Analyst believes golf is in for tougher times
TurfNet Media Network by John Reitman - February 26, 2008
The current model for growing golf in the United States is broken and is in dire need of repair.
That is the message golf industry analyst Jim Koppenhaver told to audiences recently at two golf trade shows in Orlando, Fla. His presentation, entitled "2007 State of the Golf Industry," was given during the PGA Merchandise Show and the Golf Industry Show.
"Something is fundamentally not right," Koppenhaver said. "We have to figure that out and find the key to increasing rounds again."
And many golf facilities better come up with a fix soon, or risk going out of business, he said.
Koppenhaver counsels owners and operators through his company, Pellucid Golf. For some who have been teetering on the financial brink for the past several years 2008 might be the year to "look for the door," he said.
Industry-wide initiatives aimed at attracting new golfers and enticing those already in the game to play more have sprung forth since the Golf 20/20 program was founded in 2000. The initiative debuted with such ambitious goals of producing 55 million golfers playing 1 billion rounds per year by 2020.
Clearly, that has not happened. Rather than grow since the inception of Golf 20/20, the industry experienced significant downturns from 2000 to 2003, followed by several years that could best be categorized as flat. According to industry estimates, 27 million-28 million golfers play about 500 million rounds annually, about half of the Golf 20/20 goal. Golf's zenith was about 30 million golfers in 2000, according to industry research.
Cleve Cleveland, CGCS, (right) has been battling lagging rounds for years at Newark Valley Golf Club, and agrees that nationwide initiatives are not the answer to growing the game. Cleveland is the do-it-all owner and superintendent at Newark Valley. And his well-maintained, short (5,400 yards), flat course set among the hills of central New York caters to seniors and families. The problem is, he says, families and juniors are not coming into the game.
"I don't think (growth initiatives) are working, and I don't think they'll ever work," he said. "It's a cyclical thing, and right now golf is not something that people want to do. Families don't have time for it, and kids don't want to do it. I have a 14-year-old son. He's never played golf in his life, and has no interest in doing it."
GCSAA chief executive officer Steve Mona cautioned that the effects of some long-term growth strategies, specifically The First Tee and other programs aimed at juniors, will not be evident for another 10 years or so. Begun in 1997, The First Tee provides access to golf for children who otherwise might not have a chance to enter the game. It also is designed to teach them core values, including honesty, integrity sportsmanship, respect, confidence, responsibility, perseverance, courtesy and judgment through golf.
Mona (below right), who last fall was named chief executive officer of the World Golf Foundation, which oversees Golf 20/20, said that initiative never was intended to be all things for all people, but rather a starting point. However, he did acknowledge that growth initiatives, Golf 20/20 included, must be reexamined.
"Our first step is going to be to take a step back, look at Golf 20/20 and take stock in what has worked and what hasn't," Mona said during the Golf Industry Show. "We will go through those results and determine our next step."
Although it might be years before we learn if those long-term initiatives will bear fruit, the concepts in place to help grow the game, to this point, have not worked, Koppenhaver said. Since Golf 20/20 was launched, the industry has been faced with flat participation and, most recently, negative course growth. Koppenhaver said such news has led his clients, and others, to seek more reliable information that will help them make informed business decisions.
"As an industry, we've been trying to make decisions off incomplete information, or make assumptions on what we think is happening," Koppenhaver said. "People are beginning to ask for more and complete information."
The reasons why are clear.
According to Golf Datatech, a Kissimmee, Fla.-based industry research firm, year-over-year rounds played for 2007 were down 0.1 percent compared with 2006. The trend is an all-too-familiar one. Rounds played dropped steadily from 2000 to 2003, and have been essentially unchanged since. Year-over-year rounds played from 2003 to 2004 increased nationwide by 0.7 percent, according to NGF. The following year there was a nationwide gain of 0.4 percent, followed by a bump of 0.8 percent in 2006. Cleveland has experienced that trend first hand.
Rounds played at Newark Valley have dropped steadily from 24,000 in 2000 to about 19,000 last year, Cleveland said.
About 18,200 rounds were played there during a rain-plagued 2006 season that saw the course closed for two weeks around the Fourth of July because of flooding. Last year, between 19,000 and 20,000 rounds were played at the course.
There is more troublesome news.
According to the National Golf Foundation, 121.5 18-hole equivalents closed in 2007, compared with 113 course openings. While the difference might not seem like much, it marked the second consecutive year of negative new course growth. And 2006 was the first time that had happened since the 1940s, according to NGF. While some in the industry have tried to explain this recent downward trend by noting that a disproportionate amount of those closures included non-traditional facilities (executive courses, par-3s and nine-hole facilities account for 20 percent of the U.S. course supply, yet comprised 43 percent of all closures in '07) Koppenhaver notes that those types of courses are the ones the industry needs to attract new players to the game.
In the past, inclement weather has been used to explain, at least partially, downward cycles in business. Those excuses don't apply, at least for 2007, Koppenhaver said.
Playable hours were down in several key markets, including 3 percent in Florida and Texas, 4 percent along the Gulf Coast and 5 percent in the Phoenix area. But nationwide, weather was virtually a non-factor in 2007 with 0.4 percent more golf-playable hours nationwide compared with 2006, according to Pellucid.
Two years ago, much of the northeastern United States was plagued by rain, Newark Valley included. Flooding closed the course for two weeks around the Fourth of July, the busiest time of the year for Cleveland. Rounds played that year dropped to about 18,200. Turn the calendar ahead to 2007, with favorable weather conditions for much of the golf season, and Cleveland expected a better year. However, the 1,000 or so extra rounds fell far short of what he expected.
He concluded that not only is weather an empty excuse, so is pricing, at least at Newark Valley.
Discount programs and holding prices in check for three seasons did little to boost business in an overbuilt area. Cleveland had been charging $16 to walk and $24 to ride on weekdays and $18 to walk and $28 to ride on weekends.
He plans to raise fees this year to $17 and $25 on weekdays and $19 and $30 on weekends.
"Play still wasn't up substantially from the previous year, which was awful," Cleveland said of the 2007 season. "So I'm raising fees this year. I can't keep discounting. I've given up on that."
According to Koppenhaver, growth opportunities exist, including convincing core golfers (defined as those who play between eight and 24 rounds per year) and avid golfers (25-plus rounds per year) to play more. But the real opportunity, Koppenhaver believes, is to entice occasional golfers to become core golfers. But even the number of core golfers has dropped from 17.7 million in 2000 to about 15 million. Even the number of avid golfers is slipping.
"It's possible we'll never have more than 30 million golfers in the U.S.," he said. "For there to be growth, we have to recognize the finite number of people in the market and the frequency of play that can be attained.
"I'm in that group. I played seven rounds last year. Why can't we get these people into that next level?"
One of the fundamental roadblocks to growing rounds is simply that golf is a difficult game and it is expensive. According to Koppenhaver (right), the golf experience is an equation that relies on two primary inputs: enjoyment and investment.
The enjoyment side of the equation is controlled primarily by the golfer and includes the player's skill level. The investment part of the equation, which reflects the overall value of the golf experience, includes several factors, most of which are controlled by the golf facility: pace of play, customer service and course conditioning.
There is room for improvement on both sides of the equation.
Pace of play is a catch 22. No one wants to play a 5-hour round, yet newcomers or infrequent players, often the culprit behind the 5-hour round, say that they often are intimidated or made to feel unwelcome.
Koppenhaver believes that if people invested the time and money to improve their game that it would result in lower scores and more play. And the results would be felt throughout the industry. According to Koppenhaver, research indicates the average score for all golfers hovers around 100 strokes. If golfers were able, through lessons and practice, to lower the nationwide average by one stroke it would pump an additional $1 billion into the overall golf economy. That would reflect revenue generated by lessons, more play, and merchandise and equipment sales, he said.
Greg Norman, a two-time British Open champion and 20-time winner on the PGA Tour, agreed and even took matters a step farther.
At a GIS news conference before accepting the GCSAA's Old Tom Morris Award, Norman talked about such dramatic moves as scaling back golf equipment, primarily the ball, shorter golf courses in terms of yardage and number of holes.
There should be rules for touring professionals and another set of rules "for the masses," Norman said. Amateurs, he said, do not need to be playing 7,500-yard courses like the pros.
"We have to stop that," he said.
Real and sustained growth will not come from nationwide initiatives, many say, but at the individual facility level. That includes getting more people into more lessons so they become better golfers and play more often. And it includes unique, local programs that might work at one golf course, but might not work at the facility down the street, across town, across the state or on the other side of the country.
Koppenhaver noted initiatives such as weekly short-hole tournaments, cutting larger cups, putting tournaments, etc.
"Do these things work long term? I don't know," he said.
"Things will grow at the local facility level. Look, if it's in their self-interest, then do it and hope you're competing with the guy down the street who still believes 'if you build it they will come.' Anything you can do to attract new golfers, you have to be trying that stuff."
Newark Valley does not have an instructional area or practice range, but Cleveland wishes it did, because he too sees instruction and practice as a key to growing the game and increasing revenue.
"If I did (have a practice area), I'd hire an instructor to come in here and teach free lessons," he said. "Just get them in here to take lessons and hopefully they will come back (to play). I think that's the biggest thing anyone in this business can do, and I can't do it."
But he does focus on service as a way to maximize business.
Cleveland often lets children play for free if they come with a parent. If a man is playing and his wife is riding along: "I throw a set of women's clubs on the cart. I don't charge, I just put them on and tell them 'Hit 'em if you want.' She might hit a few, and she might come back," he said.
"You just have to go with the flow nowadays."
Club Car, the division of Ingersoll Rand that manufactures golf cars and utility vehicles, has recognized the need for more effort to grow the game, and in 2004 developed its "Let's Go Golfing" program that is designed to help companies in the golf industry introduce employees to the game.
The Club Car program outlines how to teach golfers the basic skills, etiquette, terminology, scoring and practice tips so they can be comfortable and have fun on the golf course. It also proposes a series of one-hour lessons for a period of seven weeks taught by a professional at a recognized teaching facility. Most notably, the program emphasizes fun first and requires the support of senior management.
According to Club Car, compensating the golf course for the training period was the greatest expense. In Club Car's case, the company paid $105 per person for the seven-week session for 10-12 people per week at The First Tee of Augusta. The Club Car model also reflected diversity in the company's work force, including diversity in race, age and gender, but also from an organizational perspective within the company.
The company also showed its commitment to the program by scheduling the lessons on company time. Finally, the company's golf committee formed a league to keep the momentum going. More than 200 Club Car employees have participated in the program, which generates revenue from lessons and rounds played at a local club. The program has been so successful for the company that it has produced a DVD and educational kit so others in the golf industry can model the program.
"If we can get employees at organizations throughout our industry coming to the course and bringing their families and friends, we'll have a positive effect on participation, we'll support our customers and we'll be creating the game's next generation of ambassadors," said Phil Tralies, Club Car's chairman and CEO.
The Club Car kit includes a video presentation that shows Club Car employees and managers discussing the program, a "getting started" guide that outlines basic steps in implementing an employee golf program, PowerPoint version of the getting started guide that helps communicate the program to management and staff, and a list of contacts for those who need more information.
While most recognize the need to attract new players into the game, others believe it is important to remember seniors and others who perhaps once played regularly but now age or disability makes it more difficult or impossible to play a traditional round of golf without assistance.
SoloRider is a manufacturer of single-rider golf cars designed primarily for disabled golfers. According to the company and some of its customers, the device has helped keep some people in the game who might otherwise have transitioned out of it.
"We've forgotten about a generation of people who helped carry the game," said Roger Pretekin, president of SoloRider. "We have to remember those people."
The cars feature a low-impact design that minimizes the effect of the vehicle on golf course turf and a swivel seat with a mechanical stand-up mechanism that elevates golfers to a position over their ball, allowing them to hit from the confines of the seat. The vehicles, can be driven anywhere on a golf course, including tees, greens and bunkers.
The Hamilton County (Ohio) Park District owns two of the vehicles, and officials there eventually would like to have one for each of its seven golf courses. The single-rider cars are utilized by a devout group of 25-30 disabled golfers who have come back to the game. They are playing 100-125 rounds per year that the park district otherwise would not get.
The project has been so successful that the city of Cincinnati has bought three SoloRiders with a grant from the U.S. Golf Association for its eight courses. County and city golf officials note how their new golfers not only help boost rounds played, but spend money elsewhere in the operation.
In the end, said Koppenhaver, maximizing profit comes down to things the golf course can control, such as turf conditions and customer service, because he doesn't see the golf economy improving any time soon. So whatever little steps an individual facility can take, they'd better think seriously about taking them.
"We need to connect with our customers," Koppenhaver said. "A lot of people in this business need to rebound sooner rather than later, and this is not a rising tide. If you're stable, you might be in good shape. If your business is tenuous, I think you're going to be in for tougher times."