Is the Golf Economy Really Handicapped?

One of my passions is to play golf and I wanted to post something interesting to me so this was a natural fit.  I found two articles that present two similar but different sides to the economic health of the golf industry.  The first article is The 2011 Golf Economy Report which focuses primarily on the economic data from 2011 and compares it to an initial report in 2000 and a second report in 2005.  I don’t want to write a summary of the report but only state that it found the golf economy generated almost $70 billion in goods and services in 2011, down 9.4 percent from 2005, while several other sectors of the golf industry actually grew.  The data indicate poor golf real estate and a decline in golf course capital investment are responsible for this decrease while facility operations, tournaments and associations, and golf-related travel grew by 6.4%, 21.6% and 14.2%, respectively.

            The second article I found focuses more on the socioeconomic issues plaguing the golf industry in recent years.  According to an article in the Economist, The future of golf: Handicapped published in late 2014, the golf industry is facing an economic downturn.  One of the biggest reasons for the downturn is the economic recession from 2007-2009.  However, some other reasons for the downturn are a decline in new and retired players, it’s too meditative in our frenetic world and it’s just too hard.  Some solutions have been to make the game easier and change dress codes to be more laid-back to appeal to the younger generation.  Some have even suggested using the course for other sports like footgolf.  There’s no clear consensus on the exact problem or the solution among golf professionals.

The first thing that stands out to me is that golf is entertainment, at least for most that play it, and the game survived and even thrived in some areas through an economic recession.  Entertainment is one of the first things to go when I tighten up my budget and I suppose it’s the same for many other Americans.  I’m surprised the article in The Economist didn’t highlight that more by comparing the effect of the recession to other entertainment industries.

The second thing which stands out more than anything else are the reasons presented in this article for why there’s a decline in play.  I don’t agree it’s related to the game taking too long or not being entertaining enough.  I agree it’s not an Xbox kind of entertaining but many young people are willing to spend 3-4 hours going to a concert or attending a sporting event or watching it on TV.  I believe to attract attention to the sport, especially from the younger generation these courses need to focus on the almighty dollar.  Even in St. George, where there is a lot of golf, $40 a round is on the lower end of the cost to play.  I know when I was in my late teens and early twenties this was a week’s worth of groceries.  With the growth of course development and construction over the last 30 years, the demand for golf is elastic.  This means a decrease in price will increase revenues. 

Please let me digress for a minute.  I remember a number of years ago The Ledges Golf Club in St. George was a ghost town.  The grass was still being watered and cut meaning fixed costs were still being paid while little to no revenue was being generated.  I used to say there’s too much golf in St. George for these guys to be charging so much.  I think the greens fee was $60 to play 18 holes with a cart.  I would make the comment that you can sell 1 widget for a million bucks or a million widgets for a buck each.  Evidently, someone else took notice and they lowered prices and created a players card for $100 which allowed you to play a round for $20.  People showed up in droves, my friends and I included.  I was not surprised when the course began to thrive.  I don’t want to jump on my soap box here but The Ledges recently raised that players card to $350 and each round is $35.  I know myself and almost 20 other people decided not to buy the card and to play elsewhere when we've all played almost exclusively at The Ledges for the last 3 years.  It should be interesting to see how this plays out for The Ledges.

I tell that story because all the people in that group that left were over 40 years old with nice paying jobs or a comfortable retirement and it still came down to price.  That has to be especially true for a younger generation.  To get a young person or anyone for that matter hooked on golf they need to enjoy it and to do that you simply have to play more often.  This puts an even higher premium on price.  Yes, the game is challenging but so are video games when you first play them.  I’m willing to bet young people would not be as good at video games or play as often if they had to pay a fee of $40 for every 4 hours of game time.