AVALON HOLDINGS CORP

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $35.9 million in 2023 compared to $31.4 million in 2022. Avalon’s golf and related operations segment consists of the operation and management of four golf courses and related country clubs which provide dining and banquet facilities, a hotel which provides lodging, dining, banquet and conference facilities and other resort related amenities and a multipurpose recreation center.

Food, beverage and merchandise sales increased to approximately $13.5 million in 2023 compared to $12.1 million in 2022. Food, beverage and merchandise sales increased between years as a result of an increase in business activity and sales pricing at both The Grand Resort and the country clubs.

Other net operating revenues related to the golf and related operations were approximately $22.4 million in 2023 compared to $19.3 million in 2022. Membership dues revenue was approximately $7.3 million in 2023 compared to $7.1 million in 2022. The increase in membership dues revenue was attributable to an increase in membership dues rates during 2023. Net operating revenues related to room rental was approximately $6.4 million in 2023 compared to $5.5 million in 2022. The increase in room revenue was a result of both higher occupancy and an increase in average room rates when compared to the prior year. Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $5.4 million in 2023 compared to $3.8 million in 2022. The increase between years was primarily due to an increase in salon and spa revenue of $1.2 million between years. Greens fees and associated cart rentals were approximately $3.3 million in 2023 compared to $2.9 million in 2022. The increase was due to both an increase in rounds played during the year and an increase in cart rental rates. Due to adverse weather conditions, net operating revenues relating to the golf courses, which are located in northeast Ohio and western Pennsylvania, were minimal during the first three months of 2023 and 2022.

Total cost of operations for the golf and related operations segment were $31.1 million in 2023 compared with $26.8 million in 2022. Cost of food, beverage and merchandise was approximately $6.3 million in 2023 compared to $5.5 million in 2022. The increase in total food, beverage and merchandise costs between years was attributable to both higher revenues from increased business operations and higher product costs. The cost of food, beverage and merchandise sales was approximately 47% of associated revenue in 2023 compared to 45% in 2022. Golf and related operations operating costs increased to approximately $24.8 million in 2023 compared with $21.3 million in 2022. The increase in operating costs between years was directly attributable to both an increase in the level of business operations and higher employee related costs in 2023 compared to 2022. In addition, various operating costs including utilities, fuel, laundry and golf course fertilizer increased between years.

The golf and related operations recorded a loss before income taxes of $0.2 million in 2023 compared with income before income taxes of $0.2 million in 2022. The change between years was primarily a result of higher employee related costs due to higher employee wages paid per hour in 2023 compared to 2022 along with increases in various operating costs including utilities, fuel, laundry and golf course fertilizer.

The ability to attract new members and retain members is very important to the success of the golf and related operations segment. Avalon is continually using different marketing strategies to attract and retain members, such as local television advertising and/or various membership promotions. A significant decline in members could adversely impact the financial results of the golf and related operations segment.