A couple of points and a lot of rambling:
In regards to why the development boom occurred, which is ultimately the issue here, I have some insight into that since I was part of the problem. Up until the early 90's, building a golf course was generally a bad proposition. First, there were very few buyers of golf courses, and developers didn't want to get stuck owning a golf course. Second, in part due to the first problem, there was a rule of thumb that you could expect to get 70-80% of your money back when you sold - not exactly music to a developer's ears. Third, running a golf course wasn't terribly profitable because there wasn't a lot of sophistication in management. Pros ran the shop, chefs ran the F&B, and the rest just sort of ran itself. Last, with the exception of California and a few other places, there really wasn't a huge housing boom going on, so the premium you could get on your golf course frontage lots was less in dollar terms.
In the 90's, that all changed. First, the 90's housing boom increased the value of lots, and if you throw a 30-40% premium on the dollar value of a lot, that's a lot of real dollars, especially when a lot of lots were selling at a ferocious pace. Second, ClubCorp and American/National Golf became active, well capitalized buyers of golf courses, and later, everyone else jumped in - developers now had an exit strategy. Add in lenders that would finance golf courses (ORIX, Greyrock, Textron, et al) where none existed 5 years earlier, and you've got a massive change to the overall finances of getting a course built and sold. Third, golf courses became much more profitable, through a combination of better management (led in part by ClubCorp and American Golf), booming interest in golf (pre-Tiger), and a booming economy which particularly increased the amount of corporate business. There were courses that I knew where 25-30% of play was from corporate outings. For a while in the mid 90's, most courses sold for prices ABOVE the cost to construct. Add in the NGF prognostication about a course a day (which was actually issued in 1987) and developers had no reason NOT to build a golf course - the demand was coming. On an individual basis, it was a no brainer.
The problem was that the IMPACT all of the new supply, especially the high end daily fee courses, landed at once from 1999 - 2001. Each individual course may have had decent economics, but when you add them all together, it's a problem. I remember doing a deal on the Virginia side of DC in the late 90's which was absolutely booming at the time. You couldn't raise greens fees fast enough. A few courses opened, but it really didn't seem to have an impact. Then 6 new courses opened in the space of about 12 months. Epic disaster. Rounds plummeted. Then rates plummeted but rounds still didn't increase. Epic wipeout. But almost nobody saw it coming. Everyone thought the demand was endless, because it had been up until that point. But hindsight is 20/20.
Keep in mind that most developers during that period did fine. They sold and moved on to the next deal, understanding the current market economics. Even the ones who sold post 2001 did fine because their lot premiums exceeded any loss on sale. It's the guys who bought 1998 - 2002 (also 2004 - 2007, but that was for different reasons) who got their clocks cleaned. But that's how the market works.
[/size]Also keep in mind that golf courses are a very local business, each with different supply/demand characteristics. You add ten courses to a big market like New York and it has absolutely no impact. Add just one in a smaller market like Atlantic City and it's a game changer. Also making broad generalizations about the impact of large clubhouses, golfnow, or membership structures is extremely narrow sighted.
[/size]One fact: In my database, I have a list of 4300 courses that opened after 1990. 450 of those were municipal, 3,000 were public and the other 900 were private although the same number of privates converted to daily fee or closed during that time.
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