A colleague recently sent me and several other industry stakeholders and observers the latest “drive -by shooting” of the golf industry published in the Phoenix local media titled, “The Death of Golf.” His request to the recipients of the email was to provide or compile the “other side” of the story or, in his terms, “What’s right with golf.” Our subscribers (and likely the general industry population) know that, while I can occasionally be led in a general direction, I rarely follow instructions or requests to the letter. In that spirit, what I’d like to suggest in this issue is that while there are a lot of things which are “right” with the sport and industry of golf, it’s not the relevant response. The relevant white paper that needs to be written is “Why Golf Won’t Die.”
In this issue I’ll provide my take on the bedrock features and benefits of our sport which will provide some support level (where we don’t yet know but it’s there) for golfers, rounds and revenue and serve as the buffer against any “existential” threats to the sport and industry:
• What are the foundational aspects of the sport and industry which will support it long-term and provide the foundation beneath cyclical swings?
• What did we learn from the last “bubble” in supply, participation and rounds demand that will serve us in building a more sustainable future in the next upswing?
We can educate the general media, for their future drive-bys of the industry, to understand the proper dynamics of our industry without being “deniers” that we’re experiencing challenges in the fit between societal changes and our core product. At least when they decide to check in and write that next “sensationalism headline” they’re directionally correct in that it’s a mugging, not a fatal shooting.
Given that our harshest critics are not subscribers to our publications and the fact that the general industry perception is that we’re pessimistic on the golf industry in general, I’m sending this complete issue to our complete distribution list of over 30K stakeholders and industry observers for their information and entertainment. That said, for all of you who aren’t subscribers, you can continue the journey with us in the end August issue and beyond in one of three ways (all can be previewed and purchased at Pellucid’s website (www.pellucidcorp.com):
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What is the bedrock foundation of the sport and industry of golf that preclude golf from “death”?
Golf as a sport has several things on the positive side of the balance sheet which are at the heart of why the core of our consumer franchise plays and enjoys it:
• Sport for life – One of the key benefits of our sport which we don’t give enough emphasis to is that, unlike many other sports, you can enjoy it well past your “prime” health years. As we age and our aerobic capacity and muscle endurance fade, golf can still be played and enjoyed through middle ages and well into retirement (unlike baseball, basketball, football, soccer etc.). While we know that adoption of the sport earlier in life produces a much higher incidence of “players for life,” I do also think that we will get some dividend from the younger generations as they age and golf becomes a more feasible option than things like mountain biking, river kayaking etc. Our job is to make sure that, when they reach that stage in their life, we make it easy and accommodating for them to join the golfer ranks and enjoy it as quickly as possible.
• Exercise benefits and motor skills practice/improvement – I’m a big proponent of walking golf, even though I’ve now accepted the fact that I’m a pull-cart vs. a shoulder-toting walker (lugging too many A/V projectors on flights and through airports in my non-golf career). While I understand the benefits of carts in speed of play and revenue to the course, walking 9 or 18 is just a different experience across the terrain and the view than zipping down the cart path to your next shot. Given the explosion of “wearable technology” and the number of people counting their steps (they don’t seem to be getting in any better shape to me but they’re glued to those monitors daily…), I would think this is a benefit that we could up the volume on for the industry in general and also encourage more walking during non-prime time. There’s debate on the number of miles/steps/calories burned during even a 9-hole walking round but it’s definitely well beyond the “sedentary sport” rap that we often get in the general press.
• Sense of accomplishment and improvement from well-played shots – One of the few things that Joe Beditz and I agree on is the concept of “shot/hole/round euphoria.” There’s something about even the infrequent shots that turn out the way we planned them that provides lasting, positive satisfaction. As evidence, nearly any golfer will be able to recall in their last round those couple of shots or putts that were “pure.” It’s those couple of shots each round that keep the average golfer (like me) coming back to play even though the rest of the round was mediocre at best. There’s also an aspect of the gradual improvement in skill that’s rewarding and usually associated with more practice, more instruction and better-suited equipment (while I still maintain that the concept of being able to buy-a-better-game is overblown and more akin to “selling hope”). I think the golf industry at times either oversells or incorrectly sells this aspect as “the total discipline and sacrifice required to be good at golf” vs. just saying that with a few lessons, good (perhaps properly-fitted) equipment and a modicum of practice you can hit a few more good shots and enjoy the game even more. This leads to the virtuous cycle of more good shots translating to higher enjoyment which begets higher frequency and everyone wins.
• Social dynamics – While volumes have been written on the golf course as a deal-making venue, I believe that the even stronger force at play here for our sport is the social interaction between people and the “Cheers factor.” This happens at many different levels, the regular foursome, intrafamilial (father-son, father-daughter, husband-wife, family foursome) and even the random pairing of singles and doubles at the first tee. I’ve played a reasonable amount of golf as a single or twosome walk-on and can’t recall a single instance where I had a miserable playing experience. While I don’t deny that the business aspect of golf is a real factor and produces economic benefits, I think the more basic social aspect of golf (kindred spirits in shared frustration) acts as a foundational element to our sport as well.
• The beauty and serenity of nature and the “great outdoors” – I disagree with Mark Twain’s famous characterization of golf as “A good walk spoiled.” Once I accepted the fact that my game was only going to be as good as my proportional skill/time/practice and abandoned the expectation that I wouldn’t hit any truly terrible shots during any given round (particularly immediately preceding or following well-executed shots, go figure), my enjoyment level of just being out on the golf course in the middle of trees, water features, skies and sun went up exponentially. There’s a basic feeling of relaxation and being “unplugged” from the world (if you put your cellphone in your bag and leave it on vibrate) in a round of golf that I believe is an enduring trait of our sport to which people gravitate.
• Fun of competition from the simple $2 Nassau to tournament stakes – Colleague Stuart Lindsay puts this high in the “plus column” on his list. He believes that this is also something we don’t accentuate and leverage in that many golfers don’t understand the handicap system (while acknowledging that we could make it simpler and easier to understand as well) and there’s all sorts of fun that can be introduced in the average round among friends to produce the pressure & thrill of it all riding on that approach shot or putt on 18. Other features of our sport like scramble formats also can function as equalizers that allow participants to enjoy the sport more, like hitting from new areas (for me, that would be the fairway with a 9-iron approach shot for a change) and being the person in the foursome that sinks that long winding putt (after having seen the “read” from your fellow team members).
So that’s the plus side of the ledger from the participants side, let’s look at the positives from the business side of golf which mitigate the “death of golf” view of the world:
• It’s a collection of small and medium-size businesses, traditional growth engines in the overall US economy – Last time I checked, very few US consumers were cheering against the success of small businesses. As a nation, while we like the low prices and consistency that large chain retailers, restaurants etc. provide, we’re still rooting for and supportive of the individual owners, families and “quirkiness” of small businesses. The majority of golf courses epitomize this small business model and, as long as the owners provide good value, quality and genuine interest in their patrons, people will continue to reward them with their play, loyalty and dollars.
• Green space vs. development – Aside from the hard-core environmentalists, the general population recognizes the balance and benefits of green space that golf courses provide and they’re willing to “go-to-the-mat” to preserve and patronize them to avert the alternative of more housing or conversion to more commercial space (that one more strip mall and 10th Starbucks store in 3 blocks that we don’t really need). Golf benefits from being a (relatively) economically-viable green space protector which provides some insulation from the “death of golf” argument where they all close up shop in the near future and get the Joni Mitchell treatment (i.e. “they paved paradise and put up a parking lot”).
• Municipal activity and service – While there has been much debate since I entered the industry in 2001 regarding whether municipalities should be in the golf business or not, the fact of the matter is that they are and this continues to be a major factor in the health and stability of the industry. I’ve not yet seen a tidal wave of communities deciding to sell or repurpose their golf facilities (it seems that munis have on the contrary been “net buyers” of golf assets which I think isn’t their smartest decision but that’s a topic for another OtR) so this aspect of the business side of golf is also a stabilizing factor and mitigates the risk of a total sport/industry meltdown.
• Local charitable giving impact – My final inclusion in the business aspect of the industry which I place on the plus side of the ledger is the fact that golf does give quite a bit back to local causes and the community. I’m not talking about the PGA TOUR and the big splash, over-sized, televised checks aspect, I’m talking about the local kids’ recreational programs, caddy scholarships, local organizations fundraising outings etc. Golf as a business is as, if not more engaged, in “giving back” than the average small business and this fact lends stability and support to the business of golf and its place in the local communities across the country. When residents stop supporting their local courses with their rounds and dollars, this money goes away and that outcome also helps mitigate the mortality risk that the general media often overlooks.
Note that I didn’t include “history and tradition of the game” in the list of attributes that underpin the ongoing existence of golf as a sport and industry. While the USGA and other trade organizations play that card heavily and frequently, I personally don’t think that the average golfer cares much about the tradition and honor-system thing like calling your own penalties, faithfully recording every score ever played on any course or the experience of playing on the same courses and comparing your game to the top professionals etc. I know that’s important to some of the most avid golfers but I don’t think it carries enough weight to be an overall consumer “plus” in my book. So, that’s my list of the elements that I think underpin the existence and persistence of golf in the US; let’s now turn our attention to things from the last expansion cycle and hopefully lessons we’ve learned when we find the support point for golfers, rounds and revenue and start thinking about the next growth cycle.
What did we learn from the last “bubble” and current societal shifts?
What we learned from the last expansion period was that the golf industry tree won’t “grow to the sky” and there are certain gravitational realities that can be recognized during the next growth phase to help guide us to, hopefully, more intelligent and sustainable growth:
• Supply doesn’t beget demand – You cannot proactively build your way to prosperity. When Utilization Rates start climbing and exceed some threshold (let’s call it 70% for discussion purposes), then you’ve got the seeds of demand-based supply expansion. What added an additional twist to the optics was that golfers were saying accessibility was an issue but we didn’t ask the more probing questions to determine that what they actually lacked was access to the most desirable, weekend AM tee times. When you add supply, it needs more than just primetime demand to make it viable and profitable and until overall Utilization starts pushing that upper boundary, new supply is going to cannibalize vs. complement existing facilities
• You have to pay attention to the mix of the supply, not just the quantity – What I’ve found in 15 years of analysis in this industry is that the Public-Regulation supply distribution curve should resemble a bell shape. The largest amount of supply resides in the mid-range (Public-Value) and should be supported on either side by relatively balanced levels of Premium (top) and Price (bottom). This obviously varies based on things like the level of Private golf (usually depresses the supply level of Public-Premium) and Learning & Practice facilities (that act as alternatives for Public-Price golf), but I’ve found this to be a relatively reliable indicator of what the supply distribution looks like in healthy markets.
• There’s a limit to how much real estate-related golf any particular local market can absorb – I call this the “golf courses aren’t swimming pools” theory. When we were building them as amenities a majority of subdivisions in the same proximity (think northern corridor of Atlanta for example), I knew the end was near given that you can’t support golf courses with just homeowners’ dues and the recognizing that the participation level for golf is a lot lower than recreational swimming. As soon as the real estate developers couldn’t pawn off their unprofitable golf courses to starry-eyed, aspirational buyers or the homeowners associations, this reality set in and the ugliness started.
• Every municipality doesn’t necessarily need its own golf course – We’ve done work for a number of muni courses here in the Chicago area, the most interesting example is a course for a city of 3,800 residents (North Shore, not rural nowhere) which has its own course surrounded by cities/towns/villages of 20-30K population with their own courses. Even at a hypothetical 20% participation rate (due to affluence) for that city, they still don’t have enough of a golfer base to support their course from the resident population. Someone should’ve done the math on that and, in the future, maybe the municipalities can band together to figure out how many courses are needed and how reciprocal privileges might work to either reduce existing muni facilities or avoid building/renovating some number of them in the future. A corollary to this which time and space doesn’t permit, is whether, long-term, munis should be in the golf business…
• It’s much (much) harder to plow supply than plant it – Using the current cycle as support, it appears that the ratio of time to plow vs. plant is 2-3x. In other words, it’s taken us roughly 10 years to eliminate a supply build that only took 5 years. Considering that it took the housing market only like 3-5 years to shed and rebalance 20-25% of its inventory, we need to be very circumspect before the next trade association’s clarion call to “build, build, build” goes out.
• The operational component of the golf industry doesn’t move in tandem with the entertainment component of golf – While we did see growth in participation during the early stage of the Tiger era, the fortunes of the PGA TOUR and the average operator have diverged since roughly 2005 to current. The TOUR has done a masterful job of switching sponsors, inventing season-ending playoff formats and putting on shows like Golf 20/20 to keep the boat afloat as the economy and our industry struggled. While not exact math, I’d propose that if the operational aspect of golf had performed in lockstep with the TOUR (and the other media-related entities’ fortune tied to TV like the USGA, PGA of America etc.), we would be riding high with more than 30M golfers nationally and closing in on that 1B rounds/yr mark the Golf 20/20 folks aspired to (we’ve still got 3.5 years though to get there).
• Corporate behavior is subject to both positive and negative shifts – Very few (if any) really saw the meltdown of corporate-sponsored golf coming. In the next issue, I’ll discuss the topic of how corporate cost-savings has reached an artform and some firsthand experiences in a practice called Zero-based Budgeting. In this environment, where every expense is documented, scrutinized and put under a spotlight, we lost a meaningful source of revenue and profitability. Some of it appears to be making a modest comeback (which we’ll take) but the days of multiple corporate outings by the same company in a single season or the 5-7 day resort golf retreat paid for by the company are history. Like any other business, diversity of income sources is good and needs to be continuously cultivated with new ideas and ditching the old ones that are no longer trending upward.
• Status and prestige as the sole value proposition is subject to societal change – I’m reminded here of a maxim relayed to me by an industry veteran on the private club side in my early years: “Our ideal member is someone who pays their dues, doesn’t use the club and doesn’t participate in its governance.” I thought it was baloney then and the downturn of 2008 exposed it as such as the private club membership and initiation fees melted as the housing market collapsed and unemployment (particularly white-collar) swelled. In addition, the upcoming generations aren’t buying into the “badging” that comes with golf (corporate ladder thing, belonging to the fashionable private club etc.) so societal shifts also have to be recognized and adapted to.
• Golf is relatively price-inelastic – This one surprises folks and I have to give credit to Stuart Lindsay for pointing this out to me (repeatedly). Case in point, the average price of a round of golf is considerably lower today than it was in 2000. Somehow though rounds demand has plunged from 518M rounds at the turn of the century to ~460M rounds in ’15. If golf were price elastic, an approximate 10% decline in price (directionally correct but not mathematically calculated) should have generated more rounds of golf over this period than the base. So, for all those folks out there (our 3rd party marketing friends included) who think that discounting drives incremental rounds or attracts new golfers in and of itself, stop fooling yourself. Increased demand comes from a great customer experience, higher skill levels, good value and creating an environment that fosters fun. It’s really not any more difficult or complicated than that.
So, when we finally establish the support point in the current cycle where participation, rounds and revenue once again return to an upward trajectory (beyond the good weather year blessings), if we can keep the above principles in mind we should have a better shot at building a more sustainable (even if less dramatic in velocity) growth pattern the next time around. The good Lord willing, Pellucid will be around during the next upturn to remind folks of these booby-traps and we won’t let the cheerleaders amongst us insist that “this time is different.”
If I were King…
So Don, while I didn’t write the article you were asking for, the initial section above could be used for the general media inquiry probing on “the death of golf” and why it’s not going to happen in the near future or our lifetime for that matter. The second section is more for our industry internal consumption on how to avoid the next bubble when we finally get the ship righted and pointed in the proper direction.
In parallel, we could help ourselves significantly if we could avoid “self-inflicted wounds” like debates over square grooves for the common man, anchored stroke putting for mere mortals, solo rounds not counting for handicaps and televised rules snafus over the basic effects of gravity and grains of sand. Similarly, when I see things like golf reporters grilling professional athletes over personal and professional choices regarding where they do and don’t choose to play, it doesn’t endear me to the game (it does cause me to reach for the remote control to either change channels or mute the sound). While I don’t disagree that Rory McIlroy’s comments about gymnastics, swimming etc. being “the important things” was unfortunate, my needle stopped way short of the talking heads who unanimously agreed that he would “rue that comment for the rest of his life.” I’d put it up there with Charles Barkley’s comments years ago about, “I didn’t sign up to be a role model for your children.” These types of things where the tradition, history and honor of the game trump all other decisions, needs and choices just reinforces the perception that we serve the game of golf rather than it being a recreational pursuit that serves the purpose of the average American.
In closing, while I can’t attest to the accuracy of the following statements and facts, the below is in the signature line of former associate Harvey Silverman’s emails and provides as good a soundbite as any to respond to the “death of golf” inquiries (and then you can back it up with any of the more detailed support points in the opening section of this issue):
“golf courses are good for the environment, providing wildlife habitat, filtering runoff, and a 7-10 degree cooling effect compared to surrounding urban areas | golf is an excellent source of exercise | walking 18 holes burns up to 2,000 calories and meets most physicians’ daily fitness recommendations | golf contributes $68.8 billion and 2 million jobs to the American economy | golf raises $3.9 billion for philanthropic causes, more than all other sports combined”
The Pellucid file…..
Reader feedback:
The last issue on “Prices up, investor sentiment down, what gives?” got several interesting reactions, most indicating that the smaller, higher-end part of the market is seeing stability and growth while the vast majority of the mid and lower-end market still struggles with profitability/valuations, being big enough in gross revenue to matter to serious investors and lack of funding as restraints to the significant number of transactions needed to support the claim of “prices up.” One knowledgeable veteran in this area simply responded, “They are nuts.” We met for lunch the week following and he outlined his support, personal experience and results to back it up. The only real consensus point was that things weren’t getting any worse in the transaction market so I guess we can take some comfort in that until there’s either a) better data (more data points or better sample distribution across transaction types and geographies) or b) stronger support for why prices might be up.
Upcoming Speaking/Writing Engagements:
The July issue of the Pellucid Perspective was headlined by Jim Koppenhaver’s review of the leaked GolfNow Annual Sales Meeting video and why it wasn’t the “Wolf in Sheep’s Clothing Exposed” expose’ promised by other industry observers and service providers. If you missed the 7/15/16 issue, here’s a link:
We’re always on the lookout for additional sponsors at initial investment levels as low as $5K for six months for 1 half-page ad per issue. We’re continuing our successful options led by an attractive 12 month package consisting of a slight monthly discount ($9K annual) and a bundling of Pellucid information services for your organization (i.e. OtR, State of Industry, Weather Impact etc.). We’ve also recently opened options for 3 month sponsorships and less-than-half-page layout options for organizations which want exposure to Pellucid’s audience and our respected publication but can’t commit to $5K initially. For any of you interested in exploring further, contact Jim Dunlap (jdgolfer@cox.net or 760-212-3714).
Product News:
As announced previously, we recently released the ’15 update for the National Consumer Franchise Scorecard product which is delivered in Excel and contains the summary graphs from last OtR and the supporting figures at lower levels of granularity in tabular format (i.e. golfers, participation, frequency variables for 8 age and 7 income groups as well as comparisons to the 5-yr trend values for all variables). As mentioned in the opening section, you can acquire this information one of two ways:
1. Become a Pellucid Publications Member ($495/yr, 40% discount vs. purchasing separately) – PPM subscribers receive all Pellucid publications as part of their annual membership. This includes:
• Outside the Ropes – monthly digital newsletter
• Geographic Weather Impact Tracking
• National version – Monthly report at US, 45 regions, 61 markets levels of the change in Golf Playable Hours and Utilization Rates (weather-adjusted rounds demand)
• Local version – Cognilogic facility-level weather impact, unlimited web access for 1 yr period (Golf Playable Hours & Capacity Rounds, month, current year-to-date, full year projection, 10-yr Normal)
• State of the Industry suite – as described above
• Market Scorecard/Analysis
• National version – Top 25 US Golf Markets Health Scorecard – Excel spreadsheet of over 20 metrics and a relative, composite ranking of markets from San Diego to St. Louis
• Local version – Golf Local Market Analysis data workbook (15, 25, 30 minute drivetime demographics, golfer base, supply/demand balance and benchmarks and facility list
• National Consumer Franchise Health Scorecard – Size, shape, involvement trends and projected trajectory of the golf consumer base
2. a href=”http://www.pellucidcorp.com/purchase-reports/category/8-national-golf-consumer-franchise-health-scorecard”>Purchase the National Consumer Franchise Health Scorecard via our website ($199)
Pellucid is continuing to update and refine its latest product offering, the Internet Golf Course Database (IGDB). After years of frustration with existing facility database sources and the bad economics of trying to compile and maintain one on our own, we’ve joined forces with 3 other golf service providers, Apparation, Never-Search and Golfcourserankings.com and built the IGDB. Pellucid has been using it for several months now and the supply level and change figures from this year’s SoI are sourced from IGDB. We’re looking for 4 (paying) charter partners in ’16 to come alongside our efforts/investment; if you’re currently using or licensing a golf facility/course database and need better quality and quarterly updates, contact me and I’ll provide details on facts, accuracy and pricing.
One final note, we launched our ’16 State of the Industry presentation given in Orlando in January at the PGA Merchandise show as a pay-per-view (actually 1 day access) in July. It’s available via the Pellucid website and, at $9.99 for the 75 minute tour through the industry metrics, trends and key “look-outs”, it’s a compelling value (as noted above, Pellucid Publications Members get unlimited access to this video for a year as part of their package).
As always, samples of all our publications, reports and services are available on the Products page of the Pellucid website. Thanks for your continued support as an OtR subscriber, keep those cards and letters coming!
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