The Fee Is Not the Business

Matthew Erley & Evan Roosevelt | Old Tom Capital

Golf's management companies are among the fastest-growing businesses in the game. The National Golf Foundation estimated in 2022 that nearly 2,100 U.S. facilities, more than one in seven, were run by management companies, an increase of more than 18 percent since 2010. Golf Inc. reports that the 11 companies now operating 50 or more courses, a group that includes owner-operators as well as third-party managers, grew their combined portfolios from about 1,165 18-hole equivalents in 2019 to roughly 1,797 in 2026. Cities, private clubs and resort developers increasingly want professional operations without giving up ownership.

The standard way to explain the investment case is to point to Marriott, which separated running hotels from owning them in 1993 and now owns almost none of its rooms. The comparison is intuitive and mostly wrong. Golf managers lack the three things that make hotel fee streams so valuable. What they have instead is an outsourced services business, with a possible platform on top. Investors who can tell those two apart, and who pay only for the part they can verify, will do well in this category. Investors who price the whole thing as Marriott will be paying for a brand that does not exist.

What the Contract Pays

A golf management agreement is simple. The owner keeps the revenue, pays operating costs, funds capital improvements and absorbs losses. The manager receives a base fee and an incentive fee when results clear an agreed hurdle.

Seattle's 2025 agreement with its operator, Premier Golf Centers, is a clean public example. The city pays a $375,000 base fee for four municipal courses, rising 2.5 percent a year, plus 10 percent of revenue above $16.5 million once expenses and the city's debt service are covered. If revenue falls short of that debt service, the operator "shall not under any circumstances be responsible for paying the shortfall." Applied to the roughly $19 million of golf revenue the city reported for 2024, those terms would pay the operator about $625,000 a year. That is roughly 3 percent of revenue, or about $155,000 per course, in line with the 2 to 3 percent base fees common in hotel management.

The fee is paid ahead of the owner's return, and the operator carries no operating loss beyond its incentive fee. That part of the hotel analogy holds. Most of the rest does not.

Why Marriott Is the Wrong Mirror

Marriott is not primarily a hotel manager. Of its $5.44 billion in 2025 gross fees, more than $3.3 billion came from franchising, where the company licenses its brands and reservation system and does little else. Its management contracts with hotel owners generally run 10 to 50 years, according to Host Hotels & Resorts. And its guests choose the brand, which is why owners pay for it.

Golf managers have none of those three things. Few golfers pick a course because of who manages it. There is no franchise business. And contracts are short. Seattle's agreement allows either party to terminate on 50 days' notice. Portland's city code caps golf management agreements at five years. Woodridge, Illinois, hired KemperSports in January 2026 under a two-year professional services agreement, after the prior operator walked away from a 25-year lease more than a decade early. A long stated term that either side can end on 50 days' notice is, economically, a 50-day contract. What remains is the management contract on its own, and the market has priced that business before.

Aimbridge Hospitality, the largest third-party hotel manager, runs hotels for owners without a brand of its own. In January 2025 its first-lien lenders agreed to take majority ownership, converting more than $1.1 billion of its roughly $1.3 billion of debt into equity. The fee income was real. The leverage placed on it assumed a durability the contracts did not provide.

A closer analog sits in parking. SP+ managed parking for cities, airports, hospitals and property owners, and at the end of 2023 ran about 88 percent of its commercial locations under management contracts. Those contracts typically ran one to three years and could be terminated without cause on 30 days' notice or less, much like golf's. SP+ spent years converting leases into management contracts, the same shift now under way in municipal golf, and reported reimbursed site costs as a separate revenue line so investors could see its true fee income. Metropolis Technologies acquired it in 2024 for about $1.5 billion including debt, roughly 11 to 12 times 2023 adjusted EBITDA by our calculation. That is a services multiple, not a hotel-brand one.

The honest valuation range for a golf manager is therefore not somewhere between a course owner and Marriott. It is somewhere between Aimbridge and SP+, with a premium earned only where renewal behavior proves stickier than the contracts require.

What One Contract Is Worth

A simple exercise shows why the distinction matters. Take Seattle's roughly $155,000 per course and assume, for illustration, that a manager keeps half after paying for the regional and corporate teams that serve the contract. That leaves about $78,000 of earnings per course. At the roughly 20 times EBITDA the large hotel companies command, that contract is worth about $1.5 million. At SP+'s multiple, it is worth about $900,000. Private clubs and resorts pay more than municipal courses, so the dollar figures move, but the gap between the two answers does not.

So when a golf manager is valued well above a services multiple, one of two things is true. Either the buyer is paying a franchisor's price for a business without a franchise, or a meaningful share of the earnings comes from somewhere other than the fee. The second possibility is the more interesting one.

Where the Platform Earns

A manager running hundreds of facilities can buy turf products, equipment, food, insurance and software at a scale no single owner can match. It can sell food and beverage, events, instruction and other services into facilities it already runs, operate loyalty programs across its network, and carry practices from one property to the next. In this reading, the management fee is the cost of acquiring the customer. The earnings are in what the platform sells through the relationship once it has it.

That is a hypothesis. The leading golf managers are private and disclose little. But the closest public comparable suggests it is plausible: SP+ told investors it earned operating income on the insurance it provided to clients under its management contracts, buying coverage at rates no single client could get and keeping part of the difference. If golf works the same way, an investor is underwriting not a fee stream but a take rate on a network.

That raises a question every owner eventually asks: who keeps the benefit of scale? Seattle's contract answers it explicitly. The city reimburses operating costs without markup or profit, and only for amounts the operator actually paid to parties unrelated to it. Scale passes through to the owner. Value passed through strengthens the relationship. Only value retained shows up in the manager's earnings. The more a platform depends on the second kind, the more exposed it is when a city auditor or club board asks who captured the purchasing rebate. A buyer should know that split before paying for it.

The Cycle Behind the Incentive Fee

Incentive fees are usually presented as the most attractive feature of the model, and Seattle's numbers show why. Golf revenue at the city's four courses was about $16.7 million in 2022 and $18.8 million in 2023, a 12 percent increase. Under the 2025 agreement's terms, that swing would move the incentive fee from roughly $25,000 to roughly $230,000 against a $375,000 base. A 12 percent change in course revenue produces a roughly ten-fold change in incentive income.

That convexity cuts both ways. Those were the strongest years for golf demand in a generation, and hurdles reset when contracts renew. Seattle's new $16.5 million threshold sits below current revenue and rises 2.5 percent a year. Anyone selling a management business today is marketing incentive income earned near a cyclical high, against hurdles that will be re-struck at the next negotiation. A buyer should underwrite the base fee and treat the incentive fee as option value, not earnings.

The capital cycle points the same way. Winning contracts increasingly requires money up front. Seattle's renewal commits the operator to $100,000 a year toward capital improvements, or $1.5 million over the initial term, and the contract calls it a "Key Money Contribution," borrowing the hotel industry's term. Indian Wells, California, requires its operator to invest $1.25 million of its own money in capital improvements. In hotels, the steady rise of key money has been one of the clearest signs that competition for contracts is moving value from managers to owners. Golf looks early in the same pattern. Meanwhile, leading managers have moved onto the balance sheet; a KemperSports affiliate paid $160 million for Streamsong Resort in 2023. Each step can be rational. Together they describe a business that is less asset-light than its valuation usually assumes.

What Reaches the Manager Anyway

A management contract protects the operator from the owner's losses. It does not protect the operator from the owner's economics. Labor, water and insurance costs land on the owner; golf facilities saw health insurance premiums rise 6.4 percent on their most recent renewal, according to the National Golf Course Owners Association. That pressure moves through the market in three ways.

The first helps managers. Cities with tight budgets and clubs that cannot find experienced leadership turn to outside operators. Some choose leases, under which the operator keeps the revenue and pays rent; Los Angeles County's 2025 lease with American Golf pays the county 30 percent of green fee, cart and range revenue. Others choose management agreements, under which the city keeps revenue and control of pricing and access.

Municipal golf is the largest pool of new contracts. The NGF counts nearly 3,000 municipal courses at more than 2,600 facilities, about 70 percent of them more than 50 years old. Golf Inc., citing a narrower count of roughly 2,700 courses, reports that 18 percent are under third-party management "in some fashion," a measure that may include leases and concessions. That leaves about 2,200 courses without an outside operator. At public fee levels ranging from about $67,000 per course in Great Falls, Montana, to about $155,000 per course in Seattle, those courses represent a hypothetical fee pool of roughly $150 million to $340 million a year. That is meaningful, but it is spread across 2,200 negotiations with public bodies, and a course paying $67,000 may not cover the regional overhead required to serve it. The municipal market is large in facilities and modest in dollars.

The second effect runs the other way. Owners under margin pressure renegotiate base fees, re-tender contracts, ask for larger capital commitments and use short termination rights. Contract count can rise while fee per contract and contract life fall.

The third is structural. Sponsor-backed owner-operators that manage their own facilities are assembling many of the largest private portfolios. The most profitable private contracts are leaving the third-party pool just as the fastest-growing segment, municipal golf, is the lowest-fee and most political.

What a Roll-Up Actually Buys

The National Golf Foundation counts more than 200 management companies outside the largest 15, averaging about five facilities each. They are the natural pool for consolidation, and sponsor interest in the category remains active.

What an acquirer buys in a five-facility operator is a set of relationships, often held by one or two people, under contracts owners can end on short notice. Change of control is the moment owners are most likely to re-tender. The arbitrage between a regional manager bought at a services multiple and a platform valued at something higher exists only if the contracts survive the acquisition.

That makes three numbers decisive, and none appears in a press release. The first is renewal and retention by contract cohort, measured through at least one change of ownership; SP+ reported 94 percent location retention for 2023, a useful reference from another management-contract industry. The second is capital committed per dollar of annual fee. The third is the share of reported revenue that is fee income rather than reimbursed site cost. In 2023 SP+ reported $883 million of services revenue and a further $899 million of reimbursed management contract revenue, so the same business could look roughly twice as large, at roughly half the margin, depending on presentation.

Our View

Golf management is a good business that is easy to overpay for. The fee is senior to the owner and needs little capital. It is also short-dated, increasingly competed for, and exposed to the same cost pressures that push owners to outsource in the first place. On its own, it is worth a services multiple, and the market has already shown what happens when it is levered like something more.

The value in this category sits in two places the fee does not capture. The first is renewal: owners who keep saying yes through a downturn, a hurdle reset and a change of ownership. The second is retained platform earnings: purchasing, services and programs the manager keeps rather than passes through. Neither shows up in a contract, and both can be verified only in diligence.

That is the opportunity we see. The winners will not be the investors who buy the most contracts. They will be the ones who treat the fee as the price of admission, prove renewal before they pay for it, and pay a premium only for platform earnings they can see in the numbers. The fee is not the business. What the fee makes possible is.

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Source Note:

National Golf Foundation, "An Update on the Golf Management Space," September 1, 2022; "The Quiet Growth of Municipal Golf," July 2, 2026.

Golf Inc., "Largest Golf Management Companies Grow 54% Since 2019," July 1, 2026; "Municipal Golf Is Starting to See the Benefits of Third-Party Management," September 3, 2026; "Streamsong Resort Sells for $160 Million to KemperSports Subsidiary," January 2023.

City of Seattle, Ordinance 127243 and golf course management agreement with Premier Golf Centers, July 2025; Premier Golf Centers, 2023 Annual Report to Seattle Parks and Recreation; Seattle City Council, Parks, Public Utilities and Technology Committee briefing, June 11, 2025.

City of Portland, City Council Report 894-2022, and City Code 5.68.020.

KemperSports, "KemperSports Selected to Manage Village Greens of Woodridge," January 13, 2026; Woodridge Park District, lease termination announcement, August 2025.

City of Indian Wells, Indian Wells Facts, Indian Wells Golf Resort.

City of Great Falls, Montana, golf management agreement extension with CourseCo, as reported by The Electric, April 2026.

Los Angeles County Board of Supervisors, Board Letter and Lease Agreement for El Cariso, Victoria and Lakewood golf courses, September 9, 2025.

Marriott International, Fourth Quarter and Full Year 2025 Results, February 10, 2026.

Host Hotels & Resorts, Form 10-K for fiscal 2024 and fiscal 2025, notes on hotel management agreements.

Aimbridge Hospitality, restructuring support agreement announcement, January 16, 2025.

Metropolis Technologies, "Metropolis Technologies, Inc. to Acquire SP Plus Corporation for $1.5 Billion," October 5, 2023, and closing announcement, May 2024; SP Plus Corporation, Fourth Quarter and Full-Year 2023 Results, February 27, 2024; SP Plus Corporation, Form 10-K for fiscal 2023.

National Golf Course Owners Association, 2026 Golf Industry Compensation & Benefits Report, February 2026.

Hotel company EBITDA multiples, the SP+ transaction multiple, Seattle fee estimates and per-contract valuations are OTC calculations and illustrations, not reported data.