Golfonomics – What does the future hold for golf courses & clubs?

SLRG research is cited in this latest look at the impact of economic headwinds on the surge in golf participation enjoyed during the COVID 19 pandemic.

As in any election year, the economy takes center stage with considerable talk about inflation, interest rates, fuel prices, unemployment and wages. Since the golf world is sensitive to all this and has experienced a COVID induced surge in the past 2+ years, I thought it might be time to raise some questions about golf’s economic future.

Compared with the pre-COVID year of 2019, year-end 2021 saw rounds up 18% over the two year period. However, through July, 2022 The NGF Golf Datatech rounds played report showed a 4% decline from the same period in 2021 (Jan.-Jul). What does this mean? Will the gains made disappear? Will any increases in the value of golf properties evaporate?

It appears from these figures that the combination of inflation and the perceived end of the pandemic have combined to take at least a small bite from the gains of 2020 and 2021. With more people heading back to the office for work, higher cost of living and less time to play, this could’ve been expected. Will this create pricing pressure on courses and clubs? Pre-COVID, daily-fee golf courses experienced fierce price competition and private clubs competed hard for members. Now, estimates are that more than 50% of the nation’s private clubs have waiting lists. Accordingly, many of those clubs have embarked on aggressive renovation and improvement projects and many have taken on considerable debt loads, always a problem for many clubs. After a number of years where club membership was a “buyer’s market” it’s become – at least temporarily – a seller’s market. Can this be sustained?

I’ve heard stories of some clubs aggressively terminating memberships of long-time members and not welcoming back those who may have taken leaves of absence. In some cases, lawsuits have ensued. Entrance fees have increased and in some cases been established where none existed. Many clubs have become oversold and there are grumblings from members about facility access. Unhappy members could result and as, if and when the economy declines, there could be waiting lists to resign.

All this sounds great – until things change. Among my concerns are those clubs and courses that have incurred a large debt load for improvements, often with adjustable rate mortgages. While I wholeheartedly endorse the idea of continuous improvement, it has to be done intelligently and consider the economic ebbs and flows. An acceptable ratio of debt to revenue varies from club to club, but what is important is that clubs separate capital dues from operational dues and ensure that members are willing to absorb the cost, versus departing for competitive clubs. This is where understanding a club’s culture is critical. Private club boards have “taxing” power – as long as members stick around. Daily-fee courses, on the other hand are more sensitive to market pressures and have the added burden of relying on daily fees rather than annual or even equity memberships. This means that when the weather forecast is inclement, golfers often find another activity. A rainy weekend pattern can make a big difference in performance. Response to pricing can be dramatic.

It is widely perceived that golf has benefitted from the COVID induced preponderance of people working remotely from home. Just 2 years ago in October, 2020, according to Sports & Leisure Research Group, 52% of surveyed workers were working strictly or mostly at home with another 30% splitting time between home and a dedicated workplace. Those numbers have declined to 24% and 33%, which while significant suggest that golf’s COVID surge is only partially sustainable. With only 57% working all or some of the time at home compared to 80% during the height of COVID, the year end rounds statistics should give us a good picture of the sustainability of golf’s COVID surge.

The economic elements of fuel prices and labor costs impact everyone – some more than others. Many superintendents tell me that the minimum wage debate isn’t an issue for them, that since finding labor is precious, those who pay, often more than the proposed minimum of $15 per hour, get the workers. Not only can this impact a golf facility’s bottom line but either from cost or simply not having enough labor, course conditions can suffer. Poor conditions make for unhappy golfers and they either find somewhere else to play or pursue a different activity, possibly something enjoyed pre-COVID.

Among the benefits to golf in the COVID period has been a significant slowdown in course closures, down 53% in 2021 from the pre-COVID year of 2019. If golf experiences a decline again, look for that to increase. Golf is simply not an efficient use of land. Imagine a 150 acre parcel with half-acre zoning. With allowances for infrastructure, about 240 lots might be developed. At 2.5 residents per home, 600 people can use that property every day. A double-shotgun start with two groups on each hole in both the morning and afternoon maximizes golfers at 288.

In order for golf to make sense, especially on sites with potential alternative uses, it has to be profitable or it won’t be sustainable. Add to that golf’s high usage of water resources, which are currently so precious in the western US and soon to be precious everywhere, and golf courses and clubs need to consider their most critical resource as precious and plan accordingly, possibly by using drought and heat resistant turfgrass varieties and modifying maintenance practices.

As one might expect, all these factors impact both the value and marketability of golf properties. Every situation is different and should be regularly evaluated. National trends can be informative but even more relevant are those indicators found in a specific market which define a club’s or course’s culture. Combined with the (realistic) goals of the club or owner, it’s imperative to treat not only the “disease” (the club itself) but also the “patient” (the membership or owner) and formulate a plan to achieve those goals.

Nobody can predict the future. But, asking the right questions and responding to change will help make the journey a bit smoother and prepare clubs for what’s coming next.