The Week That Was, april 26, 2015

     A little-known Chinese investment group has become the 500-pound gorilla in Myrtle Beach, South Carolina’s golf operations. Last week Founders Group International, an entity that had previously purchased 10 golf properties in the Myrtle Beach area, acquired nine additional golf properties (12 total courses) from National Golf Management. As a result of the latest transactions, FGI, an entity that nobody had heard of a year ago, has become the largest owner/operator of golf properties on the Grand Strand, and perhaps in the entire Southeast. “We have made a substantial investment in the Myrtle Beach community and look forward to a bright future here,” said Nick Dou, a New York City-based immigration attorney who serves as FGI’s president. FGI, an affiliate of Yiqian Funding, isn’t done shopping for undervalued U.S. golf properties, and it’s likely to begin developing vacation accommodations at some of its courses. The first project on its to-do list, however, is to make Myrtle Beach a destination for Chinese golfers.

     Read it and weep: The U.S. golf industry lost 201 golf properties last year, according to the National Golf Foundation, leaving the current inventory at 15,372 total facilities. The NGF says that the majority of the facilities that went out of business were “older, lower-end properties that could no longer compete.” If you read somewhere that 174 courses closed in 2014, it’s because the NGF has begun to account for closings in two ways: First by counting the total number of properties lost (201), and second by counting the number of 18-hole equivalent courses lost (174). The NGF’s data also indicates that 34 courses were added to the national inventory last year, although only 11 of them are truly “new.” The other 15 are tracks that opened after “prolonged closures unrelated to a scheduled renovation,” which almost certainly means that they were previously counted as courses that closed. So if the NGF soon offers a recount of data from previous years, don’t be surprised. If all this is beginning to seem a bit confusing, I think it’s deliberate, because the NGF is going through major contortions in an attempt to make things look better than they are. One other thing: This year the NGF is also tracking courses that close temporarily for renovations, which is about the stupidest thing I’ve ever heard.

     On one topic, at least, the National Golf Foundation and I have found common ground. For years, the NGF has insisted that the waves of course closings we’ve experienced are ultimately good for golf because they help to create a better balance between supply and demand. I’ve argued that putting facilities out of business is never a good idea, and that there’s an alternative. As I noted last month, “Although the NGF can fairly say that our nation has too many golf courses, it can also be fairly said that our nation doesn’t have enough golfers.” So guess what? The NGF has begun to look at life from both sides now. It’s acknowledged that “there are two ways the industry can achieve that better supply/demand balance. The course correction can continue for several more years, or more golfers can be brought into the game.” Sadly, it’s far easier to get rid of excess inventory than it is to rebuild a customer base.

     Gifts of Gab: Even though more than 200 U.S. golf properties bit the dust last year, Greg Norman has boldly predicted that the era of course closings has ended. “All of a sudden, people are building golf courses again, and the negative trend we’ve had in the U.S. of courses shutting down will flat-line,” the “Living Brand” told the Palm Beach Post. And here’s the kicker: “Next year,” Norman declared, “more courses will open than close.” If Norman is taking bets on his forecast, he’ll find no shortage of takers.

     As expected, the U.S. Open is as good as gold for Chambers Bay. In 2014, for the second consecutive year, the municipally owned track in University Place, Washington posted a profit, and Pierce County believes that better times may be on the horizon. “There’s going to be an afterglow after the Open,” the county executive told the Tacoma News Tribune. “There’s going to be a heightened interest to take a plane and come to this part of the country and golf an American-style Scottish course.” For the record, last year Chambers Bay generated a $435,000 surplus on $6.9 million in revenues, partly as a result of higher greens fees and increases in merchandise and food-and-beverage sales. The course is still carrying $17.5 million in construction debt, but its operations are, at least for now, on the Yellow Brick Road.

     The world’s most over-hyped chain of golf properties has added a second venue in the Caribbean. The PGA Tour’s network of Tournament Player Clubs now includes TPC Dorado Beach, a 54-hole complex at Dorado Beach Resort & Club in Puerto Rico. In the 1950s and 1960s, the resort was a destination for jet-setters, beautiful people, and Hollywood celebrities, but these days it’s trying to avoid being a paradise lost. The tour is marketing it as “a world-class family retreat with a rich, storied history.” Dorado Beach is the third international property that the PGA Tour has licensed since late last year, when it added TPC Cartagena at Karibana in Colombia and TPC at Baha Mar in the Bahamas. All told, the TPC portfolio now counts 34 properties, and the tour hopes to add one in China and maybe another in Shanghai.

   Trustworthy data regarding the number of golfers in China is impossible to come by, but the Daily Telegraph believes that only 360,000 people in the nation play regularly. Unfortunately, the newspaper didn’t name a source for the estimate.