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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.

Is the Golf Industry Improving Economically?

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The recession we’ve experienced over the last few years has been tough – The job market is terrible; real estate prices are wretched; and progress has been, well…slow. But apparently, more people have been hitting the links this year!

According to a recent report from the National Golf Foundation (NGF):

“The big story of 2012 in the golf business is the year over year increase in rounds played. In fact, if fourth quarter rounds are flat with the same period in 2011, we would end the year with the largest single-year jump since the turn of the century; a national gain of more than 30 million rounds.“

This surprised me, considering the tough times we’ve been living in. Personally, my number of rounds played has also gone up this season, but that was to be expected after a couple of golf-limiting events in 2011: A new addition to the family and my battle with a foot ailment.

Though I was playing more, I suspected many were not. So I was extremely pleased to see that things seem to be improving within the golf industry – at least as far as the number of rounds played is concerned.

Golf has certainly not been immune to the recent economic woes – NGF notes that golf rounds played has declined around 11% over the past decade, bottoming out in 2009 (the height of the recession). But the good news is the numbers from 2012 appear to show nearly half of what was lost might be recovered.

NGF attributes some of this to the weather, in which 2012 saw an 8% increase in “playable days” compared to 2011. But it also credited the general increase in spending in the U.S., which seems to have roughly paralleled the increase in golf rounds.

So more people are playing golf – great! But what about the rest of the industry? Not surprisingly, course operators have seen an increase in revenue this year. But new course development is still at “historic lows and that should continue for the foreseeable future.” Meanwhile, golf equipment sales are progressing slowly – but progressing nonetheless (still below pre-recession levels).

NGF points out that as we continue to emerge from the recession, so too should we see a general improvement in all things golf-related. But one has to wonder, with Tiger a cub of his former self and no real face to the PGA tour, will the golf industry ever reach its pre-recession hay day – even in a thriving economy?

Related Posts: The Economics of Golf

Are Golf Courses Becoming More Lenient?

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Are T-shirts and jeans becoming commonplace at golf courses?
Are T-shirts becoming acceptable at golf courses? (Photo by Greg D’Andrea)

It wasn’t long ago that you could show up to a course without a collared shirt and be sent home.  You could be told that you couldn’t play if you didn’t have your own clubs.  But the more I head out and play, the more I see golf courses relaxing their rules.

For example, the last time I took my kids golfing, we put all three of us in one cart.  Three to a cart!  About six or eight years ago that would be unheard of!

Further, my kids were sharing a set of clubs.  Years ago, that would be another no-no.  But this time, no one paid any attention whatsoever.  Nor do I think they would care anyway.

See, as we all know, times have changed in golf.  I’ve been to this particular course three times now and I have yet to see it even approach “busy.”  So are they going to bust my stones over putting me and my kids in a cart?  Of course not.  Are they going to tell me that one of my kids can’t play because he doesn’t have his own set of clubs yet?  Well then they run the risk of us walking out the door instead of making money from three greens fees and a cart rental.  With golf business down year after year everywhere, what do you think they’re going to do?

Even ride-alongs have become acceptable.  Years ago, if you weren’t playing, then you weren’t riding.  But now…along with many other former “taboos,” golf courses are relaxing their rules in the interest of making money and keeping their doors open.  And that’s something that I hope continues, even after participation in the sport begins to rise again.  Actually, that is “if” it ever rises again.

These rules have long been a complaint for golfers, or, potential golfers.  For instance, if you’re just getting into the game, you may not want to spend the money on a set of clubs without knowing whether you like the sport or not.  This isn’t basketball where you can play at any local court for free, use anyone’s ball, or worst case, spend a few bucks for your own.  This is golf, where every move you make is money out of your pocket.  So how do you expect someone to just shell out all of that money just for the chance to play once?  This is part of golf’s (hopefully) former pompous attitude.

As golf rounds continue to fall, relaxing the “rules” around the course a bit can only help – especially with Millennials.  What we need is to attract more players, not shun them with silly rules.  We want people to take-up the game, not have to shell out their hard-earned money just to see whether or not they want to pursue it.  Sooner or later, if the courses don’t lighten up a bit…there won’t be any left to turn golfers away.

Swing ’til you’re happy!

What if the PGA Tour Went Extinct?

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golfstinksRemember the old philosophical question: If a tree falls in the forest and no one is around to hear it, would it make a sound? Well ponder this: If the PGA Tour were to disappear tomorrow, would anyone really care?

A couple years ago, I wrote about the economics of golf, and how the pro tours only contribute a measly 1% to golf’s total economic impact.

So from a financial standpoint, the PGA Tour could dissolve overnight without much monetary backlash to the golf industry. The golf equipment and apparel machine would still be cranking-out merchandise to supply millions of weekend hacks throughout the world.

But for how long? With the tour defunct, wouldn’t the average golfer begin to dwindle in numbers? Well, I guess that depends on how popular the tour is with the golfing masses to begin with. For example, a decade ago I would have been laughed at for even suggesting a post like this one – after all, the hero on tour was one of the most recognizable athletes in all of sports.

Ah, but today he’s barley the shell of his former self and as a result, the PGA Tour has taken one giant leap back into obscurity. Perhaps more detrimental is that no one has taken his place. Want proof? Turn on ESPN any given Sunday an you’ll see them lead the golf segment talking about Tiger‘s third-place finish, rather than the poor schlep who actually took home the trophy.

With no face to the organization and television ratings that are basically nonexistent, it makes you wonder if it’s all worth the effort? Rolling into a new city every week and setting up shop on some corporate sponsor’s dime (could have donated that money to build a new cancer wing at the local hospital or something); trotting out a B-list of tour pros to go through the motions in front of a sparse gallery of spectators; turning on the HD cameras that broadcast to an equally paltry television audience. One has to ask themselves: Does the ends justify the means?

Sure, if the PGA Tour were no longer, some diehard fans would be disappointed (not to mention some of our fellow golf bloggers) and local establishments near tour stops would miss the boost in sales. But the top pros would head over to the European Tour (which would subsequently be broadcast more frequently here in the U.S.) and golf life for you and me would pretty much remain unchanged.

Not many golfers I know are quitting because they stink – no sir, we just keep on playing no matter what the game throws at us. And perhaps that’s the most fundamental point – We don’t play this game because the PGA Tour is so great, we play it because golf is great (if anything, watching the scratch players gives us more of a complex).

So, what if the PGA Tour went extinct? As long as the European Tour added a stop at The Masters, I’d be happy. So perhaps I should re-phrase my question: If the PGA Tour went extinct, so what?

When Golf & Skiing Tied the Knot

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Okemo Valley Golf Club (photo by Greg D’Andrea)

As we push into late December, I’m constantly reminded (via radio, TV and billboard advertisements) that besides being the holiday season, it’s also skiing season. Here in New England, the prime ski location is Vermont – and one such ski mecca in the Green Mountain State is a place called Okemo.

Okemo’s advertisements are everywhere – images of snowboarders getting major air on a halfpipe or a family of four gliding cheerfully down a picturesque slope. But this excitement conjures up nada in me. Nope, when I hear the name “Okemo” I immediately think summertime and envision one of the top golf courses in Vermont.

In case you haven’t guessed, I’m not a skier. I’ve never been skiing and have never really had any desire to attempt it. But the irony is, I’ve been to some awesome ski resorts. Let’s take Okemo as an example – what was once a name only recognizable by skiers, now boasts several accolades…for golf:

  • Best Public Course in Vermont, 2006 Golfweek
  • Top 50 Courses in America, 2003 Golf For Women
  • Top Modern Club in Vermont, Golfweek
  • Best New Course in America nominee, Golf Digest

When you think about it, it makes sense to put a golf course at a ski resort. But what’s interesting is golfing at ski resorts is a relatively new phenomenon. According to the April/May 2011 edition of Cigar Aficionado, turning a ski resort into a year-round attraction is big business – for both the resort and the surrounding towns:

All of the big ski resort operators such as Intrawest, Aspen Skiing Co., Vail Resorts and Boyne Resorts, along with many smaller peers, have turned their focus from selling lift tickets to selling real estate. To do this, they have had to offer more than just skiing. The new mountain town mantra is “lifestyle,” and for more than a decade, once sleepy or even chichi ski towns have been busy repositioning themselves as year-round centers of sport and culture, building performing arts centers, sushi bars, bike trails, village centers, parks, ziplines and, most of all, golf courses.

To me this is extremely smart. Not just because of the obvious (that you can stay open year-round), but because I feel golfers and skiers are cut from a different cloth. Sure there may be some overlap, but for the most part, skiers are adventurers, while golfers are more pragmatic. Economically, this is a brilliant marriage, because the ski resort is not only reaching more people, but also reaching different types of people.

But the golfers have it slightly better (as the Cigar Aficionado article acknowledges):

[Ski towns] are famous around the globe and synonymous with luxury vacation hospitality, but even in ski season, most of their appeal and most of the time spent by visitors is off the slopes. All of these ancillary benefits, from fine dining to five-star lodging, can still be enjoyed in golf season, though without the crowds—and usually at much more reasonable prices.

And this is true – my experience playing at ski resort courses has always been great golf, at a great price, in a relaxed and quite atmosphere. Of course, as more people begin realizing these ski resort golf courses are out there, the more busy they will become.

But for now, the fact that these places have two very distinct atmospheres (depending on when you visit) will remain intact. For example, when you click on Okemo’s website during the winter, you don’t even realize they have a golf course! It’s as if they’re marketing department has recognized the two clientele are complete opposites.

Click on that same URL in the summer, and the golf course takes center stage. I’ve actually had conversations with skiers who mention Okemo and I’ll say something like “Oh, I love Okemo!” And they’ll look at me rather puzzled – they’ll ask: “I thought you didn’t ski?”

I guess the marketing is working.

Golf Comes to the Masses: India

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indiaIt’s not lost on most economists that India is an emerging market. In fact, the second largest country (based on population) is undergoing an amazing transformation – many of its citizens are about to make the leap from lower class to middle class status:

“[The middle-class] is almost a third of India’s population today, up from 8% in 1980. Since reforms in 1991, India has become the world’s second-fastest-growing economy, and the middle class is expected to become 50% by 2022.” – The Wall Street Journal

Not to completely trivialize this historic Indian development, but I couldn’t help but wonder what that would mean for golf. After all, many parts of the country were, at one time, under British control. And out of this British control came, among other things: The East India Company; IPA (India Pale Ale); and, of course, Indian golf courses.

To that point, golf was actually being played in India long before it was being played in the United States – the first golf course outside of the British isles was…yep, you guessed it…in India (built in 1829 – which is prior to St. Andrews I might add). And since then, many more Indian courses have been developed.

 

But according to Sumit Rathor (who is the Client Services Director of Rathor Associates in Bangalore and also an avid golfer), many of these courses were historically private, “with limited memberships and a waiting list that sometimes [was] as long as 50 years.”

In an email response regarding the growth of golf in India, Mr. Rathor thinks the future looks bright:

“I’ve been playing golf for nearly thirty five years now – I started playing when I was five years old. And if I were to sum up the new horizon on golfing in India, its bright and futuristic. More people are taking to golf at a very young age, because today you have a very scientific approach to coaching. I am also happy to see more women golfers in the circuit, which is certainly an encouraging trend.”

And, new course construction is always a good sign to boot. According to Mr. Rathor:

“Another encouraging trend in India is the entry of private enterprise to invest in golf courses along the outskirts of major cities. Bangalore has three new courses coming up and many more happening on the drawing board. These new courses will offer open access to virtually anybody who wants to learn or play.”

One such course (Prestige GolfShire) can be seen in the photo above. If courses like Prestige keep popping up, it won’t be long before golf catches on in a big way with the general public. And that means growth in the entire golf industry – not just in India, but with retailers here in the States too. Today, there are roughly 30 million golfers in the U.S. (which is basically 10% of the total U.S. population). Should that same trend catch on in India, it would add approximately 120 million new golfers to the world – or 4 times what is in the U.S. now! I’m sure I don’t have to point out all the sales potential for U.S. companies (just food for thought for those who think we’re losing too many jobs to India).

And let’s not forget about golf tourism. Golfers seeking an exotic locale to tee-it-up will no doubt begin considering India. And India isn’t just a weekend trip – it’s a 10- to 14-day adventure of awesome culture, sites and food (imagine – chicken tikka masala in the snack shack at the turn)! Anyway, all this will boost travel sales both in India and here in the States (on that note, flights in my area to Bangalore start at $1,300…guess I better start saving my pennies).

So needless to say, I’m excited about the growth opportunity for golf in India. Not because American companies can take advantage of a new market, but because an entirely new group of people will be introduced to this great game. And when that happens, it bodes well for golf in general.

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