How Healthy Is Our Game?

Amid recent reports that golf is losing players, facilities, and equipment sales, we commissioned some fresh research. The prognosis is not all bad, but there's still work to be done

By Matthew Rudy

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John Cuneo

Hank Haney is most famous for his prominent role as Tiger Woods' teacher, but long before he started working with the world's No. 1 player—and charging $500 for an hour lesson—Haney was a shrewd golf businessman.

Starting with a ranch he bought from World War II hero and movie star Audie Murphy in 1991, Haney expanded that McKinney (Tex.) range into seven practice facilities and three golf courses across the state.

Seventeen years later, despite a struggling economy, the most famous athlete in the world is a professional golfer (and a $100million Nike Golf endorsee), PGA Tour purses are at all-time highs, the largest equipment manufacturers are reporting record sales, and industry groups are noting that the overall golf "economy"—including equipment sales, golf tourism, and golf course real estate development—has never been larger.

But many people affiliated with the golf industry aren't celebrating. A series of studies shows that rounds played are flat or declining. Television ratings for PGA Tour events have plateaued. Traditional hot spots for vacation golf activity such as Myrtle Beach and northern Michigan have seen a raft of course closures—either from a lack of play or because of the tough business credit climate. Even Haney's flagship golf ranch became a more enticing business proposition as a real estate play than it was as a driving range, and he sold to developers.

So is the patient sick or healthy?

Many of the recent participation surveys undertaken by the National Golf Foundation, the National Sporting Goods Assn., and the industry consortium Golf 20/20 are less than comprehensive or cover only a period up to 2005. So, in spring 2008 Golf Digest and BusinessWeek commissioned Longitudes Group, an Omaha-based research and marketing company, to take the current temperature of the golf industry by exhaustively analyzing market supply trends and geo-demographic data.

The resulting picture of the industry—a mix of Longitudes' research and the existing surveys and economic data—is a complicated one. Interest in the game among sports fans and kids has never been greater. But a combination of a weak economy, the rise in airfares caused by soaring fuel costs, and fiercer competition for consumers' time and entertainment dollars has crunched margins at resorts, mid-range country clubs, small retail stores, and daily- fee courses.

The most-cited participation surveys show a game that's at best treading water and might be dipping under. The National Sporting Goods Assn.'s 2008 survey shows golf's player pool shrank 7.3% from 2003 to 2007. The National Golf Foundation's latest report shows rounds played are down 3.5% for the first quarter of 2008 and basically flat since 2005. It also shows the number of core golfers has declined.

Longitudes' research includes information from its database of 6 million golfers, analysis of golf-facility supply and demand, and interviews with hundreds of private-club and thousands of public-course managers nationwide. The group studied the relationship between the supply of public courses in the 27 largest markets across the country and the green fees at those courses, and compared the changes in fees over the last five years with changes in the Consumer Price Index.

Results show that course operators are facing problems more complicated than just a reduced flow of customers. Courses' peak fees have gone up at the same rate as inflation, but off-peak rates—which account for a majority of the rounds played—increased 33% more than the CPI. In other words, prices have risen even in the face of flat or reduced demand. That doesn't bode well for attracting new and younger golfers in a weak economy. "Energy costs are going up, and the cost of fertilizer has doubled in the last two years," says Longitudes President Sara Killeen. "Course operators had to raise rates or go under—and the number of daily-fee courses has dropped 2.5% in five years. They're feeling it from all sides.