The Pellucid Perspective - December 2010 - (Page 14)

THE LAST WORD Dear Golf Industry Santa I t’s a bit late for me to get my requests in to Santa for this year’s golf industry Christmas presents, but I’m sure the country’s golf operators got theirs right in on time. I suspect most of those had something to do with more golfers, better weather, perhaps some tax relief and maybe even a buyer with more cash than due diligence expertise. There are some stakeholders in our beleaguered industry, however, who are already enjoying some Christmas season glad tidings. Although their joy may be tempered by the number of courses they either own or lease, it appears that golf course management companies may be entering into a mini-Golden Age, although perhaps not for the reasons they and their clients might prefer. With the all-too-familiar pressures of the economy, oversupply, increasingly unfavorable demographics, declining participation and that pesky weather, more and more owners — both municipal and private — are turning to professional managers to stem the tide of operating losses. Add to that the everincreasing number of banks and other institutional lenders who find themselves the unhappy owners of foreclosed upon courses, with no expertise in golf operations, and you have a rapidly growing market for professional managers. Jim Hinckley, CEO of one of the industry’s largest owner/operators, Century Golf Partners, pointed out that according to the NGCOA’s list of operators who run five or more courses, the percentage of the nation’s 16,000-plus courses that are run by management companies has risen from 10 percent five years ago to 15 percent today. That’s a stout 50 percent increase in management deals in only five years. Granted, there are a few less courses these days, but it’s still a big jump. “I think the difficulties in the economy have caused municipalities, lenders and equity-owned country clubs to realize that they don’t have the expertise to deal with today’s challenges,” Hinckley said. Steve Skinner, CEO of another megamanager, KemperSports, agreed, saying “As the industry continues to struggle as a whole, owners are looking for professional management to solve some of their problems.” Skinner pointed out that not only are established management companies receiving calls almost daily from struggling owners, but new management companies are springing up to take advantage of the bull market for managers. Others are expanding or creating new divisions to take on courses held by lenders who prefer to see if they can bolster their inherited courses’ salability rather than fire sale them for 10 cents on the dollar right now. Other happy recipients, and some who are hoping Some other industry stakeholders have received early Christmas presents. ClubCorp and its owner, KSL Capital Partners, which had been wrestling with an impending crush of high priced debt coming due on ClubCorp assets, recently floated a major junk bond sale and came up with significant equity of their own to re-finance the debt to a manageable level. There may be a renewed source of management deals on the horizon in 2011 as well, according to Don Rhodes, director of investments for CNL Lifestyle Properties. The current CNL Lifestyle REIT will stop selling in April, and the company plans to launch a new REIT, CNL Diversified Lifestyle Properties. The new REIT will be primarily composed of other (more “diverse”) investments than the current mix, but Rhodes said it would definitely include some new golf acquisitions, which will in turn require professional managers. CNL currently owns over 60 18-hole equivalents, 43 of which are run by Dallas-based EAGLE Golf. The annual PGA Merchandise Show in Orlando appears to have weathered a storm of major manufacturer dropouts and is now happily sending out releases almost daily trumpeting the “return” of companies like Titleist, PING, TaylorMade/adidas and others, who had either been largely absent or had a reduced presence the last few years. Regardless of how much actual business those companies do at the show, it bodes well for the industry at large that they feel their participation is a worthwhile investment. Speaking of weathering the storm, Tim Finchem and the folks at the PGA Tour seem to have done commendably as well, despite a few sponsor dropouts. Although Tiger’s absences and generally being a non-factor on Sundays caused some ratings point drops, the emergence of some interesting young players on both sides of the Atlantic bodes well for the future of the big Tour, at least, although I’m not sure the same can be said for the LPGA and Nationwide Tours. If nothing else, golf ’s apparel companies, or at least the more “fashion forward” ones, have to be intrigued by the stylistic statements of players like Ian Poulter and Ricky Fowler. Not sure where Ryan Moore (or, for that matter, John Daly) fit into that scenario, but at least they’re making statements, although drastically different ones. And, speaking of Tiger, I found it interesting that during his tournament at Sherwood last week, when he actually did play like Tiger Woods until Sunday morning, Tiger said that despite his troubles of the past year, donations to his Tiger Woods Foundation were up 15 percent. Not sure what that says, except that some wellheeled folks evidently believe in what the Foundation is doing, regardless of what its namesake is up to on or off the course. Last but actually most recent, the “hopers” may include companies like Callaway, TaylorMade/adidas, Nike, Bridgestone or others whose antitrust attorneys are currently working feverishly to decide whether it might be feasible for them to acquire Acushnet’s Titleist/FootJoy brands, which parent company Fortune Brands recently announced they were going to sell or spin off. If an existing golf company is able to add the industry-leading Titleist ball and FootJoy shoe brands, along with Titleist’s club business and intellectual property patents, that would instantly realign the pecking order in the equipment and apparel markets. Merry Christmas and ho, ho, ho to all. —Jim Dunlap 14 The Pellucid PersPecTive december 2010

Table of Contents for the Digital Edition of The Pellucid Perspective - December 2010

The Pellucid Perspective - December 2010
Contents
3rd Party Tee Time Marketers: According to Some, “missed It by That Much”
Course Sales Pace Showing Signs of Increasing
Nov YtD Weather Impact Oct YtD Utilization
The Lonely Golfer Phenomenon
A Formula That Fits
Meadowbrook Golf on the Way Back?
Raffles a Risky Gamble
Denver, CO DMA
Dear Golf Industry Santa

The Pellucid Perspective - December 2010