COMPANY NEWS and Recession and Funding and Golf and Economy and Finances and Sports Business

Recession slices into golf business; courses roll out promotions

April 13, 2009

A warm March gave Indiana golf course operators something to smile about as many of them saw business increase tenfold over the same month last year.

But that didn't quell their economic fears. Local course operators are still as nervous as a long-ball driver facing a stout crosswind.

"I don't think anybody knows exactly what 2009 will bring in this industry," said Don Essig, whose company operates four central Indiana courses and manages some of the area's biggest tournaments. "With all the corporate downsizing and job layoffs, we're just kind of bracing ourselves."

The signs are difficult to read—even for a veteran operator. Officials at Brickyard Crossing Golf Resort at the Indianapolis Motor Speedway said more than 700 rounds of golf were played there this March. That compares to 29 during the same month a year ago.

On the other hand, entries in one of the state's oldest and biggest tournaments, the spring four-ball tournament at South Grove Golf Course, totaled 160 teams, about half the norm.

"That's a 62-year-old tournament," Essig said. "When the turnout for a storied tournament like that is down that much, it certainly shows people aren't playing as much tournament golf."

Even more troubling, Essig said, is that the biggest drop in play is occurring in the 30- to 45-year-old age group.

"There's been a paradigm shift that we all have to be aware of," Essig said. "People more often have to choose between spending time and money on their family and children and playing golf. And there are far fewer shift workers at places like the automotive plants. That has killed weekday play. The people that used to fill those tee times are simply gone."

And with corporate sponsorships drying up, Essig said he has seen a double-digit percentage drop in charity golf outings this year.

Central Indiana isn't the only region where golf is taking a beating. The number of rounds of golf played nationally has been declining since 2000, when 518.4 million rounds were played, according to the National Golf Foundation. Rounds played dropped from 498.1 million in 2007 to 489.1 million in 2008.

"Friends in the business tell me golf is hurting nationwide, and that includes hotbeds like Florida," said Tony Pancake, golf pro at Crooked Stick Golf Club in Carmel.

Widespread challenges

Pancake said no club or course—private or public—is immune.

Crooked Stick has seen more membership attrition in the last six months than in the last six years, Pancake said, but a lengthy membership waiting list has kept the club at its 225-member capacity—for now. The waiting list for membership has dwindled from a three-year wait to a one-year wait.

"Fortunately, we cater to hard-core golfers," Pancake said. "For many of our members, golfing is a big part of their lifestyle. For clubs whose members are only casually interested in the game, they're much more apt to be hurt by big membership swings."

Startup clubs and courses have been especially hard hit. So, too, have those clubs that are counting on a fledging housing development to bolster their membership ranks.

Such was the fate of the Sagamore Club in Noblesville. The much-ballyhooed Jack Nicklaus-designed course opened amid much fanfare in 2003.

But in late 2008, the club fell on hard times as development of its surrounding upscale housing subdivision lagged and membership didn't reach projected levels. When the bank called in its loan in December, there was fear Sagamore would fold.

But Michael Jenkins, president of Lincoln, Neb.-based Landscapes Unlimited, wasn't about to let that happen.

"While the economy is a challenge right now, we feel this course has a lot of potential because it's in the middle of a very fast-growing area with strong demographics," Jenkins said.

Landscapes Unlimited was involved in building the course and is one of the original investors. It bought a majority stake to infuse capital into the project when it faltered. The company also bought out another original investor, Arizona-based Troon Golf, which operated the course until earlier this year.

Bailing out Sagamore wasn't without risk—and it wasn't cheap. Landscapes Unlimited wrote down $3 million and added $1.5 million as part of the deal that gave Salin Bank the confidence needed to rework the mortgage. Several private founders exchanged their $100,000 investments and charter members their $40,000 investments for a small equity stake to shore up the club's finances.

Still, the club faces a steep climb. It needs to sell the remaining 73 of the original 330 lots unsold in the housing development, which Landscapes Unlimited has taken over. And the club needs to sell 60 to 100 more memberships to add to the 330 golf and 60 social members the club already has.

Shakeout continues

"The golf industry was already hurting before the economy started tanking, and things have only gotten worse," said John Snell, owner of locally based Snell Real Estate Evaluation, which works closely with numerous golf course properties. "I'm not sure anyone thinks we have hit bottom yet."

The problem is compounded in central Indiana.

"For several years, this market has been overbuilt with too many courses while the number of players simply hasn't been increasing at near the same rate," said Mike David, executive director of the Indiana Golf Office, the organizing and sanctioning body for golf in Indiana.

Several central Indiana courses have gone out of business in recent years, and David thinks the shakeout isn't over. The most recent victims were Cattails Golf Club in Elwood and Edgewood Country Club in Anderson, which have been put up for auction, David said.

But local course operators think golf might have a place in the country's changed economic landscape.

"Studies show that people won't stop seeking forms of recreation during an economic downturn," said Jeff Schroeder, Brickyard Crossing general manager. "People won't stop playing golf; they'll just carefully chose which courses they play."

Brickyard Crossing is one of many courses to launch special promotions and price reductions. Brickyard Crossing launched a month-long "Pay the Temperature" promotion in March. For instance, if it was 50 degrees, players paid $50 to play 18 holes. That's considerably less than the normal $90 greens fees.

"Well over 50 percent of the people who came out during March had never been here before," Schroeder said. "That type of exposure is invaluable."

Schroeder said memberships in the semi-private Brickyard are down slightly from last year, but he hopes some of those who were recently introduced to the course will return and bolster membership. In light of the strong March, and other promotions planned this year, Schroeder is hopeful he can exceed his 17,000-round projection for this year.

Essig is also cautiously optimistic that a strong March is a sign of things to come, but he hasn't forgotten about the dark clouds overhead.

"While promotions are great at attracting some people, most in the business are concerned that deep, deep discounts will devalue the game in the long run," Essig said. "Nobody wins in these price wars. I think the courses and clubs that survive will be those that maintain superior service to golfers."

For now, he said, special promotions and deep discounts might be necessary survival tools.

"The one thing we in this business all have to admit," Essig said, "is that golf is one thing people who are hurting economically can cut out of their budget."

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