Golf – Recession Proof?

The Great Depression of the 1930s wiped out individuals, businesses, and banks. Ultimately, 5,000 banks failed, and 9 million savings accounts simply disappeared. Unemployment snowballed disastrously. By the end of 1932 approximately 13 million Americans (25% of the workforce) were without jobs. As you would expect, the entire golf industry was devastated by the Depression. As golf club memberships plummeted by half, more courses closed their doors and ceased operations than opened them during this desolate period.

Unfortunately, this deflationary period bears a resemblance to the Great Recession of the late-2000s. One year after the Wall Street crash of 1929, real estate values had tumbled 30 percent. By contrast, from 2008 through 2010, home values showed steady monthly declines of between 7 percent and 19 percent. Real unemployment in 1930 was 16.9 percent. In the third quarter of 2010, real unemployment (factoring those people who were no longer looking for a job or who had fallen “off the grid”) was 17.1 percent.

The big difference between now and the Great Depression is the national debt. In 1930, America’s debt was $16.2 billion, 100 percent of which was held by American citizens. In 2010, the national debt was $13.7 trillion, of which $5 trillion was held outside the United States (mostly by the government of China). And while, as individuals, we have no real control over decreasing home values and the skyrocketing national debt, these dismal economic facts have a pronounced effect on our collective psyches as golfers.

In 2010, the National Golf Foundation reported that golf course closures in the United States outpaced openings, marking the fifth straight year that we’ve lost more courses than we’ve gained. The NGF reported the opening of 46 18-hole equivalents last year vs. a total of 107 closings. From 2006 to 2010, the NGF reports a net loss of 220 18-hole courses, or roughly 1.5 percent of the total supply.

The NGF released a few other tidbits of information that, along with the course openings/closure data will form the foundation of the 2011 edition of their “Golf Facilities in the U.S.” report that is expected to be released in early February.

  • There were golf course openings in 29 states.
  • Of the 46 openings, more than 60 percent were daily fee facilities.
  • There are currently more than 80 U.S. golf course projects under construction (excluding renovations).
  • States with the most openings in 2010 were Pennsylvania, Illinois, Florida, North Carolina and Texas.
  • The region with the most courses currently under construction is, not surprisingly, in the South Atlantic with 16.5 courses.
  • The total facility count at the end of 2010 was 15,890, 167 less than the all-time high of 16,057 in 2004.

Since 2005, when it peaked at 30 million, there’s been a steady decline in the number of U.S. golfers, dropping to 27.1 million in 2009. Rounds played were down in 2010, too. A building boom in the 1990s and early 2000s brought an oversupply of both public and private courses.

Golf courses all over the U.S. are closing due to lack of funds and members. Even in the golf Mecca’s of Florida, Arizona and California, the economic meltdown and changes in family dynamics combine to threaten club life. Whether it’s a $50,000 initiation fee for a private club or a $5 increase in the cost of a round at a public course, the price of playing golf is giving a lot of duffer’s cause for concern.

Private club members are finding it increasing difficult to pay the fairly significant initiation fees and annual dues. Many of them with their own recessionary problems have had to quit the clubs for financial reasons. The changing lifestyles of family golfers are also at play. The social life kids have today is not the country club way of life.

It used to be that the man of the house could just announce to his wife that he was “going to the club.” And, then hang out there all weekend. That dynamic has been changing steadily over the last thirty years.

In most areas of the country, courses owned by municipalities are in slightly better shape. However, in my old hometown back in Ohio, the Champions Golf Course isn’t doing well, at all. In 2010, the city of Columbus took another shot at trying to sell the layout with an admired pedigree (designed by Robert Trent Jones) but a record as a consistent money-loser for the city’s Recreation and Parks Department.

In regions, where golf is played year-round, many courses were built to sell real estate and to raise the prices of new houses around them. Now, with the housing market in free fall, a number of storied residential real estate developments are in foreclosure or bankruptcy proceedings. The family owned Sea Island Co. – with a stretch of private beaches and ancient oaks in coastal southern Georgia – has recently gone into bankruptcy.

All across the country there is hope that things will turn around for the struggling game but despite the best efforts of the The PGA of America and the U.S.G.A. to “Grow the Game, and, the doubling and tripling of golf advertising and marketing expenditures in various areas, the golf industry continues to flounder badly.

To add insult to all of this misery on the links, golf itself appears to be battling to remain relevant in our fast-paced society. Back in the 1930s, Walter Hagen reminded everyone that it was ok “to smell the flowers along the way.” Nowadays, people are moving too fast to even notice the flowers planted alongside the “information superhighway.”

TV golf ratings, which were already leaking before Tiger decided to whack a fire hydrant are now, even with his expected rebirth, only up a bit, while the all-important 18-34 year-old segment is tanking. Combine that with the stressed out national economy; along with extreme weather throughout the country, and the outlook for the game in 2011 appears bleak. Needless to say, this is cause for great concern for the business of golf in America.

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