Brown Golf exec talks consolidation, casual attire

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John M. Brown, COO of Brown Golf Management, said he sees a greater shift away from private clubs as many golf courses fail to generate the same level of activity they once did, which has forced some to consider semi-private operations to fill rounds.

The game also is attracting more casual and youthful audiences in many markets so golf course operators need to adapt, Brown said.

“The group that is really coming up behind is a group that wants more flexibility and wants to take their eight and 10-year-old out,” he said. “If their shirt pops out of their shorts, it’s not a big deal.”

The “stuffiness” associated with golf has absolutely changed, he said. “We’ve actually done away with the dress code at one of our facilities, which is something I never thought I would do.”

Brown, whose company is set to begin managing facilities in Georgia and Missouri, spoke with the Business Journal about the changing demographics in golf and his company’s criteria for evaluating courses to buy.

“You really gotta look at each facility in its own market and who the customer base is,” he said. “The purists are important, but they are not paying your bills exclusively. There’s got to be efforts made to bring in new customers, period. To do that, you can’t do the same old thing.”

Q: Are we going to continue to see a rightsizing of the golf business and courses being redeveloped for housing and other uses? Brown Golf has been buying courses, so how does that impact your business?

A: Yeah, I do think we’re going to see it for probably the next five to seven years. We’re losing about 1.5 percent of courses each year.

When we first started buying properties, the real indicator on golf properties used to be net profits and EBITDA (earnings before interest, depreciation, taxes and amortization).

It’s really the total revenue now just because the market has changed. We were able to buy properties for lower than one times revenue. The multiple is (now) more like 1.1 or 1.2 times revenue.

Some of that is (course) inventory going down and there is new money coming into golf from overseas. Everyone is trying to figure out a good spot to put their money and make a little bit of a return right now.

And so the valuation or what the market is bearing as far as what you can buy golf properties for is starting to rebound a little bit.

There are a lot of companies in the spectrum that we are in. There are a lot of people that have, say, five clubs to 20 clubs, and there is starting to be a consolidation related to companies pairing up. I do think that will continue to happen related to golf companies.

Q. Where do you think Brown Golf will fit in over the next five years? Where do you want to be?

We’re starting to allocate more of our focus on long-term leases and buying properties only, and getting out of the third-party management business. We still will manage, but it’s got to be the right relationship.

We’d like to have properties that we can have a vested interest in and make an impact right away. Our allocation, which was 50/50 (ownership/management) in years one, two and three, is now more like 75 percent (ownership) 25 percent (management). That is probably going to shift even more to like 90/10 over the next five to seven years.

Q. So it’s not getting any easier to find buying opportunities. How has the company’s criteria changed?

We’re a little bit more refined in what we’re looking for.

We look at school districts because young families are really important to the type of operations we run. We run semi-private hybrid facilities that don’t have an exclusive membership focus and are more of a value-oriented brand.

In the past, it was all about the layout and it was about rounds (played). That’s what I would call standard analysis. Now we’ve incorporated things like total annual revenue and what is the percentage of golf revenue versus food and beverage revenue? What does the school district look like? What is the population within seven miles? And what does the golf course look like?

Q. Where are we seeing more of a migration away from the private clubs? What other trends are you seeing within club operations?

The upper-echelon private club is never going to have a problem, no matter what economic cycle it is. It’s the second- and third-tier clubs, which are trying to recreate themselves. What’s happening is membership is dwindling, so rounds are dwindling each year if you remain private. Every time a tee time passes without somebody teeing off you are losing money. You need the same allocation of rounds.

If 15 years ago you did 30,000 rounds on your golf course, today you might be doing 20,000 rounds. The reality is you need the 30,000 rounds and it really doesn’t matter where it comes from.

I would say the food and beverage operations are more streamlined. They are more simplistic and are there to service the golfers. The reality is, for whatever reason, it tends to be very tough for a golf course to be known as a vibrant a la carte dining environment. If anything, the food and beverage offerings have mirrored more of what the golfer is looking for, more sandwiches, burgers and draft beer. It’s not martinis and ahi tuna. It’s more burgers and beer for what we offer.

Within our market, it’s more about not trying to be something that you’re not. It’s really about pushing golf and greens fees. The reality is that a dollar in golf flows to the bottom line. A dollar in food and beverage you might get 15 cents that flows to the bottom line.

The other aspect, which we’ve really gotten into, is making sure you have every channel possible for people to book tee times at your facilities.

Q. How does the Northeast compare to the Southeast in terms of management and buying activity levels and development of properties?

The Northeast has held its values better related to land values, which is why we’re not as involved in buying clubs. However, they have struggled. There are a lot of private clubs holding on. I foresee in the future that those second- and third-best private clubs within a particular city being made available to operators like our company. People still want the amenity and the asset, but it’s not necessarily able to remain an exclusively private club. So I foresee more opportunities in the Northeast to creatively put deals together.

A lot of that has already settled out in the South. Most of the private clubs are in the Northeast.