Even with the economic and social issues facing the sector, golf is still a major contributor to the Canadian economy. A 2009 Economic Impact of Golf for Canada report, by Strategic Networks Group, indicates the game of golf accounts for an estimated $11.3 billion of Canada's GDP and is responsible for 341,794 jobs. The same study also shows that Canadian Travellers make more than one million trips involving golf annually, making the golf sector an important component of the tourism, and of course, the hotel sector. With golf trends shifting, golf courses are being designed to encourage ease and speed of play, which appeals to the casual golfer and increases usage, while offsetting maintenance costs. Managers are offering season passes and value added packages that allow for greater consumer flexibility than traditional memberships. In any sector, adaptation is the key to longevity; the construction and management of golf courses are a testament to this, both for today and for tomorrow.
PKF Consulting provides advisory services in the form of strategic planning, feasibility, valuations and appraisals to the golf sector in Canada. PKF Consulting has published the Clubs in Town & Country industry benchmarking report for the United States and Canada for almost 60 years and thus has tracked and has assisted the sector in overcoming obstacles. PKF benchmarking instruments have demonstrated that golf course owners, developers and managers are no strangers to the cyclical tendencies of their sector. Currently, there are many challenges, including adjustments to corporate expense accounts, the introduction of HST in Ontario and British Columbia, rising operational costs, declining club memberships, an oversupply of courses in some markets and the increasing competition for consumer discretionary time and income.
PKF Consulting research indicates a 10% decline in private club membership over the last five years in North America. This can be attributed to a change in social trends, corporate belt tightening and changes in discretionary income and time. The prestige of exclusivity is not the catalyst of club memberships as broadly as in the past. Corporate expense accounts are being monitored more closely than in the good times and it is increasingly harder to justify recognizing a golf membership as a justifiable perk. Despite lobbying efforts by golf associations, Revenue Canada does not recognize any expense incurred for use of a golf course, such as membership fees, initiation fees or green fees as a tax deductible expense. According to Statistics Canada, the CPI has risen 46% from 1990 to 2009. With less discretionary household income and longer commutes becoming the norm, consumers are not flocking to buy traditional golf memberships as in the past.
Golf courses have been a catalyst in recreational and suburban real estate development over the past two decades. The affiliation with recreational real estate development has allowed championship golf courses to be constructed throughout the country in markets that previously were unknown to golfers. Of course, with the recent economic downturn many projects have encountered elusive capital markets at the same time as the golf consumer has become more careful with regard to their discretionary expenditures. The executive style Garibaldi Springs Golf Resort in Squamish, British Columbia recently announced that after six years of operation the course is closing after falling short of the estimated 20,000 annual rounds needed to break even. In Fredericton, New Brunswick, the Rebel Ridge Golf Club, planned as the cornerstone to a high end residential subdivision, fell into receivership and was purchased by the mortgage holder for approximately $1 million in April of this year. Two months prior, Canadian resort developer Intrawest announced the sale of the Sandestin Golf and Beach Resort in Florida in an effort to reduce debt. Other courses, such as Wyndandsea in Ucluelet have stalled due to the reduction in real estate sales.
Despite such difficulties as discussed above, both management at public and private courses are optimistic in many Canadian locations, with many courses seeing new life in 2010. The Cliffs Over Maple Bay project near Duncan, B.C. is being renewed after falling into receivership in early 2009; a new owner recently acquired the property and has indicated that they are forging ahead with a plan that still includes a Greg Norman designed championship golf course and, potentially, a resort hotel. Whitetail Crossing Golf Course is the key amenity to a 600 lot residential subdivision east of Edmonton, Alberta that has only been operating as a nine hole course for the past three years; Puddicombe Golf and a private partner who recently purchased the course expect to complete the full eighteen hole course by late 2010 or early 2011. There are two new stand alone golf courses currently under construction in the Township of Langley, B.C. (45 minutes east of Vancouver) that are scheduled to open to the public in 2011. In the community of Kemptville, Ontario, Ottawa based developers have plans to develop a 1,100 home golf course community on over 600 acres, while the Oak Bay Golf & Country Club in Muskoka has scheduled a full public course opening in 2011.
Golf course economics are also shifting and management must be increasingly creative in finding ways to reduce expenses and drive revenues. Maintenance costs, a course’s single greatest expense, are facing increasing prices for fertilizer, fuel and labour costs. PKF Consulting research shows gross operating expenses per hole ranged from $93,000 to $132,000 in 2009, depending on location. The President of the U.S. Golf Association, Jim Hyler, said in February "the standards in which we construct and maintain our courses have become, quite simply, unsustainable". Many courses are adopting environmentally friendly, low impact concepts for maintaining golf courses. Currently there is only one North American golf course to receive the Golf Environment Organization (GEO) Certified status for comprehensive and advanced sustainability requirements: Mirimichi, Millington, Tennessee. Some of these practices include restricted watering patterns and planting of low maintenance turf that makes both environmental and economic sense.
Like many industries, Canadian golf courses have been through a trying few years, golf course developers and managers are looking for creative and successful strategies to adapt to the ever-changing social and economic trends that affect their business.
Trevor Scott ~ Consultant
PKF Consulting Inc., Vancouver
