Technology Review 1999

Editorial Release
December 15, 1999

Contact: Stuart C. Lindsay
President, Edgehill Consulting Group, Inc.

Golf Course Computer Technology
Customer Service Opportunity or Cyberhype?
Business Improvement Tool or Moneypit?

OK, so the golf course operators in the US have been a little slow on the uptake of computer technology. But you would have to live on a cave on Gilligan’s Island to not notice the tremendous interest in computer technology applications in the golf business today. Much of this is due to the current explosion of awareness surrounding the Internet. A lot of the interest has centered on the use of the Internet for on-line reservations.

The reasons for the explosion of Internet activity and awareness is the result of improved technology that has decreased the cost of personal computers, along with the drastically improved capability and ease of use of PC’s. Although the golf industry has been slower than most business segments to adopt widespread use of the computer, these same factors are now making computer technology affordable and potentially useful for almost any golf course operation.

Unfortunately, most individual golf course operators and their employees are woefully unprepared to make technology decisions when confronted with the myriad of options for software, hardware, networks and Internet connectivity. At the root of this problem is the fact that computer literacy has not been one of the prerequisite skills associated with the hiring of golf management, customer service and maintenance personnel. This is not just a problem for the single course operator, but also extends to the management companies’ personnel pool as well.

There is also another important, and often overlooked factor that impedes the widespread application of technology in golf. Most companies developing software solutions fail to take the lack of technical sophistication of the golf course operator audience into account when developing their products. There are also some other major mistaken assumptions made by these companies that will be addressed in more detail. Many of these issues revolve around the basic availability, and cost, of full time (24/7) Internet access in rural areas. Rural areas also face issues of “bandwidth” limitations that can also impact the availability of some Internet activity. They also need to consider the impact of the Telecommunications Act of 1996 that will hasten the migration toward the European Model that charges by the minute for all telephone calls, including local calls. These issues will present a challenge for all Internet use and e-commerce opportunities. Today, these issues have a major impact on what is the real cost and availability of computer technology and Internet access for most golf course which are generally located on the fringes of metropolitan population centers or in rural areas.

If we start with the premise that most golf course operators are now interested in how computer technology might help them improve their business, we need to establish some basic facts:

1. The Tee Sheet is the most important tool and asset of any golf course operation. Without an organized methodology for getting players out on the course, there would be chaos. Without golfers in the first place, where is the money to cut the grass or build the course? The Tee Sheet also drives virtually all course revenues and is the starting point for most customer service contact, satisfaction and tracking.
2. The golf course’s telephone system is its second most valuable asset. Without the telephone, how many courses would fill up their Tee Sheets?

There may be a few exceptions to these facts in terms of Municipal and Private courses, but most operators interested in maximizing revenues and customer satisfaction recognize the importance of these two assets. This helps explain why fewer than 20% of all courses have adopted computer technology to help manage the Tee Sheet. This presents a challenge for both golf course operators and technology vendors.

It also illustrates an interesting irony, because it means that 80% of the golf course operators in the US are turning their most valuable two assets over to people making an average of $6.50 an hour. In short, the same people who would not consider turning their most precious asset over to a machine are already depending on a lower paid, and probably under-trained, employee to properly fill foursomes, block turn times, receive credit card data and accurately record all this information in pencil.

Fortunately, all the interest in on-line reservations will probably resolve the above issues. Any golf course seeking to take Internet based, real time reservations will have to automate their Tee Sheet. Many of the companies offering Internet based reservations currently offer alternatives based on selective blocking, release and re-release of tee times; however, these systems have proven to be confusing, cumbersome and prone to double-booking problems. We have one feasibility study client who actually operated two automated tee sheets last year because one was operationally better, but did not offer Internet connectivity. His system has caused far more work for his staff and generated more than a few customer service problems. He has now asked for help in finding a better system.

In terms of finding help in sorting out the availableoptions in computer technology and Internet connectivity; the golf course operator is at a disadvantage. Our firm has beentracking golf course technology since 1990 and we are amazed at the variety of options out there and, quite frankly, we can get confused ourselves. This sometime confusion has led us to one conclusion – the technology is constantly evolving and that no single company has all the answers or solutions.

Despite confusing options and ever-expanding arrays of products, no golf course operator can afford to ignore technology and its potential to help them run a better and more profitable business. The real trick is to determine how technology can help and how much that help will cost. If you believe all the claims made by some of the companies promising free tee sheet software, web page development, computer hardware and home page hosting, the selection and use of computer technology should be easy. A closer investigation reveals this could not be further from the truth.

If you take the information from one such company promising free hardware, software, training and installation, you will find that the golf course is required to pay for 128k modem speed through an ISDN telephone line. First of all, ISDN telephone service is only available in about 10% of the geographical area of the US. Secondly, the cost can be as high as $200 per month and installation is running about 90 days behind. In addition to the cost of ISDN, the golf course is also required to pay for and provide 24/7 Internet access through an Internet Service Provider (ISP). Even in metropolitan areas, the cost of providing ISDN bandwidth Internet access is much greater than the typical $20 a month AOL connection. This brings up a very good rule – the golf course is ultimately responsible for all telecommunications costs necessary to provide Internet access and these costs are often not made clear in the presentations by the software vendor. Another vendor requires a “static IP” (Internet Protocol) that can cost $75 - $100 per month plus the cost of a dedicated phone line. Further, this arrangement only guarantees Internet access at 28k that usually means slow response time to the customer.

This is a classic example of how many of these products are developed and promoted based on incorrect assumptions. How a company can base its technology on a telecommunications tool that is not, and probably will never be, available to an estimated 40% of US golf courses located in rural areas is beyond us. It should be noted that that the above company is currently looking at technological alternatives to the problem. In the meantime, any rural golf courses looking at this vendor are wasting their time thinking they have a “free” solution to their automation dilemma.

While we are on the subject of faulty assumptions, we might as well talk about another one shared by almost all the companies offering Internet reservation technology today. They all intend to generate revenue from what they term a “convenience fee” to the consumer making the reservation. These fees range as high as $3.00 and average about $1.50 per player. While most of these companies are telling you that the reason to get involved in on-line reservations is because golf is a competitive business, they are actually increasing the cost of playing your course with these fees.

If you question this, the answer is likely to involve asking you to consider the success of “TicketMaster” in the entertainment industry. TicketMaster has been successful for one reason – they have a venue monopoly on all the seats and the consumer has no choice but to pay the service fee. With Internet access available to only 26% of the US population, no golf course operator would be advised to make golf reservations available only over the Internet. If the golf course business is truly getting more competitive, and we certainly agree that it is, golfers will find a way to save the service charge if possible. Golfers may use the Internet to find out that a tee time is available, but if an alternative reservation method is available without a service charge, most golfers will take it. The above illustrates several key points:

1. The Internet is a very powerful information tool.
2. Until golf courses are willing to relinquish control of their most valuable asset and grant a venue monopoly, on-line reservations will be driven primarily by off-hours and travel/vacation related demand for tee times.
3. Even if actual reservations are limited, the Internet represents an added customer service opportunity for course information, directions, weather and a wide range of other potential ways to keep your customers and attract new ones.

In the December, 1999 issue of Crittenden’s Golf Inc. magazine, there was a good outline of the expected levels of Internet reservations as a percentage of total play. We concur with that article’s analysis that Internet reservations can realistically be expected to total 8% - 10% of a golf course’s total reservations. While this may mean disaster for many of the companies thinking the TicketMaster model will work for golf; it does not change the fact that Internet connnectivity is a great addition to the marketing tools available to a golf course. It does mean that a golf course should be careful about how they get their Internet access. Many of these companies offering all this “free” stuff and counting on the service fees to provide their revenues may not be around and you will be faced with repeating the whole process of finding Internet solutions and another computer conversion.

This might be a little unfair to some of these companies offering all the “free stuff” because most of them have a secondary source of revenue in their business plans – the selling of the data they collect from your Tee Sheet. These companies are generally very upfront about telling you that they intend to generate revenues from selling your customer base as rating points to advertisers and using your database to provide marketing information to anybody who will pay for it. Some of the companies have revenue sharing plans that will allow the golf course to participate in these revenues; however, these revenues are often capped and the actual control of the database resides with the vendor. This means that your customer database could be obtained by any golf course down the road.

As we have noted before, the Internet is a very powerful tool. It can be a positive marketing weapon, but careful attention should be paid to a variety of security issues. Here are a few questions to ask:

1. How secure is the Tee Sheet software? Does it limit the number of tee times an individual can make? How much of my Tee Sheet is visible? Could somebody determine how busy my course is by making multiple inquiries?
2. What happens to the customer profile data of someone making a tee time? Is that data my property or can it be used (sold) by the vendor? Who is it being sold to and do I have any controls and/or input?

Our research shows that most of the companies offering on-line reservations systems have not addressed these issues in order to adequately protect the golf course operator. Again, this reflects the lack of attention to detail and faulty assumptions upon which most of these systems are designed. It should matter to a golf course operator that his customers may be getting e-mails from or the competitor down the street. I routinely get about 10 golf related e-mails within two weeks of logging on to golf related web site. This points out another key point – once you are on the Internet, you and your customers are fair game. You may not be able to stop all the junk e-mail due to how your search engine sells portal and web site entry detail; but you need to attempt to limit the access to your customer data on the Internet to e-mail addresses and not the whole name and address data file.

We have covered a lot of ground so far, and probably managed to offend most of the companies currently offering some kind of on-line reservation solutions to golf course operators. We have also probably scared some of you into thinking that it might be a good idea to stay away from automation and the Internet altogether. Even though we still get confused over all the IP’s, ISP’s, URL’s, ISDN’s and DSL’s and are greatly concerned about Internet security, we would still strongly recommend that any golf course seeking to effectively compete in today’s, and tomorrow’s, golf market will have to establish a presence on the Internet.

In all fairness, we do believe that many of these on-line reservation companies will have to adjust and re-engineer their programs to address the issues we have raised in this article. Those that do will remain in business and be able to provide a worthwhile service. This will continue to be a microcosm of Internet development as a whole in that many of the dot.coms of today will be gone tomorrow.

We have spent considerable time and energy researching and analyzing many of these vendors – Boo4Golf, EZLinks, Golf Gateway, GolfSwitch, LinksTime, LinksSource, OnTee and TeeMaster – in order to reach some of our conclusions. We have found certain positive features in all of them, but remain concerned about their reliance on “convenience fees” for their revenue. We are also concerned the Tee Sheet security is lacking in all of them to some degree. Those that want your databases, even with revenue sharing, could potentially be downright dangerous to your business. Seek a company that allows you to determine how your database is used and protects your ownership of that data to the extent possible.

Of all the companies involved in on-line reservations, we feel that GolfSwitch currently has the best answers for some of the telecommunications problem in the rural US. Their approach can be used with a couple of others of the on-line services and their software interfaces with most of the leading Tee Sheet software available today. While GolfSwitch does not provide all the answers, their approach to telecommunications and variety of interfaces puts them way ahead of most of the others.

We have also established that an automated Tee Sheet is advisable, or required, to participate in tracking on-line reservations. Many of these companies are making that component available “free”. We have already addressed security issues with these “free” packages and some of the hidden costs and/or non-availability of telecommunications service, but there are a couple of relatively inexpensive Tee Sheet software packages available. Fore Reservations of Western Springs, Illinois is the current leader with over 500 courses using their Tee Sheet software. Their package costs about $500 per year, including service support and upgrades. Their modest one-time training fee of about $400 is of particular value to the computer novice. Fairway Systems of Englewood (Denver), CO has been a leader in automated tee time software since 1991 and will offer a similarly priced ($500) software package for 2000. About 75% of all automated Tee Sheet users also use a companion Point of Sale (POS) software package. Both Fore and Fairway offer POS packages for an additional fee of $500 per year. Both companies have used their comparatively lengthy experience in providing golf software to address many of the security issues we have raised and both are compatible with GolfSwitch.

We have established a few things with a fair degree of certainty, and we hope that some of these ideas will help you find establishing an Internet presence a little easier.

1. The Internet is a very powerful information and communications tool. This can be both positive and negative and careful attention needs to be paid to how you establish your presence on the Internet.
2. Involvement in Internet reservations systems will require automation of your Tee Sheet.
3. Security of your Tee Sheet and customer database should be a major concern.
4. Telecommunications and Internet Access costs can be significant and are often hidden in some presentations.
5. The Internet is only a supplemental marketing tool. Even though the participation rate is rapidly growing beyond the current level of 26% of the US population, it is unrealistic to expect more than 10% of your reservations from on-line sources.
6. The Internet is in a constant state of evolutionary change. It will continue to grow in power and capability, but remember #1.
7. Every golf course should have a presence on the Internet. As the power and capability of the Internet progresses, along with the explosive growth of participation, a growing segment of your customer base – Daily Fee, Municipal and Private Course golfers – will demand Internet based services.

As long as we have gone this far, we might as well make a couple other comments and predictions that may help you.

1. The real power of the Internet for a golf course operator is in management information and not in the incremental business obtained through on-line reservations.
2. The evolutions of ASPs (Applied Software Providers) and ERPs (Economic Resource Planning) will greatly enhance the availability of management data and analysis from outside sources and make it easier for you to maximize your revenues.
3. The above information will drastically alter pricing and tee sheet management practices for golf course in a competitive environment.
4. All golf cars will eventually have PC devices installed to provide a variety of services (GPS, Scoring and other customer services).

All of the above will happen with the Internet and your telecommunications system, and it all starts with your Tee Sheet. I guess it’s time we all started getting a little faster on the uptake with this computer stuff.

About the author: Stuart Lindsay is the President of Edgehill Consulting Group, Inc. of Mequon, WI. Edgehill has built two golf courses and provided management services to the Country Club of Wisconsin. A market researcher by training, Mr. Lindsay has provided feasibility and other consulting services to over 30 golf courses, along with more than a dozen banks, appraisal companies and accounting firms. Mr. Lindsay also provided research into the Commercial Turf Equipment market for the John Deere Company and has served as a resource for the Golf Course Owners of Wisconsin and as a consultant to the Golf Foundation of Wisconsin.