Teed Off

Written by Craig Morgan Category: Valley News Issue: July 2014
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Is the Wigwam’s decision to downsize acres of golfing green just par for the course in an ailing industry?

The storied Wigwam resort created a stir in the golf industry and Litchfield Park in April when it announced plans to convert about 50 acres of golf course into condominiums and apartments. Was this the long-feared first step in correcting the Valley’s saturated golf course market? Sort of.

“When you look at where the Valley was 25 years ago, the Wigwam and Biltmore were some of the best courses,” says Tom O’Malley, COO for JDM Partners, which owns the Wigwam and Biltmore properties. “We’ve added about 200 courses since then, so when you add product and at the same time see a reduction in the number of people using that product, it’s simple economics. We’re completely saturated.”

According to GolfLink, Arizona has 421 public and private golf courses, with more than 250 in the Phoenix metro area alone. The Valley has been a golf mecca since at least 1913, when Dr. A.J. Chandler decided to take advantage of the Valley’s year-round sunshine with a nine-hole course near his San Marcos Hotel. Phoenix now has more golf holes per capita than any other U.S. city – by a wide margin (see sidebar). At the same time, the National Golf Foundation reports a loss of about 4.7 million golfers nationally since 2005. Kurt Hudeck, executive director for the Southwest Section of the PGA, says the number of rounds being played in Arizona has remained flat at about 11 million per year over the last several years, but that number is misleading.

“Courses keep cutting their greens fees to compete for business,” Hudeck says. “When you do that, you’re cutting into revenue and that’s impacting a whole lot of people.”

The golf industry’s struggles are nothing new. Golf, like many industries, experienced a major downturn after 9/11. Just when the industry appeared to be recovering, it took another hit in the economic recession of 2007-08.

As courses slashed prices to stay competitive, the price war had a trickle-down effect that even hit municipal courses, like Phoenix’s eight tracts. “Municipal golf was always the affordable alternative. This created competition,” says Rob Harman, deputy parks director for the City of Phoenix. “I think 50-plus courses have filed for some sort of bankruptcy protection, yet not a single one, to my knowledge, has closed.”

After considering closing some of its municipal tracts, Phoenix took a hard look at costs and created some positive results. Harman says Phoenix’s munis were losing $2.1 million annually in 2010-11. By next year, they expect to reduce the deficit to $600,000. Part of that stems from a slow recovery in rounds played – 236,700 in 2010 and 258,000 in 2012-13. Most of it is due to better management.

The courses stopped over-seeding fairways with winter grass long ago, reserving that cosmetic touch for greens and tee boxes to cut water and maintenance costs. But the city recently outsourced its course management, which is projected to save the city $1.1 million in the first year.

Statewide, the industry is showing faint signs of recovery with increased green fees, but some industry insiders believe the current market is unsustainable, making a correction both inevitable and necessary. “I don’t want to see anybody go out of business, but with the reduced number of players, I’m not sure 250 or so courses can coexist,” O’Malley says. “What I’d really like to see is the industry return to providing a great experience and not just engage in these gas-station price wars.”

To accomplish that, the industry must address declining participation numbers among women, kids and even businessmen – topics that dominate conversation inside the PGA of America.

O’Malley says the AIG spa resort scandal of 2008, in which AIG execs spent six figures at resorts in the wake of the government bailout, has made businesses leery of footing bills for long rounds of golf. On top of that, kids are showing less interest in the game and more women and moms are working so there’s less time to play.

To draw kids back, courses are offering cheaper rounds like the Southwest Section-sponsored Antigua Golf, where kids from 12 Arizona districts can play for $15. Augusta National Golf Club, site of The Masters, just held the inaugural Drive, Chip and Putt National Final, backed by the PGA of America.

The belief is that if kids come back, parents will follow. But courses are also exploring more par-3 tracts to appeal to a business class that no longer has five hours to kill. At Wigwam, O’Malley said the old Patriot Course could become a series of three, six-hole executive loops.

“If you look at the top courses in the country like Augusta, Pebble Beach, Bandon Dunes – they’re all adding or have added par-3s and they are wildly successful,” O’Malley says. “Courses and the industry are realizing we have to alter the way we think. We have to recognize that meeting these new demands will draw people back to the game.”

Holey City
Cities with the most per-capita golf holes in the U.S., according to the National Golf Foundation:
Phoenix: 9.7 holes per 10,000 people
Tucson: 8.4
Philadelphia and San Diego: 5.8
Dallas: 4.5
San Antonio: 4.4
Houston: 4.2