A recent headline in the Wall Street Journal titled, “Restaurants Burned by Oversupply” elicited a mild sense of Schadenfreude (pleasure derived by the misfortune of others) in my mind as I related that to the struggles and situation we’ve been fighting in the golf industry for over a decade. On the one hand, it helps me rationalize that golf is not unique in the situation we created for ourselves; that of building supply without any quantitative support for increased demand. On the other hand it’s slightly comical that golf has gotten the “industry in the rough” or the more provocative “golf is dead” banner ad from the media in reaction to our situation while restaurants are simply “burned” in media coverage or they describe the seismic shifts in retail as a normal, cyclical correction.
Be that as it may, in this issue we’ll take a look at some of the parallels between golf and the “rightsizing” of other industries, what’s common and we can learn from and what’s unique to the disposal of a golf course asset vs. restaurants and retail stores:
• Restaurant industry contraction is similar in magnitude (~1% annual reduction) and elongation (it’s 5-10 years from equilibrium) to what we’ve experienced in golf
• The Retail industry is a unique combination of myriad new formats, channel shifting between physical and virtual stores and a moderation of demand which makes is reflected more in the golf retail stores sector of our industry vs. our facility supply-demand challenge
• Looking at the preview of supply change for ’16 from the Internet Golf Course Database (IGDB) resource, the closure pace is picking up but the absence of demand growth keeps moving the equilibrium goalposts further back as well
The net storyline is that we’re not alone in our current supply-demand imbalance among US industries but we do have some unique constraints on rebalancing by which other “smaller-fooprint” industries such as restaurants, retail and hotels aren’t similarly encumbered. The other unique challenge we face is that food spending isn’t necessarily discretionary while other industries like retail generally show consistent growth in all but dire economic circumstances. Golf, on the other hand, is considerably more influenced by discretionary time and spending decisions so there’s no underlying foundation for golf stability, let alone growth absent what we drive. To paraphrase an old advertising tagline, “We create demand the old-fashioned way, we earn it.”
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