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Glut of local golf courses puts squeeze on owners: Demand has never quite met expectations

November 12, 2007

Tiger Woods, the world's No. 1 golfer, has been great for the sport. But he has not helped attract enough players to the game here and across the country to keep pace with the numbers who are stepping away because of age.

That means many local golf course owners are closing the books on another tough season. Some area owners have seen the number of rounds played decline 40 percent since 2000. Golf course values here, meanwhile, have slid about 30 percent in the past few years.

"We have seen courses close, and I don't think we won't see more," said Mike David, executive director of the Indiana Golf Office, an umbrella organization that includes five not-for-profit groups. "In the next three to five years, there will be more in that same boat. Unfortunately, I don't see the number of new golfers keeping the current number of courses going."

At the end of 2006, Indiana had 425 18-hole-equivalent courses, a decline of 4-1/2 courses that year, according to the National Golf Foundation. (Nine-hole courses count as a half.) From 2001 to 2006, Indiana saw 14-1/2 courses close, a 3.4-percent decline that ranked it among the top 10 states for closures during the period.

The hard times mirror a national trend. In 2006, 119-1/2 courses in the United States opened, but 146 closed-the first time in six decades there was a net decline in courses.

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

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 number of U.S. golf courses was increasing nearly 100 a year. The National Golf Foundation suggested that, to meet future demand, the country would probably need one new 18-hole-equivalent golf course a day for a decade.

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

As a result, course owners aren't collecting the revenue for greens fees and cart rental they'd anticipated.

"There is a proportional relationship between revenues [from fees] and value," said John Snell of Snell Real Estate Evaluation, explaining the approximately 30-percent decline in local course values.

With a drop in course values, owners are forced to increase the efficiency of their operations without reducing the quality of their product or face possible closure or bankruptcy.

In 2004, Essig and his father purchased the 180-acre Hickory Stick course in a foreclosure sale from a bank. The course was adjacent to the planned Hickory Stick Crossing housing development, where houses were projected to sell for $400,000 to more than $1 million.

Essig, who also is president of the Indiana PGA, said he and other owners must work hard to shave costs and keep their courses viable.

"You are seeing a lot of courses looking for deals on equipment," Essig said. "Every line item [in the budget] is at risk right now."

For example, he said, "Does a $43,000 mower do a better job at mowing than a $25,000 mower? I doubt it."

In a separate deal from the golf course, locally based Scott Homes purchased the Hickory Stick Crossing housing development in September and plans to build on the existing 60 home sites and add 150 homes on an additional 60 acres.

The Britton Golf Course in Fishers closed in the spring and was sold to a developer that is transforming it into commercial and recreational uses.

But that can't happen in other parts of Hamilton County, Snell noted. Carmel rezoned several courses as parks a few years ago, forcing owners to maintain them as green space.

Remaining courses are exploring ways to attract more golfers and to get them to play more often.

Last year, for the second year in a row, the Indiana Golf Office held four player-development events. They featured demonstrations, free lessons and vendor booths. Two were in Indianapolis, while one was in Evansville and one was in Fort Wayne. Indianapolis Colts players attended the Indianapolis events.

The program will be expanded to six events next year.

"We are doing anything we can to generate excitement about the game," Indiana Golf Office's David said.
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