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Company Finds Niche Running Public Courses : American Golf Rakes in the Green

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Times Staff Writer

Although David G. Price doesn’t play golf, his success as owner and chairman of American Golf Corp. has enabled him to wring more dollars per square foot of green than many a pro.

“I look at it as a business, not a sport,” Price says of a game that over the centuries has fascinated players from Mary, Queen of Scots to Gerald R. Ford, earned the sarcasm of dignitaries like Sir Winston Churchill and endeared generations of college students forced to resort to an 18-hole round or two to pass a last-minute gym requirement.

American Golf has become the nation’s leading manager of public golf courses since Price founded it in Los Angeles more than 12 years ago. Driven by his philosophy of separating pleasure from profit, American Golf has turned courses that were losing money or barely breaking even into lucrative ventures for cities from New York to Los Angeles to Waco, Tex.

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The 52-year-old Price likes to say that his company is to golf what McDonald’s is to hamburgers. Its profitability, says the self-made millionaire, rests on efficiency, consistent quality, friendly service and, most of all, volume.

Founded in 1973 when Price bought three courses in Los Angeles from the late hotelier Joseph W. Drown, American Golf employs 2,000 people to run 56 courses in eight states, mostly through long-term operating leases from local governments. Last year, the company earned $5 million on revenue of $50 million, figures that it says it hopes to double by 1988.

“Most golf courses are run by pros who, as athletes, know lots about the sport but generally not much about budgets, marketing or management,” Price says. “We come in and offer economies of scale. Cities make money. We make money. Golfers get better courses at competitive rates.”

Price was a lawyer with business experience in entertainment, restaurants and real estate when he decided to take a swing at the golf market in 1972. “I jumped right in without knowing anything,” he says.

What he lacked in knowledge he made up in timing: Interest in golf was booming. So was a trend toward “privatization,” or “contracting out”--local governments hiring companies to run public services in the hope that private enterprise would do a more effective job and even earn a city or county some extra cash.

Some golfers and city officials worry that leasing courses to companies removes control of public facilities from taxpayers and paves the way for higher green fees and less concern for senior citizens or other special interests. But the surge in American Golf’s business--mostly from cities that picked the company on the basis of recommendations from other satisfied customers--suggests that the company’s ambitious expansion plans are well within reach.

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“We’ve found a niche, and we’ve learned how to do it very, very well,” says American Golf President Robert H. Williams, who is also a non-golfer.

“In 1980 we had to go begging with hat in hand, “ he adds. “Now we have to turn business away.”

The “niche” that Williams and Price speak of is no narrow slice of the golfing market. It covers 80% of the business. “We’re after that dead center golfer, the average player, the blue-collar crowd,” Price says.

The target audience is growing. The National Golf Foundation says 1962 was the first year that public golf courses outnumbered private clubs in the United States. In 1983, the latest year for which numbers are available, 61% of the nation’s 12,197 golf facilities were open to the public.

The NGF estimates that 434 million rounds of golf were played in the United States in 1983, up 67% from 10 years earlier. Today, there are an estimated 17.8 million golfers in the United States who play on 1.5 million acres of fairway that are maintained at an annual cost of $1.5 billion.

Vying with American Golf for that market are lots of small companies across the country that Price says typically are formed by “a dentist and a pro who get together and decide it would be neat to run a golf course but have no idea what they’re doing.”

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Such partnerships “know local city council members” and more than once they have beaten American Golf to a contract on that basis, he says. But American Golf is increasingly hard to beat, he says, because the company can woo cities with a “vastly larger and more professional staff” that includes specialists in food and beverage management, tournament and pro-shop organizing and green maintenance.

Major Competitor

American Golf’s size allows it to spread the cost of full-time agronomists, accountants and golf teachers over many courses. It also can buy in volume so that it can offer discounts on golf clubs and shoes and even a line of hats, gloves and balls under its own label.

The only company that comes close to being a competitor is Club Corp. of America, a $340-million-a-year business based in Dallas. But Club Corp., which also is privately owned, concentrates on managing private golf and business lunch clubs.

The markets of the two companies rarely overlap: Less than a third of American Golf’s clubs are private, and the company says it expects to grow by concentrating on management of public courses, a market that Club Corp. doesn’t want.

American Golf executives emphasize that making dollars from divots--those clumps of dirt and grass that snap into the air as a golfer’s club smacks a ball--is not easy.

For example, Price recalls that, while managing the Westchester Golf Course near Los Angeles International Airport shortly before he bought it in 1973, a maintenance crew used the wrong kind of fertilizer. The grass on 18 holes died. “It was an absolute disaster,” he says.

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Convincing government officials that the city or county will not lose control over a course has been American Golf’s toughest obstacle. “Lots of people think we’re going to go in and raise the fees and change everything all around,” Williams says.

The typical lease with American Golf promises to a city or county a certain rent or a percentage of cart-rental and course fees, pro-shop sales and other revenue, whichever is higher.

Improve Courses

This means that the contract has a built-in incentive for the local government to approve higher rates, but, at the same time, politicians must respond to voters, and every contract specifies that no fee will be raised or policy changed without approval from the local government.

In addition, American Golf usually promises to sink hundreds of thousands of dollars into the course for what are usually much-needed improvements that the city itself cannot afford to make.

Not everyone is convinced.

“There’s a fear among the older golfers who’ve lived here and paid taxes to build these courses that we’ll be forgotten, that they’ll squeeze us out,” says 64-year-old Ralph D. Blake, a retired Navy yard metalworker who has lived in Long Beach for 48 years and is a regular at the city’s several golf courses. “These courses are supposed to be public, not-for-profit.”

Others find the approach too impersonal. “The greens are better,” concedes a golfer who regularly plays on courses run by American Golf locally. “But this is factory golf.”

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Golf, in the words of the English humorist P. G. Wodehouse, is “the Great Mystery, in which the lowest scorer wins; which, like Haggis, came from Scotland; like cancer, eats into the soul, and, like death, levels.”

Driving Ranges Key

Price and his employees take a more practical view. “It’s a business,” says Frost. “A big public relations job. When a guy comes (to the course) and he feels good because I know his name, hey, I feel good. I’ve done my job. He’ll come back. He’ll bring his friends.”

More people, more friends and more golfers help rack up sales of golf balls, shoes, clubs, carts and buckets of balls for the driving range--the key profit centers of a course.

American Golf also makes money on the fees charged just to play the course, but says the real money comes from the amenities. So that’s where American Golf sinks its effort.

On a driving range at Westchester, for example, the company made a $220,000 profit on sales of $350,000. No wonder the company is installing lights at several courses it recently took over so golfers can use the driving ranges at night.

“We give golfers want they want,” says Price. “It’s that simple.”

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