The Business of Golf: Islington Golf Club
Jay, Winston, Kemar, Greg
May 9, 2013
Islington Golf Club is a beautiful, private equity golf club located in the west-end of Toronto, Ontario. The Islington Golf Club is situated in Ward 4 – Etobicoke Centre – which has a population that that aside from English, has a predominantly European mother toungue. According to the 2011 Census, Ward 4 had these top five mother tongues: Italian (5965), Ukrainian (4495), Polish (3870), Spanish (3620), and Serbian (2670). This golf course is located in a high-end community; in the Census, the highest section of household income amongst Ward 4 was the category of “$100,000 and over”, with a whopping 29.2% of the population having a $100k+ income. This member-only club has attracted an exclusive group of people that can afford to play there.
The general manager of Islington Golf Club, Dave Fox, knew that he had to make big changes to his golf club. The constant competition from competitors drove him to devise a plan to maintain his club. Mr. Fox had these 4 main questions:
* What should be the mission of the Islington Golf Course?
* What is the vision for Islington, 5 to 10 years down the road?
* How can the Islington Golf Club generate the funds to make desired changes?
* How should the club position itself in the competitive marketplace?
Under the guidance of superintendant of the Islington Golf Club, Robin Stafford, they developed a water management project. This water management project consisted of the main changes that had to be made. These changes were:
* A new water reservoir
* New irrigation system
* Fencing to protect neighbors from stray golf-balls
However, factors such as extreme competition, the lack of a specific market in the private golf-club industry, and the steep decline of members and prospective members have caused the Islington Golf Club to be in between a rock and a hard place. Their own members seem to have divided opinions on the future of the golf club; some believe that the golf course is the key feature to the golf club and thus it should be the area of main focus. Other members wanted a better all-around experience, looking into other amenities than just the golf course. These members were also the ones who felt a sense of pride when telling others that they are members of the Islington Golf Club, due to the prestigious nature of the club. However, another group of members wanted the golf club to maintain a more family-centred orientation, allowing youth golf players to move up the ranks alongside their older relatives. The lack of agreement amongst members, who are the owners of the club, is stunting the progress of the golf club.
* Immaculate golf course
* Great area to maintain a golf course in terms of income, value, and demographics
* Very connected through social media
* Accomplished professionals that deal with specific roles under a captain as if the company is a brigade
* Historical perspective, allure of playing at a prestigious golf club sparks feelings of pride and respect amongst peers.
* Well-kept website that is concise and attractive WEAKNESSES
* Lack of response for general enquiries about the Golf Club (E-Mail sent April 26 2013, no reply)
* Relatively long waiting time for a response regarding a potential membership for a single person (E-Mail sent April 29 2013, response received May 3 2013)
* Prime area for golf clubs, a lot of competition and that is a weakness due to potential members joining other clubs.
* Indecisiveness amongst member-owners who are unable to reach a compromise.
* Lack of funds OPPORTUNITIES
* There is an untapped market in families – they are not being recruited as heavily as couples and single adults. Children can move up through the system, raking in a lot of money through each stage.
* A potential sponsorship would solve the majority of the monetary issues that plague the Islington Golf Club.
* Vertical/Horizontal Integration with other competitors and companies
* A more refined and simple trial system would potentially bring in more members. THREATS
* The threat of drowning in debt is a very fearful thought for all members in the club as well as the General Manager.
* Competitiveness from local golf and country clubs – for example, the St. George’s Golf and Country Club is ranked as the 3rd best golf club in Canada.
* The younger generation not taking up the sport of golf as fervently as the generation before them.
* Stricter environmental policies that do not allow the golf club to remove trees and other parts of nature to improve the condition of the course. SWOT ANALYSIS
o In competition with four different golf courses within a 5-10 mile radius of Islington – St. George’s Golf and Country Club, Weston Golf and Country Club, Lambton Golf and Country Club, and Markland Wood Golf Club.
* St. George’s Golf and Country Club is currently the 3rd best golf club in Canada, and is ranked amongst the top 100 in the world. The course has hosted prestigious events such as the Canadian Open, LPGA Classic, and the Canadian Senior Open.Initial investment prices of these four courses range from $33,000 (Markland Wood) to $75,000 (St. George’s)
* No long-game practice facility
o Vital for members so that they can improve their golfing skills which would increase the possibility of them becoming full members.
o Given land restraints, it is a dilemma for the owner. However, other golf clubs in the area have recognized this and have addressed this issue.
* Clubhouse appeal
o The board needs to focus on clubhouse improvements that will entice new members and keep current members. The goal is to make the entire golf club more attractive and better-rounded than just being known for an impeccable golf course.
o Renovations to both the clubhouse and golf course are the most demanded upgrades of the Islington Golf Club.
* Failing food & beverage operations
o Budgeted for a loss of $50,000 but in recent years the loss was more in the order of $100,000 and food sales have been declining since.
o Members want to see a more upscale restaurant-feel, and renovating the main floor of the golf course would cost $1-$2 million.
* Declining membership
o The sellers’ list is growing without an equal offsetting buyers’ list, therefore members are no longer confident that they can sell their shares.
o Membership demands have diminished over the past few years, and a re-thinking of the recruitment philosophy is required.
* Community around the Islington Golf Club
o More and more non-golfers have moved into the area, and are complaining about pesticide use and early morning noises from equipment such as lawn mowers.
o More legal issues are arising around errant golf balls in backyards, and as a result the club considered installing a protective fence along the 15th hole.
Key facts to be considered:
– 2500 fewer rounds were played from the previous year
– 7% decline in guest fees, 11% decline in cart fees
– Expenditures on the course had increased by 5.7%
– Overall operating loss of close to $200,000 in 2008 – half of which being related to the F&B sector
– Consultant report in 2007 states that service professionalism and inconsistent delivery plus inconsistent delivery of a quality F&B experience had been identified as club weaknesses.
* Get a sponsor for the Islington Golf Club
o The costs of the Islington Golf Club are clearly too much for the club to handle. The demands of the owners of the club – the members – and their indecisiveness to come to an agreed conclusion are stunting any potential progress.
o While a sponsor may not be preferred by the golf club members, the members must be shown that the club is currently accruing losses from all sectors of the club and that a sponsor will help offset the costs and expenses, whilst still maintaining the prestige of a private golf club.
o The Islington Golf Club has a $172,183 net operating loss, and the consistent payments of a sponsor to have their brand emblazoned throughout the golf course (such as the logo on the flag on the hole, on the gazebo) will not prove to be a hindrance to the members.
* Become a semi-private club
o The club will lose some of its prestige whilst still shedding many of the operating costs, especially in the food and beverage sector.
o Islington Golf Club will still earn a lot of revenue from their banquets and weddings, however many of the golf club members value their immaculate golf course more than smaller details (to them) such as renovating the floor in the social club area, or clubhouse.
o More casual golf players would want to play on the course, and seeing as how the people that reside in that community tend to have higher incomes, there is a bigger chance that they could enjoy the feel of the club and become full members.
o Cusomer support and amenities would be seen as less critical to company success as a semi-private club rather than as a fully private club owned by the members.
Age of the customers – private golf courses have an average age membership around the 58-60 age mark.
Sex of the customers – private golf courses generally have a 2:1 male:female ratio in North America.
Marital statuses of the customers – members generally have families, and are married.
Habits of the customers – members generally have a lot of time to enjoy the golf club and to reap the full benefits.
Ethnicity of the customers – the majority of members in private golf clubs are Caucasian.
Expenditures – how much money will be spent on the technological aspects of the club? POS systems, golf carts, amenities
Innovation – what products or ideas can be upgraded to gain an advantage over competitors in the industry?
Expansion – what can be expanded in order to generate more revenue for the golf club? Can the club expand on the course, or expand on the clubhouse, or on the social club?
Income of the customers – the customers have relatively high incomes, considering the prices of membership.
Loans – Islington Golf Club may be able to secure a loan, granted that the owners have good credit.
Taxes and Bills – a variety of taxes and a set amount of cash that must be allotted each month to pay for bills such as energy, hydro, etc.
Savings – part of the 2008 small surplus of the Capital Fund was used to cover some of the operating costs. Whether the Islington Golf Club is able to save a set amount of money per month will help them prepare for a potentially dire situation.
Natural resources – trees must be cut down in order to maintain the condition of the golf course. Each tree cutting requires consent of the City of Toronto and the Mimico Creek Conservation Authority.
Environmental regulations – there are many laws that must be strictly adhered to in order to avoid any penalties or repercussions that could also harm the image of the Islington Golf Club.
Competition Laws – understanding of these important laws are vital to success. A lawyer or notary might be required.
Financial Regulations – whether the company must stay afloat, and not be swimming in debt, third-party agencies may be forced to check up on company finances.
Regulations of Imports/Exports – this is only important if items are imported from other nations, or if products are exported to other nations.
Nature – is it ethically correct to destroy nature to expand and maintain a golf course? Is it ethically correct to displace animals from their natural habitats?
Potential “Poaching” – if Islington Golf Club were to “poach” members from other golf and country clubs, is it ethically correct while they are still under contract to those clubs?
Local Competitors – the other golf and country clubs that are in close proximity of Islington must be monitored in order to detect any fluctuation within finances or club members.
Poaching – whether it may be illegal as a concept, the idea of acquiring members from other country clubs by proving that the Islington Golf Club is better shows extreme competitiveness
Promotions – at the end of the day, with each advertising technique the goal is to defeat the competition and reach the company goals. Promotions to generate more revenue to outshine the competitors will be very important.
Action Plan – Sponsorship of the Islington Golf Club
The goal is to remove the debt entirely, and to make sure there is enough money to renovate the clubhouse and to maintain the course’s immaculate condition. Therefore, a sponsor would be able to offset the many costs and expenses faced by the club. In this situation, all members of the golf club management and ownership must be involved, as it is their say and their opinions that must be heard and a compromise must be made.
1] Find a sponsor that is associated with sports, has a good image, and can relate with a demographic match with the customers.
2] Enquire about their goals as a sponsor and inform them of the Islington Golf Club’s desires that they wish to achieve from a sponsorship.
3] Ratify an agreement between a sponsoring company and the golf club, granted that the Board of Directors has agreed with the proposals in place for both the sponsoring company and the golf club. In this case, the members are the owners and a majority agreement would rule in this scenario.
Evaluation of the Action Plan
This would be one of the most effective plans possible, as it is one of the most efficient ways to reduce the debt whilst still maintaining the prestige of the Islington Golf Club. The brand equity is very high already, but with a prestigious sponsor or a strategic sponsor, the money that would flow through the company would be enough to offset the operating losses of 2009, and still be able to stay on schedule with repayments of debts.
However, the key feature of a sponsorship deal is the fact that with the extra money that would be brought through, some of it would be allotted for the renovation of the clubhouse, social club, and the refurbishment of many of the amenities that the members have complained about. “The patio is getting a tad rusty.” “We’ll have a replacement in a few days!” – That would be the future response if there is enough money that is set aside for improvements. With the majority’s agreement on a selected sponsor, they would have to agree with the company logo being placed throughout the golf club, and any clubhouse tournaments would have the name of the sponsor. But who wouldn’t want to have a company with a very high brand value sponsoring their tournament? That would just be adding icing to the cake! Imagine TD Bank sponsoring the Islington Golf Club, having been named by the Globe and Mail as the best brand in Canada in December 2012! We can see viewers flocking to the Islington Golf Club to see the TD Bank Islington Invitational that would be played only by club members. That’s when you would see a sharp improvement in memberships. And that is the wonderful magic of sponsorship.
The Islington Golf Club is in a bit of a pickle. The member-owners understand that improvements must be made, but they simply cannot agree. The club is divided into factions in which they support the funding of separate tasks and requirements. The recession of 2008 and the ostracism of golf by the Generation Y are proving to be difficult for this golf club to handle. The Islington Golf Club requires a change from top-to-bottom and it will only be seen if they are able to pick themselves off the rough and with some shrewd decision-making they can be on the green, ready to be putted in for a birdie.
The Islington Golf Club has the potential to become a relative force again – not at the levels of the Rosedale Golf and Country Club – but enough to have a sizable impact on the community of the Etobicoke Centre. As a group, we think that if a sponsorship plan is followed, in the best case scenario the Islington Golf Club could be in the green (no pun intended) and could be a successfully run co-operative company. We have not discussed a worst-case scenario because we are so sure that a correctly chosen sponsor would have little to no disadvantages if the majority of the member-owners agree with the product placement throughout the course.
We predict as a group that in the future that the Islington Golf Club will not be facing any losses, which should be the main goal. If that goal is achieved, then our plan is a success and anything else will be just extra benefits. This is due to the fact that achieving a profit is the goal for the company, as well as assuring longevity in the long-term as well as earning more contracted full members whose investments will be essential for the advancement of the Islington Golf Club.