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2012 Rounds Up Significantly: Who’s Benefitting?
NGF State of Industry Update

The big story of 2012 in the golf business is the year over year increase in rounds played.  In fact, if fourth quarter rounds are flat with the same period in 2011, we would end the year with the largest single-year jump since the turn of the century; a national gain of more than 30 million rounds.

Rounds in the country are up 7.4% through September, and nearly every state experienced a gain versus 2011.  The remaining fourth quarter accounts for only 16% of the annual rounds, so barring any major change in the pattern, the year-end gain will be just above 6%.  Since rounds have declined approximately 11% during the past 10 years, 2012 alone will recover approximately half of that dip.

The geographic engine for the improvement has been a huge swath of the northern half of the country where average year-over-year growth averaged 12%.  The area from the Dakotas to Vermont (technically, the North Central, North East Central and Mid-Atlantic regions) has driven up the national numbers… mainly because 44% of all U.S. golf courses and 47% of America’s public golf courses are located there.  Weather in these regions has been particularly favorable compared to last year.

Source: Golf Datatech National Rounds Played Report and NGF golf facility database

Click to Enlarge

Improved weather has had the biggest influence on rounds played.  PGA’s PerformanceTrak has reported a healthy 8% increase in playable days nationwide.  It is important to note that while you shouldn’t fool with Mother Nature, she probably doesn’t deserve all the credit.  National measurements of consumer confidence and spending have also been slowly and consistently edging upward from lows we saw in the Great Recession.

Source: The Conference Board

Source: Bureau of Economic Analysis - Last Revised on: October 26, 2012

YEAR-TO-DATE UPDATE

Golf Course Operations - As you would expect, golf course operators have benefitted most directly from the jump in rounds played.  PerformanceTrak reports golf fee revenues up nearly 9% at member golf facilities.  They report similarly sized gains in F&B and merchandise revenues.

However, not all golf facilities (and management companies) are experiencing gains of this magnitude.  Given that “all golf is local,” it follows that local competition, weather and economies drive individual course performance.  Courses are battling for business harder than ever.  It’s a buyer’s market. 

Golf Course Development – U.S. golf course openings remain at historic lows and that should continue for the foreseeable future.  No surprise there, considering the supply and demand imbalance that exists.  Golf course closures will be about the same as last year as well.  The gradual market correction is expected to continue with net reduction of supply helping us inch gradually closer to equilibrium. 

Golf course transaction activity has increased in 2012 as distressed properties are being purchased by opportunistic entrepreneurs, many of whom continue to operate the golf courses, rather than re-develop them.  The lack of available credit, low commercial space occupancy rates and large volumes of available residential inventory make “higher and better use” opportunities pretty rare.

Unlike the U.S. market, golf course development continues to move forward internationally.  NGF has identified 150+ new course openings since we began tracking international development two years ago, and we are tracking more than 300 new courses that are currently under construction.

International construction is widespread and underway in 85 countries.  While existing international supply is highly concentrated (the top 20 countries represent 84% of all supply), only 30% of new construction is located in those top 20 countries (not counting China).

Golf Equipment - NGF’s overall golf equipment sales index continues to trend upward.  Bottoming out in late 2009, the index has gradually improved but is still shy of pre-recession levels.  Wholesale golf club sales are up more than 8% in 2012 (both units and dollars).  While still below 2008 levels, this evidence of recovery is encouraging.

The domestic golf ball market has yet to show material signs of improvement/recovery, despite this year’s marked increase in rounds played.  Total dozens shipped has actually decreased on a 12-month rolling basis, while dollars have improved.  International ball and club sales behaved similarly to U.S. sales through the first three quarters of 2012. 

Turf Equipment Market - Turf equipment purchases by golf facilities began to fall in 2007 and since bottoming out in late 2009 have been “bouncing along the bottom.”  Purchase intent has risen over the past two measurement periods (6-month intervals) which should bode well for this industry segment.  A renewed replacement cycle could be on the short-term horizon.

LOOKING AHEAD:
Right now, the biggest factor affecting the golf industry’s near-term outlook is a general uncertainty gripping the nation, including its 26 million golfers.   

  • Stock Market Valuations
  • Housing Values
  • Unemployment
  • Federal Deficit
  • Fiscal Cliff (Tax increase and spending cuts)
  • Economic Growth & Recovery

Despite the aura of uncertainty, consumer confidence is coming back, and should come back even more as uncertainty diminishes.

Like most Americans, golfers were hit with a “double whammy” in 2007 and 2008.  Personal net worth took the biggest hit in generations with the onset of the Great Recession and huge drops in the stock market and home values.  Since then many golfers have recouped much of their stock market losses, and have begun to see their home values begin to rise once again.

The stock market has been buoyed by Federal monetary policy (quantitative easing) which should continue under Fed Chairman Bernanke.  And home values are expected to continue to rise as inventories of existing homes for sale are falling into normal levels in most markets.  If these conditions continue to positively affect the net worth of golfers, the industry should benefit.

Featured Report
Golf’s Charitable Impact $3.9B – Golf 20/20

The game of golf was used to raise $3.9 billion for charity in 2011, according to research conducted by the National Golf Foundation for the World Golf Foundation’s GOLF 20/20 division.  The money was raised principally through local tournaments, the professional tours and corporate and individual donations.

Published by VCT