Magazine - Do we Need More Golf Courses?

By Mike Orloff in Golf on 26th Apr 2010 10:00

I want to open the discussion to all of you in the industry regarding new golf course construction. Do we need more golf courses or are we actually better off with less in Australasia?

The National Golf Foundation reports that last year in the US there were more courses closing than opening, which is a first in decades. Further US news media is also reporting, it seems like every week, that various resorts are going into administration. The Resort that Tiger recently held his first “comeback” media announcement is one of these.

Are the housing developers greedy in building a course solely to sell homes? They underwrite the entire project and then leave the course to fend for itself once they have sold all the homes. Usually this will be at the expense of the members or adjacent homeowners, whose expectations have been raised so high in an effort to get them to fork out some serious cash to join. I’ve unfortunately seen this occur first hand. As an incoming general manager at various courses during my career I’ve had to strip back the operation to make it financially sustainable. It’s not always a fun job, but it has to be done otherwise the course may potentially shut down indefinitely.

We here in Australasia haven’t had that many courses open in recent times and several have been put on hold due to the global financial crisis. The few that have opened or are getting ready to open will definitely face some tough times in the early years of operation. In the best of times you would see a 3-5year operational loss until you were able to get enough traffic through your doors. We have clubs that have been around for decades that are still showing operational losses, but many luckily have gaming machines or sold land to pay off the debt.

There are several courses for sale in Australia at the moment, but overseas buyers are very hesitant to purchase. They can find much better deals in other countries with much greater financial returns. Most course sellers here are also expecting a high dollar buyout which is just not going to happen unless you find a purchaser that has some emotional attachment or ego that they want to own a golf course. The old adage “There is a sucker born every day” is very true in this regard.

Most courses have never been run with a commercial mindset, which means they have never fully realised the best return on its asset. It’s not going to be worth as much if/when they would want to sell it or if they are looking to get a bank loan. It makes these future improvements to the facility much tougher to accomplish.

Overall, the price to play golf in this region is very inexpensive compared to other parts of the world. The supply of courses in some areas is so great compared to the demand. So if we lose a few in these regions the rest would most likely would all be better off operationally. They would receive higher demand for play and membership and could actually charge more for it. This would result in a much better utilised facility that is operationally sustainable.

The times do need to change and they are.

Drop me a line with your thoughts: morloff@golfindustrycentral.com.au

To see further stories on golf courses development in the region, Click here to read the April issue of Golf Industry Central magazine.

Copyright Golf Industry Central April 2010

Read more articles in Golf, by Mike Orloff or from April 2010.