New courses/closed courses

[BCrosby]

This week's Economist magazine has a graph showing that last year more golf courses were closed than new ones opened. There are net fewer golf courses today than there were a year ago. And the trends going forward don't look good.

I would guess that the last time those lines crossed was WWII.

The Economist speculates that most of the golf course losses were due to residential and commercial development.

Is the story really that simple?

[Jeff_Brauer]

The story really is that simple.

In July, the NGF report, which lists such things, showed that the USA closed that month with exactly 16,000 golf courses.  Not about 16,000 rounded to 16,000, but 16,000 on the nose. Of course, its probably changed now.

The closure process has always been there, with closer to city courses sitting on land that is getting valuble.  It has probably always accelerated in down economic times.  We have a funny situation where housing continues to go relatively strong because of low interest rates, while golf suffered after 9/11 and in the recession, making marginal golf courses in highly urbanized areas great mid size parcel acquisitions for homebuilders.

[Eric Franzen]

Link to the article (maybe just an excerpt?)
http://www.economist.com/business/displaystory.cfm?story_id=8035922

[Geoffrey Childs]

Bob

At 7:42 and 15 seconds AM tomorrow morning the US population will hit 300 million.  Suburbs from my youth look nothing like they once did having been filled with shopping malls, homes and gas stations.

Perhaps we are at a point where golf courses will need to move out farther into the country to survive. Poor old Dev Emmet had most of his courses lost to housing a while back and maybe another round of losing some good golf courses to urban expansion is upon us.

[Jeff_Brauer]

There was an article in the Sunday paper about the baby they chose to represent the average american when we crossed the 200 Mil barrier - it turned out to be an Asian desecnt man in Atlanta.  Someone commented that a white suburbanite would have been a more representative choice, but he was born at the moment the "clock" said that we would cross 200 Mill.

They went on to say a person of Hispanic descent living in LA or surrounds would be the most representative baby to choose tomorrow for a similar honor and lifetime of occaisional fame (such as when we cross 400 Mil)

BTW, suburbs still look similar, with a little more racial diversity, its just that they are further from downtown.

When I think of the closure process, I think of the old Tam O Shanter course in Chicago closing, or Rob Roy and Old Orchard in Mt. Prospect going from 27 to 18 or nine holes, with clustered housing all around.  

Sadly, I have lost a few courses in this round (Centenial in Atlanta) but Avocet in MB and my course at Stallion Mt in Vegas have survived, with other courses there being converted to housing.

[cary lichtenstein]

A lot of the blame for course closings can be attributed to the inordinately high number of courses built in the last 10 years with the mistaken hope that Tiger and Co would spur further growth.

It is great for us golfers, but not so for the marginal course that hopes to survive and even the good course that amkes only a marginal profit.

It used to be you could not get a starting time at many courses in Chicago and that has drastically changed.

When I'm on the road nowadays, I'm shocked by how relatively easy is it is to prime times.

[Doug Ralston]

Reality must intrude again!

Truth is, as more money goes 'uphill', and fewer people in the more numerous lower 'classes' [an economic term] can afford golf because they are working jobs that simply pay less [aka underemployment], this trend must continue. Welcome to Bush Economics 101!

Yep, it IS political, sorry.The Greatest boom time for golf course construction was late 90's to early 00's; the end of Clinton economics. As you conservatives have gotten richer, those of us at the other end struggle to play. I am lucky. As I have often said, i am near Kentucky, land of great cheap golf. If i was in Chicago, I would play only chess!

It was NOT the 'tech bubble' that made Clintonomics so strong, it was jobs at equal qualitative level with education and training. Now people with advanced degrees are making 20K or less [Me!], and golf courses cannot get the traffic.

How can that be shown? Look how many PUBLIC courses are among the dying; look how many PRIVATE courses are among the newborn! Guees what? The rich are still getting rich. But the 'underclasses' are going down! I am glad you are enjoying Pine Valley and Sand Hills. I truly am happy such beauties exist. But such exclusivity has a price. It is the need to pretend not to see. Perhaps even real denial?

Doug

[BCrosby]

I think it's pretty ominous.

I understand there was over building in the '90's. But at the time no one thought they were over building. New courses were built on (more or less) reasonable projections about the growth of the game. That growth had been pretty constant for many decades. The growth rates builders relied on were not crazy numbers.

This is the thing. While population growth puts development pressure on marginal golf courses, population growth should also be spurring more rounds per year. The opposite is happening. For the first time since WWII. It is the nighmare scenario - there is healthy population growth matched with a decline the amount of golf being played. Where did that come from?

In other words, though some marginal courses go under to development, with a growing population we should be seeing even more new courses replacing those that have been lost.

Something more than just competition for RE is going on. I think this may be a cultural shift; there seems to be a shift in how people spend their leisure time and dollars.

Golf is getting hollowed out. The upper end is doing ok. The public courses seem to do ok. The great middle class, however, is leaving golf to do other things. The courses they play - the second tier privates and the upscale publics - are being crushed. Or plowed under. I don't think that's just a function of RE development. A hint at the real reason for their demise is that people in the golf business don't see any future in spending money to replace them.

That's worrisome.

Bob

[Jeff_Brauer]

Bob,

There are new courses built to replace the ones going under.  Bad news is, they were built ten years ago in numbers to last us another ten years.

Population growth is coming from new babies and immigrants.  I don't think the Scots and Japanese are our major new influx of immigrants - India, Mexico, etc. few of whom play golf.  If the traditional player % is 10-12% of total population, then it stands to reason it might go down. For that matter, all sports and entertainment is dropping a bit (including TV) because there are so many options out there.

I agree second or third tier clubs are struggling. Upscale publics are simply dropping their prices in most cases, or really striving to provide an experience worth the money for most.  Cowboys in DFW is up in price and rounds, for example.

Short version - its a complicated situation, and many factors enter in.  I cannot endorse Doug's political version as trends as opposed to fads take more than one presidents tenure to build and develop.  And, I am an optmist - golfs been going strong since the 1500's at least, with a general upward trend.  Its had to survive some invasions and other tough times. I suspect it will survive this one, too.  If its a mature market here in the US, as I suspect it may be, then growth will be slower than in other areas of the world.

[JMorgan]

A few questions thrown out there...

Should GCA's protect courses deemed worthy of preservation? Put another way, if the Landmarks Preservation Commission in NYC, for instance, could save a present-day Lido or p-d Dev Emmet's course in the NYC metro area, etc. from development if they had input from "experts" in the field, would any practicing GCA's on this board participate in this effort?

Since WWII, is there any correlation between those courses that survive economically and how they rate on this site?  Or does the market fairly sort out winners from losers?

[Dan_Callahan]

In some cases, I wonder if the architecture is partly to blame. When I first played Gillette Ridge, my immediate impression was that the course couldn't possibly make it. A combination of crappy design, awful conditioning and high greens fees all conspire against it. And it competes with Wintonbury Hills just down the road. It will be interesting to see if it is still around 5 years from now.

Just yesterday, I played a private course about 40 minutes northwest of Boston. This is a newish layout (8 years old, maybe) that has an initiation fee of close to $30k and annual dues over $5k. I won't name the course because I was a guest, but I hated it. There were at least 5 holes that forced a layup off the tee leaving at least 150 yards to the green (and that was with a very bold layup, challenging wetlands). The first 12 holes were very tight and the design was unimaginative at best. About the only thing I liked was the relatively small greens—a change from what i am used to seeing, which made things interesting.

At least in those two cases, it doesn't surprise me that courses close every year. Especially when there are so many good places to play out there.

[Michael Whitaker]

It's all about the real estate boom... tied to the swell in baby boomer retirements. Most of the golf courses that are closing are doing so because the dirt is more valuable for development than for operating the course. If you had a course that was making 500-750k a year in profit and you were offered 20mil for the property what would you do? That is what is happening in the coastal and resort areas. The property is just worth too much to developers and they are the ones fueling the course closings... just as they fueled course construction when courses were needed to sell houses and condos. Now, the tide has turned because so many baby boomers have money to invest in resort area condos or retirement homes. Things usually work themselves out in the real estate market over time. And, the thinning out of courses will only help the ones that survive.

[ANTHONYPIOPPI]

I wrote a piece for Golfdom magazine a few months back about course closings in Michigan, a state that will have fewer courses on Dec. 31 of this year than on Jan. 1.

The reasons for this are:

Overbuilt. The fact is with close to 900 courses, with hundreds built in the last 20 years, there are too many.

Poor management of new and existing courses. Courses that had been around for 20 years or longer were making money because they were the only ones in a given area. When competition moved in the older courses folded. In other cases people unfamiliar with the business jumped on the band wagon and suffered for their ignorance.

Real estate. Land prices in tourism areas have risen so dramatically that course owners would be stupid not to sell. Architect Ray Hearn told me of two instances where owners of courses he built within the last 15 years, and which were making money, were offered between $18 and $20 million for the land. Both intended to sell and use part of the profit to build another course.

Anthony

[Mike Nuzzo]

I did hear a quote while watching the ladies play yesterday...

"Mexico has 20,000 golfers"

It sounded incorrect.

I started rooting for Lorena after I heard that!

[Doug Ralston]

Jeff;

I do not find economic that complex. Hypothetical:

If you were a muni in Ohio, charging $45 for 18+ cart; would you rather be in an area where 1,000,000 people have $1,000 of spendable cash for recreation, or where 1,000 people have $1,000,000. Ask same question if you were an exclusive CC.

New we are getting less and less people with $1,000 of spendable, but more with $1,000,000. Whose golf courses will struggle, whose will thrive?

Yes, Tiger Woods was a definite factor on popularity too. But he is still here. Golf is still popular; more so on TV than ever. But the publics struggle, and the private thrive. Do not believe for a second that economic policy [geyser-up economics] is not the greatest factor. It's really easy to understand, if you are willing.

Jeff; being poor is hard for someone who loves great and beautiful courses as I do. I swear someday I am gonna get up to Northern Minnesota somehow. You clearly did some special work up there ..... thanks.

Doug

[Jim Thompson]

First things first...

So often the industry and observers try to lay out blanket statements about the game and the business and that just doesn't work.  This business is broken into numerous types of operations: public, semi-private, private, upscale resort, upscale private, muni, in a number of different population, economic and wealth settings.  I think every course, new, old or proposed needs to be considered on its own individual merits and to do otherwise is a disservice to everyone involved.

The recent rash of course closures is based on a number of factors, most of which boil down to competition, either competitive land values or customer base.  For many years golf was a great industry to be in if you were one of the few courses in town.  For years operations were getting significantly more for their product than they deserved and were willing to share it with their long list of vendors.  Just look at the prices of equipment, and supplies versus their agricultural counter parts.  It’s almost shameful.  

NOT EVERYONE GETS TO HAVE A MONOPOLY IN GOLF FOREVER! Along comes some competition that provides value for the buck and the pre-existing courses wonder where their customer went.  The fact of the matter is, if you are part of the course that was their first and you have such low levels of customer loyalty that you lose them to a new course, you probably weren’t minding your store.  

The closings and re-development of real estate based courses cannot be a shock to many as well.  Many of these courses were built on the premise of non functional long term business plans designed to get the developer maximum dollar for the real estate and leave the course side land owners with the choice of either buying the course from the operator or have their golf back yard sold out from under them as future residential development.  Sadly most of these models are sold to potential local developers based on the past thirty years of NGF data as well.  The result of this model is that the developer made double value on the initial real estate and market on the lots that went in the fairways.  It’s not a secret and I think folks are finally catching on.

Cheers!

JT

[SB]

Well put, Jim.  The economics of each market is different as well as each course's reason for being plowed under.  

I would say the vast majority of the courses that I have seen being plowed under are being sold because the value as residential development is double what it is as a golf course, regardless of economic cycle or golf market.  High land costs also contribute to fewer course openings, as developers can no longer pass the cost of 150 acres of land onto homeowners.  

[Joe Hancock]

In West Michigan, even golf courses on undevelopable land are in the crosshairs. There seems to be less interest in golf at the start-up level.

Joe

[John_Conley]

Welcome to Bush Economics 101!
...
Yep, it IS political, sorry.
...
Now people with advanced degrees are making 20K or less, and golf courses cannot get the traffic.

Doug:

I'm about as apolitical as one can be - I dislike the behavior of most politicians - so I'm not sure how to ask the question.

What were these people making before Bush was elected?

There is a lot of wealth in this country and it seems to be created no matter who is in office.  Take a look at who has money and the recipe hasn't changed.  Business owners, doctors, lawyers, salespeople, developers.

I don't know what I am.  I'm not rich and I'm not poor, but you could find people to say I'm everything in between.  The funny thing is how I feel I have less and less the more I earn.  It isn't that the cost of things has increased much; it's that what I consider "standard" is so much more than what used to constitute normal.  Houses are WAY bigger.  Cars are much nicer.  We eat out more.

I'm not sure this has anything to do with politics.

[TEPaul]

This kind of thing doesn't surprise me and frankly it doesn't even bother me in a general sense. This is just the good old supply/demand equation at work and as much as someone might try to counteract it no one ever will. It's economic Darwinianism.

But some clubs and courses worry me today or did in the past.

Did yoiu know that Shinnecock, of all places, came within a whisker of selling the club to developers back in the 1950s?

Deepdale was threatened recently by their township until the Governor stepped in a put a stop to that nonsense.

The one that really concerns me is Atlantic City Country Club---a truly historical old American club and course if ever there was one. I'm very worried for its future.