Despite holding an MBA in finance and the CFP certification, the “economics” of a Hole in One are over my head. It is summer, so the topic is relevant – and there have been one or more Holes in One per month for the last year at my golf club. Even pickle-ballers can sound in on this one.
A Hole in One for a golfer – from professional to putt-putt – is a big deal! On a regulation golf course, public or private, there are actual (unwritten but established) rules around the accomplishment ranging from:
- Tradition since the beginning of time holding that the person scoring the “ace” buys everyone in the clubhouse a cocktail or drink.
- Local members of golf clubs and friends are known to have driven from home to participate in the “free drink” celebration. (Hold the thought: “free drink”).
There are more mundane rules such as: in order for the hole score of “1” to count toward most official total round scores and overall competitions, the golfer must complete a “full round” (meaning the golfer cannot quit after the ace). And so on.
The “free drink”, though, poses an economic mystery. Here goes –
- A lot of golf clubs charge a FEE to ALL members every year for varieties of “Hole in One insurance”. The fee used to be $1 per year back in the day but has gone up to as much as $10, $20 or $50 per year at some clubs.
- By opting out, the member risks having a hole in one and then having to pay out-of-pocket thousands of dollars to cover the cost of a cocktail for all present at the club to celebrate. Insurance 101.
- There is the possibility of sneaking out…but achieving that move could prove difficult and also be frowned upon by friends and fellow members – in addition to being no fun.
- Certain other golf clubs charge ALL MEMBERS a “Hole in One drink charge” every time a Hole in One is scored at their golf club.
- Who is being insured here? Possibly the lucky golfer and definitely the golf club. Definitely NOT the much larger group of not-present members.
- Whoever is present that day or at a random designated time gets to claim a drink.
- The drink charge is at the expense of ALL golfers – most of whom will never score a Hole in One in their lives – and who mostly are not present to consume a drink! Multiple sunk costs!
- AND… some clubs charging the “Hole in One drink charge” pay back a portion of the “unclaimed drink charge money” to the Hole in One golfer (as if the gal or guy scoring the “ace” needs more to drink)!
Perhaps a PhD in Golf Hole-in-One insurance can explain. In the meantime, I will be over at the local club waiting for my drink from the Hole in One drink charges I paid in February, March, April, May and June. I was present to claim the drink for the latest August Hole-in-One.
Happy summer and happy golfing, pickle-balling and beach going! And HAPPY BIRTHDAY to a very special person!
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.