The Plight of Hundreds, Maybe Thousands of Golf Courses

Many 'experts' in golf blame the current economy or the 9/11 disaster for the golf industry's chgallenges today. However, I saw the problem developing back in the early 90's. As an associate with Hayward and Associates, golf course mortgage brokerage firm in Tampa, Florida, we were learning as ealy as 1993 that many golf courses were unable to pay their bills. Yet, since 1993 they built at least 300 golf courses a year for ten years!

In the mid 90's I was circulating faxes to management companies with a slogan, "Golf courses don't create new golfers. They have to get theirs from other golf courses." I saw exactly what was happening while managing Oak Ford Golf Club in Sarasota, Florida.

Now I'm not a rocket scientist, but if my 'fair' share of golf players among ten golf courses is 50,000 rounds, or one tenth of the 500,000 neighborhood rounds, and two more golf courses open..... Duh! Didn't my share shrink to one twelfth of 500,000 or 41,666 rounds? My share dropped by 8,334 rounds, or over 16.6% almost immediately. Actually, the effect of two new golf courses in the Sarasota marketplace affected rounds virtually exactly to the math. In fact, between 1990 and 2000 they added at least ten new golf courses to the area. Where the hell did they think these golf players were coming from?

Many feasibility studies were entirely misleading, which lead to the oversupply of golf courses. Many predicted annual growth in rounds and revenues almost to oblivion, which I called the 'Excel Trap'. I even fell for it for a few years.

The Excel Trap was (still is) an easy spreadsheet function where you took a set of assumptions and ran the growth multiples out as many years as you wished. I mean, you could take, say 40,000 rounds and increase them by 5% a year and, just like magic, you forecast over 62,000 rounds in year ten. Keep going and you break 100,000 rounds in year-20.

What's worse, they also added an inflation factor to the price of a round of golf (I admit I did it back then too), so the revenue factor also kept rising. So not only did rounds increase by 5% every year, but so did prices. By running prices up every year (1995 through 2005), by year ten we were forecasting $2,887,943 in fee revenue averaging  $46.54 green fees from 62,053 rounds. We know now that those forecats never happened. In fact, it wound up, as golfers call a hook when you played a slice - the old "double-cross" as the ball flies even further into the woods. Not only did the 62,000 rounds never materialize, they're only getting $28,00 a round in 2005, not $46.54.

I didn't mean to talk you ear off with this posting, but my point is not only did none of the forecasts hold true, they never anticipated that there were going to be fewer golf players tomorrow morning than there are today - and that's pretty well a fact!

We need to grow the game or watch it flounder for years to come - maybe even worse.

BTW: Does this scenario sound familiar?: Community Golf Course War

What are your thoughts?

Mike