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Though the golf industry has been flat in the United States, golf is booming
in many other areas of the world.
Jim Haden’s comments are typical of those working on new golf projects in
the United States.
“In the marketplaces where we do the bulk of our work, the Eastern United
States and predominately the Southeast, we are seeing very little golf
course development,” said the principal at N.C.-based HadenStanziale P.A., a
planning and landscape architecture company focusing on land planning and
new communities. “We are doing a lot of work in high-growth areas and new
golf is not part of the equation.”
Haden’s observations come as little surprise to American course owners
who have struggled with an oversupplied market in recent years. But venture
outside the United States, and the course-development engine, though not in
high gear everywhere, is motoring along quite well in certain spots.
China and
South Korea are seeing the greatest growth potential, with
Vietnam picking up, according to Asian Golf Course Owners Association
Executive Director Leslie Quahe.
China, which KPMG’s Golf Industry Practice estimated had between 500 and
1,000 courses under construction at one time, recently placed a moratorium
on new courses while the central government works out a common policy for
location of courses, water use and community displacement.
“Nevertheless there are quite a number of courses that obtained their
licenses before the moratorium so building is still taking place,” Quahe
said. “The reason for this growth can be found in the growing affluence of
its own people, the large number of ex-pats moving in to operate the
numerous multinational companies relocating to China and the huge tourist
influx they are trying to facilitate. China is fast becoming the playground
of North and South Asia.”
After working for his brother-in-law Perry Dye in Asia for many years,
O’Brien McGarey and his wife, Cynthia Dye, founded Dye Designs Group and
opened their first Chinese course (West Coast Golf Club) last October on
Hainan Island. In addition to serving its own 1.4 billion residents and
their growing pocketbooks, many of the newer Chinese layouts are located in
destination resorts and second-home markets for affluent Koreans and
Japanese attracted to central and southern China because of the mild
weather, McGarey said. The China Golf Association conducted a recent survey
concluding China needed to develop 2,000 courses in the next eight years to
service current demand. The country currently lists about 250 facilities and
McGarey expects the building moratorium to be lifted in 2006.
“Unfortunately the percentage of the population that plays golf is
infinitesimal,” said Joe Lenihan, president of Pacific Golf Management (PGM),
among the largest golf-management and ownership groups in Japan. “Most of
these [Chinese] courses are private or resort and rely heavily on tourist or
foreign play.”
It is also expensive to build a course in China, averaging about $18.5
million, according to Stephen Johnston, national director of the KPMG Golf
Industry Practice. Johnston also noted memberships at Chinese courses can
cost up to $36,000, five to six times more than a white collar worker’s
annual income. “There is the issue of ‘haves’ and ‘have-nots’ who can afford
to play these areas,” he cautioned. “I see greater unrest as a result of
that. There have been many articles written about [possible] internal civil
war because of the economic differential. When you hear that, in terms of
leisure time, it usually means hitting a wall pretty soon.”
China has seen the benefit of operations like Mission Hills Golf Club, a
10-course complex in Shenzhen. Tara Gerber, marketing communications
coordinator with Greg Norman Golf Course Design, said Dr. David Chu,
chairman of the Mission Hills Group, reported, “Not only does a project of
this prestige and scale provide impetus for the enhancement of China’s
status in the sports tourism industry. Mission Hills has become a benchmark
for a burgeoning industry providing employment for 5,000 people and
generation of tax revenues of RMB [Renminbi] 40 million.”
The golf craze in South Korea and the growth in courses there has been
largely fueled by the success of the country’s professional golfers such as
the PGA Tour’s KJ Choi and particularly LPGA players Grace Park, Se Ri Pak
and others, Quahe said.
“There are a half-dozen Korean players on the LPGA Tour who are beating
the brains out of everyone else,” Troon Golf Senior Vice President of
International Business Development Chris Roderick said. “That has created a
tremendous interest to build courses in that country.”
McGarey has five projects underway in Korea, which he estimates has 230
existing courses, with another 30 to 35 set to start construction and a
similar number seeking approval. One of his projects is on popular Jeju
Island off the southern tip of the Korean peninsula, about a 45-minute plane
ride from Seoul.
“It has a temperate climate with year-round golf and a designation for
many years as a tourist-development zone,” McGarey said. “There have been
direct flights for years from Japan and Korea, but now players are also
coming from Shanghai as the Chinese market has expanded.”
Many local Korean provinces are fostering golf development by giving land
or attractive financing to form private-public enterprises, something rarely
seen in other Asian nations, McGarey said. “We built a course for the city
of Pusan several years ago which then sold it as a private club to recoup
the investment,” he added. “Korea is a great market and it should be
sustainable.”
Since much of the development is occurring on government land, it often
takes a while—as much as two to six years—to get a course permitted, McGarey
and Roderick agreed. But the South Korean economy has recovered nicely from
the recession that started in 1997 and has enjoyed sustained growth in
recent years, even in high-end markets.
“We are seeing membership prices almost paralleling things we saw in
Japan years ago,” McGarey said. “Club Vision Hills, 30 minutes from downtown
Seoul, has the highest priced membership in Korea at about $500,000.”
Quahe believes Vietnam, with its many beautiful beaches and a
development-friendly government, is ripe for golf growth. “She [Vietnam] has
always been influenced by China to begin with, especially with the spread of
Communism during Mao’s era,” the AGCOA executive said. “Now that China has
radically reinterpreted its position and largely succeeded in that exercise,
Vietnam is paying close attention and will follow in China’s footsteps in
the near future. I personally know of several parties already positioning
themselves to establish courses once they get clearance from the
authorities. In all three countries [China, Korea and Vietnam] there is a
good mix of private and resort courses for tourists. I think public courses
come a little further down the life cycle.”
India, which has the largest number of English-speaking people in the
world, could also soon begin developing more courses, Roderick said.
Lenihan’s company specializes in resurrecting distressed Japanese golf
properties and operates 95 such facilities throughout the former golf-crazed
island nation. Japan is still experiencing negative growth in terms of golf
development with courses selling below the cost of replacement.
“In Japan, we as management are dealing with a number of issues you may
not ordinarily find in day-to-day operations,” Lenihan said. “With most
companies going into bankruptcy and most members losing their deposit
amounts, the anger and resentment from members is running high and the
difficulty of getting back the trust of members is difficult. We are also
dealing with courses that have had no capital expenditures put into them for
years and years. We have had to reinvest millions to bring the golf
facilities back into condition. We are also working with a high-quality
workforce. But it has received years of improper training on working
efficiencies, so we are getting back to the basics with day-to-day
operations. Most owners in Japan are also dealing with a shortage of funds
available to purchase or upgrade their existing facilities. With all the
bankruptcies in the past 10 years, banks are not eager to lend to this
industry.”
Former golf-development hotbeds Singapore, Malaysia and
Thailand have
reached saturation, Quahe said, although McGarey noted a recent uptick in
Thailand. “Some would argue there has been an oversupply which occurred
during the economic boom before the 1997 Asian financial crisis,” Quahe
said. “Singapore, for example, is maxed out and the government has decreed
that absolutely no more land will be allocated to courses. There will be
little growth in Indonesia and the Philippines for slightly different
reasons with political instability and national deficits not conducive to
the long-term commitment required to invest in courses. This is unlikely to
change in the mid term.”
As for Australia, the continent is a difficult environment to develop new
courses, particularly upscale ones, because of the tradition of inexpensive
green fees and memberships, Johnston and Roderick agreed.
“It is not a market used to paying high fees,” Roderick said. “They are
not as concerned about the condition of the course. They just want to play
golf. That is ingrained in the culture.”
Greg Norman’s Medalist Development is probably the biggest player in the
country with projects near Sidney, Brisbane and Melbourne. “Medalist has a
half-dozen projects driven by golf and real estate coming out of the ground
in the next couple of years,” Roderick said. “We have a couple projects in
Fiji and are looking at projects in Tahiti and off the coast in New Zealand.
The sponsorships of their major events have fallen the past couple of years
and so there is not as much money for golf marketing. Many of the courses
Asians purchased back in the 1980s have gone under but are resurfacing with
new groups buying them.”
Specific ownership challenges and management issues throughout the region
vary by country, Quahe explained. “For example, in Singapore, the main
problem is high personnel costs as locals are used to high wages and will
not do ‘menial’ tasks. All maintenance staffers are usually from Sri Lanka,
India and Bangladesh, requiring housing, transport, licenses and
foreign-worker taxes. In Thailand and Indonesia, by contrast, labor is
extremely cheap and courses feel obliged to hire workers’ family members.
Some courses might have 400 caddies they have to train, clothe and feed
during the day, even though most might only get their rotation twice or
three times a week.”
Johnston is more excited about development in Europe than the Far East.
“Statistics show Europe has the greatest probability of growth and the
financial ability to pay for leisure,” the KPMG executive said.
There has been a strong shift away from developing private members’ clubs
in Northern Europe and toward resort golf in Southern Europe, the Eastern
Mediterranean (Turkey, Cyprus, Greece) and the Middle East (notably Dubai).
“This has been driven by the strong growth in the secondary homes
market,” said Muriel Muirden, managing director of the London office of
Economics Research Associates, a privately held real-estate advisory company
specializing in leisure economics. “Europeans are not big spenders on golf
memberships and in many markets the number of golfers is low. On the other
hand, baby boomers are driving the second-home, semi-retirement and
retirement-home market in warmer climates—hence the shift south and east.”
Spain is among the strongest countries in terms of recent development,
according to Tim Kenny, executive vice president of Nicklaus Design. ”Most
of the courses are private residential. Spain is growing because of the
residential-retirement market out of England. Their currency is so strong,
they believe Spanish housing and golf opportunities are a bargain.”
According to Roderick, many developments around the Mediterranean are
including golf as part of residential and resort projects. Historically,
Spain and Portugal have been the biggest golf markets outside Scotland,
Ireland and Britain. Courses are being built in Portugal and Spain, but they
are having some severe water issues. Areas of North Africa—such as Morocco,
Tunisia, Libya and Egypt—have seen growth along their Mediterranean side, as
have Turkey, Greece and Italy.
“In Southern Italy you have some things happening in Sicily. Cyprus is a
booming market for golf planning,” the Troon executive said. “Morocco,
Egypt, Cyprus and Greece are trying to attract Northern Europeans, who
traditionally would go to Spain and Portugal and provide them with a good
course or two. Portugal has purchased the World Cup for the next two years
as a launching pad to show they are in the golf business. Around the Black
Sea there are many projects coming out of Istanbul and Bulgaria. Most of
these regions need a tremendous amount of help with planning.”
European Golf Course Owners Association Executive Director Lodewijk
Klootwijk noted the number of courses is growing in most European Union (EU)
countries. The upsurge in development is particularly strong in nations
bordering the Mediterranean. On the other hand, the United Kingdom, Germany
and France have seen little increase in recent years.
The northern Mediterranean coast has and will continue to experience
significant growth in resort and second-home properties, benefiting from an
annual increase in the number of European players that has ranged between 7
and 8 percent, Klootwijk explained. Spain continues to develop courses,
while countries such as Turkey and Croatia are on the cusp of becoming
prominent golf destinations. Holland has plans to double its capacity,
although Klootwijk expects only about 20 percent of those projects will
actually be built.
The environment is the major obstacle to building new layouts. “In all EU
countries, it is harder and harder to get permits to build and maintain a
course, especially using various chemicals,” the European GCOA executive
said. “The industry as a whole took the initiative to establish a foundation
to lobby on behalf of the environmental sustainability of golf courses.”
Some countries face problems with governments unfamiliar with how to
administer the permitting process, Klootwijk said. It sometimes requires 10
years or more to permit and build a new course. Banks may not loan money for
golf projects because of bankruptcies at some properties in the past. Course
owner associations have started developing training programs to address the
need for better-educated staffs.
In the Middle East, Dubai in the United Arab Emirates is probably the
leader in terms of golf development. Long simply a stopover for travelers
venturing to South Africa and Australia, Dubai is best known in golfing
circles as home of the Dubai Desert Classic. It also features other
properties such as Emirates Golf Club, Montgomerie Dubai, Desert Course at
Arabian Ranches, Dubai Creek Golf and Yacht Club, Al Badia Golf Resort, Nad
Al Sheba Club, and the Jebel Ali Golf Resort & Spa. Several new Greg Norman
and Ernie Els designs are planned by developer Nakheel Golf and Dubai Sports
City. A marketing effort called “Golf in Dubai” represents all Dubai’s golf
clubs, handling everything from the staging of tournaments to game and
course development.
Greg Norman Golf Course Design will create two eco-signature courses and
two other layouts in Dubai. “Dubai has established itself as a destination
for people on every continent. The attraction is the result of many
factors—weather, location, security, luxury, unique experiences and
technological advances,” Gerber said. “A couple of challenges are water and
blowing sand. Having sand to work with can be beneficial at times and other
times it can be difficult, because it can be tough to shape or form.”
Dubai’s Shaikh Mohammed has made golf part of the area’s future, added
Roderick. “When the oil reserves have been depleted, Dubai wants to become a
golf destination,” he said. “So they are developing hotels, golf within the
resorts and golf communities. There are seven courses in Dubai and another
three opening in another year and a half. Nakheel Group has contracted Greg
Norman to do four courses for them and will start construction of the first
two within 30 days. There is another new project in Dubai called Dubai Golf
City. It is coming out of the ground in the next six months with five golf
courses planned.”
Roderick noted other hot spots near Dubai, including: Abu Dhabi, where
three or four new projects will be announced in the next few months; Oman,
which is in the process of looking at three or four golf courses and hotel
projects; and Bahrain, which is starting to develop more golf and hosts the
Qatar Masters the week after the Dubai Desert Classic.
Though most development has been in the southern region, Northern Europe
is not completely dormant. Scotland is seeing a surge in new resort courses
on the drawing board similar to what Ireland experienced five years ago,
Muirden said. In Scotland, England and Ireland, some new development has
focused on tourism, Johnston said.
“Their golf operations are so much cheaper because of what they do [in
terms of maintenance], that allows them to improve their price point
regarding tourism and makes it a more profitable and buoyant economy,”
Johnston said. “When they make more money they can spend more on marketing,
which attracts more people. Also there is more American ownership. The
owners of Kiawah [Resort in South Carolina], for instance, have a couple new
projects in Ireland. I see the Americanization of marketing there.”
Many of the newer Irish and Scottish facilities are modeled after some of
the better resorts in the United States, with fractional or interval
ownership of residences, Roderick said. “Ireland is becoming a very
aggressive market for new golf and golf resorts. Several high-end projects
are planned with Ernie Els and Darren Clarke involved. Old manor houses and
castles are being rehabbed as part of many projects. But they all include
some sort of ownership portion with a resort hotel, combining both to make
it more attractive to the traveler.”
Countries experiencing little or no growth, Kenny said, include Germany,
France and England. “One problem is the availability of land and two is the
emergence of very strong environmental groups, the no-growth groups,
particularly in Germany and France.”
Other roadblocks throughout Europe and the Middle East include water,
environmental and financing issues. “The approval process holds them back,
but financing seems to be available for the better projects,” Roderick
concluded.
The strongest growth in this area has been in Mexico and the Caribbean,
where a mixture of resort and residential properties are being built, Kenny
said.
“The reason for growth in the Caribbean is the tremendous increase in the
number of European buyers and the value of European currency and the British
pound,” the Nicklaus executive explained. “The value of their currency has
created a situation where buying something in the Caribbean is
worthwhile—and in many cases a great bargain. In Mexico, it is a
combination. American buyers want to go somewhere closer to home with great
weather, and that is driving people to Mexican resorts. With the rise in
residential golf in Mexico, you have middle and upper classes in that
country who want to experience and emulate the gate-guarded residential golf
communities they have seen in the United States.”
In most of the Caribbean, Latin America and Mexico, there is little local
play, according to Economic Research Associates Senior Vice President Greg
Cory. “Affordability is a big issue. If you are going to grow the market,
you have to increase local demand, which is the same thing we are facing
here in the United States. Courses in the Caribbean and Latin America are
really relying on resort and second-home play. In more far-flung areas, that
does not amount to a lot rounds. Selling second homes and filling room
nights are the main reason to build golf in these areas. In places where
golf is not really the driving force behind development, you only get about
20 rounds of golf out of every 100 occupied-room nights. You wind up with a
lot of surplus capacity but no one to play. At the other extreme, like a
Pebble Beach or Doral, you might get 90 rounds per 100 occupied-room
nights.”
But the relatively low 25,000 annual rounds most courses average in the
Caribbean and Latin America is not a problem as long as the golf course
helps sell real estate and hotel nights, Cory said.
Among the more active Caribbean countries in new golf development,
Roderick reported, are the Dominican Republic, the Bahamas, Anguilla, St.
Lucia, St. Kitts, Nevis and Barbados. “The biggest concern in those areas
has traditionally been water. Most of the islands have a couple projects
planned, but it is going to be tough without more water.”
In Central America, Costa Rica has built several resort projects and
Panama has several in planning. Little is happening in South America.
“Mexico has 15 to 20 major projects that have been on the board for
awhile,” Roderick said. “Cancun has taken Cabo del Sol’s lead and is
building some beautiful courses. The entire Yucatan Peninsula will become a
great golf destination at some time. There used to be just a couple of
courses to accommodate a handful of people. But they are tearing those up
and redoing them. There are another three or four coming out of the ground
shortly that will give people in the United States a reason to go there.
Cabo San Lucas is an extension of Southern California. The infrastructure is
starting to catch up with development. Central Mexico and Mexico City are
also starting to develop more courses.”
More then 60 percent of Canadian courses are located in one province,
Ontario, Johnston said. As a result, what happens there often drives the
golf market in the entire country.
Growth in new courses has slowed considerably in recent years as most
markets across Canada are well supplied, according to NGCOA Canada Executive
Director Jeff Calderwood. The surplus is less deep than in the United States
and the oversupply occurred several years later.
Calgary and Toronto were considered the last two major centers that could
withstand further development. But they are also reaching the saturation
point. “Even so, new construction in Toronto has continued at a surprising
pace, particularly in the high-end market,” Calderwood explained. “The
strong corporate sectors in these two cities has justified much of this
growth. But intense competition for this high-end market is prompting
considerably more creative pricing and value-added promotions.”
Significant new development has occurred recently around Toronto and the
tourism areas in the northern part of the province. While Canada used to be
significantly ahead of the United States in terms of demand per course, that
has changed in recent years. Canadian courses used to be running at 90
percent of capacity, while U.S. facilities averaged 70 percent, Johnston
said. Canada has dropped to around 85 percent, partly because of the
additional supply provided by new development.
“Most of that has been in high-end golf,” said Johnston, who is a
Canadian. “But golf courses that were perceived as high-end in the past and
had less competition are having to reduce green fees because people can see
a greater difference with the new courses. What was a lower-end Tier I is
now a high-end Tier II and the pricing has changed. There is more
competition in Canada.
“We never used to do much real-estate development with golf but we are
doing more now. That has resulted in a greater course supply. In the past,
most Canadian courses were built as stand-alone facilities, so there was a
lot more feasibility and due diligence done on courses. With more real
estate, that due diligence is decreasing. And because of the success of
destination golf, we are seeing more golf built in tourist areas, like the
Niagara Falls area. Although golf in Canada is still relatively healthy,
there are more supply-and-demand issues. Instead of the
‘build-it-and-they-will-come’ philosophy, there are more dog-eat-dog
situations with clubs stealing rounds from one another.”
While Haden and others have noted the drop-off in the U.S. golf market,
certain parts of the world are still experiencing positive growth, which
should provide some reassurance for U.S. course owners for the years ahead.
“The U.S. market has been flat,” Roderick said. “But people in other
parts of the world still see golf as a big play.”
In the end, America is still home to roughly half of the world’s almost
32,000 golf courses. Times have been tough for U.S. course owners in recent
years, as they used to be in many Asian and European countries. But, in
time, golf operations improved in those areas. The same is bound to happen
in the United States.
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