October 10, 2008
The recurring world-wide turmoil in the financial markets is bound to have broad-reaching effects.
Since this is a golf column, however, I thought I’d stick with that element.
Some of those effects might not be so immediately visible. For example, a recent article in USA Today noted that financial services companies are the lead sponsors in eight different PGA Tour events, including the Wachovia Championship held each spring in Charlotte, North Carolina.
Thanks to debacles with subprime lending, bogus collateralized debt obligations, and other shenanigans, fewer such companies continue to operate. Those that remain will most likely be looking to save some costs, while also searching for new money and reassuring their remaining nervous investors.
Citigroup and Wells Fargo are tussling over which megafirm can take over troubled Wachovia, which has a branch or two here in the Cape Region. However, USA Today also reported that the Tour received a commitment to keep the popular tournament going, at least until the current contract runs out in 2014.
On the other hand, the USA Today story also said that the PGA Tour is “working on finalizing the 2009 schedule.”
To these semi-cynical ears, that sounds like Commissioner Tim Finchem and his crew are already adjusting to a newly diminished golf sponsorship landscape. Look for some quiet announcement in the next several months about a cancelled event, or perhaps an unnoted drop in total purses among some of the less-popular tournaments.
The touring professionals are not the only ones who would be smart to adjust to the current financial falloff. The National Golf Foundation ran a survey among many different groups with business interests in golf, and this week sent out a story quoting several responses.
Facility operators had these comments: “Golfers are not spending money on the “extras” like they have in the past. They appear to be more careful on how they spend what disposable income they have.”
“Operational inputs including fuel, fertilizer and chemical, labor costs, etc. have all increased at a much greater rate than our revenues.”
One golf course architect said, “Some of our clients… have stopped all their construction until there is some confidence that the market has hit bottom.”
A golf equipment maker noted, “Orders from our existing account base have slowed considerably, so we are focusing on programs to aggressively increase market share…as I assume everyone else is. I anticipate ferocious competition throughout the golf industry as we all fight for survival.”
And a golf course development consultant discussed the primary problem from his perspective: “Financing is the #1 issue. Without available capital among U.S. lenders, the domestic outlook for golf construction (new or remodels) is bleak.”
The nation’s golf course superintendents are taking action as well, and it’s not going unnoticed by their suppliers: “With the cost of fertilizer, seed and gas doubling for a course, I expect they will need to cut back sharply in other areas to stay afloat.”
“Customers are waiting until they absolutely need something.”
The NGF also noted that on a national basis, golf rounds in August were up 4.4% over August 2007. However, that improvement only reduced the overall net decline in rounds for the year-to-date comparison, now down 0.5%.
As Ren & Stimpy might say, “Happy Happy Joy Joy,” eh?
All these challenges make Davis Sezna’s comments in the October issue of Golf Digest even more relevant to those thinking about how to meet their own club’s needs.
Sezna, previously a highly successful restaurant operator in Wilmington, is now the president of La Quinta Resort & Club and PGA West. He notes that “ninety percent of the clubhouses today are overbuilt and underutilized.” From his perspective, that just shouldn’t happen:
“[T]he club should be about the camaraderie of their membership, with a professionally trained staff serving great food, ice-cold beer and a reasonably priced wine list. Most clubs could save millions of dollars by not competing with the Joneses. Instead, they should recognize the charm of their clubhouse and fill it with an incredible hospitality experience.”
If more clubs could act on that advice, they could handle the current economic challenges far more easily.