable income in the economy. Your food and beverage drop 3 percent because of this fact. Your expenses increasing 3 percent coupled with your Food and Bev decreasing 3 percent. It is time to revamp the food and beverage program again at this point. Do research and cut wasteful costs and focus on what the customers want at this time. Profit this year is the lowest of the last five years.

2024 is a booming year due to the fact that rounds increased 400 over the last year. Big things are happening as the price has been increased to $37 a round. You revamp your food and beverage program entirely and hire a chef. Due to the large absence of higher quality food in the town your incomes although modest propel the year into the highest profit in the 10-year span.

Costs increase overall for the operation 15 percent due to 3 percent general increase for the course and 12 percent overall increased cost for the food and beverage. Food and beverage now operates at roughly 20 percent profit for food and 78.25 percent profit for beverage.

2025, the final year in the analysis proves to be very similar to 2025. Although food and beverage increases 10 percent over 2024 100 less rounds were played. Although gross revenue in 2025 is higher than 2024 expenses continue to rise at the rate of 3 percent of the previous year due to the increase in food and beverage. This equates to a slightly less profitable year but still good overall.

The gross profit for the 10 year study was $622.387.30. When looking at our initial irrigation investment of $250,000 we can calculate our Return on Investment.
The formula is as follows:

(Gain-Cost)/Cost=ROI

($622,387.30-$250,000.00)/$250,000.00=1.49

So for every dollar we spent on the new irrigation system $1.49 was generated for the evaluation period. Clearly, I have demonstrated with some predictions and real life situations that the golf course not only can be turned around it can be extremely profitable which in turn contributes to projects needing attention elsewhere.

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