The Week That Was, january 8, 2012

united states 2011: A Year To Forget

Jim Koppenhaver has reviewed the events, crunched the numbers, and published his analysis of the past year in the golf business. To be sure, it’s not a year that will have a cherished place in anyone’s memory book.

Although 2011 won’t qualify as one of the worst years in recent history, Koppenhaver writes, we as an industry just can’t seem to shake the nagging lack of growth in players, rounds, and revenue.

And he doesn’t expect to see much improvement in 2012.

True to my nature as a realist, he admits, I don’t see any significant signs of imminent recovery in the broad range of measures which we track.

Koppenhaver made these remarks in the current issue of Outside the Ropes, a newsletter published by his company, Pellucid Corporation. Here’s a little more of what he had to say about 2011:

The more time I spend in this industry, the more I continue to gravitate back to some relatively simple truths about golf and the health of our industry’s consumer base: Golf is a game and industry of discretionary money and time. If one considers that currently the United States as a whole is at a historically low level on both dimensions, it should come as no surprise that the consumer base for golf isn’t growing.

In my opinion, what’s currently most impacting the golf industry is the thinning of the middle class. If you read (and believe) the mainstream media, it’s not the upper class that’s suffering in this current cycle (I’m arbitrarily defining that, for purpose of discussion, as the $200K+ household-income crowd), it’s the middle class that’s getting squeezed, primarily on the employment front as corporations downsize and reduce middle-management, which has long been a staple of our consumer base. . . .

Given that this situation didn’t improve meaningfully in 2011, I’m not optimistic that the consumer base will show growth when the numbers are tallied in the first quarter of 2012. . . .

[Regarding the oversupply of U.S. golf properties,] the good news is that supply levels continue their retreat, albeit at a slower pace than needed by the industry to produce any meaningful relief from the dilutive effects of the period of “irrational exuberance” from 1990-2005. Our quick and inexact analysis suggests that [in 2011] we’ll see a net reduction in supply of roughly 100+ facilities. . . .

This would be a slightly higher pace than we’ve seen in 2009-10, but it’s quite possible that the National Golf Foundation’s more thorough accounting . . . will show that the supply absorption pace continues at about a net loss of 50-75 courses (or an agonizingly slow rate of less than 1 percent per annum). I continue to believe that meaningful stabilization and rounds/revenue health for the average facility will require a roughly 10 percent reduction in supply, which, unfortunately, at the current pace suggests that we still have eight to 10 years “in the woods” due to supply dilution influences. . . .

Note: I can’t link these passages to an online article, as they came to me via e-mail. If you’re interested in reading other Pellucid-produced reports, call Koppenhaver at 847/808-7651 or send him an e-mail at jimk@pellucidcorp.com. The company’s website is PellucidCorp.com.

And in Other News . . .

. . . china Still wondering when China will lift that annoying moratorium on golf construction and let the development dogs loose? Well, it wouldn’t be prudent to expect any new guidelines to be issued anytime soon. A new government will be installed in China later this month, and it may be a while before the nation’s legislators get around to formulating a development program for golf. Here’s an estimated time frame from Rick Robbins, the treasurer of the American Society of Golf Course Architects: “Since golf is not the highest priority on the country’s agenda, it could be six to eight months or longer before a new administration’s rules are in place.” No doubt, this is discouraging news for most everyone who’s been banking on commissions in the People’s Republic to carry them through hard times in their native lands. But here’s the upside: “Once the government comes out with regulations and policies,” says Lee Schmidt, the Scottsdale, Arizona-based architect who knows Asia intimately, “China can be a great market for years.”

. . . sri lanka Tourists continue to flock to Sri Lanka, and golf development in the island nation continues to gain traction. The Lanka Business Report says that Sapphire Bay Resorts Pvt. Ltd., an affiliate of a Canadian development group, hopes to build a golf resort on 400 acres of government-owned property along the island’s northwestern coast. The resort will take shape northwest of the city of Kalpitiya, on an inlet called Uchchimunai -- one of 10 inlets that the government wants to develop through public/private partnerships. If Sapphire Bay can come to terms on a lease agreement, it’ll build three hotels, a hotel school, and a golf course. The Report also notes that Sri Lanka’s tourism business is “booming,” with arrivals expected to be up by roughly 33 percent in 2011. The number of travelers visiting the island isn’t large -- 758,458 through November -- but it’s exceeded the nation’s goal for 2011, which was 750,000.

. . . cuba Cuba may still be waiting for its golf development program to kick in, but in 2011 the nation was expected to attract a record number of tourists -- an estimated 2.7 million of them. The number comes courtesy of Cuba’s ministry of tourism, which hails the result as an indication of “our strong position in the international tourism market amid the changing world situation.” Most of Cuba’s visitors typically come from Canada and Britain, but in recent years the country has been seeing increased traffic from Russia and Argentina, not to mention other nations in Latin America and Europe. Still to come, tourism officials hope, are additional vacationers and sight-seers from the United States, along with a parade of linksmen (and -women) to be lured by the construction of at least five long-simmering golf venues.

. . . nigeria Kudos to the Central Bank of Nigeria, which has decided to fund grass-roots programs intended to popularize golf among the nation’s children. The development effort will begin with a series of bank-sponsored golf clinics, but it won’t end there. “We are also talking to the relevant golf authorities about building mini golf courses and ranges across the states,” a bank official told an African news group. The goal, said a news report, is “to produce a new generation of golfers in the next seven years who will be household names on the international professional golf circuit.”

. . . wild card click As we all know, necessity is the mother of invention.