Most people's image of golf is the of the young, black American player Tiger Woods, but the reality in the UK is that participation is dominated by affluent white males in the 3564 age bracket.
This was one of the main findings of market research firm Mintel's Golf UK report, which was published in 2003. The report says: "In terms of basic population growth, the best prospects are offered for those marketing to the 55-64 age group, which is expanding strongly. This is the post-WWII baby boomer generation, which is moving into pre-retirement with a far more demanding and sophisticated set of consumer characteristics than the previous generation of 'greys'. On the negative side, the over-55s are unlikely to take golf up for the first time. But this is more likely among the 35-44s, who have the advantage of having grown up in even more affluent conditions and who are also increasing."
Some golf operators are making efforts to attract more women and young people but the Mintel report says change will be slow. It is an industry that suffers from a lack of leadership because there are so many different governing bodies involved in the sport (about 18 in the UK). Mintel's research also shows that golfs potential is inherently restricted because two thirds of adults (53% of men, 82% of women) say they have never played the sport and never will.
"The golf market is suffering slightly," says Stephen Blake, the manager of the European office of the Golf Research Group. "There are not many beginners coming into the sport and those that do are not playing as regularly as they used to. Golf courses have had to work even harder to just stay where they are."
But in spite of the difficulties in attracting new members, it is not all doom and gloom. The Mintel report says "there is no evidence of real decline" in recent years. And the annual TGI survey of sports participation shows that golf has been neither growing nor waning in popularity in the past few years. Adult participation in the sport was 7.9% in 1998, fell slightly in 2000 to 7.8% and then rose to 9.8% in 2002, although this is probably because TGI introduced a broader definition of what constitutes playing a sport, in 2001.
This level of participation in golf means the UK industry was worth about 420m [pounds sterling] in 2002 in annual fees based on 1.2 million members paying an average fee of 350 [pounds sterling] a year. Mintel estimates that annual fees account for only 85% of the money spent on services by the typical golfer. With other expenditures such as joining fees, competition entry fees and green fees for playing as a visitor or guest at other dubs, the industry is worth nearer 500m [pounds sterling] a year.
Participation in golf has risen, but the reason the industry is so keen to attract more players is the result of a massive golf building programme in the 1990s. There have been 603 new golf facilities built in the UK since 1990, according to the Golf Research Group's the Financial Performance of UK Golf Courses 2002 report. Some of these facilities were only nine-hole courses, while some existing facilities added new holes. So overall, the equivalent of 727 courses of 18 holes have been built since 1990.
Much of this development followed the 1989 document, The Demand for Golf, published by the Royal & Ancient Golf Club, the world's governing body for golf. The organisation, which is based in Scotland, recommended that 691 new 18-hole courses were needed in the UK by 2000 in order to meet demand. The result was a 32% increase in facilities by 2002. But participation levels have not risen to match this increase.
"The Royal & Ancient's report said the best courses were pay and play ones close to urban centres," Blake says. "We have had the right number of courses built, but often people spent too much money on their construction and put them in the wrong place. Golf is a very low margin industry to make a profit, so you have to keep building costs to a minimum."
The rapid building programme of the 1990s has dropped off dramatically, and the number of new courses built each year is now usually in single figures. The Golf Research Group estimates that 83% of the courses built since 1989 either went bust or experienced severe financial difficulties.
But the boom in building in the 1990s has had two major legacies. One is that there is greater choice for consumers, with waiting lists to join most clubs now short or nonexistent. The market is far more competitive and this is partly because of the second major legacy of the increase in golf building--a change in the way the golf industry is structured. This happened because most of the new courses were proprietary (profit-making ventures, owned by an individual or a company). This has changed the balance of power in the UK golf market, which was dominated by private clubs (a club owned by its members and operated on a non-profit basis). About 55% of the UK's golf courses are private, while the number of proprietary clubs has risen from 13% in the 1980s to 36% now. The remaining 9% of UK courses are municipal (council-owned).
The growth in proprietary courses also led to the introduction of commercial golf chains, something unheard of before the 1990s. More than 120 of the UK's 900 proprietary golf courses are now owned by management chains.
The UK's largest golf operator is the 23-atrong US-owned American Golf chain. But this may not be the case for much longer as the firm's parent company, American Golf Corporation, is reportedly trying to sell the UK clubs, and a number of venture capital firms are now sniffing around. AGC, which was bought by a group of investors in 2003, operates about 240 public, private and resort clubs in the US.
There are a number of other UK chains, but none the size of American Golf. Clubhaus, which has 11 clubs, was previously a listed company, but went private in May when it was bought by Legal & General Ventures for 56m [pounds sterling]. This was done through an investment vehicle led by Clubhaus founder and managing director Charlie Parker. Seven of the firm's 11 venues follow the country club format, which feature large health and fitness clubs. The other four have planning permission to develop into country clubs. The company had been held back by large debts, but hopes the deal with Legal & General will allow it to move forward.
Crown Golf was formed in January 2003 "after health and fitness operator Crown Sports sold its golf interests to Bennelong for 15.4m [pounds sterling]. Burhill Estates has eight clubs after it bought The Shropshire Golf Club in Telford for an undisclosed amount in early 2003.
Other chains include the Jack Barker Group, which offers pay and play facilities at nine sites. It is currently constructing a 27-hole golf course and driving range in Mansfield and will shortly be announcing the addition of three more Jack Barker Golf Centres that should become operational by early 2005.
David Cross, the former head of health club management contractor DC Leisure, has five pay and play courses at three sites operated under the UK Golf Centres brand. Cross is also involved in four other golf courses, including the Camberley Heath Golf Club in Surrey in which he has a 30% stake. Hotel operators are the other major players. Whitbread-owned Marriott Hotels has 16 courses at 11 sites. The company says its golf venues attract 750,000 members, hotel residents, corporate and society golfers each year.
De Vere Hotels owns 12 golf courses across seven properties. The company is currently building a 96-lodge timeshare and golf course development at De Vere Cameron House. "We are currently also negotiating with Leeds City Council for the purchase of Oulton Park Golf Course, a municipal golf course that is adjacent to our Oulton Hall Hotel," says De Vere golf operations manager Robert Maxfield.
As the UK golf market is very fragmented, it is difficult to generalise about what the most successful models of operation are. Some courses operate a mixture of pay and play and membership. Others, such as hotels with golf courses, might allow guests to play and also offer the public membership or a pay and play option. Many hotels also act as venues for large-scale corporate golf events. But one definite recent trend is that pay and play is becoming more common.
"I think the UK market is moving more towards pay and play as it did in America," says David Cross. "People want to play golf, but not always like at a members' club where they might go three or four times a week. People's lives are more hectic than they used to be and pay and play is more flexible for them."
Cross also says the standard of pay and play courses has improved dramatically: "In the early days, pay and play was local authority and it was usually of a low standard and poorly operated. Now there are a lot of upmarket and mid-market pay and play courses."
But not all membership courses are having problems as well-managed clubs in good locations always do well. However, it is often the management chains that make more effort to appeal to non-golfers and will market themselves more aggressively.
"There is a massively untapped market for junior and women's golf," Jack Barker Group operations director Mike Shattock says. "Many private members clubs still do not provide a warm welcome to these groups, particularly if they are also beginners."
The management chains are growing, but the market will probably remain pretty static for the foreseeable future as very few courses change hands each year. Property firm Strutt & Parker reported a rise of 13.3m [pounds sterling] in total gulf course sales to 41.7m [pounds sterling] in 2003 compared with 2002. But there were 13 sales in 2003, similar to 2002 when there were 12. The increased value of sales was because of a small number of properties sold at particularly high values (London Golf Club, Mill Ride Golf Club and Camberley Heath Golf Club).
Charles Greville-Heygate, of Strutt & Parker's leisure and hotels department, says the market appears to have settled into a pattern and he does not expect a major change in the foreseeable future. "There are plenty of people out there who want to buy, but there isn't a great deal on the market," he says. "It is mainly UK buyers, unlike ten years ago when the Japanese were involved, but they are now selling rather than buying. There is not much American interest either."
There are also not many new courses being built. It is difficult to find investors in new courses, mainly because of the problems experienced by many of those built in the 1990s.
"Back in the heady days of the 1990s there were 100 courses built in one year, but now there are literally a handful," Greville-Heygate says. "Since the 1990s, supply has increased hugely, but the number of golfers has only increased slowly. In order to make a profit you have to find a special site and they are few and far between."
Some new courses are being built, but they are often part of larger developments. Examples include a course as part of developer Onslow Suffolk's plan to spend 300m [pounds sterling] creating an indoor real snow ski slope-anchored leisure site on a former cement works in Suffolk. Peel Holdings has plans for a 111m [pounds sterling] racecourse in Manchester that will feature an 18-hole golf course. An existing racecourse in Doncaster is embarking on a redevelopment that will include a golf club--Doncaster Metropolitan Borough Council chose Arena Leisure as the preferred bidder for this 55m [pounds sterling] scheme in June.
In the North East, Sir John Hall, the president of Newcastle United Football Club, is part of a 600m [pounds sterling] project to create a 500-acre business park at Wynard. Part of the plan features leisure, including golf facilities. And in Scotland, Ecosse Regneration's 600m [pounds sterling] Heartlands scheme on a former Scottish coal mine is to include two golf courses.
On a smaller scale, golf pro Seve Ballesteros is working with Bridgedown Golf Club in Barnet, North London, to create an 18-hole course, nine-hole academy and a school of golf. The academy and school will be branded under the Ballesteros brand and will open in 2005.
The future for new golf facilities may lie in the concepts that are springing up in urban centres and are based around driving ranges.
Sports retailer JJB Sports is developing large driving ranges combined with a golf superstore, teaching academy, putting green and large car park. There are currently four sites in New Maiden, Sidcup, Manchester and Glasgow.
Playgolf has just floated on the Alternative Investment Market to raise funds for the expansion of its urban golf concept, currently operating in London and Manchester. The firm is also developing its first 'golf in an hour' concept, in Harrow, Middlesex.
Another recent development is TopGolf, a gulf-based entertainment concept centred on a driving range. Golf balls containing microchips give players feedback on how far they have hit the ball and a score in points. There are TopGolf Game Centres in Watford in Hertfordshire and Chigwell, Essex. A typical centre has 55 bays, food and beverage, golf retail, tuition and an amusements area. TopGolf is owned and operated by Baydrive, which is backed by 15m [pounds sterling] from Henderson Private Capital.
"TopGolf appeals to golfers and non-golfers and is something that could broaden the appeal of golf," says Toby Boyle, Henderson's head of private equity, Europe.
Baydrive has submitted planning applications for TopGolf sites in Essex and south-west London, both planned to open in 2005. A site covers 10 acres or more and costs upwards of 2m [pounds sterling] for a range conversion.
It may be that it is concepts such as those being developed by Baydrive, Playgolf and JJB Sports that will introduce younger players to the game and in turn help attract people to traditional courses. The industry certainly needs some innovation if it is to move forward.
Source: Leisure Report
