Wednesday, December 03, 2008

Golf industry in trouble as U.S. economy declines

I wonder if the golf industry will also be asking for some government bailout money as well? From MSNBC News:

Behold the golf course. Graced with rolling fairways, pristine greens, ancient oaks and other natural fanfare, it presents a striking picture.

But as beautiful as a golf course may be, its looks belie the trouble besetting the industry that created it.

According to the National Golf Foundation, the number of new courses expected to open in the United States in 2008 is the smallest in 20 years. More courses are scheduled to close this year (nearly 100) than the 80 expected to open, though the closures have fallen since almost 150 were shut down two years ago. The golf construction boom of the 1990s – when about 2,500 new courses (mostly daily fee ones) were added to the 13,000 or so already extant in the U.S. – is not only over; it’s stuck in reverse.

The problems of the broad economy are bedeviling golf course construction. The housing market’s collapse has hampered development, since a number of golf projects these days are tied into on-site housing. Getting financing to build a new course is tougher than it has been in decades. Projects that were started this year have seen the bulldozers turned off until better times appear.

According to the MSNBC story, it takes around 200 acres of suitable land, near a reasonable population center, to start a golf course. And just to build a golf course could take years in attracting money and securing permits. So the construction of a golf course is a "time-consuming venture." I would also guess that it is fairly expensive for golf courses to maintain their greens--with watering and mowing--and manage their country club buildings for golfers to relax in. So the golf courses would have to charge a high rate for golfers to play. Here in the San Jose area, the Santa Teresa Golf Club charges a weekday rate of $40, a Friday rate of $46, and a weekend / holiday rate of $60 to play. The Los Lagos Golf Course charges around $37 to $46 per player, depending on time and availability. The Almaden Golf and Country Club charges a proprietary membership dues of $625 a month for full access of the facility. And finally, Pebble Beach, located down near Monterey California, charges around $495 to play. This is just a sampling of what golf courses are charging in the San Jose area. Tack on the expenses of purchasing the golf clubs, golf bag, golf shoes, balls, tees, and you are getting into a fairly expensive sport here.

Then there is the subject of the golf courses being tied with on-sight housing. The housing market has completely crashed, considering the fallout from the subprime mortgage collapse on the housing market and the financial industries woes. To build a house next to a golf course, the builder is going to charge a premium price on that house. But with housing prices falling, such a builder is going to have a problem charging higher prices for a house, located next to a golf course, in competition with an increasing number of foreclosed homes, or even short-sale homes. Of course, it could get worst if the builder was constructing both the homes and the golf course. It is no wonder that the builders are turning the bulldozers off on these housing / golf courses until the housing and U.S. economy improves.

And the current golf courses are struggling in this economic downturn.

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