Has the recession really arrived

[JohnV]

Just a couple of interesting items.

Two weeks ago, I went up to Bandon with 3 friends.  On Sunday we played Bandon Dunes at 8:50 AM.  The tee time in front of us was open.
On Monday, we played Pacific Dunes at 8:50 and the tee time behind us was open.  The other 3 days we played there were lots of twosomes and threesomes around the course and other times.  I was surprised to see so many slots unfilled in the prime early August timeframe.

Now this week, Pasatiempo is running a special for Santa Cruz county residents of $80 Monday through Thursday (24-hour advance bookings.)  They had a $75 deal over the winter, but it seemed very unusual that they would have a deal in August.

Pajaro Valley, where I play frequently hasn't been real busy the last few times I've been there either.

Has the recession finally hit the good places to play?

[Jim_Kennedy]

JohnV,
Rounds are down a little over 3% nationally for the first five months of this year than the same period in '01.
    

[RJ_Daley]

In our area, it isn't the economy necessarily that has the number of rounds significantly down, it was an ugly slow starting spring that they will not be able to catch up with even under normal conditions the rest of the year.  

I wonder if the municipal and low end daily fee courses have some advantage in a bad economy in that they are priced low enough where they are still affordable to many, and those that normally in a good year would play a couple of high end CCFADs just wind up going to affordably priced courses to get their golf habit taken care of? :-/

It seems to me that the low maintenance budget, minimalist ammenities that can at least sell cold beer has the best chance of hanging in there over a long dry spell in weather and $$$.

[Craig_Rokke]

Around Philadelphia, there must be close to twice as many public course choices as there were 15 or 20 years ago. I'm
pretty sure that the number of golfers has not kept pace over that time frame.

[Matt_Ward]

Just keep in mind this: the full shake-out one sees with Wall Street and the like will come to golf, but not right now as courses in the pipe line from 5 or 6 years ago are now either just opening or will open next year. The question becomes how do so many courses handle the flat nature of total golfers? Particularly in areas of the country that depend on the visiting golfer (i.e. Myrtle Beach to name just one location?).

In addition, golf development will not be anywhere near the robust pace one saw in the 90's. The upscale model course that seemed so bullet-proof may not be as invincible as many previously thought.

Clearly, we are moving towards a more leaner time and that may result in more price opportunities for value oriented golfers. At the same time the elite places are not about to offer discounted fees for fear that potential customers will become addicted to them and not pay the full tariff. The coming shakeout is going to have signficant shock waves for many. We shall soooooon see ...

[John_Conley]

Matt:

In Orlando this summer, we actually would be much better off if 20% of our courses closed.  Rates are very low, but course conditions are bad at many courses and I can't blame them because it doesn't pay to spend money on maintenance.  As one of my friends pointed out last year, don't just watch the rate.  Also watch to see if they are getting play at the reduced price.  Here they aren't.  There just isn't enough demand.

I predicted much of this three or four years ago when I didn't see anything opening that was trying to attract new golfers.  Everyone wanted to get play from the guy next door.  A reasonable business model, but only until the next guy comes and tries to take business from you!

People watch Tiger Woods on TV and assume the game is healthy because of HIS popularity.  But sponsorship for professional events is lackluster and television often pits three or four events against each other simultaneously.  When it is the PGA Tour vs. the LPGA vs. the Hogan/Nike/Buy.com/Nationwide vs. Europe or amateur, who do you think will win?

I think NASCAR has been posting better ratings than some Tour events this year.  Their followers are far more brand loyal than a golf viewer when it come to sponsors.  People actually buy Tide and shop at Winn Dixie because of their support of Motorsports, while ads for the Rendezvous simply let people know the car is available and show its features.  Nobody is buying BECAUSE of the association with Woods.

For course owners it will get worse before it gets better.  I actually think equipment companies have a chance for some improvement in the near future now that the permissable manufacturing standards are known.

As you said, we shall see.

[TEPaul]

It certainly has!

[David Tepper]

Anyone interested in the state of the golf course business should punch up 3-year stockcharts of National Golf Properties (symbol TEE) and Golf Trust of America (symbol GTA). As they say, "a picture is worth a thousand words"!

[Matt_Ward]

John C:

There are plenty of facilities in the NY metro area that have developed multi-tiered pricing in order ot keep the tee sheets as full as possible. In some cases it works but there are far too many courses that seem to believe they are the second coming of Pebble Beach and refuse to acknowledge some basic economic realities.

The problem is that many "new" upscale course believe they will be the great Godsend to golf and start out with a pricing model that makes it very difficult for anyone to play with the exception of those who are either "passing through" or the "one-round" types who make their annual visit by rarely play more than once.

I cannot imagine how facilities can charge $100+ and fail to deliver optimum conditions and a layout that has some real gusto in my "neck of the woods." The gravy train is indeed over and with the general economy failign to produce any real signs of robust activity it will likely mean even more of an issue in '03 and quite likely '04 as well.

Golf is clearly going to have some major contractions because the amount of players is not growing and it seems likely you will see a cannablization in the overall scheme of things. This is already taking place with the equipment companies as many of the mid and small sized companies have either been bought by larger ones or simply scaled way back on their total product package they offer consumers.

Although new course development appears to be tapering off the possibility for course renovation, restoration, modernization may be something of value since so many courses from years ago clearly need some attention to their respective designs.

Unless facilities develop creative branding and marketing programs the day of "build it and they shall come" is more a slogan from the past than a trend for the future.

[A_Clay_Man]

Saturation?

Changes in value sentiments?

Boycott against the benign designs of the modern era?

Take your pick as to why. Just know that any extended period of growth has to be followed by some contraction.

I'd say the growth of GC's over the last twenty yrs. has been impressive. It will take time to regroup but the result should be an emphasis on minimalist, or lower costs to maintain, designs.

[Mike_Cirba]

During my trip to Florida this past week, I saw evidence of what I think is going to be a trend if economic times stay tight.

On the same day, back to back, I played Tom Fazio's high-end, upscale Emerald Dunes (ranked in Golf Magazine's "Top 100 You Can Play before slipping off the list this year), and Dick Wilson's municipal West Palm Beach Country Club.  

Both courses were quite good from a challenge standpoint, with the Fazio course having all of the bells and whistles thrown visually into modern design.  It incorporated a man-made, 50 foot high "super dune" with running waterfalls in multiple directions, that serves as backdrop for a couple of greens, as well as a hyper-elevated tee for both the 11th and climactic 18th holes.  Carts were mandatory, and were equipped with a GPS system that allowed everything from food orders to hole tips.  The course was watered, green, and soft, but generally immaculate given the summer season.  There was little to complain about, save some long cart rides from green to tee, a LOT of holes incorporating water hazards, but overall, there was some good strategy and challenge mixed in with the lovely landscaping and super shaping.  It played about 7,050 yards from the tips.

The West Palm Beach course is much more basic fare, although the holes are well-designed, solid, playable, and challenging, as well.  Breezes from the nearby ocean really came into play as Wilson elevated almost all his greensites, which are well-protected by bunkers.  It is most definitely a "second-shot" course, as ample room is provided off most tees, with a smattering of well-placed fairway bunkers.  The turf was much tighter, permitting some roll in the fairways, although the greens mostly required aerial approaches due to their elevation.  There were no water hazards in play, which might be unique for a Florida course, and trees were set well back on most holes.  Walking was permitted, and encouraged.  It played about 6,800 yards from the tips.

I played Emerald Dunes solo, and there were only a small handful of other souls on the property.  In fact, I didn't run into another group until I came upon a twosome at 12.  At West Palm Beach, I had to purchase a ticket, and wait to be paired with a threesome.  The course was literally humming with activity all day, although pace of play was surprisingly brisk once I got out there.  

Later in the week, I coupled another big CCFAD (Polo Trace) with a West Palm Beach afternoon.  Virtually the same story.  

What's the difference?  Why Pricing, of course.

Prices for each are below;

Emerald Dunes - (cart required) $130 (in season) to $70 (out of season)

Polo Trace - (cart required) $120-130 (in season) to $50-70 (out of season)

West Palm Beach - (walking permitted) $26-36 (weekends in season after/before 1pm) $16-26 (weekdays in season after/before 1pm) $23-27 (weekends off season after/before 1pm) to 21 to walk anyday after 1, $12 if you're a resident.

Despite all of the highly-polished non-golfing amenities at the first two courses, I'm not sure a lengthy recession won't have more and more players finding the West Palm Beach's of the world and leaving the high-end CCFAD's in droves.

[Evan Fleisher]

Mike,

Nice review and description of WPBCC.  I too played there this past Spring and experienced just about the same thing.  Why spend $100+ and have to ride a cart, when a course like West Palm offers a challening and fun layout, where walking is permitted for a fraction of the cost?

[W.H. Cosgrove]

I understand that there is problem.  I belong to a mid level club in the NW where we have steadily improved the facility, have initiation and dues at a level somewhat lower than our neighbors, have hosted major local tournaments to rave reviews and continue to be unable to attract members in numbers sufficient to maintain needed membership numbers.

After having tried a number of schemes to fill our membership with some limited success, it appears as though we have reached a point where we are 'deer in the headlights'. The club seems out of good ideas and is drifting.  How does the process work?  First we react, then we mourn and then we blame.  Something like that.  I fear the last stage.

Who has some good positive ideas as to how to end the spiral not only at my club but across the nation?

[Rick Shefchik]

I co-authored a long analysis of publicly-owned golf courses in the Twin Cities metro area for my paper earlier this summer, and the results were exactly as this thread has portrayed: not enough golfers, too many golf course, revenues declining.

In our area, the CCFAD's are the ones taking the hardest hits; many are discounting and running coupons. But the weather around here (same as R.J.'s) has been a big factor, too. As one manager of muni (who doesn't run coupons) told us, "It's not as though the tee sheet is empty on a nice sunny day."

Some upper-end courses have already been sold at a loss here, and a few others will probably follow after this year. And yet four or five more courses are scheduled to open next year, and about the same number the following year.

The long term answer is simple, in my mind: The number of players has to grow, and the only way to do that is to build (or retrofit) more courses for kids, where they can learn the game and afford the greensfees. If a city or county is thinking of building a course, it should be a 9-holer with learning facilities and modest greens fees that makes beginners feel welcome. There are more than enough options already for the player who knows how to play.

[John_Conley]

Rick:

Bingo!  Yet no one has been too excited to built that type of course.  Macro and Micro-economic forces aren't aligned, causing many to do things that are bad for the overall market.

Cos:

Sometimes economic forces are too strong to combat.  If your area is like Orlando, I suspect it will be hard to attract enough people to commit to monthly dues.  It is rumored that Rio Pinar and Tuscawilla will "open their doors" in a final admission that it is too hard to survive as a private club.  That would leave the area with Lake Nona, Isleworth, Interlachen, Heathrow, the CC of Orlando, and Windermere as the only truly private clubs I can think of.

About 50 courses have opened in the last decade as "semi-private" with the intention to close the membership.  They may have been able to do it if the number were more like 5.

I suspect you've already done what you can do.  One bit of financial advice for your club is to ask an outsider to come in and consult on the final decision of whether or not to remain private since all involved are probably a little too close to the situation to remain totally objective.

Good luck.

[Matt_Ward]

Mike Cirba outlined it perfectly. It's time for consumers (those golfers that are still active) to make better decisions. The CCFAD's had better implement a much more comprehensive branding and marketing program. I've seen some clubs in my area offer 2-for-1 special if you tee off on certain days before a particular time -- usually it's before 8:00 AM.

Ditto withg flexible pricing later in the day. There is still a CCFAD in central New Jersey that charges over a $100 and STILL refuses to have twilight rates. HELLO!

Clubs should also try to piggy-back on what many NHL and NBA teams offer -- multiple plays without being tied to the club for the entire season. You can buy packages to see a series of games for NBA and NHL teams --so why not golf rounds that offer some sort of meaningful promotional rate? For example if you buy 5 rounds in advance can you get an automatic weekend time for at least 2 of those rounds? I don't know why many private clubs don't provide even limited access on their slowest days to generate additional revenue. No doubt the PV's and Baltusrol's will never do this but plenty throughout the country that are not rigidly private can implement without much problem or inconvenience for regular members.

There's little doubt the elite CCFAD's will face less of the impact of the recession than others, however, locales dependent upon the visiting vacation golfer had best get their creative ideas in place because the 19th hole at many of them will be a ghost town.

[Mike_Cirba]

Matt;

I don't think the "elite CCFAD's" are immune, at all.  In fact, look at the problems that have occurred at both Stonehouse and Royal New Kent, each of which have had Golf Digest "Best New Course" honors bestowed upon them.

[Dan King]

I've never been much of a prognosticator -- one look at my stock portfolio will convince anyone of that -- but I keep plugging along, and as they say, even a blind squirrel finds an acorn now and then.  

I've been saying that cart ball is a passing fad. When the economy was good you had this large number of golfers, new to the game, who cared very little about the game's traditions. To them, golf was only a social event, a way to spend five to six hours with their buddies or business associates. It was the Urban Cowboy craze of the seventies.

But the economy has tanked, and the new golfers aren't there any more. They are out looking for a newer, cheaper fad (Sitting around Starbuck's, back to the bars, who knows?)

Cartball courses are going to be a fading memory. Courses are either going to have to redesign to convert cartball into golf courses, or open them up for sheep to graze. The whole concept of using bizarre terrain to build golf courses is coming to an end.

I played a course yesterday in San Jose. It's a new course called Los Lagos that opened last spring. It's a good par-68 course, that was turned into a very bizarre routing due to environmental issues. The routing was done with no consideration for walkers. There is a long walk across a bridge, and you end up making this hike four times. A small change to the routing and you only have to make this hike twice. A few paths here and there and the course could be much more enjoyable by foot.

But they didn't consider that because they wanted to rent carts. Despite the bizarre routing yesterday afternoon it looked like about half the people playing where walking. At $29 to walk and $42 to ride, that had a huge influence on the choice. Still on a difficult routing to walk there were still many more people hoofin' it than there were only a few months ago.

Dan King
dking@danking.org

"Oh golf is for smellin' heather and cut grass and walkin fast across the countryside and feelin' the wind and watchin' the sun go down and seein' yer friends hit good shots and hittin' some yerself. It's love and feelin' the splendor o' the good world."
 --Agatha McNaughton (Golf in the Kingdom)

[Matt_Ward]

Mike C:

The examples you provided have issues for a variety of reasons that go beyond the "recession" this thread talks about. Stonehouse and Royal New Kent have difficulty in being located in a market that has never really embraced "upscale golf" and both facilities made the mistake, at least initially, of thinking the "build it and they shall come" philosophy would keep a steady stream of golfers coming.

The town of Toano where I believe Royal New Kent is located is not exactly "hotbed" city for golf. It's isolated and somewhat away from the hustle and bustle of Williamsburg.

I really like Royal New Kent and I credit the new ownership team in doing the type of branding and marketing that's necessary to stay financially afloat. Strantz did a better job, in my opinion, with RNK than Stonehouse, and I believe it has the necessary muscle to challenge all types of players.

Mike, the CCFAD situation doesn't lend itself to one sort of answer on what they can do. Much of the solution will be based upon the specific location of the facility and how much an overall "golf presence" exists in that area as well as the disposable income levels within close proximity of that respective layout.

A good example of a CCFAD that has held its pricing structure in my "neck of the woods" is Ballyowen in Hamburg, NJ. The course is easily able to attract NYC based golfers who make the trek to get away from the big city to enjoy the countryside views the course provides. If Ballyowen were not immediately near the NYC market -- such as if the course were located in the nearby Poconos -- then it's pricing structure would have faced clearly different impediments in encouraging repeat play with such a high green free.

No doubt -- if things truly do get worse -- even the best located CCFAD's will have to implement different strategies to keep their botton line in mind. But, I've heard this a number of times from the very high CCFAD's -- they won't go down the line of lowering prices too much because it will simply encourage even more bargain hunting when things turn around. Just like Marlboro cigarettes which don't "bump down" prices to lower the value of the brand -- the same strategy will be followed by the very high on the CCFAD totem pole.

How successful they will be depends upon the depth of where the economy goes.

[Tim Weiman]

Matt Ward:

A few years ago Dusty Murdock told me Royal New Kent would never make it financially. While I don't always share his views on architectural matters, Dusty certainly knows his way around the economics of golf.  It's an IMG thing, I suppose.

Actually, Dusty based his feelings around the course design.  He felt it was a classic example of a golf architect losing sight of what the game was really like for the average golfer.  He other words, Strantz committed the sin of designing for better golfers rather than ALL golfers.  In short, Dusty felt the course would suffer from many people checking it out, but never wanting to return because it was just too hard.

Obviously, the location is less than ideal.  But, the DC area always struck me as starved for good public access golf.  Did Strantz just get the design wrong?  Did he go overboard catering to better players?

[Jeff_McDowell]

Clearly golf courses are struggling. But I think the reasons are more complicated than bad weather, over built, no growth, etc. I'm not a savy enough business guy to understand this stuff, but let me give you two examples of why I think it's more complicated.

A recent report by Golf 20/20 shows that rounds were down by 5.7 percent in the upper midwest. But when the NGF asked owners why rounds were down 2% said competition, 2% said overbuilt, 80% said weather, and 16% said the economy. So this study makes me stractch my head, because most owners say we're saturated.

The other example is a 9-hole addition that opened two years ago. This course is twenty minutes from the Brainerd area, which the most over-built golf area in MN. Everyone said the course was nuts to add 9 holes, and that no golfers would come to the course. They were wrong. The first year the course was opened it had its most profitable year.

The theory I'm leaning towards is that the golf market is extremely complex, and that no matter how overbuilt an area appears, the right design at the right price can be viable.

[David Kelly]

I was in Kohler a couple of weeks ago and both the Meadows Valley and Irish courses had many tee times available to anyone who wanted to walk on.  Even Whistling Straits had a bunch of open tee times, in fact we were able to move our 2:00 tee time to 3:30 and save about half the cost by being the first group out for the late rate.

[Scott_Burroughs]

Matt,

Stonehouse is in Toano, RNK is in Providence Forge.

Tim,

RNK and Stonehouse are 2 hours from Washington D.C., not in that market.  They are between Richmond and Williamsburg.

[John_Conley]

The other example is a 9-hole addition that opened two years ago. This course is twenty minutes from the Brainerd area, which the most over-built golf area in MN. Everyone said the course was nuts to add 9 holes, and that no golfers would come to the course. They were wrong. The first year the course was opened it had its most profitable year.

Jeff:  

I have no doubt that happened, but using an outlier to "prove" a point is faulty logic in my book.  That operator figured their new 9 would draw play from other places.  And for that year he was right.  But what if you and I build the next 18 in that already oversupplied area?  (I can see the glossy brochure now!  A Jeff McDowell classic!  Carved through the trees of the Northwoods, the views will evoke the spirit of Paul Bunyan and the smells will remind you of deer piss!  Be the first to accept the challenge of the course with the best name of any new course in 2005*, Mt. Majestic Mosquito National Links! * -Linksgolftravelworldweek Magazine )

Overall, the golf market will be worse off for every operator - collectively.  One man's gain is another's loss.  If you had no growth in rounds played and no increase in courses available it would be a "zero-sum game".  We KNOW we don't have a meaningful increase in participation and we KNOW there are still more courses coming on line.

Your assumption that this example near Brainerd is a lasting viable business is, in my opinion, wrong.  Many of the courses we talked about enjoyed a good first year because of "newness" or "trial".  To sustain the health will depend on continued play, which many courses in Orlando, Myrtle Beach, and some of the other areas mentioned simply aren't getting.

"the right design at the right price can be viable"?  You are right about that.  The problem is that more of the growth has been targeting the "Country Club for a Day" instead of the more introductory level course.  The shakeout we are seeing is enough proof to me.

[Paul Richards]

Back to the topic, I spoke with a friend who owns an affordable golf course ($45 with cart).  He says their play is down roughly 9% on the year.  He also told me that many of the upper-end courses in the area are down even more, from 15-20%.

I'd say the recession is hitting the golf industry right now.