The effects of the global financial crisis have been felt in some form or other by most of us, so it is little surprise that a report from KPMG Golf Advisory Practice suggests that revenue from the golf business across Europe, the Middle East and Africa (EMA) has dropped dramatically in recent times.
The report measures the impact of the economic downturn on golf through the business performance of golf courses in 2009 and reveals that two-thirds of the golf courses surveyed in the EMA region said the financial crisis had impacted negatively on their operations, with nearly half of all courses reporting reduced revenues and profitability.
Golf courses based within a residential community or tourist resort area are surprisingly the worst hit of all, with 78% saying that they had experienced a down turn in their operations.
Overall 35% golf courses reported lower or stagnant revenues without being able to reduce costs, raising the prospect of unsustainable business operations based on current trends.
Half of the businesses surveyed said that they had been forced to make redundancies or cut staff jobs.
Golf course managers are also relatively optimistic for 2010 with 54% predicting excellent or good performance in the coming year, although managers in Great Britain and Ireland are the most pessimistic with 49% expecting ‘medium performance’ and 11% foreseeing poor or very poor performance.
Andrea Sartori, head of KPMG’s Golf Advisory Practice in EMA, concludes;
“While golf course operators, on average, are feeling more positive about their future prospects, two fundamental business factors suggest the way back to the fairway will not be straightforward.
Firstly, 35% of the golf courses surveyed are facing the worrying combination of decreasing revenues and increasing costs. For some golf courses, the narrowing of profitability might come sooner than expected and it would not be a surprise if we saw some golf courses going out of business in 2010. The depressed transaction prices of golf courses are evidence to the fact that the industry is really struggling.
Secondly, nearly half of all the courses surveyed reported a drop in revenues, fuelled in part by one or more of the following: a fall in memberships, green fee revenue, as well as food and beverage spending. While this decline in revenue may not be significant when averaged out (-3% to -5% across the EMA region), it is still worrying that 13% of courses have reported a reduction of more than 20% in the number of rounds played.
Golf courses – particularly those linked to tourist resorts and the ones operating in mature markets like Great Britain and Ireland – will have to work very hard on their relationship marketing, pricing strategies and service levels to attract new customers or lure back the old ones.”
The full KPMG report, Golf and the Economic Downturn, is available to download, free of charge, from the new website: www.golfbusinesscommunity.com