Is the worst finally over?

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Commentators are now saying that the Federal Reserve’s decision to raise the discount rate is a signal that “the financial crisis is largely over” and that things should normalize. It’s the first rate increase since June 2006.

But in golf, it seems to be a mixed bag. We keep reading stories about foreclosures, bankruptcies and course closings. At the same time, we are told that rounds were only down by .9% in 2009, and revenue at courses was only off by 5%. Of course, a lot of industry insiders don’t think those numbers are accurate.

Private clubs continue to struggle with membership retention, and some think things will never get better for them.

But perhaps the worst is over, if industry shows are any indication. The recent Golf Industry Show saw flat attendance for qualified buyers, and was only off in numbers because 1,000 fewer exhibitors attended. The Golf Inc. Conference at Amelia Island is still six weeks away, but we have seen very strong sign-ups, and expect to see a good increase in non-exhibitor attendance. (Vendors still are very conservative with their marketing dollars). 

So, it seems that some courses may be finally leaving the “hunker down” mentality behind. While other courses — those that were poorly managed or poorly strategically positioned to begin with — move forward with bankruptcy, fire sales and shut downs.

 

 

Comments

Yes I believe the economy is slowly turning around. I see our business picking up just recently and I feel confident it will continue to pick up more and more this year.

I'm Director of Golf - City of Fort Worth and we operate 99 holes of course located at five facilities. After reviewing trends it appears that municipalities are holding their own through this down economic time. Our weather pattern has been such that it's difficult to predict how this season will be as we've experienced the worst winter in Fort Worth for over fifty years. That coupled with down economy and the overbuilding of golf courses I feel we're still not out of the "tough times". All reports I read show golf flat over the next five years and no growth until 2014 or 2015. Of course if there are some courses that close that will help the other facilities survive and enable them to grow their business.

Our January 2010 golf consumer sentiment study (Presented at the NGCOA Show) of a representative sample of over 1,000 avid golfers suggests heightened expectation to maintain or increase play this season. Couple this positive sign with accompanying attitudinal trends, and the outlook from the consumer's perspective is cautiously optimistic. A complimentary copy of our findings is available in the downloads section of www.sportsandleisureresearch.com

We are in the midst of one of the largest projects in Silicon Valley. New driving range, 30,000 sq ft fitness center, new banquet rooms and bar expansion. We heard a lot of "this is not the right time" however we started last March and since that time have gone from a large for sale list to almost 0 and the price of stock has doubled. We will be complete in July 2010 and expect to have wait room only for full membership and Social. So yes there is a light at the end of the tunnel.

I like Jon Last's "cautiously optimistic" comment above and he should know given the business he is in. With a degree in marketing and enough credits for a degree in economics I fear we haven't seen even the tip of the iceberg in the housing and financial markets. Plus, we have yet to feel the economic impact of the commercial real estate bubble. I'd rather be "cautiously optimistic" but I am not. Economically we will be better off if we begin to let the "chips fall where they may". Sorry GM, AIG, banks that made "stupid" loans, and people who entered (selfishly) into morgages they couldn't afford. The golf course industry won't take the hit these other industries are. But, it's not going to be fun any time in the next 4, 5 or 6 years. Hold on tight and market your course better than the course next door.

We have a client similar to Dirk Zander (above), who decided to pull the trigger to renovate its golf course. The Club is a private, 27-hole, New York Metro Area course called Upper Montclair CC in Clifton, NJ. It was founded over 100 years ago. No significant renovations to drainage, irrigation or bunkers have taken place since Robert Trent Jones, Sr. redesigned the course when the Garden State Parkway was built along its western boundary, necessitating its redesign, in the late 1950’s. In order for the Club to protect and enhance its greatest asset and take advantage of competitive contractor pricing, Club leaders elected to start the renovation project after a lengthy permitting process, last December. It is anticipated that work will be completed fall of 2010 and that the Club will be in a position where few others are in the area, to offer a freshly renovated course for its members, guests and perspective members.

Brace yourselves folks....we haven't seen the bottom yet and probably won't for another couple of years. Anyone who even thinks about building a golf course should be taken in for therapy. Renovations and rethinking how you market will be the opportunities of the future.

Jack and others are on the mark. We work with owners all over the country and there is practically not a day in the last 90 days that other brokers in our company haven’t come to us with a client of theirs that owns a course who is in trouble. We just did a proposal for an owner who spent $6.5 million on developing the course, put $3 million into a food and beverage operation, $1.5 million into the club house and $500,000 in misc. to finish it up. We told him based on his existing revenue and pro forma revenue the market will pay between $4.5 million to $5 million. He couldn’t believe it. He needs to. With revenue down, EBITDA down and little to no financing, golf buyer’s perceive more risk and are asking for a higher return on their unleveraged dollars. The consequence is lower values for course owners. Most courses are selling below replacement cost. Since courses are selling below replacement cost we shouldn’t see much new construction over the next few years. With 1000-1500 courses closing in the next 10 years as estimated by the NGF, that will restore equilibrium to the golf rounds, and consequently demand will catch up and over take supply. (When is the million dollar question.) In spite of the over building and declining revenue, there are still very good markets in the US that are not over supplied. Even in over supplied markets, owners have increased their EBITDA, by cost containment, being experts at marketing, customer service, and retention of their core golfers. The days of waiting for the fish to come to bite your one fishing line is long gone. The new fishermen of today are finding golfers buy casting wider nets, using multiple lines, using multiple mediums for pursuing core and non- core golfers. It is not just enough to know and like golf, the successful courses are learning to be great marketers. So while the market is tough, it is not unbearable for good managers, operators and brokers. www.nationalgolfgroup.com

Today ABC announced massive staff cutbacks. They used to words "think" "rethink" I "think" the outcome will depend on how we think and do things different. I admire ABC. I'd like to see golf courses "thinking" and "rethinking" for solutions rather than going down with the ship. Ref: http://www.msnbc.msn.com/id/35549151/ns/entertainment-television/

When the time is full of difficulties it is difficult to pass,as like in the economy it turned around slowly and i hope it will take their position back soon.

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