Matt Campbell’s “State of the Golf Industry” Analysis
I have spent my entire career looking at the game of golf through the eyes of a customer and trying to create programs and environments accordingly that motivate those that have never played to take the game up and those that are playing to simply want to play more? I also have served on multiple committees that govern the game of golf, been to countless education seminars hosted by just about every golf organization that exists and am constantly reading and evaluating anything that I can get my hands on to absorb all the information that I can in ways that make our game better.
The part that concerns me the most in regards to the past and current efforts being made by the PGA of America, the USGA, the First Tee Program and various other organizations have “proven” not to grow the game but they are still continuing to run basically the same types of programs? My evaluations are based over the last ten year period which is a time span long enough to properly identify statistics that are meaningful.
The two biggest repeated mistakes that are glaringly obvious to me that have been made:
The programs are all based around that 98% of the instruction given to juniors is in various locations such as the driving range, putting green, sand trap, school gym, local parks and classroom. I would whole heartedly conquer that these locations are perfect places where the game can be introduced.
The mistake is thinking that this is all that must be done and after this introduction it is up to them if they decide to play the game or not? This is at best, only ½ of what is required to actually create a “new” golfer. The most significant factor that motivates 99.9% to play the game in the first place is the opportunity to get out and play on a golf course? If an individual, regardless of age never get out on a golf course, “They will NEVER become golfers!” But these players simply have nowhere to play at a reasonable rate, that the layout is not too hard and will not take all day to play?
The largest industry wide mistake made was by developers assuming the game would grow based on the profits realized that golf course owners experienced in the middle to late 90’s and early 2000’s. With the intent to capitalize on those profits golf courses were built in historic record breaking numbers in a short period of time all over the United States. The strategically fatal error made was 96% of the golf courses built in that time period were harder than the national average course slope rating of 113 with the false assumption that the hard core player segment would grow as well?
Profitability relating to industry standard was extremely good in the in the middle to late 90’s because there were not nearly as many golf course options the customer had to choose from, thus creating an “owners market”. The prices that golf courses were able to charge for green fees during this time were significantly higher than the value returned, but supply and demand made it possible and the golfers paid the going rate. I am very aware of this fact as I was actively employed as a PGA Golf Professional during this time and witnessed it firsthand. Golfers were lined up at the door waiting to play and virtually no marketing or promotion was needed at all? An advertising or marketing budget was virtually an expense that simply did not exist?
Since peaking in 2003, the total number of golf participants has declined by 4.8MM, or about 16%. Almost all of that loss has been from the “Core” golfer group which is down almost 24%, from 19MM to 14MM.
With only 14 openings recorded in 2012 replaces 2011 as the low point since accurate measurement began in 1995.
When the economy turned eight years the golf industry did as well. Revenues and profits reduced significantly resulting in lack of cash flow. Owners like many others, have a tendency to spend just about as money as they make. Rather than adjusting their lifestyles accordingly, many borrowed large amounts of money that our banks were lending out with great interest rates leveraged against assets that depreciated and are no longer true values. Owners took this money and replenished the cash flow necessary to operate and did not change their lifestyles or change anything in how they ran their businesses hoping that things would get better? Things actually got much worse. Now owners are faced with a debt load they never had before and revenues less than they had ever been making it virtually impossible for their operations to stay open. Operations were not able to charge the green fee and turn the number of rounds necessary to service the debt much less realize a profit and operate?
Statistics indicate that the industry has experienced the worst roughly 18 months ago and the trends are starting to go the other way. This is good news for those operations that have made intelligent decisions and are still viable operations or those that have the financial backing to make it through the next 2-4 years. This is not good news for those operations that are not able to hang on due to depleted funds and will close down. It is because of failing operations that the trends are improving. The fact that the game is NOT growing is why the closures are happening at record breaking numbers and this is what saddens me the most!
Now in the year 2013 with the current golf courses being the length and layout that they are, the logic has always been that the operations “target audience” is primarily the hard core player or the player that is good enough to play their golf course? This same logic is applied at just about every operation that exists. This fact and assumed logic that the hard core player is their “only” audience has in turn, significantly reduced the owner’s market share resulting in less profit. But, what it has done resulted in a current “golfers market” as they have more golf courses to choose from at lower rates due to supply and demand. This trend that has been applicable over the last ten years combined with the technologies that continue to improve at a staggering pace that have made golf equipment better and easier to use, but the fact is that the game is not growing? It is glaringly obvious to me that industry efforts from the past have “proven” not to work or the answer to the elusive question of how to grow the game of golf?
Herein lies the ultimate dilemma and fact that our industry as a whole must face and accept regardless if they want to or not to realize maximum profitability or even remain a viable business moving forward?
The lifeblood of any golf operation that missions is to realize maximum profitability thru golf operations and not future real estate sales or anything different that just golf operations, lies predominately in Green Fee revenue. Selling tee times by utilizing logical and effective tee time “Yield” management every day, 365 days a year. Filling your tee sheet for the maximum rate a customer is willing to pay for filling times both horizontally and vertically on your daily tee sheet (“Horizontally” equates to full foursomes in every time slot. “Vertically” equates to selling a foursome in timeslot that is available from daylight to dark.) Roughly every 8-12 minutes that goes by (depending upon your tee time intervals) is time lost forever and is physically impossible to ever be realized again? The imperative importance of comprehending this very fact is that your “fixed” expenses relative to maintaining your golf course or being open for the day relatively don’t change regardless if you tee off (5) players or (300) players? The maintenance expenses incurred to maintain a golf course on a daily basis regardless of who plays or not are primarily fixed and do not change. There are minimal expenses related to the amount of play that have very little impact on the bottom line relating to filling divots, picking up garbage, ext. but relatively minor. The only other thing that could be effected by the amount of play is potentially payroll? In many instances is also a fixed expense due to salaries or the necessary employees being available regardless of how busy the operation may be on any given day.
If you look at the above pyramid you will see that 44% of the golf market is the “Occasional” golfer that plays very little. As I have pointed out, statistics indicate that it cost too much to play, golf courses are too hard and it takes too long to play? But I have also proved that when solutions exist to these issues, golfers will play!
I have heard the statement more times that I can possibly count “There is no money in the beginners market or junior golf?” This statement holds true if you take (1) hardcore player in what they spend in a year against (1) occasional player as this is a very obvious fact. But what the majority fail to realize or comprehend for reasons beyond me is that the occasional market segment is the market that is virtually untapped. There simply is nobody providing opportunities for this market resulting in very little or no competition at all!
My point being is that there is not a golf operation in existence that fills every tee time they have for sale and do not foresee that happening anytime soon. Rather than throw the revenue away, fill those voids by providing opportunities for the occasional player which in turn creates customer loyalty, grows the game and increases demand. There are a multitude of options available to increase revenues at every golf operation that exists in America. It just requires the ability to see the voids, solutions that fill those voids, consistent implementations to realize all that is possible.