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How Golf Got Stuck in the Rough; As young people seek faster-moving fun, only 14 new golf courses opened in the U.S. last year, while almost 160 shut down

How Golf Got Stuck in the Rough

By Lindsey Rupp and Lauren Coleman-Lochner June 19, 2014

Not that long ago, golf was considered the activity of choice for corporate bonding and the upwardly mobile aiming to look successful. Today companies are relying less on glad-handing on the links, and many young people are cool to a pursuit viewed as time-intensive and elitist. The result: Golf is suffering from an exodus of players, and courses are closing. The number of U.S. golfers has dropped 24 percent from its peak in 2002, to about 23 million players last year, according to Pellucid, a consulting company that specializes in the business of golf. It found that in 2013 alone, the game lost 1.1 million players.

Given the sport’s costs and inherent difficulty—while a video game on a smartphone can be mastered in as little as a few hours, golf can require years of practice to play well—that slide is unlikely to end anytime soon. “The game is hard, the game can take a lot of time, and it’s expensive,” says McRedmond Morelli, founder of Boxgroove in Bellevue, Wash., which gives its 50,000 members access to a network of private golf clubs. “There is no equivalent to the bunny slope on golf.”

Slow golf equipment sales over the past 15 months have created a glut of inventory at wholesale and retail outlets, forcing them to slash prices. Dick’s Sporting Goods (DKS) was selling some drivers, priced at $299 just 20 months earlier, for $99, Chief Executive Officer Ed Stack said on an investor call on May 20. That day, Dick’s reported it missed its golf gear sales target by about $34 million in the first quarter. The news helped send the retail chain’s stock down 18 percent, its worst one-day tumble since the company went public in 2002. “We don’t feel we’ve found the bottom yet in the golf sales number,” Stack said.

TaylorMade, a golf equipment maker owned by Adidas (ADS:GR), reported a 34 percent drop in sales in the first quarter. AndCallaway Golf (ELY), maker of the Big Bertha driver, delivered its own dim forecast in April, warning that full-year profit could come in at the low end of its previous estimate. “We anticipate a heavy promotional environment while the industry works through excess inventory,” CEO Chip Brewer told investors. Callaway hasn’t reported an annual profit since 2008.

Although an especially cold winter and the sluggish economy are no doubt part of golf’s problem, a generational shift is a bigger cause for concern. “The baby boomers were supposed to be the salvation of golf,” says Jim Koppenhaver, president of Pellucid, but they have yet to take up the slack. “We’ve got to find a way to stem the decline in the golfer base,” he says. His company’s research shows the number of golfers today is lower than in 1990, even though the U.S. population is 27 percent greater.

Koppenhaver calls the traditional 18-hole round “an anachronism,” requiring about six hours “door-to-door,” including more than four on the course. Nor does the pastime have the social currency it once held. Explains Gerald Celente, publisher of marketing magazine Trends Journal: “Everybody’s hooked up to their handhelds, so [today] it’s social networking instead of sports.”

Overbuilding in the 1990s led to a surfeit of courses as the growth that operators anticipated never materialized. Only 14 new courses were built in the U.S. in 2013, while almost 160 shut down, the National Golf Foundation reports. Last year marked the eighth straight year that more courses closed than opened.

Those sticking with the sport are playing fewer rounds. U.S. golfers played a total of 462 million rounds last year, according to researcher Golf Datatech. That was the fewest since 1995. Says Morelli: “All the people under 35 are leaving the game.”

To attract more casual players and expand revenue, particularly among younger people, clubs are rethinking some of the sport’s tenets. The U.S. Golf Association, the PGA of America, and Golf Digest have launched a “Time for Nine” campaign to counter complaints that the traditional 18-hole game takes too much time. And some clubs are adding attractions such as yoga and hovercraft rides.

Then there’s Hack Golf, a movement to identify the parts of golf that aren’t fun and fix them. A standard cup is 4.25 inches in diameter, often making even short putts difficult to sink. Some courses have added wider holes to make the sport faster and easier, with a Golf.com story in April asking, “Could a 15-inch hole be the answer to golf’s growth problem?” TaylorMade in April sponsored a 15-inch cup tournament. The brand also co-sponsors a website with the PGA, hackgolf.org, with the goal of “crowdsourcing the future of golf.” The site has elicited 1,471 ideas. A recent suggestion: smartphone apps to reserve tee times, pay for services, and communicate with the pro shop.

Clubs in more than 30 states, including the PGA Country Club in Port St. Lucie, Fla., are even trying FootGolf, a combination of golf and soccer designed to capitalize on the growing popularity of the latter. The game is played with a regulation No. 5 soccer ball on a course with shortened holes and 21-inch cups. Wearing knee-high argyle socks is recommended.

The professional and marital decline of Tiger Woods, once the public face of golf, hasn’t helped. With neither Woods nor Phil Mickelson playing on the weekend at the Masters this spring, only 7.8 percent of U.S. television households tuned in—the tournament’s lowest TV rating since 2004, according to Nielsen. That was a 24 percent decline from the 2013 finale, when Woods and Mickelson played and 10.2 percent watched.

Star power definitely has “a major effect on viewership,” says Will McKitterick, an analyst at researcher IBISWorld. “But the industry as a whole has many more structural issues that have less to do with Tiger and more with golf becoming less popular.”

The bottom line: As young people seek faster-moving fun, only 14 new golf courses opened in the U.S. last year, while almost 160 shut down.

 

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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