In the beginning of the Coronavirus pandemic, most golf courses and clubs around the country were closed by executive orders from state governors. The financial impact to these courses was significant for sure, however there’s been a silver lining.
Since mid-April, most have reopened for play and many have seen enthusiastic interest and increased play. Golf is an activity which lends itself well to the concept of social distancing. With minor changes, golf can be played safely in the social distancing environment and provides for the outdoor recreation, exercise and social interaction many lost during the “stay-at-home” period when many people weren’t able to go to work, school, restaurants and shopping.
Some think this will be a sustainable boom for golf that will reverse the recent declines in participation and help the game grow again. One such individual is highly respected Philadelphia Cricket Club (PA) Director of Golf and COO, Jim Smith, Jr.
I posed the following questions to Smith, to get a perspective from “behind the counter” from a guy whom I’ve to be very perceptive regarding the golf industry:
You mentioned that COVID-19 could be the biggest boom to golf since Tiger Woods. What are the 3 main reasons you believe this?
- It would be hard to envision an event that would put a golf club in so many hands, either for the first time or with greater frequency.
- Golf is a ‘safety sport’ – worries about the virus transmissibility will help ‘safety sports’ well into the future.
- Working from home will become much more prevalent in the future – that will give people more time to enjoy golf.
Do you think that the recent increased golf activity (at PCC and elsewhere) will be sustainable after people go back to work and are able to resume other activities?
- It will certainly level-off and/or drop slightly, but for the reasons noted above, I believe a significant piece of the increase in golf activity is sustainable.
How do you think golf will promote/spur participation growth and increased frequency of play among the younger generation, especially given golf’s traditional culture issues with that group?
- Hard to say, but I’d like to see them highlight the safety of the sport relative to others, and the physical benefits. Additionally, golf is one of just a few ‘lifetime sports’ that people can enjoy their entire life. Lastly, the younger generation should be educated that golf is one of the best networking tools available – Millennials are accused of being WIIFM (What’s In It For Me), so why not appeal to that drive by tying participation in golf to helping them achieve things in other areas of their life?
Do you believe that the golf culture will “relax” in response to COVID-19 in order to accommodate a more diverse and younger crowd?
- In some areas of golf, yes; it would not surprise me to see a continued expansion of things that were once considered taboo – relaxed dress codes; music on-course; ‘golf-boards; and the like. However, I think there will always be a cadre of facilities who view promoting the ancillary benefits of golf as part of their mission, focusing on things like discipline, respect, and tradition. In my opinion, it’s not necessary for every club to focus on being the same thing – there is room in the industry for some clubs to lead changes to ‘normal’ golf behavior, and others to reinforce a more traditional golf experience.
How do you think clubs and courses will fare financially with the existing restrictions on dining and other activities, and the possibility of people being reluctant to frequent crowded situations?
- Frankly, a lot of clubs are going to have problems – many are operating on razor-thin margins and few, if any, will escape a reduction in net income in 2020, even with higher usages – this is a result of losing outings/weddings/guest play (all very high margin) due to restrictions placed on facilities by various governmental authorities. So unless a club has the capacity to fund operating losses via assessments or borrowing, they will be in a pickle, and even more so as pressure to improve facilities (capital spending) occurs. There is still an oversupply of courses relative to golfers (the Tiger Woods ‘hangover effect’) so some closures will likely strengthen those clubs that can weather this storm.
What thoughts do you have about how clubs might use clubhouse spaces alternatively if dining and functions are reduced?
- With respect to dining, most clubs operate a la carte dining at a loss, so a reduction in dining often means a reduction in losses (bizarre how the club world works). On the other hand, functions like outings and weddings help subsidize a la carte, so trying to replace that revenue is an important part of a success plan. The question becomes – is what you are going to do in available space going to contribute to the bottom line in a positive way, or just cost the club more money? Creating activities that don’t pay for themselves AND contribute a profit margin need to be looked at very carefully during periods of economic uncertainty.
With many families impacted financially by the pandemic, what impact do you foresee on club membership, both short term and long term?
- What we are seeing is that golfers have never valued their golf membership more than now, mainly due to the fact golf is one of the few sports that is allowed. So I don’t see clubs taking a hit in the short-term; to the contrary, some clubs are reporting record interest in membership. However, over the longer-term the economy will drive decision-making – golf tends to lag the ‘real word’ in terms of response to downturns, so if the recession deepens or is extended, it will ‘thin the herd’ a bit. The question is whether increased participation that I expect as a result of COVID will offset reduced participation resulting from economic hurdles. I believe it will, and that there is an opportunity for many clubs to strengthen their position in the marketplace, even amid such uncertain times
Smith’s club is a successful, metropolitan club with 1,600 members (approx. 800 golf), high revenues and an enthusiastic membership. What Smith perceives is a “flight to quality” some of which he believes will trickle down to middle and affordable market clubs and daily-fee courses in the form of more golfers. However, as he states, clubs with “thin margins” will likely not escape reduced revenues in 2020, even with potentially higher usage. Those clubs that depend on food and beverage and banquet revenue are likely to struggle without a plan to replace that revenue.
It’s likely that there will be more contraction as golf courses and clubs experiencing stress before Coronavirus may be pushed over the edge. If Smith is right, and golf experiences long term growth, players should prepare for full tee sheets and fees that are more representative of the cost of producing golf rather than what the competitive market will bear in the imbalance of supply and demand that has existed in recent years in many markets. I believe that the key to golf keeping some of the spike in long term growth depends on not only how people feel about social distancing after there is a reliable vaccine and we no longer fear COVID-19, but also whether the game can effectively broaden its appeal to those groups historically turned off by the perceived “stuffiness” that exists at many levels of the game.