IN THIS ISSUE
State of the Industry – Annual Update on Trends in the Golf Business
Converting Satisfied Customers to Loyal Customers
May 2013 Rounds Played Report
Closed Golf Courses – What Happens After the Final Shot Is Played?
List of NGF's New Members in Q2
NGF TOP 5
Sponsored by: NGF’s App Membership

Top 5 countries with the most golf facilities (not including the U.S.).

Grow the Game by Lowering Frustration
by Michael Hebron

Some have said golf is broken and in need of fixing; play is down and there is a lack of interest in taking up the game. On the other hand some do not agree the game needs fixing, but how the game is seen needs some rethinking.
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Maximizing Hard Goods Sales are Hooked at the Hip with Player Development Programs
by Ken Morton

Today, buying golf equipment is complex and complicated. It is complex because modern fitting techniques and new technology have proven that by just changing a lie angle, a shaft flex or shaft type, the length of a club, the size of a grip or up to any one of 14 fitting factors can and will dramatically improve a person's game.

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PAST ISSUES
Closed Golf Courses – What Happens After the Final Shot Is Played?

The NGF Domestic Golf Facilities Database reveals that more than 1,400 golf facilities (some with multiple courses) have closed their doors permanently since 2001, part of a natural supply correction necessitated primarily by the overbuilding of the 1990s and early 2000s.

When we put the number of facility closures in perspective, the magnitude is far from alarming. In fact, the net change in supply is actually up by more than 120 18-hole equivalent golf courses since 2001. And although we have seen a net reduction of 500 18HEQs since 2006, this is equivalent to only 3.3% of peak supply.

The fate of these closed golf course properties was one of the topics presented at NGF’s Annual Golf Business Symposium in April. After all, we’re talking about a lot of land - often situated on prime real estate. Also, these closures are in the news, often involve interesting repurposing of land, and frequently result in litigation over the ultimate reuse.

NGF analyzed the golf facility closures hoping to answer several key questions:

  1. What types of golf courses are closing? Specifically, what do the 1,400+ closures look like in terms of facility type, state, region, price point, year open, etc.?
  2. What happens to the land? We researched a subset of about 60 closures across types, price points and geographies to find out what the outcome has been for these properties.
  3. What effects, in rounds played and overall economic health, have the closures had on surrounding golf courses of similar type that remain open?

What Types of Facilities have been Closing?
Although it has been well documented that the golf course overbuilding that most contributed to industry stress was in the high-end daily fee segment, these were not the types of facilities that were closing over the last decade or so. Our analysis of the universe of facility closures revealed that they were disproportionately:

  • By Type:  Daily Fee (privately owned)
  • By # of Holes:  9-Hole
  • By Price Point:  ‘Value’ (less than $40 peak green fee, including cart)

NGF surmises that, in many markets, the overbuilding in the upper middle and premium price point daily fee segments, and the subsequent discounting of green fees at these facilities due to oversupply, resulted in downstream stress on the lower fee / lower quality public facilities that we’ve seen closing. Golfers were able to play high quality golf courses, especially during off peak demand periods, at prices close to those they paid at the lower quality courses they formerly frequented. The downward pressure on prices was one of the significant factors that ultimately drove many of these courses out of business.

Other key findings from NGF’s analysis:

  • Golf courses with an associated housing component, as well as premium price point facilities ($70+ peak green fee with cart), were disproportionately underrepresented in the sample of closed properties.
  • Private clubs, which comprise 25% of existing supply, represented only 8% of closures.
  • By geography, closings were generally proportionate to supply across most states. There were relatively higher rates of closings in the southeast, east-central, mid-Atlantic, and south-central regions, as well as in Nevada.

What’s happened to the Land?
The most salient finding from our research on the subsample of 60 facility closings is that the repurposing of these sites is often a long and winding road, as owners and municipalities grapple over proposed land use changes, and citizens storm Council meetings concerned about effects on property values, traffic impacts, views from their front porches, and overall quality of life.

We found that it is common for the municipality to ultimately take ownership of the closed property, either through purchase (sometimes at auction) or through eminent domain/condemnation. The primary impetuses for acquisition include political pressure from residents, the desire of the municipality to control future land use, and/or the economic undesirability of the land to private buyers due to the municipality’s successful blocking of rezoning (often in court).

For NGF’s sample subset, which represented properties that have been closed for several years or more, the outcomes broke down as follows:

  • Golf course land was already repurposed or under construction: ~30%
  • Reuse was still undetermined: ~70%

Of the 30% of properties that were repurposed or under construction, the land reuse broke down evenly between open space / recreational (e.g., disc course, multi-use park, restored wetlands, etc.) and some type of commercial, including residential, municipal (e.g., Town Hall), and industrial use.

For the remaining 70% of properties that were yet to be repurposed, about half were in planning or awaiting approval for reuse, while half remained in limbo. The limbo category covered several possibilities, including up for sale, being litigated, being actively opposed by citizens groups, or fallow. About 1 in 3 fallow properties were being maintained to some degree, while about 1 in 4 were in formal litigation or being protested by residents.

NGF MEMBERS:  Click Here for detailed examples of repurposed land and properties in limbo

Effects on Surrounding Golf Courses
Intuitively, it would seem that the remaining market golf courses would benefit from the closure of a nearby competitor, as the golfers that formerly patronized the closed facility are not likely to entirely give up playing the game. So, where do these rounds go? NGF spoke to a representative sample (same type as closed course, similar price point, closest in proximity) of nearby operators. Surprisingly, most noticed little or no effect on their rounds played. When a positive uptick in activity did occur, the effect was most commonly cited in terms of increased tournaments and memberships sold.

Why the lack of a noticeable increase in rounds when the pie is being shared among fewer competitors? Perhaps the biggest reason was that, for a large percentage of respondents, the closings happened concurrently with one or more mitigating factors, including the overall downturn in the economy. Also, some operators are likely not vigilant in tracking new customers or increased play by current customers who used to also play at the closed golf course.

Finally, our interviews led us to conclude that the rounds are being dispersed across several market golf courses, and that a percentage of the rounds played at the closed facility are simply going away. The overall lack of engagement by operators at the facilities we contacted, as far as their knowledge of how a competitor’s closing affected them, leads us to conclude that aggressive operators stand to gain market share by targeting these ‘displaced’ golfers.   

Published by VCT