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have we killed the goose

State of the Golf Business: Past, Present, Future

Golf is a way of life to some and a pass-time to others, but on one level or another its played by almost 30 million Americans today. Despite its popularity, the only thing growing in the domestic golf business these days is the grass. Some have even speculated that golf is dead, the run is over. Golf is not dead at all, its just sick, we’ve killed the goose that laid the golden egg.

To understand this first we need clarify which measuring stick we are using and separate the business of golf from the game of golf. First a little math and a short history lesson is in order.

There are about 16,000 golf courses in the United States as of 2008. We know this amongst other statistics found here thanks to a small group of dorks that keep up with such things at the National Golf Foundation In Jupiter, Florida. Over 3000 of these golf courses have been built in the last 20 years. That’s almost 20% or one fifth of the current supply in economic terms. Now during that time the average number of “golfers” or people that consider themselves such, has fluctuated some, but remained mostly static somewhere between 28-30 million. Now it doesn’t take a dork at the NGF or an economist’s infinite wisdom to see that someone misread the demand curve here. Why were so many golf courses built? Well, it actually had nothing to do with golf and everything to do with real estate. The golf industry is simply suffering from the same “irrational exuberence” that led to the housing bubble and and other related problems in our economy.

Historically most golf courses fell into a few categories, private, municipal, and public daily fee courses. Many of the first wave of courses built in the US were in private clubs, which evolved during the roaring 20’s and the days of prohibition when land and money were plentiful and where the clubs provided a veil for the elite. As golf’s popularity grew many public facilities were built to give more access to the sport, but these courses were often subsidized to stay afloat and keep the cost of greens fees down. Eventually, the numbers made sense and a private developers built courses with small club houses and low overhead where the fees generated from rounds were enough to make them economically viable. Along the way however, much of the stigma of golf being a “rich man’s” game stuck with it despite the fact that today the national average for a round of golf with a cart is about $42, which you’d be lucky to get out of a movie or bowling alley for these days.

Enter the developers, marketing “experts”, and bankers. Golf courses ceased to be self supporting entities and became amenities. They were no longer there to sell greens fees, but to sell hotel rooms and real estate lots. In 2005, at the peak of the housing bubble it is no coincidence that there were over 1000 courses in some phase of construction either proposed, in planning, or actually breaking ground. 60 percent of those were part of a residential community, whereas historically only about 20 percent were such. Demand was no longer driving golf, cheap money was. A golf course now only had to perform long enough to sell the development and many times was then left in the hands of an unsuspecting homeowners association. It was a game of hot potato. If you think a condominium project has a problem if it can’t sell enough units to take care of the common areas, imagine a struggling subdivision trying to support a 150 acre golf course. Just as home loans get foreclosed on so do golf courses. When they fail the banks don’t know what to do with them as when a course is broken down it doesn’t make very good collateral, are hard to liquidate, and most of them are only worth a fraction of what was actually put into them form an investors point of view. In fact you may even own a course or two and not know it thanks to a REIT, stock, or your local bank. However, not all is lost as the aftermath of this building boom may leave some jewels that may have never been built otherwise and may sentence some of the junk that should have never been built under any circumstances to fade back to dirt.

So what does the future hold for golf? In short, golf is making a move back to the basics, not declining per se, but where it should be. When we finally come out of the other side of the tunnel golf will be better off. We will see less and less of the $20 million “signature” courses and more quality golf for more people. Green will no longer just symbolize money and grass to the industry, but a chance to mitigate its misunderstood relationship to the environment. The worldwide push of sustainable building practices may play a key role in turning golf courses from amenities to assets as we learn how to integrate them into tools that contribute to green space, wastewater filtration, and even giant heat exchangers for district geothermal heating and cooling systems of the subdivisions they encompass.

Golf’s base is also growing in diversity. Worldwide popularity is gaining and courses are being developed in emerging markets such as China, Eastern Europe, Russia, as well as those closer to home such as Mexico, Costa Rica, and Nicaragua. With golf pushing to become an Olympic event, the international celebrity phenomenon of Tiger Woods, and players such as South Korean Y.E. Yang that just became the first Asian-born player to win a major at the recent PGA Championship this trend is sure to continue. So while some measuring sticks may show that business is down, the game itself is doing just fine.

Golf is far from dead, its just evolving.

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"For architect Mike Young, a veteran of the Georgia golf scene and also busy in Central America, this could be his much-deserved breakthrough course. Long Shadow combines two styles, with a front nine through wooded riverfront land and a back nine that is discernibly more open and heathlands in style, with a bolder, more scattered approach to bunkering. Unity in the composition comes by virtue of the rough-hewn fescues and native grasses that frame the holes. "

-BRADLEY S. KLEIN, Golfweek