The world of golf braces for a tough year as corporate sponsors tighten their belts and golfers cut costs
From the Print Edition:
Fred Thompson, March/April 2009
The color of golf has traditionally been green, and no more so than during the past two decades. We're not talking grass here, we're talking money. As the American and global economies burgeoned throughout the 1990s and made it over the hump of the 2001 9/11 tragedy, the game of golf benefited prodigiously. The Tiger Woods Effect was supposed to bring untold millions of players into the game. Instead, it brought in millions upon millions of dollars. Make that billions.
While the number of players didn't increase dramatically, the amount of money coming into the game did, at all levels. The PGA Tour's purse money shot up with the trajectory of a Woods drive; private clubs with entry fees of half a million bucks or more grabbed headlines; posh resorts asked as much as $500 for a greens fee; and club companies placed $500 tags on drivers. The price of a golf ball exceeded a gallon of gas. Private club rosters were close to capacity and public courses were, for the most part, making money. Golf meccas such as Scotland and Ireland, fueled by the American longing for the links land, gleefully turned dollars into pounds sterling and euros at an exhilarating pace.
Then the economy tanked, or is that shanked? Like a lot of industries, golf isn't likely to be the same. There are no gimmes anymore.
Buick parted ways with Tiger Woods. What does that tell you? With the reeling financial and auto industries heavily involved in golf from a promotional aspect, big question marks exist about whether the level of sponsorship can be maintained. The PGA Tour lost a tournament for the 2009 season, as did the Champions Tour. The LPGA Tour lost four.
The impact at the professional tour level, however, may not be as profound as it will be, and has been, in other areas of the game. Winter golf hot spots in Florida, the Caribbean and Hawaii saw steep declines in the number of players, and in many cases the level of greens fees they could charge.
Not even the Celtic Tiger was immune. Two golf resort properties in Ireland tanked, others dangled by a thread and a number of projects in development were stopped. Several golf clubs in the New York area were reeling from the double-bogey whammy of the financial sector meltdown and the Bernie Madoff Ponzi scheme scandal.
What follows is Cigar Aficionado's survey of people throughout the game in America. All agree that the challenges ahead are significant, that the economic downturn is the game's most difficult up and down in decades. But they also share a common optimism, a belief that things will be better, that they will make this up and down, though it might require a 20-foot putt on the 18th hole.
PGA Tour commissioner Tim Finchem, speaking at the season-opening Mercedes Championship at Kapalua, was in his best cautious-optimism mode. The trade winds on Maui were gentle while the ill winds of financial peril were rising. "It's going to be a tough go," Finchem said. "A lot of companies are cutting budgets, cutting advertising, cutting sponsorships across the country and around the globe, and it is going to make our work more challenging. But our value is still there.
"On the competitive side, there are two reasons we are excited. One is that not only do we have Tiger coming back at some point this year, but we have this great batch of really stellar performances the last few months [read that Anthony Kim and Camilo Villegas] that we think are going to excite fans. "Secondly, we do like the reaction to the changes in the FedExCup this year. We think we are in a situation now where we have three levels of the FedExCup competition. . . . We know it's going to be more exciting."
Charismatic players and high-profile competitions can sell tickets, but ticket money is not the backbone of professional tour golf. Big corporations and television are the cash cows, the "Green Team," if you will. Without huge chunks of cash from corporations that provide tournaments with prize money and hospitality income, and provide television with advertising revenue, pro golf would not exist in its present form. Corporations are taking a hard look at how they will be doling out this promotional money, and Finchem invites that scrutiny.
"When we start into a downturn and companies are reducing their expenditures in advertising and marketing and sponsorship, they are going through a process of deciding what's more valuable to them, where they get the most value to the dollar spent," he said.
"In my experience, every time there was a downturn there was even more scrutiny than the last time, and there's better scrutiny. . . . We have performed very well in that regard because of our value model. In terms of spending a dollar with the PGA Tour versus spending a dollar with X sport or Y sport, we come out very well. The first step is to win that contest and come out ahead."
Larry Peck, the promotions manager for Buick and Pontiac, oversees Buick's very large commitment to golf. In the fall, Buick and Tiger Woods announced they were severing their relationship, that an endorsement contract thought to pay Woods in the neighborhood of $9 million a year was going to end prematurely. The PGA Tour credits Buick as its first corporate sponsor, in 1958, and Peck says Buick has no plans to get out of the game, but it will be cutting back. Currently, Buick sponsors the Buick Invitational in San Diego and the Buick Open in Michigan. In 2008, it had 20 official car deals with tournaments. In 2009, it will have just five. And it won't have Tiger anymore.
Ernie Els has 16 career wins in the United States.
"In the economy now more than ever we have a need to promote our new products, specifically in 2009 at the Buick Invitational and Buick Open to promote our new Lacrosse," says Peck.
"That said, we have also made a number of cuts, most notably our nine-year relationship with Tiger Woods. . . . I've got nothing to say other than great things about Tiger. We grew with him, he grew with us. You put Tiger in an ad, people tended to watch. There are 50 million—plus golf enthusiasts in the country, with strong demographics for an upscale automotive brand that wants to promote itself to that audience. The PGA Tour provides a good means to reach it."
The PGA Tour has reached out to its players, asking them to consider playing more tournaments and participating within events at those tournaments outside of showing up on the first tee and signing a few autographs by the scorer's cabin. Ernie Els, one of the most affable and savvy of players, understands the need to do more.
"These are crazy times," says Els. "[My company] is locked in, thank goodness, through 2010, with most of our sponsors. We've got to thank them again, just to be sponsoring us, all of this money we play for and there's a lot of people losing their jobs. So what we are doing, we should almost feel guilty, because it's really tough out there and we've got to be thankful for what we've got, and I think the players do realize that."
Carolyn Bivens, commissioner of the LPGA Tour, is working feverishly to remind her sponsors that the LPGA provides a quality platform for them. The LPGA Tour hasn't flourished as robustly as the PGA Tour, and Annika Sorenstam (now retired) couldn't bring the big numbers to the LPGA like Woods did to his tour. The LPGA does not have a fat domestic television rights contract to feast from, instead having to fund its own broadcasts in conjunction with its tournament sponsors. The tour will offer $55 million in prize money in 2009, about a fifth of the prize money of the PGA Tour. A third of the LPGA schedule is played outside the United States, primarily in the Pacific Rim and Europe, as officials search for sponsors wherever they can find them.
The economy cost the LPGA four tournaments on its 2009 schedule—the ADT Championship, the Fields Open and the Ginn Open and the Ginn Tribute. (The PGA Tour also lost an event sponsored by Ginn, the troubled resort and high-end residential company.)
"I'm old enough to have gone through the savings and loan issues, the other economic downturns, but I wasn't one who saw this coming," says Bivens. "We were changing the business model, trying to bring parity to the LPGA and monetize its success. I'm grateful this didn't happen two years ago. I sure wish we had had one more year. We were on a great roll. One more year and we would have gotten through our television negotiations.
"As far as LGPA official money events in 2009, we'll have 31. That's versus 34 in 2008. Given what could have been the potential economic impact on our schedule, we view this as a barometer of stability, appeal and value for our players. . . . But it's no secret that the road ahead is going to test our mettle. We face real challenges."
The PGA of America, the organization of club professionals that also jointly puts on the Ryder Cup, monitors what's going on in the private and public golf sectors and isn't alarmed—at the moment.
"In 2008, we enjoyed the definition of the new business goal, which means that flat is the new up in corporate America," says PGA of America CEO Joe Steranka. "We had less than half a percent decrease in rounds played [in 2008] and we had around a half to 1 percent increase in revenue per round. We demonstrated that even in this economy, people are looking for recreation in tough financial times. Golf provides a great escape. Golf held up very well when you look at discretionary spending."
That isn't to say that things were rosy, or at least flat, everywhere. "In drive-in markets like Ocean City, Maryland, Hilton Head and Myrtle Beach, you had declines of 8 to 10 percent," says Steranka. "We think facilities with high price points could be somewhat vulnerable, not so much from their core clientele, but from the standpoint of the casual traveler."
Ben Hunt has been feeling the pinch in Myrtle Beach, South Carolina, where golf is a way of life. Hunt is a PGA professional and owner of the Grand Strand Golf Association that represents 63 clubs in the area. "There's a definite downturn here, between 10 and 15 percent, I'd say," he says. "We had lost several courses over the last few years to real estate development. Developers would come in and offer a golf course owner so much more than what he could make on the course that he would sell. But that boom went bust. We have a 54-hole facility, Bay Tree, that was sold for development. All there is now is a bunch of weeds." The private-club sector also faces some tough times, especially when people with money suddenly don't have so much.
"We are seeing some challenges in club membership, seeing some strategies for maintaining their memberships whether it is a hiatus from pay[ing] full membership dues for a year or allowing someone to go to a social membership," says Steranka. "In Palm Springs, where there was a ramp-up in high-cost private clubs, we see a ramp-up in the amount of people trying to sell memberships. We don't see the private-club model as broken. The private-club challenge seems to be regional. We've also heard from a handful of professionals who have lost their jobs because of what they said were economic conditions."
Private clubs, those bastions of American green, are feeling the blues. The Los Angeles Country Club is putting off a major renovation of its North Course, settling for some bunker and tree work. Several clubs in the New York metropolitan area are losing members and at least two clubs on Long Island have talked about merging operations.
All of which makes for uncertain times for a club manager such as Don Molitor of the Woodmere Club on Long Island, just outside of New York City. "Just like other clubs, we are looking at ways of cutting our expenses while trying to live up to expec-tations," says Molitor. "We've cut the operating hours for the restaurant, the locker room, fitness facilities. At a club like this, it's 20,000-plus dollars a year before you even stick a tee in the ground, so there is a certain level of expectations, things like having a perfectly green course and having a very good restaurant and all sorts of help. We had an organized roundtable discussion of managers, professionals and superintendents back in December. A banker spoke to us, and the words are still echoing in my head. He said we had a hell of a party the last 20 years, and now we are paying for it with a hell of a hangover."
Charles Robson is executive director of the Metropolitan PGA in New York and has his hand on the pulse of the game in this golf-blessed area.
"We are more concerned about the future of our clubs and courses, thereby our professionals," says Robson. "We've had one professional lose his job, ostensibly for financial reasons. There are several clubs that are well below full memberships. There are talks of mergers, though there are a lot of rumors flying around. I think public courses will continue to be healthy, because as members start leaving private clubs, they will still want to play golf."
Robson also raises an important question about the nature of private clubs, which also applies to high-end public facilities. "I think you will see a rollback in expectations," says Robson. "Maintenance budgets are being cut, dining budgets being cut, golf services budgets being cut. This whole idea that everything has to be five-star. Does everything have to be five-star to be golf? Can't it be four-star or three-star? The basic game is simple, and maybe this situation will make it more simple again."
It's a thought shared by David Fay, executive director of the United States Golf Association. "This quest for perfection is going to be dealt a pretty serious blow," says Fay. "My course up in Newport [founded in 1893 and one of the original members of the USGA], we don't have an irrigation system. We are sort of minimalist: no food and beverage service other than a lunch of soup and cold sandwiches. The way we maintain our course might be replicated by other clubs. Greenskeeping, facility maintenance would be a good place to cut back on." The USGA will bring the U.S. Open back to the Black Course at Bethpage State Park this June. The course, 30 miles from Manhattan on Long Island, hosted the 2002 event won by Tiger Woods. Financially, it was as wildly successful as the competition. For 2009, Fay knows that the expectations can't be that high.
"Golf benefits when the economy is strong and will be affected when it is weak," says Fay. "At our three Opens, we sell corporate hospitality. When times are tough, entertaining clients at golf tournaments is going to be one of the first places corporations are likely to cut back on. The Open at Bethpage will still be sold out, but given the large number of companies in the financial industry that participated in 2002 and you would expect to be back in 2009, I would have to believe that some would step back altogether and others might go from a large tent to a small tent."
There is still one strong selling point about professional tournament golf. The fact that tournaments are set up as nonprofits that contribute to charity makes shelling out precious dollars a little easier than, say, buying a suite at a football game or $250 tickets to a basketball game. Peter Miele, director of the PGA Tour's Barclays Classic, thinks the charity angle is key.
"People who are looking to spend their money have to be very critical," says Miele. "The fact we support local charities, I hope that is the tipping point for funds to come our way as opposed to another entertainment venue. That's what sets the PGA Tour apart and always has. I know for a fact that companies look at us differently because the money is going to local charities."
The question is, how much green is there to go around, anyway? How much money is there to continue to support clubs, public fee courses, golf travel and golf equipment sales? Fay chooses not to take a grim view of the situation, even displaying a bit of dark humor.
"You think that there will be courses that will be plowed under, and some might be," says Fay. "But given the situation in the construction-development industry, that's probably not going to happen. Somehow courses will keep going, some private ones going public, some merging operations. People are going to still play golf."
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