Volume 2, Issue 3 – March 2012
Fellow Citizens of Crazy Town -
Clearly the golf industry has not been immune to the challenges presented by the economic climate of the past several years. The headwinds of the recession, time compression and the pressure on discretionary spending are realities that nearly every U.S. business sector is reckoning with…so why does golf absorb a disproportionate amount of negative yakking?
Golf remains a very popular target for the media, presumably because of its perception as an elitist, discriminatory and expensive game. The data, however, shows that golf is played by a broad cross section of Americans. This image challenge will be the subject of a future Mayor’s blog or Dashboard article, but consider that nearly one out of three Core golfers (you know, the people who play more than 90% of the rounds and account for more than 90% of spending) have incomes less than $50k annually. Recreational golf is not what you see on the PGA TOUR each weekend…and it’s not always CEOs playing Seminole either…it’s John, Bill and Kathy playing Simi Knoll.
In any case, many media outlets have concluded that their audience will be attracted to articles that bring golf “down a peg.” Clearly, other business segments (including recreational activities) have struggled with the loss of customers/participants and the closing of doors/facilities…but they rarely attract the same level of attention or pervasive negativity from the national media.
As the golf economy and its businesses react to the imbalance of supply and demand; exaggerated by five-plus consecutive years of attrition in golfers and rounds - we can expect the next decade will be one of supply contraction. Golf courses will continue to close as part of the natural market correction and the volume of golf course transactions will also rise. Neither the closures nor the transactions are bad for the golf industry…but the heightened supply-side activity will inevitably be covered negatively as presumed indications of golf’s pending demise, both locally and nationally. The pattern and content of recent media requests to ‘da Mayor reflect this.
NGF recorded 157.5 closures (18HEQ) in 2011 versus 19 new openings. The net loss of 138.5 may be the largest number since we began detailed tracking in the mid-80s, but it still represents less than 1% of facilities.
IN FACT, FOR THE SIX CONSECUTIVE YEARS OF NET CLOSURES, THE CUMULATIVE NET REDUCTION WAS 358.5 18HEQ. THAT’S LESS THAN THE NET GROWTH OF 362 WE HAD IN THE YEAR 2000 ALONE.
The point is that these recent closure figures should not be alarming to you, nor do we suspect they would raise the eyebrows of leaders in any mature industry with 16,000 doors. We do believe this is the right time to consider how to re-frame the discussion of the contraction we’re seeing. We do not yet know whether the downward trend in participation or rounds played will reverse itself in 2012 (we suspect they will), so efforts to reposition this conversation should probably be skewed toward the supply-side. We have spent time looking at both unmanaged scenarios expecting no demand side growth…and “managed” scenarios where higher retention and new player development efforts like Golf 2.0 work to grow our franchise of players and the rounds numbers.
Please take a look at this month’s Dashboard article covering the 2011 openings/closures and review the “NGF Industry Supply Index” which tracks the ratio of golfers per 18HEQ. The baseline index of 100 was determined using the average number of golfers/18HEQ for the five years from 1986-1990. This is one way we track how reduction in supply will actually deliver a positive effect to the engine of our industry…golf courses.
To help you respond to any media requests you may receive, or queries from within your own organization, here are some highlights and speaking points:
- There were 157.5 closures and 19 openings in 2011 for a net supply reduction of 138.5 golf courses (in 18-hole equivalents). This represents less than 1% of supply.
- Course closures continue to be disproportionately lower-priced public facilities, including a large number of 9-Hole courses.
- Since the “correction” in supply began in 2006, there has been a cumulative reduction of 358.5 18HEQ. That’s only 2.4% of the U.S. course total prior to the decline.
- In 2000 alone, we added 362 courses, more than the entire recent cumulative six-year reduction.
- Since 1991, the number of 18HEQ in the U.S. has grown by 30%, outpacing golfer growth of 6.5% over that span.
- The current correction in supply is overdue, and necessary to help restore a more healthy equilibrium between supply and demand. The correction is likely to continue for the foreseeable future. According to NGF’s “Golf Course Supply Index,” the ratio of golfers to golf courses is still 17% below where it was 20+ years ago.
Cheers from the HMCT (aka Greg Nathan, NGF)
Why “Mayor of Crazy Town?”
I invite you to click here to read the first installment of this blog.