[Tim Liddy]

Interesting article in WSJ
http://online.wsj.com/article/SB122730715276749201.html

[Steve_ Shaffer]

I doubt that a new WPA would build golf courses considering the need for infrastructure repair and modernization of our nation's bridges.

[Jeff_Brauer]

I figure golf has been going strong since the 1400's or so. It has its ups and downs but it will continue to thrive.  Its intersting that the downturn is considered much less for golf.  It does seem like the NGF complains about play being flat, not growing.  But, other than weather related issues, play hasn't really declined a lot either.

That said, there can be a lot of individual pain for facilities.  Of all the closings, I would tend to guess that most are mom and pop operations we never discuss here, not the high end.  I gather the biggest depression era trend we will copy, though, is country clubs becoming public courses, and most of those being bought by cities themselves, not private owners trying to convert them.

[Tom_Doak]

Jeff:

Do you have any examples of Mom and Pop closing up shop?

I doubt that's the case.  Mom and Pop have probably owned their course for a long time and don't have any debt on it, so as long as they can maintain it for less than they take in, they're okay.  They might always close if some real estate developer comes in and makes them an offer too good to pass up, but that's not likely to happen in 2009.

The interesting thing about this article is that it illustrates the difference between ACTIVITY and BUSINESS.  Golf participation may not go down much, but the number of new golf course starts has already fallen off a cliff.  By the same token, TV watching isn't going down much, but the flat-screen TV business isn't looking that great this year.

[Mike_Young]

Two years ago a supt from a large exclusive 5 course resort, past ANGC asst etc.. mentioned that "you don't see many supts after the age of 50 anymore"......he purchased one of my courses near Athens that was a small public course in the woods....he cleaned it up, runs the shop, cooks hamburgers and he is killing it....mainly because of his enthusiasm and his absorption of players that are dropping from other more expensve places to play.....and he will do more and more as this thing progresses.....But if he had bought a 5 mill deal....no way....

[Adrian_Stiff]

Low end golf courses will still do okay, its the higher end ones that will struggle. People will still play golf but they will play less frequently and will want to play cheaper.
The higher end ones will have to adjust their price, possibly coupled with lowering their budget and that can mean a drop in standards.
The need for the high end corporatey all singin n dancin packages will shrink big time as companies simply conserve cash rather than splash it to entertainment funds.
Maybe there could be a return to Artisan membership as there was after the world war.
Golf will by be hit quite hard by the recession and there will be casualtys.

[Jeff_Brauer]

Tom,

One golf feasibility consultant I work with told me that, but I guess I can't really back it up with specifics.  I am thinking mostly of rural golf courses here, not individually owned courses near a big city which could do fine, without sending off a big debt payment to the bank or 20% off the top to a management company. They could obviously cut prices and survive.

Thinking back to my Chicago days, public courses like Chevy Chase and Mt. Prospect were originally pretty nice CC's.  Since fewer country clubs were built in the last decade compared to the 20's, my guess is that a lot of high end publics will also be bought by cities and converted to mid priced publics as well.

In Texas, the city of Missouri City has purchased a failing 36 hole country club.  Some DFW suburbs are looking at buying some private and high end publics, like Los Rios (city of plano) and Chase Oaks (city of Allen, even though its actully in Plano)  

Of course, when its "every course for itself" it may be hard to distinguish any overall trends of who does well and who doesn't.

[Steve Lang]

  10's of Millions of golfers, 70 $ billion of market

take away fractions, there's still alot out there..

for the folks that work 8-5, a golf get-away after work and/or on weekends has certainly been earned and will be taken by golf nuts..  especially when means and freedom are available, one can play on the computer when its dark..

given the right crowd, it doesn't matter what the venue is.. 

some nice deals available on those close-out sales!





 

[Mike_Young]

Jeff,
I am helping a bank right now with a bankruptcy of a course where 5.6 mill is owed and it will go for around $200,000 so that a person can clean it up and increase the potential sale value of the land around said course where the bank has another note for considerable more......I bet we see some of these thing sgiven away with the stip that they be brought up to par by the new owners.....Mike

[Bill_McBride]

Mike Young always says that he thinks mom and pop operations are the best model, but I guess that's if the price points are low and the maintenance budgets are the same.  No PGA pro, no CMA manager.

I'm worried that our club is in trouble with its $7M debt.  The budget is close to unsustainable, not good in these troubled times.  It seemed like such a good idea after Hurricane Ivan got us an insurance settlement and we got a new course, clubhouse and now a new tennis center.  Do people still play tennis?

Luckily I've been off the board for a couple of years.  Those guys must be burning the midnight oil.

*** Looks like my post crossed with Mike's.  His opinion hasn't changed.

[Mike_Young]

Bill,
7 million debt...
We are fighting our board right now....just passed a 6 mill redo where 590 members voted.....over 320 of those were proxies and it passed by 16 votes which means actually 9 votes would have changed it.....and they think that by borrowing the money now we will be that much ahead when we come out of this thing....just amazing what a good manager can talk a board into if he has been trained.....of course it always helps to have chosen a board you can manipulate too      we have a problem....

[Bill_McBride]

Bill,
7 million debt...
We are fighting our board right now....just passed a 6 mill redo where 590 members voted.....over 320 of those were proxies and it passed by 16 votes which means actually 9 votes would have changed it.....and they think that by borrowing the money now we will be that much ahead when we come out of this thing....just amazing what a good manager can talk a board into if he has been trained.....of course it always helps to have chosen a board you can manipulate too      we have a problem....

We definitely have a problem.  The scheme was the rapid growth made possible by a really terrific new course and clubhouse.  Who knew?  $4M insurance settlement, $7M debt - what could go wrong?

If the City of Pensacola would put just a little money into its 1925 "Wild Bill" Melhorn-designed Osceola GC, it might become a pretty attractive alternative!

[Jeff_Brauer]

Jeff,
I am helping a bank right now with a bankruptcy of a course where 5.6 mill is owed and it will go for around $200,000 so that a person can clean it up and increase the potential sale value of the land around said course where the bank has another note for considerable more......I bet we see some of these thing sgiven away with the stip that they be brought up to par by the new owners.....Mike

Mike,

That is exactly the model I think will go forward - a newer and nicer course will be bought for almost nothing, taking the debt off the books.  That provides the new owner with generally a more attractive competitive course and no debt expense.  It gets to the cost basis of the mom and pop with a newer course.

[Mike_Young]

Jeff,
Let's hope so....they got to have some of us to clean them up.....using my new pseudominimalsupertraditonalperimeterweighted design philosophy.....of course if the client doesn't want that I can build them 18 flags with really nice USDOT spec cart paths...just sign the dotted line

[Adam Clayman]

The ironies within the subtext is the "industry" apparently would rather cater to the 17 million golfers who are outside of the 12 million core golfers. Is that the lesson of this downturn? Take care of your real customer. No more egomaniacal 30 million dollar budgets for courses that are now categorized as strictly commercial.

Mike Young points out the opportunity for those who know how to grow the grass. Making a good burger and serving a cold beer helps too, but, takes up more time and in all honesty, pays for the rest of it. I  know I see it every day, too. Corey and his dad take care of things on the cost side and work everyday, all day. Winters are filled with X-mas parties and other functions in the small clubhouse. They are actually becoming  fairly well known for providing very good food at reasonable prices.

There will always be exceptions. Another small time operator, in a very small town between here and North Platte, at course nobody has ever heard of (even 95% of the locals have no idea he's there) is auctioning off everything. His was a lease deal with the local power plant on yet another Marty Johnson design.
You better believe we will be there to pick up anything and everything useable we can, at prices a fraction of their replacement costs.

[George Pazin]

You'd have to be pretty foolish to believe any business or industry is recession proof, but the writer of the article doesn't say golf is, he says that it appears to weather downturns better than most (seems to me food and energy would be even better). Any time you find yourself saying, "it's down, but it's not that bad", that's a pretty big warning sign.

The notion that the depression brought golf to the masses is an interesting one, one I've never heard before. Seems more theoretical than anything else to me, but I haven't really thought it through yet.

[Jim Nugent]

I'd like to see some actual numbers out of the Great Depression.  # rounds played, # of golfers, # of new courses, etc.  Most of key paragraph,that the article is built around, is just generalities:

"This was the period during which golf became acceptable to a much wider range of people," he says. Many of those defunct private clubs reopened as public ones. The Works Progress Administration built more than 100 new golf courses nationwide, opening up the game to thousands. Women, forced by circumstances to work outside the home, took up the game in unprecedented numbers. And the professional tour, though it struggled financially, began to establish itself in the public imagination as charismatic pros like Walter Hagen and Byron Nelson stole the limelight from the blue-blood amateurs, like Mr. Jones, who had dominated golf until then. When golf blossomed again after World War II, it was a different game."

Unprecedented numbers of women, e.g., does not mean much if the number to start with was real small.  Opening the game to thousands is trivial, when many millions already play.  And of course the question he doesn't ask or address is, what would have happened had there been no depression at all?

One way golf was not recession proof back then was in golf course architecture.  As I understand it, virtually no great new courses were designed during the depression.  And very few for decades after.  Instead we got the dark ages of golf course architecture. 

I wonder if it was as benign as he suggests? 

[Chris Cupit]

NGF numbers can be manipulated to say anything and I know of few "hands on" operators who put much stock in what NGF says.  I am sure there are some really smart folks at NGF but.....

Here are two examples:  One report from 2007 has the NGF revising its own numbers upward by 20% from 12.5 Million to 15 million!  If you stick with there original 12.5 million core golfer number you have a 7% drop in core golfers compared to 2003--not a time when golf was booming and a pretty significant drop when adjusted for overall population gains!  Or, take the new number (15M) and core golfers are up from 2003 by 12%!  Which is it???

Also, how many operators would consider a "core golfer" someone who averages less than one round of golf a month?  More of my thoughts FWIW to come

NUMBER OF CORE GOLFERS HIGHER THAN PREVIOUSLY REPORTED
ACCORDING TO NEW NGF GOLF RESEARCH

[MAY 9, 2007]- - According to a new national study of golf participation in the U.S., the number of Core golfers (adults age 18+ who play eight or more rounds a year) is higher than previously reported. The Core golfer number is estimated to be 15.0 million as compared to a figure of 12.5 million published by NGF a year ago.

The study also found that the number of junior golfers increased between 2005 and 2006, from 4.4 million to 4.8 million kids ages 6 to 17. The overall number of golfers for 2006, counting anyone age 6 and above who played at least one round of golf during the year, is estimated at 28.7 million, down 2.0% from the prior year.

CORE GOLFER NUMBER DIPS IN 2004

[June 6, 2005] -- Based on NGF’s recent annual sounding of golf participation, the total number of adult golfers dropped 3.9 percent, from 28.4 million in 2003 to 27.3 million in 2004. The number of Core golfers – those playing at least eight annual rounds – was 12.8 million in 2004. That’s 4.7% lower than the 13.4 million recorded in 2003.


Trend in Adult Golfers
Other than 1997 to 2000 (Tiger effect?), the number of Core golfers, those playing eight or more rounds per year, has been relatively stable over the past 15 years.
 


"The number of Core golfers has been essentially flat for the past four years," says NGF president Joe Beditz. "Given the statistical margin of error around these numbers, we don’t put too much emphasis on one-year variations in participation. What we can say is that the number of Core golfers is more than it was 10 years ago, but less than five years ago."

NGF focuses on Core golfers because, while they represent 47 percent of total golfers, they account for 91 percent of rounds played and 87 percent of golf-related spending. The number of junior golfers ages 12-17 increased from 2.5 million in 2003 to 2.9 million in 2004. And the number of total golfers ages 12 and above dropped from 30.9 to 30.2 million.

[Chris Cupit]

Mo thoughts:

I am an owner/operator with my mother in the Atlanta market.  Affordable private family golf that has been in business since 1973 (my father started the club).  Average Atlanta ID is $20,000 although few are getting anywhere close to their advertised IDs right now, and average monthly commitment (dues plus junk fees/minimums/assessments) is $450 plus.

I have always been more affordable with a solid course, nice but not fancy clubhouse and fewer bells and whistles than most.  My ID is $7500 and  my monthlies are the least expensive around for private at $331 for a full family membership.

Lower end clubs are hanging in their although all of us are seeing a significant slowdown.  I am getting some guys from "fancier" clubs "trading down" to me but the overall impact is very real and negative. 

At the very high end (ID of $75k and dues of $700) those clubs are still doing well and have plenty in the cap reserve for a rainy day.  The clubs getting absolutely killed are the "upper-middles".  Those clubs (IDs around 25k and monthlies of $500) can not command their ID fees and can only keep increasing dues or assessments and that just begins the death spiral that we all understand.

I have always said that a problem somewhat unique to the golf industry is this:  tough economic times should help weed out the inefficient or poor operator.  However, unlike other businesses that fail and close up, in golf the failure never goes away--it is very rare that a club disappears and is replaced by something else--eventually and at the right debt structure the club succeeds. 

So instead of a failure resulting in a closed competitor and a more proper "inventory" of product, you simply have a cheaper, less debt ridden club that started out at one level and was brought down to another.  Now the fundamental supply and demand problem still isn't resolved.  Surrounding homeowners are not happy as the "new" lower end club has not made them feel secure in what for most people is their most significant investment--their homes.  Competing clubs have not only not seen a reduction in inventory but the affordable option now is flooded with more competition.

The result is that instead of a mix of options along price points you end up with a real glut at the bottom and top of each markets and that is a shame for the golf consumer.  Great prices for a while but, eventually, fewer choices.

[Ken Moum]

Jeff,
I am helping a bank right now with a bankruptcy of a course where 5.6 mill is owed and it will go for around $200,000 so that a person can clean it up and increase the potential sale value of the land around said course where the bank has another note for considerable more......I bet we see some of these thing sgiven away with the stip that they be brought up to par by the new owners.....Mike

Mike,

That is exactly the model I think will go forward - a newer and nicer course will be bought for almost nothing, taking the debt off the books.  That provides the new owner with generally a more attractive competitive course and no debt expense.  It gets to the cost basis of the mom and pop with a newer course.

Where I play, we owe ~$1 million on a facility we claim is worth about 1.5. But the reality is that it's unlikely to be worth that. The loan (for a new clubhouse!!) was made in 1988 and has been refinanced repeatedly so the principal is still almost what it started at.

In 2005, our board pushed through a new class of membership that paid about half as much as Stock dues, and our stock members are down to about 50.

So despite the fact that we have more members than before, our cash flow is so bad we have been offered one free month for prepaying 2009 dues or food minimum.

I suspect it's not going to work and some time in the next year or two we'll default on the loan. At that point, I hope something like the scenario Mike mentioned is possible.

In 2005 I tried to promote organizing a member group that would buy out the bank loan and run it like a non-equity club. With no debt service I think you could have run it without losing money.

But the members who could have pulled that off are gone.

I hate to see my beloved old Donald Ross in such dire straits, but we certainly aren't alone.

Ken

[Jim_Kennedy]

Something the CSGA sent to member clubs about the state of the game:

http://www.csgalinks.org/2009%20The%20State%20of%20the%20Game.pdf

....and some ideas for growing the game, etc., on their blog:

http://csgalinks.blogspot.com/

http://www.csgalinks.org/Club%20Issues/Private_Clubs.htm

[Don_Mahaffey]

Where I play, we owe ~$1 million on a facility we claim is worth about 1.5. But the reality is that it's unlikely to be worth that. The loan (for a new clubhouse!!) was made in 1988 and has been refinanced repeatedly so the principal is still almost what it started at.

In 2005, our board pushed through a new class of membership that paid about half as much as Stock dues, and our stock members are down to about 50.

So despite the fact that we have more members than before, our cash flow is so bad we have been offered one free month for prepaying 2009 dues or food minimum.

I suspect it's not going to work and some time in the next year or two we'll default on the loan. At that point, I hope something like the scenario Mike mentioned is possible.

In 2005 I tried to promote organizing a member group that would buy out the bank loan and run it like a non-equity club. With no debt service I think you could have run it without losing money.

But the members who could have pulled that off are gone.

I hate to see my beloved old Donald Ross in such dire straits, but we certainly aren't alone.

Ken
[/quote]

 
Ken,
Same story all over the country, courses upside down due to debt because they were unwilling to do the things to operate within their means. Some courses are doomed because of the market they're in, but I believe most could make it if they were honest with everyone and simply operated with the $$$ they generate. I know that sounds simple, but maybe they have to survive with 6 groundsmen instead of 12. Maybe you have to quit trying to serve breakfast and mid week diners in the clubhouse. Buy used equipment for cash instead of constantly incurring debt by leasing the latest, greatest wonder equipment. And then actually take care of it as it will last a whole lot longer than the reps tell you. Find employees for the pro shop and golf course who like golf, and golfers, and who you can train.

The other day I read a thread on Supt DG where some Supers were complaining about how hard it was to find mechanics and irrigation specialists. How about hiring a Super who can train people to do these jobs instead of spending $75K on a mechanic and $20/hr on an irrigation tech?
Do you really need to send your employees to every conference out there. If you want to sell me shirts, come to me; don't make me go spend 5K to go to the PGA show. Last week I got an e-mail from GCSAA telling me that the greatest benefit from attending the Golf Industry Show in New Orleans is the networking opportunities. Man, I hope my boss doesn't realize I’m asking for 5K to attend so I can go network...he thinks I'm going to learn something. The associations that support golf employees need to wise up or there will be a lot more resumes posted on their websites.

[George Pazin]

I have always said that a problem somewhat unique to the golf industry is this:  tough economic times should help weed out the inefficient or poor operator.  However, unlike other businesses that fail and close up, in golf the failure never goes away--it is very rare that a club disappears and is replaced by something else--eventually and at the right debt structure the club succeeds.

This isn't unique to the golf industry. Any business that has underlying asset value will not simply vanish if it goes bankrupt, and there's arguably no better underlying asset value than real estate. That's one thing that often gets overlooked in all the bogus "Too big to fail" arguments - the businesses in question won't necessarily just shut their doors and fire all the employees. In many cases, there would be a bankruptcy process that would yield a superior business model going forward, just like the recapitalized golf courses remain your competitors.

Nobody ever said running a business was easy! Actually, that's not true, there's 537 elected folks in DC who think they know everything, including how to run every business (in spite of a general lack of experience in industry, and a proven track record of running the government rather poorly).

I should have said no one who has ever run a business would say it's easy. I always tell people they are more accurate than they realize when they say they'd like to own their own business - they want to own it, not run.

Which golf course do you own?

[Tom_Doak]

Don:

Thanks for a dose of common sense.

Not to pick on Mike but his example is a perfect microcosm of what's wrong with America.  If that golf course is refinanced for 10 cents on the dollar, the members will get a nice new course, and who has picked up the tab?  A failing bank -- we taxpayers have got a lot of those coming our way.

But who is really to blame?  It's not the bank -- it's the members of the old club [or maybe a developer, Mike didn't lay out the scenario] who borrowed for something stupid and now blame the bank for loaning them the money.

That's the whole financial crisis in a nutshell -- loan me some money so I can live beyond my means, and maybe I'll pay you back later if it works out.

[George Pazin]

Tom, ultimately it's the foolish voters putting up with such nonsense that are at fault.

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