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The Economics of Golf

How is the golf industry doing financially? Who's investing? Is the game growing? Are Millennials playing enough? This section is about the overall health of the golf industry.

Golf Pros Dicked Over By Dick’s

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dicksIt’s no secret our country and perhaps 85% or better of the rest of the world is suffering from a down economy. Considering the situation, most turn to basic financial survival instincts and resort to cutting back spending by starting with the luxuries. Unfortunately golf tends to fall into this category.

As a matter of fact, Dick’s Sporting Goods recently laid off around 560 golf pros from their stores (in case you didn’t know, Dick’s employed actual PGA pros at their stores, up until this week that is, to distinguish themselves from an online outlet). Their reasoning for the mass cannings? According to a story by ESPN, Dick’s blames the economy, less people playing, too many products flooding the market and a downward trend in their golf equipment sales.

After hearing of this, we connected with someone (a golf pro who shall remain anonymous) that just happen to be one of the Dick’s casualties this week. Here’s what he had to say:

1. How do you feel Dick’s handled the situation?

“I thought they could have changed our role before they laid all of us off. They still sell equipment that many customers seek advice on. Which ball should I play? What loft is a sand wedge? As it was, I was already one of two people to cover an entire floor. I carried more kayaks down than golf clubs at times. Tennis was given to golf to cover and sell as well. So in my opinion, since your gonna staff it anyways, why not someone who knows what they’re doing? The company strives for a customer service number – who better to service people but a golf professional. I think they should have looked at some of their processes to save money. For example, each week the regional manager would have a conference call with corp[orate], then they would have a conference call with the district managers, then they would have a call with store managers who relay the information to the dept manager, who has an hourly associate do the task. Seems like a big waste of corp[orate] dollars to me.”

2. Dick’s attributed the layoffs to the game’s dwindling popularity – were you able to witness any slow-down at the store?

“I was at the driving range on a Wednesday afternoon and just about all the bays were full. I couldn’t get a tee time because the local course was booked. I think people are still playing. While I was there, everyday a steady flow of people came through the store. In my opinion, the rule restrictions out on clubs years ago changed the market. While the companies all claim that the new models are better etc., in most peoples eyes it wasn’t much better than the clubs they purchase a couple of years ago. If they did like the new models, most buyers realized that the price would be half in 6 months. They should have given the pros more say in what sells. For years I begged them to send me wide shoes. One style was available in wide in the store. So just about every Friday, someone would come in looking for shoes for the weekend and left with nothing.”

Hmmmm. So now that we have (kind of) heard both sides to the story, I almost forgot to mention another reason that Dick’s used as part of justifying their layoffs: The decline of Tiger Woods. Tiger Woods?!?! I mean I kind of get it but it’s a tough sell to say part of the reason a pro lost their job is due to the decline of Tiger Woods. Regardless, we want to wish all those involved a quick return to the job they love.

So, how do we turn this negative into a positive? I like to refer to Warren Buffet’s theory of “Buy when there’s blood in the streets.” Obviously this refers to the calculated purchasing of stocks when everyone is selling, but relating this theory to golf, now is a good time to get in.

Many golf clubs, associations and instructors are dropping their prices to attract more golfers back. So if you’re looking for those golf lessons or club to join, now might be a good time to do so. Hey, it worked for Warren Buffet…

Hit’em long…yell FORE…Hug a Golf Pro this week!!!

So Much For Growing Golf in China

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You may have read about this a few weeks ago but if not, here’s a quick recap: Basically, the Chinese government has begun destroying new golf courses (some so new they haven’t even opened yet) to enforce a ban put in place to preserve water, land and curb pollution in the country. You can read the original Reuters story here.

While the particulars of this story are all very interesting, what the Reuters piece doesn’t mention is the overall impact this will have on the golf industry in general. Golf is in its infancy in China, but its growth had looked extremely promising. The country has just 639 courses (compared to more than 17,000 in the U.S.), but nearly 50% of them have been built in the last five years.

Now consider that this growth happened all while the country is under the aforementioned ban on building new courses (which dates back to 2004). Why would developers risk fines and other penalties to build golf courses under the guise of “Sports Training Centers” and “Tourist Resorts”? Because there is money to be made – lots of money.

Golf is beginning to catch-on with the more wealthy Chinese and they are willing to pay for it – from expensive memberships to high-end golf course properties, golf is a chance to affirm their status in the community – just like it was in the U.S. years ago before the middle-class also began playing. As courses spring up in new areas, it stands to reason new golfers would also be born. The game would grow exponentially and with it, the industry as a whole – equipment, apparel, etc. – an entire golf lifestyle niche would be carved-out in the country.

Think about what 10,000 golf courses in China would do to the industry as a whole. Heck, even 5,000 courses would be an unbelievable asset to the game. No one is denying that golf courses use water and take up space – but done properly (using effluent water and minimal chemicals), they not only benefit those that play but the communities they are built in as well.

But in China, it’s just not meant to be – at least for now anyway. Though developers had been flying under the radar for nearly a decade and building new courses anyway, it appears those days are over. The Chinese government publicly announced it had not only closed but destroyed five illegal golf courses in March as a warning to developers. With only a few hundred courses, golf in China is sure to remain a minor sport enjoyed by only a small percentage of wealthy.

Food Is The Way To A Golfers Heart

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Golf courses should give a little to get a little...
Golf courses should give a little to get a little…

It’s funny…there are sometimes places I just don’t want to go and people I simply don’t want to go with.  Sometimes it’s a person or a couple that you know well enough to feel that you just can’t tolerate spending any significant amount of time with.  Maybe it’s a person or a couple that you don’t really know, but know enough about to already feel like you’re going to have a miserable time.  It may even be a person you’ve never met, but you just don’t want to deal with entertaining a new person.  Do you know what I mean?  I feel that way a lot, in both my personal and professional life.  If I don’t want to go spend time with this person or people, then I’m not going.  Unless there’s food.  The idea and the chance that there may be good food can convince me to go almost anywhere and give almost anyone a chance.

Now this doesn’t work only for me.  This is also very common in my professional life, as well as many others who work for a living.  My job occasionally requires me to go to a “networker” or that type of event.  I’m not going to say I “hate” going to those things, but I will call it a strong dislike.  My boss can tell me he needs me to go because he can’t make it.  I’ll hem and haw a bit, but then he’ll tell me…”They always do a good job with the food there.”  OK…I’ll go.  “Open bar” works just about as well.  Whatever venue holds the event, or whichever organization hosts it, is happy to provide the food in the hopes that some of the attendees will be returning.  Wouldn’t it be nice if golf courses did the same?

Yes, I know there are plenty of tournaments where the post-round spread is a large part of the event.  But I’m talking about more of a course “open house” if you will.  Why not use this type of thing to get some people out to your course?  Give the people an event.  Not an event for the people who are already members.  Put out an open invitation to non-members so you can attempt to make them members.  And if not members, then at least a few daily fee players.

Some years ago, I remember some of the reps of a nice local course coming into my office looking to sign my company up to a corporate membership.  They were friendly, nice people and had some nice very colorful brochures with great pictures of their course and clubhouse.  After they left, I mentioned to my boss that I had played the course and it was pretty nice.  But my boss, as well as his boss, didn’t even give it a chance.  But perhaps an invite to a free round would have helped.  Maybe one of those non-member events could have helped as well.  Well, in hindsight, anything would have helped since the course has now been out of business for roughly ten years and is now a nature preserve.

So again, maybe another idea to help some course pump a little life into the stagnant state of golf.  Throw a little party for some non-members.  Maybe you can bring in those new members you’re going to need when the old crew decides to hang up their spikes.  Maybe you can recruit a few new daily fee players who don’t necessarily have the money for a membership or don’t want to be tied to one course, but like your course enough to drop $50 on a round a couple times per season.  Or maybe you can find a company who would like to rent your facilities for some of their corporate events or outings.  Do you have banquet facilities?  People hold wedding receptions at golf courses you know.  The courses maybe just have to not be afraid to give away a round here and there or spend a little marketing money in a different way.  After all, it takes dough to make bread.

Swing ’til you’re happy!

5 Things Wrong With Golf

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5ThingsWrongWithGolf

Let’s not beat around the bush – there are inherent problems with golf that are rarely discussed. Now I’m not going to try and solve any of this stuff in one post, but I do intend to address them in hopes of beginning a conversation around what (if anything) can be done to change this game for the better. People in the industry are always talking about needing to grow the game. Perhaps we should start by considering the five 800-pound gorillas below.

1. The Cost
It shouldn’t be any surprise to see “cost” on this list. There is perhaps no greater turn-off to people than how much money it takes to play this game. The top brands push the most expensive equipment and apparel on us – from advertising to in-store displays. Where is the section of $25 Nike golf shirts? Or the $100 Taylor Made drivers? (Not even last year’s model will be that cheap). Why do we have to spend half a grand just to have an “average” set of new irons? Retailers and brands say they are helping us to become better golfers, but all they are doing is helping us hand over our hard-earned cash with minimal results in return. We all know the formula to playing better golf: Talent and practice – preferably lots of both. Money isn’t part of that formula and it’s time the industry stops pretending that it is.

2. The PGA Tour
I am not denying the tour is an integral part of golf. Without it, the game would surely suffer both economically and in popularity. But it is sorely in need of a makeover – preferably with its schedule. First, the season is far too long with barely an “off-season” for fans to recoup mentally. It makes sense from both a business perspective (TV ratings and tournament sponsorships) and the fans’ perspective (being mentally engaged) that the season be condensed to 6 months or less. Second, the lack of a proper end to the season. The FedEx Cup is an attempt to provide that grand finale we all want, but it’s not working. Perhaps a shortened season will help, but the end to the tour’s year needs to be defined much better than it currently is.

3. The Rulebook
This is tricky because I don’t want to change the fundamental way we play golf. But there are things in the rulebook that are hindering the expansion of the game. There are too many nuances to consider; too many cans and cant’s; too many caveats that require too much referencing back and forth before a complete understanding of the rule can be fully grasped (especially for new players). What we need is a simplified rulebook for casual play. We average golfers do this already (who really walks all the way back to the tee to re-hit after losing a drive)? Let organized tournaments continue to use the present book. But for the recreational golfer…please, give us some relief.

4. The Courses
Specifically, there are too many of them. What the hell is this country doing with 17,000 golf courses? The answer: Wasting space. The reality is we built too many courses over the past few decades and the result is too much supply and not enough demand. The herd could use some thinning and the good news is this thinning has already begun…compliments of the recession. While some watch with a wary eye over the fact that more courses are closing than opening in the U.S., economists know this is ultimately a good sign. Thinning the herd will result in higher quality courses, far better equipped to meet the needs of the individual golfer. And that will bode well for both new and current players alike.

5. The Focus
If there’s one thing we stand for here at GolfStinks, it’s that this game is meant to be fun. But in every corner of the golf industry, the main focus is on making people better players, rather than helping them enjoy themselves. Now I understand that some people can’t enjoy themselves unless they are better than everyone else, but those folks are in the minority. The vast majority intend to have fun when golfing – typically through camaraderie or enjoying the outdoors, with the final score being secondary. Yet the gravitational pull from the industry to consistently focus on becoming a better golfer is hard to ignore. Until there is a shift in focus from “playing well” while on the course to “feeling well” while on the course, golfers will continue to struggle with that love/hate relationship they have with this game.

Course Closures Today For A Better Tomorrow

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Every year around this time, the National Golf Foundation (NGF) releases its Golf Course Openings and Closures Update. And every year for the past eight years, the number of course closures in the U.S. has significantly outpaced the number of openings – 2013 being no exception.

For example, in 2013, 157.5 golf courses closed their doors, while only 14 opened. Many of you might know one of those 157.5 courses that are now defunct. In fact, some of you may have frequented one of them. But you shouldn’t let it get you down for long, because there’s a light at the end of the tunnel.

Obviously the courses that closed were struggling – most likely a direct result of the 20-year golf course boon between 1986 and 2006, where more than 200 courses were built per year on average. When the real estate market crashed in 2007, something had to give – and that has translated into a reverse of what we saw from ’86 to ’06 (and according to the NGF, we’ll probably continue to see for at least the next few more years).

This is what we call “market correction.” For over twenty years, golf courses sprang up like weeds across the U.S. landscape. And while we golfers might have indulged in the gluttonous pleasures for a time, course owners and developers were pushing beyond the logical limits of market demand.

So now the market has taken things into its own proverbial hands. We are witnessing almost the exact opposite of what we saw during the boon on a year-over-year basis – golf courses are closing so the market can readjust to actual demand. And, according to the NGF report, the majority (66%) of the closures were courses that were public and had sub-$40 greens fees. This is reminiscent of a thinning of the herd.

In nature, a thinning of the herd is a good thing – it supports survival of the fittest and those remaining are typically of higher quality. From an economic standpoint, these closures are positive for golf in general – especially in the long-term.

So while your local muni closing may have you worried that the golf industry is at the precipice, fear not. When the dust settles (and it will), the industry will be stronger than ever – with higher quality courses at more competitive prices. And that bodes well for all golfers – especially those who haven’t even swung a club yet.

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