Wednesday, November 12, 2014

Golf Everyone? We Hope So

We've been reading a late the sport of golf in general is declining in popularity.  We've also heard that, several Oro Valley golf courses are experiencing difficult financial times. One is up for sale. Another will likely be acquired by its main debt holder.

A decline in the popularity of this sport has combined with challenging economic times.

Could this have significant impact on Oro Valley?

Apparently, Golf Is Not For Everyone

Oro Valley has 6 golf courses. All of these courses are 18-hole courses. There are a total of 40,414 yards of fairway.    All of these courses have homes built around them.  Our guess is there's probably 1,200 such  homes.   There's probably five times that many that are dependent on the golf course.   There are probably 6,000 properties that are directly impacted by a golf course.

So, if something happens to a golf course, such that it can no longer operate as a golf course, it's not only a problem for the owner of the golf course but also a problem for those live around it.

Private member clubs are finding it hard to survive.  More are being sold to or managed by private companies. So, the sale of Oro Valley's Stone Canyon Club, a top 100 club, to golf star Phil Mickelson's company,  Mickelson/Loy group, is no surprise.

Without doubt, Tiger Woods brought a level of excitement to the sport of golf that engendered an entire new wave of players.  But, for the past five years, Woods as been a non player.

The result of all this is that "... country clubs are lowering prices for membership and for nonmember rounds of golf." (Source)

There are in fact those who predict golf will continue to decline in popularity.  "It won't go away, but it will likely tread water over the next couple of decades."

Add to this the concept that research shows that Millennial's (those born between 1980 and 2000) are simply not as interested in sport of golf as previous generations.  "The participation rates of people aged 18 to 34 fell roughly 13% in 2013 from 2009, while their rates for other active sports like running rose 29%, according to SFIA data."

"For the fifth year, overall participation in golf fell in 2014 as measured by the number of U.S. individuals who reported playing on a course at least once, according to Sports & Fitness Industry Association data." (Source)

The reasons given for the decline is that the sport of golf takes a long time to play and that it costs a lot of money.   It is generally not a family sport.  So, in a town that thinks its getting younger, as Council Member Mary Snider has asserted, the sport of golf does not seem to be an attraction for younger families.

Golf Courses Are Money Losers

The decline in popularity has resulted in a decline of profitability for golf courses.    "Average net profit margins for privately owned golf courses and country clubs have been negative for several years." (Source)  These courses have a net profit margin of  -10%.  For example, in 2013, one public course in Ohio (Grantwood) cost $1.1 million to run but it only takes an review of $1 million.

All public of courses require subsidy by the taxpayers. Municipal golf courses are facing the same difficulties as private golf courses.

"The cost to maintain a municipal golf course is rising, and as many cities and parks departments feel the strain of tighter budgets, everyday expenses represent enough of a burden, let alone the improvements needed to be competitive. "Municipalities are having to make decisions," says Jeff Bollig, senior director of marketing and communications at the Golf Course Superintendents Association of America, who estimates that 2011 saw a net loss of 107 golf courses in the United States. "Do we operate this course at a loss and understand that it is a service we provide, do we break even, or do we try to make money that returns to the general fund?" (Source)

Add to all of this the fact that there are golf courses galore in Pima County so Oro Valley's golf courses do have competition.

You might ask: Why should I care?  

You should care because if an Oro Valley golf course goes dark it will substantially change that neighborhood.  Those lush greens; the cooling effect, the beauty will be lost.   One can imagine the outrage the public would feel if this were ever to happen.

Imagine, too, operating a golf course at a time when the sport is in decline and when it is projected by experts to continue to be in decline for many years.    How does one make money in a declining business? How does one even keep that business going?

Today, Oro Valley is very dependent on the success of the golf industry.

What do you think?

1 comment:

Richard Furash, MBA said...

I must agree with this. Golfing is still in decline. Many golf courses are in financial trouble. It costs so much to keep golf courses and club houses in tip-top shape. Good course supervisors are quite highly paid. Some banks will no longer finance golf courses. Hopefully, Oro Valley does not put too much trust in the financial gains from any Oro Valley golf course.