Golf Services - Industry Outlook

THE GLOBAL ROLE OF THE GOLF COURSE

The status of the golf industry around the world differs dramatically by country or continent. In the United States, the overdevelopment of golf courses over the last several decades has resulted in the notion that the role of the golf course has reached its pinnacle and is in decline. In reality the role of the golf course has changed, and may be diminished, but its role as an amenity and driving force for economic and real estate development remains unique and meaningful. Elsewhere in the world, the story is much different as in Western Europe golf development is continuing and in eastern and central Euorpe golf development is moving agressively forward, while in Korea and elsewhere in the developing markets of Asia, golf is nacient, and is providing the impetus for economic growth, tourism development and new resort related developments.

The golf course serves several unique functions within a local community or within a countries boundary. While the golf course elicits a range of emotional responses from proponents and opponents, the strengths and the allure of golf signify status and sophistication for the affiliated entities, and provide the catalyst for the economic advancement of economic objectives . In addition to its social cache, the golf course promotes a desired lifestyle and is one of the few market positioning tools that can overcome locational considerations that would otherwise be considered deficient.

Perhaps no other land use fulfills such a diverse array of objectives as a golf course. Social, recreational, environmental, political as well as economic and financial objectives provide critical pressures which shape the function of the golf course or private club and influence the objectives of its operations. This diverse set of interests and objectives dictates that a broad contextual understanding of the function of the golf facility is a necessary base from which to invest, value or plan. Understanding the desired roles that golf will play is critical to creating and extracting value from the golf course and developing an understanding as to the larger strategic objectives of the golf course.

Due to its chameleon characteristics, it is perhaps not surprising that no other real property is held by such a varied set of entities as are golf courses. Golf course ownership entities include non profit enterprises, club members, federal, state, provincial or local agencies, real estate developers, hospitality operators as well as private and institutional investors. The role of the golf course is in part dictated by its owner and their strategic objectives. Consequently ownership changes often alter the role of the golf course, and effect its operation and impact its value as well.

Golf inevitably plays a significant role in the positioning of a development, as it provides the "cache" that few other amenities can match. It is therefore not surprising that the inclusion of a golf course is often the first step in the formulation of the projects amenities. In most cases, knowledgeable developers understand that the role of the golf course has little to do with its immediate financial success. While many golf facilities must eventually stand alone as a financial endeavor, the majority begin their existence as part of a larger land development, resort development or other business operation. The end result is the immediate transfer of value from the golf course to the surrounding real estate, hotel, operating entities, community or even country.

What many developers and operators fail to realize, or to plan for, is that because the role of golf course lies is outside of its immediate operations, its role has to change as the dynamics stakeholders change. This typically occurs as towards the end of the development, when real estate is no longer for sale, and the developer no longer has a vested interest in the golf course. In the long term, the golf course and its cache brought in the end users, and served its purpose in creating value in the surrounding real estate, but the role of the golf course often changes when the developer exits. At this point the golf course must stand on its own financially, and if the developer did not pay sufficient attention to the long term prospects for the golf course, the value of the golf course and the value to its users and stakeholders ultimately suffers.

HVS Golf Services recognizes that the financial drivers for the golf course often lie in the outside the golfing facilities, and the key to development and value lies in understanding and maximizing the market potentials of the larger entity. In the long term, however, the golf course should be planned to stand on its own.