Course operators expect golfers to return as economy improvesFebruary 26, 2010 6:00 AM
by Ed Crews
The recession has been hard on Dave Cheek’s golf game. For several years, the Henrico County resident played regularly with seven other gregarious men who hit the links across Central Virginia every chance they got. That changed as the recession deepened in 2009. “We used to play Saturday and Sunday and one day during the week. Now, we’re lucky to get out once a month,” he says.
Faced with a down economy, many of the group’s members have decided they can’t afford to play, at least for now. Without his companions, Cheek, too, is staying home more. “Golf is about having fun with your friends,” he says. “My friends have been going less. So, I’ve been going less.”
Cheek’s experience symbolizes developments in the state and national golf industries the last two years. In short, golf enthusiasts have reacted to job loss and financial difficulties by cutting back on playing time, travel and equipment purchases. For course operators, that made 2008 hard. Last year was even harder. In addition, bad weather in the fourth quarter kept players off courses, hurting year-end revenues. The evidence of all this can be seen in rising bankruptcies, failures, cost-cutting and layoffs. “It was a time when our industry really had to put a sharp pencil to paper,” says Jamie Conkling, executive director of the Virginia State Golf Association.
This year will bring more challenges. Unemployment remains high. Many people are paying down debt or rebuilding portfolios. So, some golfers can’t afford to play. A golf course building boom in the late 1990s led to overcapacity. More bankruptcies and closures may be ahead.
Yet, even with these realities, some Virginia course operators believe 2010 has the potential to be better than the two preceding years. “We expect to see revenue advance from ’09 levels. The change in the economy is not going to be like a light switch suddenly going on, but we will see some growth even if it’s slow,” says Glen Pierce, head PGA professional with Heron Ridge Golf Course in Virginia Beach.
That outlook is rooted in a belief that the national and state economies may have turned the corner. A recovery, however mild, probably lies ahead. In addition, after months of anxiety and forced thrift, many people are eager to get out of their homes and relax. For hundreds of thousands of Virginia golfers, that means hitting the fairways.
Cheek knows that other players want to return to the game as soon as their financial conditions allow. “My friends who aren’t playing all say they are hoping that everything gets straight soon,” he says. “As soon as their paychecks get back to normal, they’ll get back to the game.”
To appreciate fully what’s happened to the golf industry recently, it’s important to remember its size. This is a big business. In America, the game’s total impact amounts to $195 billion, according to the National Golf Foundation. Here, the Virginia Golf Council reports that figure is $3.1 billion. With numbers that large, any change in industry fortunes affects thousands of players, course employees, vendors and suppliers.
Economist Jeffrey J. Schott took a close look in mid-2009 at the industry’s recent experience. He was particularly interested in cause and effect — the tie between recessionary fallout and golf industry developments. Schott, who is with the Washington-based Peterson Institute for International Economics, shared his observations during a speech on “Golf In A Troubled Economy” at the National Golf Foundation’s Business Symposium. He found that:
• The upper middle class disproportionately felt the recession’s sting. Because most golfers belong to this population segment, their economic pain also hurt course operators and, by extension, their vendors as well as equipment manufacturers and retailers.
• Marginal golf venues have been hit hard. That’s reflected in closures and bankruptcies.
• State and local revenues are down. That affects the budget and operations of public courses.
• Disposable consumer income fell. Players probably will not increase spending for equipment or travel to distant courses.
Statistics show the net effect of all this. In 2008, National Golf Foundation figures showed that 106 U.S. courses closed. The number of golfers fell from 29.5 million to 28.6 million. Rounds played dropped from 499.6 million to 489.1 million.
Definitive figures are not available for 2009. However, the downward trend apparently held. Closures continued. The final total may reach 10 percent nationwide. Fifty courses opened in the United States through summer 2009 — well below the peak of 400 in 2000. Two Virginia courses opened last year: The Club at Viniterra in New Kent County and Ballyhack in Roanoke.
Golf course bankruptcies continued last year. One of Virginia’s most notable was The Federal Club in Hanover County, a 3-year-old, Arnold Palmer-designed course. Its parent companies filed for protection from creditors in October. The club has changed from private to semiprivate and formed an alliance with Spring Creek Golf Club in Gordonsville. The arrangement allows golfers to play both courses for the price of one membership.
Amid all the turmoil, players are facing some unexpected benefits. “The truth is that it’s a good time to be a golfer,” Pierce says. “Everybody is working to keep their customers.”
Already, public and private courses are refining their services and offerings to attract and to retain golfers. They also are looking for ways to make golfing better, more fun, more economical and more accessible. Not every course is offering a discount. Many operators are trying hard to hold the line to protect revenues. However, Cheek reported that he has seen discounted fees in the Richmond area. He also said that with a decrease in golfers, courses are easier to get onto and waiting times are way down.
Other observers also note that 2010 is an excellent time to join certain upper-end private clubs. In some cases, these clubs have reduced joining fees, and waiting lists for membership are shorter as people have dropped off due to financial considerations.
In addition, some great golf travel packages exist, says Paul Mauk, president of Toano-based Traditional Golf Properties. Prices are attractive, and rooms are available.
Undoubtedly, the recession will continue to change the golf industry this year and beyond. Observers in Virginia agree that the next five years in particular will be telling.
Certainly, the overcapacity issue will get addressed. This will be painful for some. The process will be marked by closures and, perhaps some bankruptcies. It also means that the state will not see many new courses built. “We have lots of good public courses. We have lots of good private clubs, But, restructuring is under way,” Conkling says.
Interestingly enough, some operators see opportunities as the state’s golf industry reshapes itself.
For example, Traditional Golf Properties bought The Golf Club in Providence Forge plus three in North Carolina in late January. Founded in 1999, the company owns, leases or manages 11 mid-Atlantic courses. These purchases reflect a long-term optimism about golf and economic growth in the region as well as a highly disciplined acquisition and operational strategy, Mauk says.
Traditional Golf Properties is not aggressively pursuing new properties, he says. Any future purchases will be in the same region as the company’s other courses and will require extensive research and planning.
Not only will the state’s industry get reshaped in the near future, it also may not experience the long-predicted influx of baby boomers to the game, Conkling says. For years, operators have expected that as this generation retires, it will have the time, money and inclination to embrace the game. Unfortunately, the recession hit boomers especially hard. Some not have only too much debt but also hold badly damaged investments. Retirement — and golf — may have to wait until their finances improve.
Growth opportunities do exist, though. Minorities and young people in high school and college may come to the game, if offered the right reasons, help and inducement. Perhaps, the best option exists with making the game more family friendly, says John Kelly, general manager at Salisbury Country Club in Midlothian. Many parents want to share their love of the game with their children. It’s a chance for father-son or mother-daughter bonding that other activities don’t offer. Golf also is a healthy alternative to video games and television. The key will be offering age-appropriate training and programs. For example, Salisbury has enjoyed success with its “Golfin’ and Fishin’” program that lets younger children hit golf balls and then fish in water features on the course.
Players also may find that their favorite courses will stay attractive and prim, despite courses cutting back in other areas. Pierce and Kelly emphasize that taking care of a course is vital, even if it means sacrifices elsewhere. The operations best positioned for the post-recession world may be those taking care of their greens today. So, odds are good, the state’s best golf venues will remain attractive and inviting.
Operators also may become more innovative in increasing the game’s accessibility. One traditional obstacle to play is the time that 18 holes require. Conkling believes that we soon may see more six- and nine-hole courses.
No matter what else the recession may have done to Virginia’s golf industry, it hasn’t really affected one area — the passion players bring to the game. This passion remains strong, even if indulging it has required adjusting to new economic realities.
“People still will come to the course,” Kelly says. “People really love the game of golf. If they need to, they’ll get more creative to fit it into their lives.”