Newfoundland’s Humber Valley Resort – the award-winning Doug Carrick course near Deer Lake – needs to lower its green fees and increase the number of rounds played in order to survive.
Well I say, ‘duh.’
That’s the details from a report issued by Global Golf Advisors, an Ontario golf consultancy run by “king of aces,” Stephen Johnston.
As most G4G readers know, Humber Valley is a great golf course. One of the best in the country. But there was never an appropriate business model to support it. After a number of financial hiccups, the course was placed into receivership earlier this year and is now soliciting offers for its assets, which includes the Strawberry Hill resort facility, the course and clubhouse.
I’ve never spent much time with one of these reports, but I find it intriguing to see a) how much it relies on the RCGA’s largely discredited golf participation study and b) how much of the information seems like common sense if you’ve been involved in the golf industry in any way.
The key, according to GGA, is to cut the rates, involve more locals and, well, pray that it all comes together. The market won’t tolerate $100 green fees, something that should have been self-evident to the previous owners. So GGA suggests a $50 fee and $100 for tourists. Frankly, that’s still cheap for a course of this quality – which I’d suggest is in the Top 10 in Canada.
I must admit to being surprised at just how few rounds were going through the course before it closed:
The Humber Valley golf course did not open until 2006 and therefore historic results would not reflect mature results, however, as of 2008 annual rounds remained below 3,000 which is low even for a start-up. Our analysis has assumed that Humber Valley is capable of obtaining 16,000 rounds per season at maturity. We feel that this range is the attainable volume of rounds per season given the location, the quality and price point of the golf course and the related resort development. The increase in rounds played from
historic levels is expected to result from an increase in the number of local and tourist rounds played as a result of a lower price point and increased marketing initiatives.
The conclusion by GGA is this:
The key to improving operations at the Humber Valley River golf course relates to increasing the number of rounds played. Given the historically low number of rounds played there is significant room for improvement. The two main recommendations for increasing rounds played are to decrease the green fee rate charged to market appropriate levels and to improve marketing initiatives to tourists. Humber Valley Resort golf course has tremendous potential to be marketed as a golf holiday destination. The golf course
should be the key amenity for the area and therefore and with the proposed new pricing should offer value for money to patrons.
And if this happens, what is the bottom line, according to Global Golf – a net cash flow!
The estimated maintainable cash flow based on the opportunity projections and
assumptions is $410,000 before annual capital maintenance of $59,000, resulting in a net
cash flow potential of $351,000 per annum.
What Global Golf doesn’t say – and what is really the main question – is how do you put a valuation on the facility? The golf course is great, but in a remote area with almost no local support and hasn’t been properly marketed to a wider audience. Marketing it outside of the province would take some cash – and there’s little for that in the budget outlined by Global Golf. Is the golf course and clubhouse – which surely cost millions to build – worth anything? Is the starting price actually zero, just to find someone willing to take a risk on the course? Is there really anyone other than the government of the province who can make this work?