2004 -- The Golf Course Shakeout ???

[Matt_Ward]

I've been working with a few reigonal media I know throughout the USA in researching the very real possibility that a significant number of courses in key areas of the country (e.g. Grand Strand / Myrtle Beach, parts of the Midwest, some of the Great Plains, even the Far West) may be contemplating closing their doors permanantly because of the stagnant nature of the total number of rounds being played. I have heard figures of 20% or more of courses in certain geographic areas may be facing the end of their existence because of slow or no growth in total rounds being played.

It would be easier to simply turn the land over to housing and pocket the quick $$ that comes from such a situation.

I have to ask those who follow the industry closely do they see such situations spreading to more and more locations?New course development within the greater NYC metro area has come to an end -- save for a few layouts that are about to come on line or have the wherewithal of deep pocket developers / investors. Even then -- the NYC area is an aberation because demand to play is still high -- also disposable income is greater than just about any other area in the USA -- and the number of available courses within 50-75 miles of Manhattan is not as great as other regions of the country in handling the number of people interested in playing.

With golf course building being so high just a few years ago (400+ courses) and the growth rate of players being especially flat -- falling in certain areas -- I have to wonder if golf development is now heading into the dark ages where only the well-heeled projects will move ahead? And even if they should open will such courses continue to appeal to the narrowest range of players? If memory serves those who play 30+ rounds per year (about 10-15% of the total players) are underwriting upwards to 50% of the total $$$ generated from rounds played. That is staggering in its lopsided nature.

Did those who push particular high-end projects forget that the long term development of the game simply cannot grow by fixating on the folks who have the $$ for daily fee golf that routinely costs $75 or more to play? Was it just a case of grabbing the immediate dollars and forgetting all the rest. To be fair -- should it be their concern?

I also have to wonder what specifically the National Golf Foundation, the USGA and PGA are doing because despite all the feel-good talk about First Tee the reality is that golf is being identified more and more as a time consuming game that is far from cheap and really is removed from the next generation of young people coming up as potential players.

Be curious as to the comments from those in other sections of the USA and how they view this topic. Thanks!

[Tommy_Naccarato]

Matt,
Read Geoff Shackelford's The Future of Golf in America to see if there are any similarities to these warnings.

The talk I hear from Lost Canyons is that they have looked into the possiblities of dumping the Shadow Course for houses or, at least a nine from each side, or the possibility of making the place 27 holes. Cascades is talking about changing the golf course into a executive course with the building of several condos around the place, and once Angeles National opens up, it should be the death throw for it as a CCFAD.

Why, there is even the possibility that they are going to rename the 36 holes of Robinson Ranch, "Robinson Ghost Town."

[Matt_Ward]

Tommy:

How is the golf market adjusting with the number of new courses that have opened these last few years in the Inland Empire -- such as Hidden Valley in Norco, Empire Lakes in Rancho Cucamonga, Oak Quarry in Riverside, etc, etc. I know there are a few others as well. I mean can all the new courses sustain themselves with a business model of $75+ per round? In many ways that's what makes Rustic Canyon so appealling.

Ditto the same thing for the courses just outside the Bay area and taking root in former wine country areas.

I congratulate the SCPGA for developing the layouts they have in Calimesa -- at least people can access a facility with rates that allow for return play throughout the year.

[Tommy_Naccarato]

Matt, I have heard Hidden Valley is in severe chaos and it may even be closed down to nine holes and then eventually razed for housing. Its just not that good of a golf course.

Oak Quarry on the other hand is doing fairly well, all things considered with the economy. Hank Schiller is still there, and thats a good thing! But unfortunately, Scott Miller has left SCPGA, and he was one of the good guys. To my understanding, Scott was the victim of a budget cut two weeks ago due to insufficent lack of play. The DOG is now acting as both head professional and DOG, and while some will say, well that shouldn't be a problem, for a 36 hole facility, I think it is.

The course is not getting anything during the week, and only to a certain time on the weekends, and its apparently its a move until business picks up. My theory is, will it ever? I just think that the glut of courses, at least affordable ones is little and the cost to build these facilites with huge clubhouses and high construction costs is now facing its risk, and it isn't pretty.

[Tom_Doak]

Matt,

I can't imagine that 20% of the courses in Myrtle Beach will actually close ... they'll just go bankrupt and be bought by someone else at 50 cents on the dollar.  There's still a lot of demand for golf there, just not at the prices they want to charge today.

Unfortunately, that isn't going to leave very many people looking to build new courses around there.

I did hear from someone just yesterday that Bulle Rock's abandoned second course is now going to be 600 homes instead.

[Scott_Burroughs]

Just checked out Bulle Rock's web site, which has been re-designed quite a bit from a previous version, and now there is no mention anywhere of a 2nd course coming.  The old site mentioned it in several places.

I think their prices didn't go up any for this year as well.

[Scott_Burroughs]

Tommy,

Do you think that Hidden Valley's woes can be attributed to the "fiasco" that happened there a couple of years ago?  HV was never terribly expensive, when compare to places in Orange County.

Didn't someone mention that SCPGA also has a "location problem"?  Constant high winds in the pass....

[Steve Pozaric]

In St. Louis, for the first time in a while, no new courses opened this year, although the 27 holes in Forest Park have undergone a significant redesign (alas, a 100 yr old course went under the knife; some great changes, some good changes, some not so good).  We have lost 3 courses in the last year or so -
Crystal Springs, a Hurdzan/Fry course with a poor location south of town;
Hawk Ridge, a decent course to the west that is now an executive 9 with housing (growing residential area); and
Cherry Hills, a former CC that I guess just never could make it as a public layout (growing residential area).
There might be another course in the far N.W. suburbs, but I am unsure about that.

What is surprising, from a locals standpoint, is that Walters Golf, a local golf management co. (no relation, I think, to the Las Vegas Walters), had a go at managing Cherry Hills and Crystal Springs.  They manage a number of other good public and private courses.  If they could not make it work, either there was something wrong with the courses or the golf economy.

[A_Clay_Man]

I'd be interested in how that Goldman Sachs deal is marinating? Was it with Troon golf?

In my region, the price point is low, but my home course is busy.

I wonder how are things in Amariillo?

Dr. Klein suggested awhile back that this contraction in facilities would be a good thing. A little harsh, but misguided proformas and wasteful expenditures, should have their price.

[Matt_Ward]

Tom D:

I have heard from a range of knowledgeable people that there are a number of courses within the Grand Strand area -- stretching from Georgetown SC to Brunswick County NC that are truly hurting financially. Whether or not 20% of the courses will actually close in '04 is not as far-fetched as you think.

Too many courses have simply priced themselves out of reality and given the nature of the clients coming to the area it's really about providing them value for their $$. I mean just how many noteworthy $75+ courses really exist in that assembly line area for golf?

In addition, developers would just as quickly take the golf course properties and use them for housing -- your example of Bulle Rock is a classic example. The developer can sell 3-4 acre lots and build 600 MacMansions and simply forget about doing 18 holes when an existing course is already there. If you estimate each MacMansion at a minimum of $1 million each that's not a bad windfall.

Tom -- when you say demand -- I think you have to see what the Grand Strand has become. I don't doubt that 10-15 years ago it could have easily supported what was there at that time. But, things have changed with more and more courses coming on line and everyone battling for the limited number of golfers coming. Let's also not forget that other areas of the country are also making their pitch to grab golfers.

The golf market has not recognized how to develop and market quality golf at prices that can be sustained by Joe Sixpack and his cohorts. One of the great things that happened for golf was the addition of Barona Creek and Rustic Canyon. However, those are isolated instances. There you have a situation where quality design and affordability can work in tandem. Unless the key players recognize this and start to advocate it loudly and consistently the only pattern that will continue is the shrinking base of avid players.

[JohnV]

While I haven't heard of any closures around the Western PA area, I know of one course that was 80% completed where the owner went bankrupt and it won't be finished.  Also, a number of the lower-tier or more remote private clubs are switching over to semi-private to get more revenue in the house.

I don't know how Myrtle Beach is doing, but I've gotten 4 different large mailings in the last two weeks from them and other South Carolina tourism agencies so they are really pushing hard to get people down there.

[Pete Buczkowski]

Matt:

This scenario is playing out in Macomb County MI, about 20 miles north of Detroit.  Of the ~10 area public courses within a 5 mile radius, 2 have been sold in the last year to make way for housing, while at least 3 more have had offers or have accepted buy-outs.  The courses are dull late 80s/early 90s offerings, before housing stretched that far from Detroit.  The public market in metro Detroit is already quite bad, and now the area courses have the charge top $ for relatively poor offerings.

[Matt_Ward]

Despite the laudatory goals of First Tee I can't see how the existing golf landscape in a number of locales won't be experiencing a massive shakeout of golf courses -- especially in areas where overdevelopment has really escalated.

There are a number of developers who simply viewed golf as a reasonable investment to grab housing $$. Unfortunately, a number of them simply failed to understand that unless some aspect of that course / development was unique the opportunity to grab higher and higher green fees each year with a shrinking base of players was not a promising situation in many instances.

The theory behind the success of the Grand Strand was compelling 15-20 years ago when there weren't as many places and the price differential was wide enough to allow for people to sample 1-2 big name places during a week's stay.

Now, just about all the courses think they are grade "A" designs and each of them offers $75+ golf. In a number of instances many of these facilities are downsizing their investment into quality turf and you can see the frayed edges of these places.

The golf industry simply grew without any heed to the dynamics involving the total number of players. Developers only paid attention to that limited group of people at the top end of the scale. Now the roosters are coming home to roost and I don't see how many of these facilities will operate with a profit margin that is successful. We shall see ...

[Jason Hines]

   Hi Matt,

It will be interesting to analyze these economic times after the courses and economy rebound to determine some of the "signs" of this particular industry.  I.E.  Private Clubs going semi-private or public, Selling the club for real estate (which what one of the worries is at my club, 90 years old and sitting on a lake).  Lowering of green fees to cover variable costs,  Housing developments etc.  I have attached the first announced building activity in my home town in 2 years.  (Omaha, NE 600k people).  They are purely talking economics.
   
 
 

Published Saturday
March 27, 2004

Another nine holes, newly-built homes due at Players Club

BY LEE BARFKNECHT
WORLD-HERALD STAFF WRITER
 
The Players Club at Deer Creek  
   
Nine more holes of golf and more houses are coming to The Players Club at Deer Creek.

Dan Livingston, project manager, said Friday that construction is set to begin within a month to add a third nine to the 18-hole complex in northwest Omaha.

The new nine will be similar to the first nine, Livingston said. Golf holes will wind through valleys, while homes will sit on hills and knobs overlooking the course.

Seeding of the new nine will be done this fall. The plan is to begin play in July 2005.

The Players Club, an Arnold Palmer design that opened in 2000, had always planned to become a 27-hole complex.

"This development is driven by lot sales," Livingston said. "With 9/11 and the stock market drop, things slowed down.

"But we're probably only one year behind our original projections. Things are really picking up. We have 40 homes now under construction."

Livingston said the 2005 Street of Dreams home show has been awarded to the new area, called The Highlands at Deer Creek.

The new nine holes of golf consists of three par 3s, three par 4s and three par 5s.

"In my opinion, the easiest birdie chances for amateurs are par 3s and par 5s," Livingston said. "It will be a fun nine to play."

Having 27 holes available, Livingston said, is a big plus for a golf complex.

"Research shows that having three nines makes each one 50 percent more productive," he said. "You can maximize your peak times by sending off foursomes on three nines.

"It also helps with maintenance. At slower times, you can take a nine out of play for a day or two and let it rest or do repair."

[Tommy_Naccarato]

Scott,
Hidden Valley, aka Happy Valley   was originally $75.00 when it first opened before the big boom, and then jumped to like $85.00 pretty quickly. It was one of those newness things where everybody thought the course was really good, and when the newness wore-off, Kemper saw it coming and jumped-out of the course management and the place has continued to slowly decline overtime. The maintanence is O.K., and I don't think the "event" had anything to do with it, but you never know!

SCPGA, and the wind, well yes it does blow out there, but its odd, because even though its just right across the freeway from Oak Valley, it doesn't seem to blow nearly as much over there. Maybe its a break or something.  The course is popular, just not as popular as they hoped. It does attract from a fairly big market though as last time I checked, San Berdo is still growing pretty big. Those are good courses out there, all three of them, with Oak Valley being the better of the three, and maybe Shooter or Kye Goalby could add something if they're listening, but when we were there about three or four weeks ago, it was playing pretty good.

I think the SCPGA is right by keeping things afloat, because the Inland Empire is going to grow more by leaps and bounds, and they know it, and then they'll come back. Just not at the prices they charge though. I think if they had those courses at a $60.00 cap, they would be packed. But if you do the formula, $10.00 green fee for million dollars of cost to build, then their in trouble and better find a partner.

[Joe Hancock]

More real world observations, from an owners perspective:

Golf used to compete with golf. Now it competes with MANY other recreations. One round of affordable golf for a family of four equals at least one month of boat payment. One month has at least 8 weekend days...you get the picture. I also saw on the news that motorcycle registration is up something like 25%.

In our area, ( Grand Rapids, MI) golf was over-built. The competition is fierce. Last year, there was a reasonable daily fee selling 18 holes with cart and fountain drink for $13.99. We didn't try to compete. God bless 'em.(p.s. said course is being contemplated for a new zoo, so they're money-grabbing.)

Our current rate is $32 for 18 w/ cart. I doubt that the future will ever allow me to raise prices much, if at all. Meanwhile, cost continue to skyrocket, especially insurance, fuel and labor. I can try to do less maintenance, but if and when I feel I'm neglecting the course, I'm outta there. Actually, I'm hoping to go do something else fun in golf (construction again...ironically), and that will free up some payroll.

We've had 3 terrific days in a row (low 60's and partly cloudy), and we are averaging 50 people a day, mostly 9 holers. It's still early in the season, so no need to hit the panic button.

It's a challenge still worth taking on for the moment, but I don't for one second hold anyone to blame if they sell a course for big development dollars.

Joe

[W.H. Cosgrove]

It would seem that some contraction will occur in the Pacific NW.  High real estate prices and stiff competition from other recreational opportunities combined with anemic growth make this seem inevitable.  

I have a concern with contraction.  This has all the earmarks of starting a downward spiral.  Courses close, prices continue high preventing new players from taking up the game and more shrinkage occurs.  I have not had the chance to read Shacklefords new book yet but I would assume he looks at some of these issues.  

Golf needs more regular players.  To do this we need to make the game less expensive to learn and play at the entry level, the game needs to be played more quickly,and we need to concentrate on making it less difficult.  

After reading about 4 1/2 hour rounds at Rustic at the KP and adding that Jonathon was concerned about green speeds, it doesn't seem a long leap to suggest that green speeds are too high and as a result have made the game too difficult and slow.  That spells boredom!  New players want to spend more time hitting drives and we are spend over half our time lining up our third and fourth putts!

As posters on this site we lack insight as to what it must be like to try to learn the game.  We may actually be loving our avocation to death!

[JakaB]

After reading about 4 1/2 hour rounds at Rustic at the KP and adding that Jonathon was concerned about green speeds, it doesn't seem a long leap to suggest that green speeds are too high and as a result have made the game too difficult and slow.  That spells boredom!  New players want to spend more time hitting drives and we are spend over half our time lining up our third and fourth putts!

Cos,

I know you think I pick on you..but sitting here watching American Idol...I have to say you are out of tune.  The problem with golf has nothing to do with fast greens or hot balls.  but...A problem does exists with people who even consider lining up third and forth putts...I hope you were kidding when you included yourself in that sad group.

[Tom_Doak]

Matt,

I can't understand the thinking in Myrtle Beach.  They used to maintain the Heathland course at The Legends for $350K per year ... say $500K in today's dollars.  So it costs them maybe $750K per year to keep the doors open.

At that rate, they could play 30,000 rounds at $25 per round to break even.  No, that doesn't pay a dime of debt service, but neither does shutting down.

Now The Legends does twice that many rounds at twice the green fee, so they aren't going bankrupt.  But I would think that more than 80% of the courses in Myrtle Beach could make those numbers work.  And a lot of the older courses had their mortgages paid off a decade ago.  So, unless they're going to get redeveloped for housing, I can't see why they would shut down.

[Matt_Ward]

Tom D:

The amount of rounds per course is not as high as you think. I've talked with a few well placed sources and given the vast number of courses that dot the landscape (Georgetown to Brunswick County) the numbers are simply not growing -- if anything they are either flat or falling.

A good bit of Myrtle Beach is still locked back in the 70's and 80's -- in terms of infrastructure and course upgrades. Unless facilities make it a point to upgrade what they have why the need to go just there when other options are available.

The newest facilities in town may be able to ride out the tough times but the overall golf crowd is not flocking because the sheer numbers are not expanding.

[Bob_Huntley]

Wall Street Journal- 3/31/04- Business Real Estate Section

Cobblestone Country Club, 308 acres, World Class 18 Hole Golf Course, 13,500 sq.ft. Clubhouse.

Auction SAT April 17th at Noon.

I guess this is somewhere in Florida.

[Matt_Ward]

What plenty of people don't realize is that existing courses are not going to go out of there way to confirm that growth is indeed moving at a tortoise level.

They will always "spin" the argument that things may be bad but not with THEIR course. Given the flat nature of player growth and given the fact that a very small percentage is really responsible for much of the $$$ in the total rounds played one has to be a bit more skeptical that all of these courses will be fully operational and profitable in '04 and ahead.

[Pete Buczkowski]

I'm sure Tom knows more about Legends than I do, but they recently (~1-2 yr) shut down operations at 2 of the better layouts on the beach, Ocean Harbour and Marsh Harbour.  Far as I know, they are just sitting unattended to right now.  Surely two scenic tracks, easily in the top 20% that MB has to offer, can turn a profit by remaining open and just doing regular maintenance.  Or are there other forces behind their demise?

Matt:  Numbers at specific courses may not be up because of the surge in upscale courses in the past 5 years.  Last I heard, there were 117 offerings on the beach, up from the 100 or so of 5 years ago.  I suspect that guests to specific courses may be down, but the total number of golfers is not necessarily declining.  I agree with you that the courses charge astronomical prices for the product they offer, but you need to bear in mind that MB is a different animal due to the low hotel fees which keep the overall package price down.  Most of the MB patrons don't care if their golf portion was $100/round if the overall package is $130/day including room and breakfast.  Let's face it, the majority of the vacationers there have golf as the secondary concern behind other activities.  

I also heard the rumors regarding the demise of some MB courses along Hwy 501, such as Robbers Roost, that are worth more as shopping or housing complexes.

[Tim Taylor]

Yeah, I noticed this too. Bulle Rock's web site has the exact same look and feel as Twisted Dune's, Pine Hill's, and Pine Barren's. Does anyone know if Empire Golf bought or is managing Bulle Rock?

I still have a nine hole rain check for Bulle Rock from last fall.

TimT

Just checked out Bulle Rock's web site, which has been re-designed quite a bit from a previous version, and now there is no mention anywhere of a 2nd course coming.  The old site mentioned it in several places.

I think their prices didn't go up any for this year as well.

[ChasLawler]

Pete - not to nitpick, but I don't believe Ocean Harbour was ever affiliated with the Legends. Marsh Harbour was/is, and I think you're correct in that it's just sitting unattended to right now. Oyster Bay and the Heritage Club are the other two off-site courses affiliated with the Legends.

As far as MB goes, my guess would be that places like the Legends and Barefoot are probably OK, because they offer something relatively unique to the area. I would imagine the courses in jeopardy would be many of the courses built during the 70's and 80's which really don't offer the traveling golfer anything architecturally different than what they might find at their local muni. Even though many on this site may despise a place like Kings North, it does at least offer the golfer something that he/she has probably never seen before.

Kings North