Subpar profits in Inver Grove Heights

On a rainy day last week, business lagged at Inver Wood Golf Course in Inver Grove Heights. But the weather wasn't the only reason rounds were down.

City officials say they've seen a steady decline over the past decade in rounds played, with a resulting drop in revenues. Now they're trying to figure out what can be done to help the course stay up to par in a difficult economy.

"Everybody's having this same problem -- it's not just us," said Al McMurchie, manager of Inver Wood. "It's a very difficult business."

He points to new trends: Fewer young people are taking up golf. Companies have cut way back on entertaining clients on the greens. And too many new golf courses have been built since the 1990s, while the number of golfers is shrinking.

In response to a call from the Parks and Recreation Advisory Board, the city is paying an Arizona firm $55,000 to conduct an operational audit of the 275-acre course.

The goal is to improve financial efficiency and attract more players to golf more rounds to generate more revenue, said Eric Carlson, the city's parks and recreation director.

"We also are trying to educate ourselves and the golfers about what our course is capable of, what the market's doing, so that everyone understands that to be successful in this market it's going to be very difficult," he said.

"Golfers in general are playing fewer rounds annually, and there are fewer golfers on the market than there were in the 1990s," Carlson said. "It seems that the younger generation isn't playing as much golf as the older generation was when they were younger."

How to boost revenues

At issue in this south-metro suburb are differing philosophies of how the golf course should be run.

One faction, led by a member of the local parks and recreation board, wants the course to give discounts, as competitors do. But McMurchie and Carlson maintain discounts would simply eat into profits rather than draw more golfers and rounds.

The new audit isn't aimed at looking for missing money. None is missing, Carlson said. Rather, it's intended to scrutinize and analyze the operations, policies, practices, staffing, programming and other factors in order to improve the current business plan.

The foundation's analysis of city-owned golf courses in the state concluded that municipal courses lost about $2 million in 2007, the most recent year for which comprehensive figures were available.

As with many municipal golf courses, Inver Wood's 27-hole course has seen a drop of roughly 25 percent in revenues since the mid-1990s, McMurchie said.

Nationwide, courses have experienced declines generally ranging from 25 to 35 percent, he said.

In the mid-1990s, when golf was extremely popular, between 70,000 and 75,000 rounds were played each year at the Inver Wood course. Now, it's about 55,000 a year, McMurchie said.

The club has boosted fees, he said, to help revenues per round remain steady in the face of climbing expenses.

The full 18-hole course in 2008 and 2009 has a $36 green fee, up from $34 at the beginning of 2008.

On the senior side, Inver Woods' executive nine-hole golf course costs went from $8 to $8.50 in 2008.

Analyzing the problem

The audit is just beginning. It will be overseen by a newly appointed 12-member volunteer advisory committee.

"It will give us some outside input in terms of how to generate more revenue and protect the revenue that we have," McMurchie said.

The recession, coupled with tight city budgets, has heightened concerns about funding of municipal golf courses in tough times, McMurchie said.

"We were incredibly successful through the 1990s and even the early 2000s," he said. "And then, of course, we've had market conditions present themselves: the overbuilding of golf courses, the softening demand by players. Business entertainment as an example has all but dried up."

Early this decade, amid a milder recession, came a double whammy for the industry: Tax laws were changed, which reduced the ways golfers could claim business entertainment expenses on the courses, he said. And then came the terror strikes of Sept. 11, 2001, and the resulting hit on the economy.

"On top of it all, we've had a difficult weather pattern really the last several years," McMurchie said.

The audit is to be completed by December.

Or, he said, it might show those concerned with the course's operations that it is being managed well.