Recession and Golf and Economy and Sports Business

Wet spring, slow economy slice into area golf business

August 25, 2008

On a typical Saturday at Smock Golf Course on the city's south side, visitors are treated to a symphony of thwacks, pings and the occasional plunk.

In good or bad economic times, it seems, people in Indiana and across the country have always played golf.

But these days, the sound of that symphony has waned.

"It's been kind of a brutal year," said Jan Tellstrom, golf director at Smock, a municipal course.

Nationwide, the number of rounds of golf played through the first half of this year is down 2 percent from last year, according to the National Golf Foundation, a Florida-based firm that acts as the industry's primary research arm. In central Indiana, the situation is worse. Course operators are reporting play decreases of 6 percent to 10 percent.

In a summer that has seen $4-a-gallon gas and higher household expenses across the board, the economy has definitely turned into a sand trap for the golf industry.

"We're going to be OK, but I do think you'll see more and more courses close in this area," said B.G. Winings, general manager and head pro at The Trophy Club, a semi-private course in Lebanon. A semi-private club offers members discounted rates and first shot at tee times, but welcomes non-members, too.

With cost-conscious golfers using coupons or playing during discounted twilight sessions, revenue declines have been steep. Contributing to the decline are golf course pro shops, where sales are down 10 percent to 25 percent this year, according to area golf course managers.

"With the way things are for some people financially, some of our visitors are deciding they can do without that $50 shirt with our logo on it," said Jeff Schroeder, head golf professional at Brickyard Crossing Golf Club, a semiprivate course on the grounds of the Indianapolis Motor Speedway.

But fiscal woes haven't been the only worry for Indiana golf course operators. During the height of the local golf season--May through July--the state was pounded by record rainfall and several tornadoes.

"The rains created incredible problems," Tellstrom said. "We had turf damage, bridge damage, and we lost some real critical weekend dates. They were just simply washed out."

Typically, a golf course makes half its revenue on the weekend and half Monday through Friday.

"This year, we've had 30 inches of rain since June 2," said Ted Bishop, general manager of The Legends of Indiana Golf Club, a semiprivate club in Franklin. "When you talk about losing a Saturday or Sunday, that's 25 percent of your revenue for the week. And we've lost a few of those."

Golf course managers across the central part of the state have reported being completely washed out 20 to 25 days this year, with another 10 to 15 days partly rained out.

The number of rounds played at Smock is down about 10 percent this year from last year, Tellstrom said. Smock was down nearly 20 percent, but pleasant August weather has allowed his course to cut into the deficit.

"At one point, we were up to $80,000 behind last year," Tellstrom said. "We're a relatively small business, so that's a big chunk for us. Thankfully, we're only down about $15,000 now."

The Trophy Club in Lebanon--where course operators said most patrons drive from 20 minutes away--has seen its greens fee revenue drop 8 percent. Weekends are down 11 percent.

Declining revenue isn't golf courses' only challenge, Schroeder said. Expenses have also increased 5 percent to 8 percent for most courses.

"We've seen cost increases in everything from fuel to herbicides and pesticides," Schroeder said. "With the volatility of petroleum prices and the impact it has on other goods we need, it's really made our expenses difficult to gauge."

Supply and demand issues

While the weather and economic downturn might be short-term concerns, the golf industry faces a longer-term challenge: a static number of players.

Despite all the hype about Tiger Woods' influence, the number of U.S. golfers has remained at 26 million for more than a decade, according to the National Golf Foundation.

"We are [still] waiting for the big Tiger effect," Chip Essig, who owns Hickory Stick Golf Club, a public course in Johnson County, and is part-owner of a management firm that runs other courses, told IBJ last November. "The number of people who watch golf is bigger, but it hasn't changed the number of younger players replacing golfers who are retiring."

An oversaturated market hasn't helped, said Mike David, executive director of the Indiana Golf Office.

A boom in golf course construction boosted the number of U.S. courses from 12,846 in 1990 to 16,052 in 2004. During the same period, the number of Indiana courses increased from 375 to 456.

Today's problems date to overly ambitious growth expectations in the industry in the late 1980s, years before Woods became a pro in 1996. Back then, the U.S. was adding 100 courses a year. The National Golf Foundation suggested then that, to meet future demand, the country would need the equivalent of one new 18-hole golf course a day for a decade.

"The growth rate leveled off, and we didn't meet the projected level of demand," David said.

The shakeout has begun. Since 2004, closings nationwide have reduced the number of courses to 15,990, according to the National Golf Foundation. Indiana is down to fewer than 450 courses.

Britton Golf Course in Fishers, Golf Club of Brown County in Nashville, and Logan's Run Family Golf Club in Logansport are among the Indiana courses that have gone out of business in recent years.

New generations of potential golfers have plenty of other activities to consider these days, including soccer and video games, which tend to be less costly than a set of clubs, balls, greens fees and lessons. Even avid golfers, David said, are pulled in more directions.

"Times have changed, and people's leisure time is at a premium," he said. "It's not easy to get people to set aside four or five hours to play golf even once a week."

That leaves many courses in a dog fight.

"There are eight to 10 public courses in central Indiana fighting for the same golfers," Schroeder said. "Then you throw in the country clubs, and you have a tough situation. If everybody's product is similar, it's a free-for-all."

Service with a smile

That free-for-all atmosphere has changed the way courses operate, with a large number offering more discounted rounds and ramping up the services they offer. With daylight-saving time in effect here, twilight specials have become especially popular the last two years.

Smock has launched family specials this month, where a family of four can play nine holes, without a cart, for $23.

"We're doing everything we can to stay on people's radar screen," Smock's Tellstrom said.

Some course managers shudder at wholesale price slashes with fears that, even if the number of rounds played increases, the slight revenue gains won't offset increasing expenses.

The average price nationally for an 18-hole round of golf is $50, according to the National Golf Foundation. Where population densities are high, and the corporate atmosphere is relatively robust, the average is higher. Chicago, for instance, has an average cost of $95 for 18 holes. The cost of playing in Indiana, however, seems to be declining. That might send course revenue plunging.

Tellstrom said it's time for a paradigm shift in golf operators' mind-sets. He said customers want flexibility in how many holes they play, a more thorough introduction to the game, and better instruction once they're hooked.

"The days of the arrogant, aloof golf course manager are over," Tellstrom said. "Customers' expectations are changing, and that has some in the industry pretty uncomfortable. I agree, prices now are about as low as they can go. So [golf course operators] are going to have to improve their services--or go out of business."

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