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New Research Report Shines Spotlight on Negative Fallout from Bartered Tee Times
By David Gould
Running 60-plus pages in length and representing months of collaborative work by a team of researchers, “Beware of Barter: The Ins and Outs of Trading Your Tee Times” was released by the National Golf Course Owners Association in mid-January to course operators and the industry generally.
It’s an in-depth, broadly sourced white paper that explains from multiple angles how the apparently simple act of bartering tee times for digital services unleashes a complex series of economic repercussions, many of them disadvantageous to course operators.
Within the multifaceted relationship between course operators and the companies that supply software and perform third-party tee time selling, there is plenty more to see than just barter, but within the report there’s an insistence on barter’s intense ripple effects.
“Take away barter and you would still have all the tug-of-war issues about customer engagement and loyalty,” contends Jay Karen, CEO of the NGCOA. “However, barter is what’s allowing the online tee time agents (OTTAs) to price golf as low as they choose – lower than what the regular rates are, as priced by the course operators.”
The corollary of this statement is the assertion that, without barter, only the natural variables of supply and demand would impact pricing.
“Barter injects an unnatural and erroneous transference of pricing control to a party with different interests than the golf course itself,” Karen says. “This is the steroid that strengthens discounting and weakens the business.”
It’s often been said that prices dramatically below rack rate aren’t desirable for the OTTAs. Once in possession of a bartered tee time, they could have no other motivation than to sell it for the highest price possible. Except there is indeed a competing motivation, driving golfer traffic to the OTTA website and booking engine – extreme bargain prices have been relied on to deliver that benefit.
The report, available for download at ngcoa.org/BewareOfBarter, takes a chronological approach in its early going, working to explain how course operators ended up with an imbalanced relationship to OTTAs and a scrambled relationship with their own customers – all due to the Pandora’s box that tee time bartering represents. Material gathered to build this argument includes in-depth case studies from course management groups in Florida and Arizona, a GOLF USA Tee Time Coalition Market Sentiment Study, two academic papers on tee time pricing, plus data and media reporting about prices and booking in the hospitality industry.
It was the 2018 sentiment study that seemed to confirm the need to train a bright light on barter. It revealed, according to Karen, that “the industry has a very complicated, love-hate relationship with the barter method of compensation for technology and tee time distribution.”
Driving the hate side of the relationship is the sense of lost pricing power and muddled customer relations, Karen explains.
“We firmly believe,” he states, “that the barter economy is allowing for deep, unnecessary and erroneous discounting of golf, as well as aggressive disintermediation with customers that golf courses have worked decades to cultivate.”
How did we get here?
It’s sometimes forgotten that OTTAs and vendors of golf management software (GMS) weren’t initially inclined to accept bartered times in exchange for their services. Instead this throwback to agrarian economies was an arrangement of convenience or even necessity, based on the number of courses that coveted the new digital resources but couldn’t afford them. Harvey Silverman, a veteran golf marketer and co-founder of Quick.golf, served as lead author of the NGCOA report. Silverman has seen few if any scenarios in which the law of unintended consequences came down as harshly on a marketplace as it does in this case.
“To put it simply, paying with cash instead of tee times eliminates nearly every issue we describe in the document,” Silverman states.
“There is a place in the market for OTTAs. They serve a purpose of convenience for golfers looking for a tee time.... But the business relationship has to be fair and equitable, and we have lots of data and testimony to prove it hasn’t been for many, many golf courses.”
What’s a tee time worth?
One of the core questions examined in the report is how much value is given up on either side of these barter transactions. When open tee times are traded for software and/or expanded marketing of tee-sheet inventory, is one side or the other advantaged? To answer definitively would require that a dollar value be assigned to what the course and the vendor/marketer each bring to the table.
The dollar value for the proffered tee time is particularly elusive, but chapter one of “Beware of Barter” walks step-by-step through an arithmetic formula to produce concrete answers. Readers can turn this portion of the report into a workbook of sorts, running the numbers relevant to their own facilities to arrive at a quantitative statement of what they are giving up. In tandem with the inquiry into what bartered tee times are truly worth, the report considers the “opportunity cost of barter,” by crunching through yet another formula.
The report can be read as a treatise on consumer perceptions of value in a golf experience as well as consumer behavior in and around the purchase of a tee time. The second chapter, “Price Elasticity and Golf,” probes this topic thoughtfully, using academic research produced by Drs. Cathy Enz and Linda Canina of the School of Hotel Administration at Cornell University. Their writings include this finding, which for many would be counterintuitive:
“Demand for golf is primarily price-inelastic, suggesting that a price drop will not have a significant impact on demand and [thus] revenue will decrease.”
Also in that chapter is baseline information on “reference price” effects, or what others have called an “anchor” in the consumer’s mind as to what they should rightly expect to pay. “Third-party tee time sites such as GolfNow, TeeOff, Golf18 Network, Last Minute Tee Times and others have trained millions of golfers to shop for a price first,” the NGCOA authors claim. “With that, golfers have gained a reference-price-effect perspective that golf is too expensive.”
[Editor’s note: Announcement of teeoff.com coming under the GolfNow umbrella, through the latter’s acquisition of EZLinks Golf, came just prior to publication of the NGCOA report.]
It has been widely and credibly asserted that barter and aggregated selling have caused the product represented by a round of golf at any particular course to become commoditized. By its nature, that product doesn’t commoditize well. Imagine that, instead of a tee time being handed over in lieu of cash, it was a roll of fairway sod cut from the course’s turf nursery. An end user would view it strictly on its merits, independent of where it came from. This simply cannot be the case with a product so “native” and so richly experiential as a tee time on a golf course. The end user of a traded round, as “Beware of Barter” points out, scarcely recognizes that the product has changed hands once previously, before he or she purchased it.
This conundrum is best expressed in a survey write-in comment that the report prominently quotes. The course operator who provided it begins by lamenting that bartered inventory isn’t segregated to a special site where golfers viewing it would see disclaimers pointing out the otherwise unseen barter transaction.
“There are real issues that pop up at the golf course counter that can and do create issues and confrontations between the golfer and the operator,” notes the survey respondent. “Rain checks, aeration issues, double-booked times and golfers showing up early or late for their bartered times are just a few of the issues that are created when bartered times and non-bartered times appear simultaneously on the same page.”
Learning from the Hospitality Industry
Indeed, the mere existence of golf aggregation sites goes against the nature of the product – an 18-hole outdoor recreational experience based on venerated, 400-year-old customs – in ways that could never apply to seats in an airplane or motels along the interstate. The latter section of “Beware of Barter” contains thought-provoking comparisons to the hospitality industry and its relationship to third-party booking sites, including some fairly recent redrawing of lines between the hotel companies and the likes of Expedia and Travelocity.
Lead author Silverman, summarizing the chapter on lessons golf can learn from the lodging industry, notes that barter-avoiding golf courses still face challenges in their partnerships with OTTAs.
“Even though hotels pay cash in the form of commission,” he says, “they still must contend with how their properties are marketed. The critical factor is ownership of the customer, and building loyalty with them so they are visiting and reserving on the hotel website rather than the third-party site.”
Earlier on, in the report’s third chapter, “Rate Integrity and Parity - Protecting Your Brand,” there’s a summary statement echoing that sentiment. “Golf course operators need to consider,” it says, “whether a third party should be allowed to have this much influence over their pricing and overall product image.”
Control and influence of this sort spirals up from the basic premise of tee times being exiled from the tee sheet that is their natural home and transformed into a promotional tool serving an entirely different type of business. What began as a workaround eventually took on embellishments that, according to the report, deepened discounts off of rack rate – the report states it thusly:
“OTTAs have created a highly competitive landscape to gain customers. They will enhance their offerings to golfers beyond ‘hot deals’ or the like, offering flash discounts, loyalty clubs, free passes and subscription services.... The result is that OTTAs are routinely circumnavigating even the lowest agreed-upon resale price of tee times with golf course operators and causing confusion for the golfing customers.”
The report moves from this observation to a direct question to the reader:
“Do the OTTAs generate revenues for you by selling bartered tee times? Perhaps, but do these revenues cover the additional costs of such an arrangement beyond ‘goods for services,’ including rate erosion, customer disintermediation, and search engine competition?”
Take that to the bank
While to many the cash-flow relief that barter provides is too valuable to give up, to others barter is a practice that needs to be jettisoned. In “Beware of Barter,” two in-depth cases describe how the cord can be cut and what gains can be realized through doing so. There’s an MCO (multi-course operator) success story as well as a success story about a two-course municipal golf operation.
The latter is Golf Brevard Inc., a non-profit Florida corporation led by local golfer and CEO Tom Becker. Golf Brevard recently overhauled its operating approach including discontinuance of tee time bartering. The business turned a corner and is poised for further success.
“To isolate PoS bartering as the sole factor in the turnaround would be a huge mistake,” says Becker. “However, having the courage to walk away from it was an important step in our initial success.”
What golfers pay to play and how they define value in the tee time marketplace is a thorny issue that elicits opinions and commentary from many quarters. The NGCOA report doesn’t attempt to settle all debates on the topic, but its fusillade of arguments and analytics concerning barter make it highly difficult to deny the need for a rethink of that payment mechanism by anyone who’s ever used it.
David Gould is a Massachusetts-based freelance writer and frequent contributor to Golf Business.