Experts See More Green in Golf Courses

If you cannot afford to live in a home with a waterfront location or view thereof, the next best recreation-outdoorsy locations are often adjacent or near a gorgeous golf course.

And some homeowners--especially those who prefer golf to boating--might reasonably argue that fairways and greens outdo waves and ripples as neighboring amenities.

Multiple evidence that a golf course enhances a community is available in this national capital area. The nationally known magic of Burning Tree, Chevy Chase and Congressional is more related to residential desirability than to the basic drive-and-putt facilities bearing those names.

In addition, this area has a dozen other golf-centered communities and neighborhoods--including Reston and Columbia with two courses each--that are regarded as premier places to live.

If you can candidly aver that “our home borders the fifth fairway at Burning Tree,” the listener’s ears perk up and nearby people may stop to listen to what else you might be saying at a cocktail party or at your downtown club.

However, there’s also considerable truth in the view that golf courses have long been regarded as “loss leaders” by the real estate and resort industries.

Research executives J. Richard McElyea and Gene P. Krekorian so noted in a recent article in Urban Land magazine, adding that golf courses are “necessary but very costly amenities, justified only by their effectiveness in enhancing real estate prices. . . .”

But these two California specialists in golf properties have observed a “recent and continuing improvement” in the economics of golf development.

Why? More people are playing golf, more effective management of golfing facilities, an increasing rate structure and demographic changes.

McElyea and Krekorian contend that golf is a major beneficiary of the graying of America. The baby-boom generation has matured enough to be interested in golf.

They are now in the 35-54-year-old group that has a high golf participation ratio. More important, the 65-and-over population is now the fastest-growing group and those folks play the most golf rounds per capita. As the aging population grows, so grows the number of golfers.

An increasing retirement-age population also increases the golfing demand during slack midweek periods, which McElyea and Krekorian regard as a “major factor in improving profitability of golf course operations.”

This accelerating emphasis on golf as a recreation indicates to the researchers that 125 or more new golf courses will be developed annually in our 50 states--compared to an annual average of only 80 courses during the past five years.

The research-minded writers also point out that greens fees and cart fees have escalated rapidly--more than the prices of most other goods and services. Now the bottom lines of more private and public courses are less brilliantly red or even almost black.

Golf cart rentals are very profitable, and more courses are making the use of carts mandatory. That’s the case at the new Eagle Creek residential community near Naples, Fla., where celebrated shot maker Ken Venturi is not the golf pro.

He’s the active developer of the course that requires a $18,000 entry membership fee and an annual fee of about $1,800.

But golfing properties are not an easy approach to getting rich. Not long ago, it was common to estimate the cost of building a golf course at $100,000 per hole. Now it’s $225,000 or more. A high-quality new course can cost $4 million or more, and maintenance costs have escalated about 50%.

One of the nation’s most successful resort courses is Pebble Beach in California, where about 45,000 golf rounds are played annually at an average effective rate about $75. That’s an income of $3.3 million just from greens fees.

McElyea and Krekorian say that the primary value of the Pebble Beach development was perceived to be its build-out potential when 20th Century Fox paid about $75 million a decade ago for the remarkable Pacific-fronted resort property. Now real estate development in the Del Monte forest area is more difficult, due to conservation/growth control measures. But, surprisingly, the resort operations became a strong source of income.

The lesson may be that the economics of resort operations are more favorable than for second-home development and sales, even though a lot bordering a golf course commands a premium of 40% to 75%. And rich people pay that premium to look at grass they don’t own or have to cut.