Skip to main content

Indigo Insider: June 2021 Edition

Dear Friend,

School is out and summer has officially begun. Golf participation continues to outpace pre-COVID trends and many facilities are enjoying full enrollment in growth of the game initiatives and programs. We are thrilled about the record-breaking usage and positive momentum over the past 15+ months, but recognize a few disconcerting macro trends. Without raining on any parades, we have highlighted a few areas of note:

“Transitory?” 

Speculation abounds that the current economic policy (stimulus, bond buying, etc.) will lead to substantial inflation. The Consumer Price Index (“CPI”) rose 5% in the month of May, the highest year-over-year increase since the summer of 2008. If you tried buying lumber or a used car recently, your wallet felt the impact of inflation. To date, the Fed has referred to increased inflation as “transitory,” calling it a short-lived result of pent-up demand and supply chain lags. Comments from the recent Federal Reserve meeting did not suggest any tapering of the current bond buying program and suggested interest rate hikes would not begin until 2023.

This likely means that operating costs will increase and golfers will have less discretionary income to spend on recreation/entertainment. The current period of high demand is an opportune time to reset the rate structure and pricing to protect against the impact of future inflation.

Labor Demand

The labor market remains 7 million jobs below the pre-COVID peak (Feb 2020). Businesses are facing a general scarcity of labor despite 15 million Americans claiming unemployment insurance benefits in the month of May, compared to 2 million prior to the pandemic. As a result, weekly wages in leisure and hospitality increased 10.4% last month when compared to February 2020.

We are watching the labor market with great interest over the summer and into the fall. As several States wind down their enhanced unemployment insurance the labor market reaction will be telling for the business owner.

Embracing technology may help golf course owners partially offset increasing labor costs. Mobile check-in and pre-payment of tee times was widely implemented during the pandemic and proved beneficial on multiple fronts. Future innovations like pro shop kiosks for check-in and autonomous mowers may eventually see widespread adoption.

Is It Sustainable?

The golf industry has been a major benefactor of the “work from home” movement as well as a great way to socialize and recreate during COVID. The pent-up travel demand will likely be impactful on golf participation over the next 6 months due to increased vaccinations and the usual summer vacations. Additionally, there is a gradual return to work initiative which will likely increase after Labor Day. Time will tell if the industry is successful in retaining golfers at the heightened levels of participation we have recently enjoyed. In the highly unlikely event that you did not adopt any strategies to capture the information of the influx of new golfers at your facility, we have a few suggestions that still might prove useful.

If any of this resonates or you wish to compare best practices and initiatives to implement, feel free to reach out. We look forward to our next conversation.

All the best,
Mike

Share
About the Author
With 30 years’ experience in golf, Mike oversees Indigo Golf Partners growth plans and specific lease, acquisition, consulting and third-party management opportunities. He enjoys an invaluable talent of dissecting ways golf courses, country clubs and resorts can create significant new revenue and save expenses without compromise to quality. Previously, Mike managed the company’s vast southeast portfolio. A PGA member, he is a graduate of Mississippi State University, an avid cyclist and diehard college football fan.