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Valley's overbuilt golf industry faces financial woes as recreation habits change

To many the Valley is synonymous with golf. Green fairways and upscale clubhouses lure homebuyers and vacationers to golf courses here —in the middle of the desert — but the state of the economy and a decline in play are threatening to turn many courses brown.

2013-12-17

To many the Valley is synonymous with golf. Green fairways and upscale clubhouses lure homebuyers and vacationers to golf courses here — in the middle of the desert — but the state of the economy and a decline in play are threatening to turn many courses brown. “The big overarching question is: Is golf dead?” asked Mark Stapp, director of the W. P. Carey Master of Real Estate Development program. Stapp posed the question at a panel discussion he moderated titled “Future of the Golf Industry in the Valley.” The discussion is part of a series presented by the W. P. Carey School of Business and the ASU Real Estate Council. David O’Donoghue, senior vice president of club and resort operations at DMB Associates, Inc. had this to say: “golf is not dead but it’s not doing well.” The economic downturn coupled with a saturation of golf courses in the Valley are factors sending the sport to its death. “Golf needs a severe kick to get it restarted,” he said. Declining game The National Golf Foundation (NGF) noted this decline in the article “The Leaky Bucket – Attrition in Golf Participation.” “Golf participation remained flat in 2012. NGF participation research revealed that there were about 25.3 million golfers in 2012, just off the 2011 figure of 25.7 million. The year-over-year drop is within the margin of error, but the bigger picture - the 4.7 million golfers lost since 2005 and the downward trend in participation - is more alarming,” the article stated. The decline is being felt in private and public courses. Jim Burke, acting parks director for the city of Phoenix said, “Municipal golf is not dead but it’s certainly on life support.” He said in the early 1990s there was an average of 90,000 rounds played on the city’s public courses per year. Today they’re seeing less than 40,000. Burke agreed that the average golfer’s demographic profile has changed. Retired golfers aren’t playing every day as many in the golf industry thought they would, and the younger generation simply isn’t golfing, he said. To add to the dilemma, golf courses were overbuilt in Phoenix, said John Fought, president of John Fought Golf Course Architecture. He compared it to having five McDonald’s restaurants in a two-mile stretch. “Everybody thought you had to have a golf course in the center of your facility and it didn’t matter what it looked like or the quality of it,” he said. “There are so many, with all due respect, crumby golf courses out there.” According to GolfLink, Arizona has 421 public and private golf courses. Fought said developers were more focused on fancy water features and amenities at their courses, rather than the golf. Building those pricey courses made a round of golf cost $200 and players aren’t willing to pay that today, he said. “We really got enamored with golf and allowed it to get away from its roots,” he said. On the courses Fought is designing across the country, the game is the focal point. “The glamour of golf is going away,” he said. “The two worst inventions in golf are the golf path and golf cart,” O’Donoghue said. Walking the course is the way the game was meant to be played, he said. Being green in the desert Another challenge hurting the Valley’s golf industry is grass: How to keep a golf course green in the desert. “We shouldn’t have green grass,” O’Donoghue said. “It’s a fallacy. It’s an over-seeded rye and we do it to sell real estate. You should be playing on scrubbed up Bermuda but we’re so conditioned to perfect greens, perfect course conditions, perfectly raked bunkers — and when you’re looking at the business model, that costs an awful lot of money to deliver every day.” He said some courses in Scottsdale pay $800,000 a year just for water usage. “It is cost prohibitive to own and operate a golf course,” he said. Burke echoed this concern saying paying the maintenance costs for the city’s public courses has been challenging. The city experimented in 2001-2002 and did not over-seed their courses. “The golfers walked and didn’t come back for three or four years,” he said. “They wouldn’t play on a fairway that wasn’t green.” The problem intensifies in golf communities where the surrounding homeowners have to cover the cost of the course maintenance. The expense for the homeowner makes the golf course a liability, O’Donoghue said. Neighborhoods where developers maintained waiting lists of buyers now say they have a wait list to get out, he added. Fought said this problem is magnified here in the Valley more than anywhere else in the country, and it has taken a toll on the sport. “This city shows off more than any other, the real issues in the game of golf,” he said. The remedy Experts agree that the business needs a new approach — as well as new players — to get the sport on track. O’Donoghue suggests repurposing excess course land and doing away with some of the poorly designed golf courses entirely. He also said some courses are offering a six or nine-hole game to attract those golfers that don’t have time for or don’t want to play a traditional 18-hole game. But all agree that this is not easy to do for many legal, political and practical reasons. Innovations in golf course maintenance and technology, such as recycling water from washing machines and showers to maintain the course, are part of the solution. Fought suggested limiting the lush green grass to the tee boxes and not the fairways. Despite the decline in the game in the United States, golf will be included in the Olympic Games in Rio de Janeiro in 2016 and that’s bringing some energy to the game internationally, O’Donoghue said. “The positive here is the game is growing outside of the U.S.,” he said.

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