The Week That Was, april 10, 2016

     McConnell Golf has set out to create a revenue stream in daily-fee golf operations. The Raleigh, North Carolina-based company has leased the Raleigh Golf Association’s 27-hole complex, an affordably priced public venue that John McConnell views as a place where “the average high-handicap golfer can play and feel good about his or her game.” The RGA facility opened in 1929 and is reportedly the second-oldest golf property in the capital city area. McConnell plans to add a McConnell Golf Training Center to the complex, so he can introduce the sport to a new generation of players. “We want to offer lessons at a very reasonable price to people wanting to learn the game,” he told the Raleigh News Observer. McConnell, who’s purchased a dozen private clubs in recent years, called the arrangement with the RGA “a beta test,” an indication that similar ventures may be on the horizon.

     For the second time this year, a survey has determined that those nasty, ill-informed, and controversial statements that Donald Trump is making on the campaign trail may be doing lasting damage to his namesake brand. In January, a division of Young & Rubicam, the big advertising company, determined that “the value of the Trump name is collapsing” among “the people Trump’s business depends on,” which it defined as folks who earn more than $100,000 a year. Now Forbes, citing the results of a survey of 500 U.S. residents who earn at least $200,000 a year, has concluded that the Candidate is “alienating a broad portion of the demographic that makes up the core clientele for his high-end golf course and hotel properties.” Penn Schoen Berland, which did the polling, reports that 53 percent of the respondents are now either less likely or much less likely to patronize a Trump-branded hotel than they were previously, as opposed to the 11 percent who are either much more or somewhat more likely to do so. In addition, the survey’s results indicate that 45 percent of Trump’s prime demographic “would make a specific point of not visiting Trump-branded hotel or golf properties over the course of the next four years,” while only 7 percent would. Despite these findings, it’s worth noting that Trump’s golf properties are still on track to host some of our industry’s most coveted events, among them next year’s U.S. Women’s Open, next year’s Senior PGA Championship, and the PGA Championship in 2022.

     In a scathing analysis, a New York City-based hedge fund contends that ClubCorp’s stock is a risky investment because the self-described “World Leader in Private Clubs” is wildly over-valued. Kerrisdale Capital Management, which is short-selling ClubCorp’s stock, finds much to dislike on the Dallas, Texas-based company’s balance sheets. It complains of ClubCorp’s “billion-dollar debt burden,” its annual losses, the lack of membership growth at its “same-store” properties, and its weak profit margins, which “have been flat or down over the past five years, even as the number of clubs in its portfolio has grown almost 40 percent.” After talking with the general managers of more than a dozen competing private clubs, Kerrisdale has concluded that ClubCorp differentiates itself from its competitors by “targeting lower-end customers and skimping on service,” and it asserts that ClubCorp’s properties “appear to perform worse than average,” with “member attrition three times the industry median,” “lax course maintenance,” and “bad customer service.” Boil it all down, and Kerrisdale contends that ClubCorp’s stock, currently priced at just over $12 a share, should be trading at less than $3.

     For what it’s worth, the Street also recommends that investors sell their shares in ClubCorp. The Street is bothered by ClubCorp’s “deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins, and generally disappointing historical performance in the stock itself.” If you’re wondering how such analyses are playing on Wall Street, ClubCorp’s stock ended last week trading at just over $12. In July 2015, the price was nearly $25.

     My Bad: In last Sunday’s post about ClubCorp, I wrote that the company’s golf and country clubs division generated revenues of $694,680 last year. The number was wrong in two ways. First, it came from the column of 2014 results, not 2015 results. Second, I neglected to measure it in thousands: The number is $694,680,000, or $694.7 million. In 2015, ClubCorp’s golf and country clubs division actually generated revenues of $842.6 million. I apologize for the mistake.