In a time when the supply and demand for golf course is no where near equilibrium the City of Chicago and the Park District are proposing to spend $30 million to rebuild the Jackson Park and South Shore Golf courses into one 18 hole Championship golf course designed by the legendary Tiger Woods. Does this make sense, on the surface based on the pure economics of the golf course industry, the answer is an easy, no. But nothing is simple or easy and golf, like life is complicated.
Let’s take a deeper look at the project and why it may or may not make sense. First, the basic economics of golf courses; a typical (if such a thing exists) 18 hole golf course in Chicago should be able to generate 20,000 rounds. Rounds vary from course to course with some course having as few as 12,000 and others hosting up to 30,000 rounds in a year in the Chicago area. The top two courses for green fees in Chicago are Cog Hill Dubsdread where the top green fee is $155. The Glen Club has a high season top rate of $195. Let’s assume that a new Chicago area Tiger Woods golf course can charge $200 per round. However, no course gets its top rack rate for every round so lets further assume the course averages $125 per round. That number might be high, considering no one wants to price out the people that are already golfing at Jackson Park and South Shore there will be probably be some resident discount program available.
So 20,000 rounds at $125 per round produces $2,500,000 in golf revenue. Let’s guess that you can sell $250,000 worth of merchandise and another $1,250,000 in food and beverage. Total projected revenue would be $4,000,000. Golf course profit margins vary widely from course to course but a generous profit margin on $4,000,000 in revenue would be 25% or $1,000,000. It does not take a degree in business and economics to understand that $1,000,000 in income does not warrant a $30,000,000 investment. However, there is much more to the South Side golf course than pure golf course economics and that is where fuzzy math comes into play.
According to a Chicago Tribune article by Kathy Bergen from January 6, 2017 “Its backers — who include Mayor Rahm Emanuel, the Park District Chief Executive Michael Kelly and a bevy of influential golf industry leaders — see it as a once-in-a-generation opportunity to put Chicago on the national golf map and at the same time draw tourists to the South Side, spur badly needed economic activity, create jobs and introduce more low-income children to golf and its caddying and scholarship opportunities. “It will be a real investment — an economic engine for the neighborhood,” Emanuel said after the plan was announced.”
Can a golf course provide all those benefits, I don’t know, but I certainly hope so. For a city looking to provide jobs and economic growth a high profile golf course just might be the answer to some of the problems we face. In the case of the new golf course the City plans to solicit private money in the form of donations to help decrease the public cost an improve the overall economics of the deal. If they can get enough money from private sources, this very well could be a Win Win for the city, the south side and local golfers.