Whack! Plop! (Insert suitable swear word)! Squish! Ah, the sounds of golf in spring.
Only this year, besides the chirping of birds and the cursing of missed birdies, there’s another sound wafting over the damp greens and muddy fairways. It’s the nervous drumming of fingers and gnashing of teeth, as course operators and their financial backers fret about the effects of a deepening recession on their cash flow and, in some cases, on their survival.
“I hear all these stories from Florida. My God, it’s unbelievable,” says Dalt Hicks, the 81-year-old owner of the Cardinal Golf Club in Newmarket, Ontario. “I don’t know about here yet.” This winter, course operators from the Carolinas to Florida laid off staff, slashed prices and offered previously unheard-of incentives, such as free golf shoes, to keep green fees flowing during what is normally their most lucrative season. As Canadian golfers dust off their own clubs, it’s too early to forecast how many fewer rounds will be played or what discounts will be needed to keep the duffers hacking.
Hicks, an industry veteran who is adding another 18 holes to his complex in June, says business at public courses like his could be down as much as 10% to 15% this year. And newer private clubs could face even steeper declines, because it will be tougher to attract members. “The recreation dollar is going to be stretched out and we’re going to be involved with that,” Hicks says.
Golf has held up remarkably well in grim times past, because the typically affluent people attracted to the ancient game simply would not be deprived of their chosen respite from the daily litany of economic and market misery. They are no less eager to get back on the links today, but the industry itself is facing an economic slump at the worst possible time.
A building boom in recent years has produced a glut of courses across large swaths of North America. At the same time, the growth of golf itself has gone flat, notably among young people, as the costs of playing have climbed and other sports compete aggressively for the shrinking leisure dollar.
“A bit of an overbuilding scenario went on in the golf course business, certainly in Ontario and nearly every jurisdiction,” says Ken Fowler, a businessman in St. Catharines, Ontario. His eponymous private investment firm owns resorts in Ontario cottage country and rural British Columbia, where overpriced golf communities have proliferated in hopes of luring the wealthy denizens of Calgary and Vancouver. “It’s creating a situation where there are too many courses for the number of people who want to play.”
Because of the high cost of acquiring the prime real estate they occupy, most of these expensive ventures—a high-end course runs as much as $15 million—have been designed as centrepieces of ambitious residential or resort projects. The golf facilities make the residences more marketable, not to mention pricier. And the property sales finance the golf construction. The boom attracted plenty of golf-industry amateurs who thought it was “a charming thing to do,” Hicks says dismissively. Others are less polite, describing the plethora of new developments as the latest rich man’s folly.
To get any kind of rate of return on their investments, particularly at northern latitudes bedevilled by short seasons and uncertain weather, the owners have to keep flipping properties. It’s a flawed business strategy that has come unglued with the credit freeze and the collapse of real estate prices.
“There’s no question the market for resort real estate has slowed right down for sales of new product,” Fowler acknowledges. “But we think it’s simply because everybody is sitting on their hands right now, as they are on a lot of purchases.”
Prominent Canadian golf course architect Douglas Carrick has four Ontario projects on the drawing board, but none is going to see the light of day any time soon. A couple have made it through the long planning approval process, but the developers are “waiting until things show signs of turning around before they embark on investing the money,” Carrick says.
