January 11, 2015 – With the end of another year come the hard figures from studies done on how the golf industry is surviving. From 1986 to 2005, the golf course industry grew at a robust 40 percent with almost 4,500 courses opening. But since 2006, with all of the economic hardships, including the real estate market plunge, more courses have closed than opened. The financial crisis of the mid 2000’s mirrored the same sort of irresponsibility from mortgage lenders compared to golf developers and golf management companies.
The fact is that the lack of stabilization in the golf industry is not a secret anymore. TV ratings, club manufacturers, golf courses, and golf and retail shops are all declining. My personal explanation of the deterioration can be summed up in one word: suffocation. Too many golf courses, too many golf professionals, too much water usage, and not enough money to go around are suffocating the industry. Environmentally and financially, the industry’s leaders are going to put their belts on one peg tighter and reason with logic, not dreaming, that one day there will be another Tiger Woods sequel or clone.
In the golf industry plummet, much like the financial crisis in the mid 2000’s, all regions were impacted negatively. Like the big banks notion that the property markets in bigger regional areas would rise and fall independently of one another; the golf industry fell victim to this same critical misconception. Courses from Myrtle Beach to Alabama, Texas, and San Diego were closing just as all the housing markets across the United States fell collectively.
Environmentally, golf courses now have to adapt to less than adequate water usage, not only in California, but in New York, North Carolina, Florida, Texas, and Arizona. Financially, owners and golf management companies will have to accept less revenue (but not at a lesser price per round), and players will have to understand exactly what the “new green” of golf courses will look like.
Over-seeding is a major expense that allows the courses each year to get a “facelift” in time for the winter season, determining what will be green when the milder weather hits, which prohibits consistent growth. A lot of courses, especially in the southwest, have rescinded on their normal over-seeding practice, “tightening” the spending around the course. The over-seeding process has become a gradual change from mandatory wall-to-wall seeding, to its current trend of seeding just the greens, collars, and tee boxes done.
A trend that is worrying a lot of golfers is the amount of public courses closures, especially public destination resort courses. On average, 130 golf courses have closed annually over the past eight years. Of those courses, over 90 percent are daily average fee courses that are less than $50 a round. Before the decline, most of these courses were charging well over $50Ãƒï¿½Ã‚Â¾ however, when the crunch hit, a large portion of management’s first considerations were to lower prices.
Golf courses are not Walmart or any other discount retail chain. A golf course operator can’t just price cut and attempt to suffocate fellow competitors. Sustainability is short term in this business model. Golfers are apt to price change. Lowering the prices is 100 times easier than inflating them back to even a percentage of what they may have been. Golf course development will become rare in the United States for quite some time. The game has gone global which means there are two certainties: 1. the game will grow overseas to a more affluent and economically stable market; and 2. the private clubs in the U.S. will become substantially more important to keeping growth a reality and not a dream.