Course closures outpace openings in 2006

"According to the National Golf Foundation, there was negative net growth in golf facilities in 2006 for the first time in 60 years, as the number of courses that closed (146 18-hole equivalents) was greater than the number of openings (119.5). In releasing the data, NGF said it was not an alarming occurrence, but a confluence of events – openings returning to more normal levels and weaker facilities being culled. "

We began a cycle of dropping participation just after the start of the new millennium. Of course, the IPSOS Reid study claims that we had a big increase last year. Now remember this poll was based on equal sampling in all the regions so that southern Ontario had the same impact as PEI. This makes the results tough to believe when a quarter of all play is from Ontario and a huge majority of that is from southern Ontario. Ask any course operator in southern Ontario, play is down.

"In the late 1980s, the number of openings was about 100 per year. There followed a wave of increased construction in the 1990s that peaked in 2000 with nearly 400 openings. Since then the wave has subsided to near historic levels. "

In southern Ontario the build out has easily followed this massive spike and it is quite clear that we are about to follow the same pattern of construction…or lack there of. The interesting thing is there may be a possibility of no new courses built in southern Ontario in a year or two!

"The culling of courses is not viewed as a negative by NGF. The organization expects overall course supply to stop expanding in the absence of increases in demand. It is primarily the weaker courses that are closing and, in many cases, owners who sell are profiting from long-term real estate appreciation. Finally, a better quality overall golf supply means a better quality experience for players."

I really have no problem with what they are saying about weaker facilities and bad business models being culled. In fact, many of Ontario’s most foolish projects will end up declaring bankruptcy. The Niagara region has a series of courses all built beyond the regions price point, and the casino traffic is not what they all anticipated. Anyone surprised by this – after Legends we all knew. The Muskoka’s feature a very short season, granted there is plenty of money (for now), but too many courses were built in isolated locations. Nobody wants to leave the family and the cottage for the day to play golf and these courses are excessively expensive to build. Finally Collingwood will be the next area to face the same. There building like mad to match the real estate boom, but the courses are already showing signs that the demand is not there – and yet more are coming.

"NGF recorded a 56 percent jump in the number of closures between 2005 and 2006, from 93.5 to 146. These 146 closures represent about 1 percent of the total supply of golf courses in the U.S. Closures were primarily public (97 percent). They were disproportionately short courses (executive and par-3) – 20 percent were short courses vs. 8 percent of total facilities. And, they were disproportionately stand-alone 9-holers, 46 percent vs. 28 percent of total facilities. Closures were predominately values courses; with nearly half having peak green fees under $25. Closures occurred in 39 of 50 states."

We’re always a little behind the curve up here, but this is coming. As a developer friend said to me a few years back, “Why would I build now, when I can buy them at 50 cents on the dollar in a few years?” Clublink will begin to acquire courses again but many will simply go to bankruptcy. I’m still trying to figure out who is going to fill Coppinwood, the new Greg Norman course and Gord Stollery’s course all being or been built east of Uxbridge for high end membership. The market won’t carry all of them.

The business model still remains the same, if you build a clever course at a reasonable cost, you will make money and be busy. If you build a massive project with every bell and whistle, you must charge a premium, and then everything must go perfectly for you to make money - including the economy, and that nobody can control.