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February 2023

Fresh Eyes Make Scenic Hills A Turnaround Success

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By: Steve Eubanks

The world is full of executives moving from one industry to another. From hotel CEOs taking over airlines to food-service executives leading social media startups, the business environment is littered with CEOs who thought leadership skills were ubiquitous, regardless of the industry. Sometimes that works. Often, it does not. Coal-mining executives aren’t usually successful in the luxury retail market, for example. But in the case of Scenic Hills Country Club, in Pensacola, Florida, it was a new owner’s lack of golf experience – fresh eyes on a staid business – that saved a venerable old course. And today, in an environment where supply chains are broken and costs are consistently on the rise, that owner’s lack of institutional rigidity has served him, his partners, his customers and his employees better than anyone could have imagined. 

At first glance, Leo Lynne’s story is not unfamiliar. He was a successful investment banker in Southern California. He did a lot of work in New York and became quite good at identifying undervalued assets in otherwise struggling businesses. In short, he was a financial gunslinger. Because that business has a burnout ratio higher than a Montana meteor shower, Lynne sold the bank and moved to the Caribbean where he opened a charter sailing business and expected to spend the rest of the days wiling away on the turquoise seas.

Then came a health problem, a rare form of MS that caused him to lose the use of his hands and feet for the better part of nine months. So Lynne sold the charter company and moved to Florida for treatment. He ended up in Pensacola, buying a house on the 10th hole at Scenic Hills Country Club, in 2015. 

“I thought everything would be fine,” Lynne said. “The University of West Florida owned the golf course, so I figured they had some state money, and everything should be good. A couple of months later, I got invited to a meeting at the clubhouse, which I thought was a ‘welcome to the neighborhood’ type of gathering. It turned out to be a ‘the neighborhood is being sold’ meeting. Most of the people there were developers looking to gobble up the golf course land cheaply to turn it into housing.

“There was a group of members, about 30 people, who said they would put up $25K each to keep that from happening. It was pretty raucous, as you can imagine. A fellow named Jeremy Reese was heading up the board. I went to him and said, ‘Look, my background was providing financial guidance to businesses that were struggling and helped turn them around. I can do that here, but I don’t want 30 business partners.”

Lynne and Reese put together a small group and bought Scenic Hills. Reese’s background is in construction. His wife, Jennifer, came from the hospitality industry. Lynne had been involved in distressed workouts before selling afternoon excursions around Abaco Island, in the Bahamas. 

“Yeah, I play golf, but not well, and I certainly never saw myself in the golf business,” Lynne said. “As for the restaurant business, I like to eat and drink, but that was about all I knew. However, what I did know was how to find cost savings and how to put the right people in the right seats on the bus. This is really about a couple of guys who were able to take an old golf course and turn it around and make it a success by finding people who knew what they were doing in their specific roles and bringing them into a family-type working environment.”

Because Lynne had no preconceived notions of how a golf course should operate, he was able to bring fresh eyes and a different perspective to both sides of the ledger. First, he cut out the employee leasing service and brought the staff in house. Then he looked at all the vendors and saw a lot of fat. With a few calls, he put services out to bid. Finally, he looked at the revenue side and realized that there wasn’t enough price elasticity in the market for Scenic Hills to make it on memberships alone. The club became semi-private with banquet and dining facilities being leased out to functions throughout the community. 

“Being an outsider, people would look at me and say, ‘Well, what do you know about it?’ The answer is, ‘I didn’t know anything about it other than it’s a business like any other, and you have to get the right people in the right spots and motivate them properly,’” Lynne said.

“Sure, there were plenty of surprises. Some of the best ones were the overwhelming community support. For five years in a row, ‘Pensacola News Journal’ and ‘VIP’ magazine have ranked us the best golf course in town. And we’ve always been ranked as the best event space. This year, and I’m really proud of this, we were ranked in the top three ‘Places to Work in Pensacola.’

“Another big surprise is that we have done in three years what we projected to do in five. We quadrupled revenues in three years. I didn’t think we would have that kind of lift. Although I hoped for it, I was surprised. This was a sinking ship, and we were able to plug the leaks.”

Obviously, there were some downsides.

“We have five distinct customers,” Lynne said. “You have your golf customer, your tournament customer, your food-and-beverage customer, your banquet customer, and then you have your membership. And they don’t all agree. They all have their own agendas. I didn’t realize how difficult it would be to balance and juggle all of those disparate interests and break the mold of ‘club versus business.’ Scenic Hills was a private club for many years and a good bit of that mentality has stuck around.

“To some, I’m not their favorite person. I run the place as a business, which shakes some people up. Regardless of how much I want this to be the social and recreational hub on this side of town, at the end of the day, you have to stay in business first. Those are the decisions that come first. They might not be the most popular, but they will keep the club and the business around for another sixty years.

“For example, we have a Thursday-night event that brings in $10,000 in revenue. Because of that event, the members can’t sit at the bar on Thursday night. Some of them are upset by that, even though we built them a $100,000 member’s lounge, which is open just for them. What some of them fail to understand is that it is the $10,000 event in three hours on a Thursday that allows us to keep the membership viable and affordable.

“The other struggle is that we were the superheroes when we first came in. They were all but throwing flowers at our feet when we bought the place. But now they’re seeing the successes we’re having and they’re demanding stuff. That’s tough, because we’re plowing all the increased revenues back into the facilities.”

That brings us to the current supply-chain mess and all the inflationary pressures that are eating away at the industry. 

“I’m sure you hear it everywhere, but it’s brutal,” Lynne said. “We waited 16 months for our new golf carts. Then you have to juggle what you can do with all your fertilizers and fungicides, things where timing is critical. A sand delivery, for example, used to be you’d pick up the phone and it’s here this afternoon. Now you don’t know when you can get it. That affects how you budget.

“When a vendor says, ‘this quote lasts until the end of this conversation,’ it makes it hard to plan for anything. With some of the equipment suppliers, they say, ‘Do you want one?’ and when you ask, ‘Well, what is it?’ they say, ‘We don’t know yet, but do you want one?’ They say, ‘We don’t know what it looks like; we don’t know what the price is going to be; we don’t know exactly how it’s going to work, but if you want one you’d better get in line now.’

“That makes a challenging business even more challenging.”

Other expenses unrelated to the supply chain aren’t making life any easier. The electric bill at Scenic Hills has jumped from $60,000 a year to $130,000. But this is where Lynne’s background in finding gems in the dirt comes in handy.

“Look, there’s no magic bullet. There never is,” he said. “It’s a game of inches. Just like golf, it’s that little putt here and there that changes the scorecard. With us, it’s a dollar here and a dollar there. There’s no one big line item. There are just pennies you can save on the margins. And we have a ton of line items.”   

 

 

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