Last week, I visited Orlando for the Golf Industry Show, NGCOA Conference and CMAA Show. Usually, along with the recent PGA Merchandise Show, these events are a good opportunity to “take the temperature” of the golf course industry.
There are mixed signals out there. On the positive side, I spoke with several golf course architects and builders, who while not doing much in new course development are busy with renovations and restorations. Membership at many private clubs is up, with some of the more prominent clubs having waiting lists for the first time in a long while. The last couple of years has seen increases in rounds played at daily-fee facilities, albeit still at competitive rates.
Conversely, as I wrote recently in my blog, according to the National Golf Foundation, in 2015 there were more than 1.6 million fewer golfers in the US than just 4 years earlier, with participation down to 8.2% from 9%. Participation among minorities (non-caucasians) has dipped from 5.4 million to 4.7 million. Not long ago, we learned that after years of golf’s largest player segment comprising of the 45-55 age group, it shifted to those aged 55-65. That’s a bad sign because it means we’re not doing a good job of attracting the next generation. Of particular interest to us at GPA is the nature of our recent assignments.
We have recently completed or are currently working on 3 separate assignments involving golf courses that have ceased operations and are seeking approval for redevelopment to alternative uses. In at least two of those cases, there is potential market depth to accommodate these facilities, but since they now require redevelopment for golf, the cost is too high to justify the project and other uses are being pursued. I recently shared a blog post about the impending closure of the club I grew up playing in Pennsylvania.
The mood at each of these events was generally upbeat, however, with the exception of the CMAA event (which seemed larger than past events to me) the PGA and GIS were noticeably smaller and appeared to have fewer attendees, if only from the “eyeball” perspective.
What is the impact of these observations on the economic viability or value of golf course properties?
In recent years there has been an ever-so-slight decrease in capitalization rates from golf course sales. Some say simply that values are increasing. Recent surveys and sales analysis of Gross Revenue Multipliers shows a very steady pattern with little movement. All this would suggest that golf property values are pretty stable relative to income characteristics. It stands to reason that those courses that survive should ultimately gain market share as more and more courses close. Again last year, while I haven’t seen the numbers yet, I’m told that the US lost a net of about 150 courses. Some predict this number could be higher if development restrictions were to ease on many of these properties, which developers are pursuing regularly.
Golf is not doing a good job of creating growth. Millennials, Minorities and Moms (The 3 “M’s”) are under-represented and the game’s hierarchy is still focused on the age old issues of cost, time and difficulty. If golf is to turn the tide and experience growth, which in turn will spur both economic success at existing facilities and new development, the game needs to embrace the 3 M’s. For the 3 M’s, golf and its venues have too many rules. In many cases, these rules are tied to time honored traditions. Where’s the happy medium? Hopefully, we’ll find it soon. Our game needs a shot in the arm.