‘The worst is over for most golf clubs’

Martyn Clapham
By Martyn Clapham May 19, 2015 16:43

The director of an organisation that markets golf clubs to potential buyers has said that the worst of the financial problems that has beset the industry has come to an end.

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Golf clubs have struggled since the financial crash in 2008, with many unable to raise revenues for vital improvements, which in turn has seen their membership numbers drop dramatically. This has coupled with a general fall in participation in golf, which has seen several clubs go out of business and many more teetering on the brink. Furthermore, several struggling clubs have been criticised for having an unprofessional culture that has contributed towards their downfall.

However, Ian Simpson, director of Savills Oxford, has said the worst is now over for the industry. Simpson said that an upturn in leisure spending, an increase in farmland prices and changing planning regulations mean there are new options mixed with new optimism for golf clubs.

“Although it is too early to predict potential growth and turnover, we believe that for many clubs the most challenging years are likely to be behind them,” he said.

“Upturn in spending is apparent and likely to translate into increased leisure spend, although the difficulty for many remains having the spare time for leisure activities such as golf.

“Even at the lower end of the market, there is reason for optimism, with the market remaining underpinned by alternative use values. National farmland prices on average are now close to £10,000 per acre and therefore the number of courses reverting to pasture land on sale is likely to rise in coming years. This is particularly the case in more remote areas where populations are low, as well as in better locations where too many courses were developed in the boom years of the 1990s.

“For those clubs which are fighting for existence, the difficult decision is whether to invest further or cut the losses. Where income is stagnant or falling, clubs may consider redevelopment of certain assets or expansion of their existing property. National planning policies are evolving to enable more development in some areas, which may assist owners with redundant clubhouses and unused farm buildings.

“Where sites are tight for an 18-hole course, there may be scope for a redevelopment or rearrangement of the layout to create a more challenging course of nine holes and using part for another use such as a practice area, perhaps funded through land-filling. This is a bold move however, as it can mean much disruption to play and loss of earnings for that period. Particular attention should be paid to underperforming assets where there is local housing need or potential can be identified for holiday accommodation.”

Simpson added that the growth of alternative golf courses is also helping the industry.

“If a full-scale redesign is not something that would fit on a particular property then there is potential to consider enterprises on the course such as FootGolf and DiscGolf,” he said.

“There are now nearly 12,000 registered FootGolfers and an increasing number of centres for them to attend. Golf businesses can allocate block time slots to take advantage of the opportunity without having on-course conflict between golfers and footballs – particularly given the differing sizes of the pin!

“We have been busy with valuations over the last six months, seeing a number of owners reviewing their funding to be able to expand through the addition of facilities or further sites, which is an encouraging sign that many owners are seeking the adaptability to prosper. We have also visited a number of properties and clients across the UK and Europe discussing disposals, of all scales and so we look forward to a much improved level of opportunities for investors over the coming months.”

 

Martyn Clapham
By Martyn Clapham May 19, 2015 16:43
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15 Comments

  1. Bob Braban May 20, 13:23

    This has to be taken in context. Savills is a general estate agent that sells golf clubs as part of a very large portfolio and whose ebullience about any sector of the market is the best advertising they can get. Did you ever hear an estate agent say “actually, although we’d love to sell you this you’d be buying a pup”? Savills suggest that lack of available funds for improvements is a factor in declining memberships. It may be, but it is miniscule. Similarly, with supply exceeding demand by several hundred golf clubs, a few reverting to farmland is going to make very little difference.

    From a general business standpoint the fact that there are now 12,000 people registered to kick a ball around a golf type layout may offer business opportunities to the owners of the venue, but it has absolutely nothing to do with golf.

    Whatever Savills forecast, the problems with golf club management and marketing remain substantially the same as they have been for the past twenty years and all the evidence is that the problems are getting worse rather than better. Somewhere there may be enormous pockets of juniors taking up the game, but I have been unable to find them. There is every reason to believe that this vital element of recruitment has been damaged by loss of coverage on mainstream TV as the PGA milk every penny from media revenues whilst consequentially suppressing the publicity that is so essential to their own survival. Leading on from there, if potential players do not start as juniors, with the pressures of time and finances that haunt the labour market of today, there is far less likelihood of them starting until they reach retirement age and in the next few years even that market will start to decline as the ‘golden age’ pensioner becomes a lot rarer. There are other routes into golf such as migration from other sports but it is important to remember that existing players bring people into the game. They don’t get sent in.

    Although Savills may be guilty of an advertising puff, in essence they are not wrong to promote optimism to those who may be considering acquisition of a golf club as a business. There are few golf clubs that may not be viable, but with tolerably good management the majority can be turned into effective businesses, albeit at the expense of competitors in their geographic area. Too many members’ clubs persist in pursuing management practices where tradition and sentiment allow the maintenance of an unjustifiably high and unsustainable cost base. At the same time the main recruitment thrust is frequently focused on trying to create markets that simply do not exist at the expense of those that do. Business managers are not hampered by those practices. Their directors ‘direct’ and their professional managers ‘manage’! A far cry from the club practice where all too frequently the directors attempt to ‘manage’ and the professional managers ‘clerk’.

    Bob Braban
    http://www.golfclubmarketing.org

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    • Andrew Craven May 22, 08:52

      Perhaps a little unfair. I have no loyalty to Savills but they are with a handful of others such as KPMG considered to be robust advisors in the golf industry. Savills sit on the bank credit committees for most golf deals, most credit committees turn down golf deals because they are almost never a ‘pup’.

      Reply to this comment
      • Bob Braban May 22, 14:00

        The relevance of Savills is really to the commercial end of the industry and their prime function is to sell property. Talking it up is a perfectly normal business strategy and is to be expected. Overall, what they say has very little to do with the health of members’ clubs, now or predictably in the immediate future. Although most are very cautious, the danger is that some members’ club management committees might identify with this over-optimistic forecast and do themselves some damage in the process. However, as I said earlier, where Savills have credibility is that the market seems fine for the proprietor who buys the right club. With tolerably good business practice that club could quickly out-perform local committee run competition and become very successful. Of all sectors of the leisure industry golf clubs are probably the worst equipped to resist competition.

        Reply to this comment
    • Jeremy White May 23, 07:51

      Some great comments, Bob, particularly regarding the business benefit of managers over committees and the dearth of juniors. Just on the 12K registered Footgolfers, it may have nothing to do with golf itself, but it certainly seems to represent potential value to golf clubs as far as using some of their excess capacity. I am not a footgolfer. It just seems pragmatic to explore alternative “golf-themed” activities to generate revenue. Footgolf, disc golf, speed golf and others exist in part due to the legacy issues in golf participation, so business managers of under-performing clubs would feel duty-bound to review them as potential income streams.

      Jeremy White
      http://www.connectgolf.com

      Reply to this comment
      • Bob Braban May 23, 10:41

        You are right of course Jeremy. Where there is spare capacity and potential for development of alternative activities, almost anything that will increase the revenue stream should be looked at. Most of the people I work with don’t have anything other than their 18 hole golf course so they have no way of introducing alternative activities without degrading their existing business. If they do that, they will see a mass exodus of existing customers. If there is one thing that established golfers have in common it is a very conservative attitude to their sport. They like the existing arrangements. Many see shortening of courses and an increase in hole size as an insult to their ability. They are on the course to be challenged and in my experience the majority would rather get an average score on a difficult course than a great score on an easy one. “I got 32 points at Wentworth” is a much better bragging theme than “I got 45 points on the short course at …….”. I was once told that the definition of hell was “a hole in one at every hole” I don’t see any of that ilk taking to other golf themed activities. That leaves mainly new customers and despite many years of marketing experience I struggle to see ways of enticing them into a hybrid activity that has no exposure in schools, no general media exposure and no role model history.

        Most business managers will be forced to rely on developing their core business. From my travels I have absolutely no doubt that in almost all clubs this is achievable, particularly in an area where there is weak management of competitor clubs and at this time that is frequently the case. Of course there are managers who are simply ‘seeing out their time’ or have just given up trying to have an influence over the business activities of their club and just ‘clerk’ from day to day. However, in my experience there are an enormous number of managers who cannot make progress because they are thwarted by committees comprising people who are good at golf, have been members for a long time or are simply well liked by their peers, all splendid assets, but not qualifications for running a business. I was recently told “We shall be fine now we have some financial expertise on the management committee” The newcomer was a 26 years old bank clerk! Managers go into management because they want to manage. Many see clearly the way ahead, but a committee that has little experience will always be cautious, often to the point of fear. The most frequent decision many make is to leave it until the next meeting to see if things have improved. All this is good news for the club that has a manager that is allowed to manage. They are the ones that will emerge from the pack.

        Bob Braban
        http://www.golfclubmarketing.org.

        Reply to this comment
        • Jeremy White May 24, 12:30

          Thanks again, Bob, for the detailed reply.

          I am a 35 year casual golfer and child of Generation X. It is foreign to me that members’ attitudes towards the health of their clubs would be to cut off their noses to spite their faces. Would they really prefer to see their clubs go under than be tainted by footgolf or other non-golf revenue streams? Even if they didn’t have to participate?

          If yes and managers have to focus on the core business of golf, what you are saying is better management practices will undermine neighbouring facilities’ profitability. It flies-in-the-face of the “grow the game” statements, repeated ad nauseum by pretty much everyone in the industry. For the better managed clubs to improve their performance, the reality is further rationalisation would be needed.

          I see a lot of similarities between our market in Australia and yours in the UK. Most clubs are semi-private and presided-over by volunteer committees, often without the requisite business acumen to properly see their clubs through these lean times. However, I do see an opportunity within my demographic of casual golfers, or social golfers as we call ourselves here. As you know two-thirds of golfers are now casual. We want to play more golf, but our opportunities are limited by work, family, non-golfing friends, and the busier nature of modern lifestyles. Opportunities are also limited by golf club management practices. Non-member visitors can still be treated like second-class citizens, even though most of us are golf-tragics with good skills, knowledge of, and respect for the game. We would play more often and be club members if more flexible options existed, but sadly they are thin-on-the-ground. It feels like I need to be retired before I can get proper value from a membership subscription.

          In your golf advisory travels, what sort of recommendations do you give to clubs regarding the casual golfers opportunity and what sort of reaction do you get?

          I know you only touched on it, but I’m sure we could also have a great discussion about junior golf and pathway programs (or lack thereof).

          If you prefer you can contact me via email: jeremy@connectgolf.com or via LinkedIn: https://au.linkedin.com/in/jjpwhite

          Jeremy

          Reply to this comment
          • Bob Braban May 24, 22:12

            Hi Jeremy,

            I’ve just seen your post and it raises some very important discussion points. I’ll respond in detail tomorrow. I’ll keep it on here as the focal article is available if anyone else is interested.

          • Jeremy White May 25, 14:42

            Hi Bob

            This discussion has inspired me to write some more on this topic on my company blog. You may find it interesting: http://buff.ly/1LBNTzG

            I look forward to your reply on my earlier questions.

          • Bob Braban May 25, 15:38

            Hi Jeremy,

            I apologise in advance, but brevity here will be difficult! At the core of the problem, in the UK and USA in particular and to some extent in continental Europe, there are simply too many clubs. In the UK some 800 additional facilities in the past twenty years offered up not fewer than 500,000 new membership slots at a time when participation was starting to fall. A lot of those facilities are business enterprises that are managed as such. At first many were immature tracks that had little appeal to experienced golfers and a good number actually contributed to the health of established clubs by introducing new members to the sport and acting as feeders when they looked for something better. Twenty years on and those facilities are now maturing, are better managed, often less expensive, better at treating customers as if they matter and overall more appealing. The traffic is starting to go the other way. Just to illustrate the point, I have recently resigned from a very poorly managed club and had the choice of 6 quality options within 15 miles. 30 years ago I paid half as much again and drove 25 miles each time to get to a reasonable club.

            On the matter of members being prepared to “cut off their noses”, it is difficult to say. The problem here is that poor management equals poor communication and I can say with certainty that in the average members’ club, despite being effectively shareholders and de facto owners, the great majority have absolutely no feeling for the financial health of their club. If 15% attend the AGM that is not unusual, and of the members that read the financial statement, few actually understand it. In almost all cases, the financial statement will put the best possible construction on matters in order not to alarm members. The truth would be more helpful!

            As far as growing the game is concerned, in the markets with which I am most familiar viz. UK and USA, there is no evidence of that happening. Your experience as a visitor to clubs is one with which I am very familiar. There is certainly room for any club to make a real impact in the casual golf market, but getting the management to take the appropriate steps is very problematic in that it requires a total attitude change. For a hundred years golf clubs have been centres of arrogance and although many believe they have changed, the truth is that the changes have been small and the culture remains to treat customers as if they have been endowed with a prize they have no right to expect. I regularly play at a club in the USA that blew away all old practices and over the course of four years turned an annual $50,000 in green fees into over $1 million. They achieved this by treating customers with respect and making them feel that they were valued. By implementing effective marketing techniques and developing loyalty. It is the kind of change that any UK club with reasonable facilities could make but it does not happen because it needs bold and competent management and a departure from the established ‘you play at our pleasure’ attitude.

            As well as this culture change, there is a very real need to develop junior programmes. All the evidence is that when you do manage to get juniors into the sport they have an infectious enthusiasm that spreads among their peers. Parents simply love their kids to be involved in golf because it has a clean and healthy reputation and this is an aspect of recruitment that is often overlooked. In a previous post I touched on the problem of the sport being largely absent from TV. That is a killer element. Although it gets a lot of publicity, Sky remains a minority facility and the greed of the industry restricts golf to that limited exposure. Get it back on mainstream TV and there will be a quantum change in uptake. At present clubs need to get into schools, offer free introductory lessons and loan equipment during the school holidays. These are pretty simple objectives and cost very little, but again club management seems unable to tackle the task.
            Bob Braban
            http://www.golfclubmarketing.org

          • Jeremy White May 27, 12:59

            Once again, Bob, thanks for your generous reply. Simply excellent reading. I apologise in advance for the brevity in my own response. I have a product launch to attend to, but still must acknowledge your thoughts.

            From the outside looking in, I read a bit much into the haughty attitudes, so it’s not a cut off their noses thing, it’s a blissful unawareness thing. It makes sense. Sadly (perhaps only for them), they will be the ones caught up in the rationalisation, as discerning members like yourself choose to go elsewhere.

            I’m glad you and I are on the same page regarding junior pathways. The golf industry seems to be in a state of denial about the downturn in participation. The continual blame of slow play, dress codes and other relatively insignificant issues deliberately ignores the bad decisions of the past, and the lack of a clearly defined strategy for successive generations of golfers. I took up golf because I grew up next to a golf course. I was lucky. Jack Nicklaus is bang on when he says you have to get them when they’re young.

            Golf needs to be in schools. Now.

            Any later and it’s too late. Forward thinking codes throw money at schools to get children playing their sport. Golf isn’t entitled to players. Nowadays it needs to go out and get them. Expose kids at a young age and build a lifelong golfer. Golf rounds and equipment must be given freely to juniors.

            Also I’m not sure clubs themselves should be involved junior development, unless they are delivering a governing body’s prescribed programme. Even then, PGA pros are distracted by their own local club/shop issues, so may not see the long-term value in free lessons, free rounds and loan sticks. I have tried to find junior clinics for my son here in metropolitan Sydney and the lack of enthusiasm for kids’ golf is unbelievable. The focus is revenue in the now, and juniors don’t tick that box.

            Do you have a blog? If not, I would love to publish some of your thoughts on my site so they are seen by a few more pairs of eyes.

            Jeremy

          • Bob Braban May 27, 18:57

            Hi jeremy,

            Many thanks for your reply. I think the great majority of those wth whom I have worked over the past few years would agree with our combined views. As far as junior involvement is concerned I do believe this will have to be driven by clubs and there is a great deal more equipment manufacturers could do to assist in that effort. They are heavy on sponsorship for the professional game, but in the long term they are going to have to give a lot more thought to where those players come from and accept that it is not, at the end of the day, the tournament players that determine their profitability. No mass market = no profit.

            I have my marketing site at http://www.golflincs.co.uk and that has offers a lot of information, but in fairness to those clients who pay a nominal fee for consultancy work, I don’t publish everything. You are welcome to reproduce anything on the site or in our discussions. At the end of the day the objective is to improve the situation for popular golf.

            Best regardfs,

            Bob

          • Jeremy White May 28, 07:34

            Hi Bob, I was taking a look at your website and found this link returning a blank page: http://www.golflincs.co.uk/Marketing%20Context.htm

          • Bob Braban May 28, 08:28

            Thanks Jeremy,

            Where that went to I don’t know! I’ve just uploaded and it seems to be firing OK now

    • a golfer June 23, 12:28

      Hi Bob
      I would be good if you got your facts straight. With regard loss of coverage on mainstream TV that was an R and A decision and not a PGA one. They are the governing body for amateurs that is suppressing publicity.

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