Now and Ten

What will Golf look like in 2022?

By J.J. Keegan

In 1899, when 307 golf courses existed in the United states, Thorstein Veblen, the author of The Theory of the Leisure Class, expressed his opinion that individuals participated in golf as a way to demonstrate their conspicuous consumption of leisure. In other words, as America transitioned from an agrarian to an industrial society, individuals were attracted to the sport as a way of showing off their superior financial position and to flaunt their lack of need for work.

At that time, Colorado was represented by two courses: the City and County of Denver's Overland Park and Colorado Springs' Patty Jewett. Overland Park, which opened in 1895, was both the fifth municipal golf course in America and the fifth course opened west of the Mississippi River. Play at Patty Jewett commenced in 1898.

From that humble beginning, golf in the United States has grown to a $24.8 billion industry in which 26 million golfers play 460 million rounds while frequenting 15,882 facilities. In Colorado, more than 460,000 golfers spend nearly $400 million while playing 7.9 million rounds on the state’s 256 golf courses.

Despite that growth, more than 110 years later, golf has not lost its elitist brand. Two-thirds of the rounds are played are by those with a household income of at least $85,500, and their median age is 41.9. The national median household income is $51,618, with a median age of 37.1. For every round played in America by someone who is Hispanic or African-American, Caucasians play seven rounds. For every round played by a female, men play 5.1 rounds. With Generation Y playing 58 percent less than baby boomers, this is hardly the foundation for an industry hoping for dynamic growth.

Why is golf challenged? Our time-crunched society is an antithesis to leisure. With the cultural changes stimulated by the evolution of technology and our quest to be constantly updated in an experience based economy of endless choices, we have witnessed a lifestyle integration of work and play. In addition, as Madelyn Hochstein, president of the eminent social science and marketing research firm Daniel Yankelvoich Group, stated at a recent Golf 20/20 conference, “We have become a child-centered society in which status is now earned by demonstrating how busy we are.”

The harsh economic environment combined with adverse weather during the past several years, golf is a struggling industry in which the supply of facilities exceeds the demand. During the past six years, 257 more U.S. courses have closed than opened. To balance the industry, my strategic consulting practice, Golf Convergence, forecasts 1,659 facilities should close in the United States. That's 10.4 percent of the current total.

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In Colorado, we believe the courses likely to be at risk are in the hinterlands, where a paucity of population exists or where courses are clustered in tight groups in the suburbs. Don't be surprised if four or five courses in the Denver metro area, as well as courses in Canon City, Glenwood Springs, Gypsum, Ft. Collins, Longmont, Loveland, Pueblo, Trinidad or Walsenburg close in the next 15 years. A more frequent occurrence than heretofore will be private clubs opening their facilities to the public. In 2011, private clubs such as Garden of the Gods, Ravenna and Red Rocks sponsored open golf outings for the public. Expect more clubs to follow suit over the coming years.

Colorado, however, will likely be spared losing 10.4 percent of its courses. This owes in large part to: 1) the fitness orientation of its citizens, Colorado being the least obese state in America; 2) the median income in the state, which exceeds the national average by 6 percent; and 3) the number of municipal golf courses, which is double national averages, as highlighted below.

Course Type  United States  Colorado

Daily Fee  58.10%  44.92%

Municipal  15.06%  31.25%

Private  26.04%  23.83%

In the short term, net losses at municipal golf courses can be covered by general fund reserves and capital improvements funded through favorable borrowing. Only to the extent that net losses exceed the cost of maintaining open park space, $1,500 per acre per annum, municipalities aren't likely to close their golf courses, although accelerating fringe benefits paid government employees and utility costs are a growing concern.

New course construction, at an average cost of nearly $8 million, will grind to a halt. Since the average life of a golf course's infrastructure is 20 years, renovations will become in vogue as the median Colorado course was built in 1981. The City and County of Denver's Wellshire and Louisville's Coal Creek are the first courses likely to see major improvements. A renovation at Denver's City Park is long overdue.

Water conservation efforts will make brown the new green on golf courses. Considering these multiple factors, we need to ask, “What does the future hold for the golf industry?” At the national level, we don't need a crystal ball. We just need to understand the motivations of those who influence the game and the business of golf.

One of game's influencers, the United States Golf Association, is steadfast in its adherence to maintaining tradition by applying a single set of rules and uniform equipment to level the playing field for national championships. In 2000, at the PGA Merchandise Show, then Executive Director David Fey stated, “It is from the innate difficulty of the game that enjoyment emanates and that the rules needed to be consistently applied.” Current Executive Director, Mike Davis, reiterated that philosophy at the USGA Annual Meeting in February, 2012.

In contrast, Arnold Palmer stated is his book, Playing by the Rules, “I'm sure that I could watch the golfers at one of my clubs for a while on any given day and be able to disqualify half of them for this or that infraction. But why would I want to? Golf should be fun. And those of us who love the game should be encouraging fun and recreation, not building roadblocks for future golfing generations. The USGA would be well served by adopting that attitude.”

Think about it: Golf is the only major sport that doesn't have a bifurcation of its rules or its equipment to encourage the beginner to learn or the less skilled to play more frequently. Baseball, for example, gradually increases distances between bases as players mature and improve; football has its flag leagues with shorter fields and myriad weight and age restrictions for younger players; and basketball features lower rims for juniors and variable 3-point lines for different levels of competition.

Golf is expensive to play and difficult to learn. It can be very time-consuming, as evidenced by the six-hour round during the 2012 Pebble Beach Pro-Am. And frankly, if one isn't skilled, it isn't a lot of fun. For the individual not focused on score or championships, golf's only socially redeeming value is that the course is a fabulous nature preserve to enjoy and share the fellowship of family and friends.

Thus, the USGA and the state golf associations (which I perceive as licensed franchisees performing sales and administrative duties) exist to protect the status quo and portend to stymie the economic success of the golf industry.

While the USGA's focus will remain on the game of golf, the 7,000 members of the National Golf Course Owners Association, the 28,000 members of the PGA, and the1,377 members of the LPGA will become increasingly focused on the business of golf, which provides each their living. This translates to recruiting new players by emphasizing youth, women and minorities, and motivating former players to return with greater urgency. We are already seeing this in new golf-industry initiatives such as Golf 2.0, Get Golf Ready, Tee It Forward, Family Golf Monthly, and Play Golf America.

These programs will redefine golf and shatter the hallowed traditions on which the industry's brand image has been formed.

Bastions like Castle Pines Golf Club, with its properly reserved reverence from Mr. Vickers; Cherry Hills, with its championship pedigree; and Denver Country Club, with its blue-blood orientation of Denver's finest, will be unaffected as a small segment of society will seek to preserve an aristocratic lifestyle. But the remaining 90 percent of facilities will undergo massive changes.

To open the entry door to the game in order to compete for the entertainment dollar, the industry will adapt to the cultural changes in our society. Denim, tee shirts, and golf hats worn backwards will be accepted. Cell phones will be welcomed. Roaming beverage carts will disappear as golfers use their mobile devices to place food and beverage orders while playing.

Tee markers will be based on ability, not gender or age, similar to the signage used on ski slopes. Courses will become easier and the slope rating, currently at 127, will probably decrease as renovations will make the courses more player-friendly. Those difficult golf courses in remote areas, such as the Sand Hills of Nebraska, are targets for closing. As they do for skiing, customers of all abilities will be able to rent better equipment at municipal and daily fee courses instead of having to invest $1,000 or more for a set of golf clubs. This is going to open up the game to the infrequent player who wants to play with the latest gear.

At private clubs, high-equity initiation fees will be replaced by low non-refundable initiation fees and monthly membership fees for not only golf but for a wide range of activities. Memberships in multiple clubs will subside, thanks to the evolution of concepts like the Outpost Club and, at a different level, Canongate. Clubhouses will be transformed to sports bars, fitness facilities, and day-care centers. The fixed orientation of an 18-hole course will lessen, and golfers will be encouraged to play merely the number of holes they desire, whether 3, 6, 9, 12 or 15, with flexible rate schedules introduced.

At all golf courses, the number of women professionally employed in the business of golf, currently 5 percent, will dramatically and fortunately rise. The LPGA and the PGA will consolidate their educational programs and raise the certification bar significantly based on expertise in business practices. Those organizations could downsize by 25 percent without jeopardizing the supply of required business professionals. The conflicting forces of sexism and feminism, so prevalent today, will abate, but unfortunately will not be eliminated.

Yield management, customer segmentation, and CRM marketing that leverages social media will become standard business practices. Golf Channel (NBC/Comcast) will likely become the leading technology supplier in the golf industry. The development of software that can run the course on “auto-pilot”, will help streamline and improve efficiency.

Counters will disappear, as golf shops will be transformed into retail stores like Apple and Microsoft. Carts will become more like entertainment centers, with GPS, adapters for iPods, music systems and beverage/snack compartments. New clean bathrooms, rather than porta-potties, will be the primary capital improvement at golf courses to render them more women-friendly.

What do these changes mean? For people who have pondered about learning the sport, it is a great time to walk through the entry door. Golf course owners and PGA Professionals will be striving to provide value-based entertainment for you, your family and friends in a warm and welcoming environment. For the avid and core golfer, equipment manufacturers will be continue to introduce fabulous new designs to make your round more competitive. All will benefit from third-party consolidators placing downward pressure on green fees so that cost of playing golf will become affordable.

Are these predictions likely to occur? The theory as to what should occur is well documented. Thus, in an industry known for firmly preserving the status quo, the only thing known for sure is that capitalism creates and capitalism destroys. The golf business is in the entertainment sector of the nation’s economy. In spite of all that is financially negative about the golf industry as it exists today, I believe it can successfully adapt to the changes in our society. In that case, if the golf industry were a common stock, it would make for a wise long-term investment.

J. J. Keegan, a Golf Magazine panelist, is the managing principal of Golf Convergence and the author of The Business of Golf‚ÄìWhat Are You Thinking? He formed his opinions from flying more than 2.5 million miles during the past two decades visiting over 4,000 golf courses in 41 countries, counseling golf course owners and managers how to maximize their investment return. As his few friends frequently say, “He is often in error, but never in doubt.”