Golf Industry in 2010

Turning the corner or just another blind dogleg?

Stuart Lindsay29 June, 2010 © 2010 Edgehill Golf Advisors

Macro Economics

• Stocks peak 3rd Quarter of 2007 and start to tank signaling the start of Recession.

• Housing market collapses in tandem

• Huge net worth destruction on 2 fronts.

• Recessions always have a negative impact on both travel and recreation based on discretionary spending.

• Recession technically ends in 1st quarter 2010

• However, stock market has only recovered ½ of value lost in Recession

• Housing starts and Sales of Existing Homes continue slow, meaning no recapture of home equity values lost during recession.

• Consumer spending is showing signs of life, but will be conservative (NML Study, June 2010)

Hot off the PressConsumer Fundamentals from NSGA

• We had a “net” loss of 700,000 golfers in 2009.

• Rounds stayed steady on a “weather neutral” basis.

• This actually means that the average annual frequency per golfer increased !!

Positive Growth in the “Avid Golfer” Segment

• Loss of participation is in the groups of casual involvement

• The growth in the “committed” group is consistent with demographic trends (aging Boomers)

• Overall results are sideways, but that is not necessarily a bad performance.

2009 Rounds

2010 Rounds YTD through April

2009 and so far in 2010 Not Kind to Resort Areas

2009

National - 0.6%

Hawaii - 12.8%

Phoenix - 1.4%

Las Vegas + 3.4%

Orlando - 3.1%

Myrtle Beach - 5.0%

Hilton Head - 1.5%

2010 (Jan – April)

National - 3.0%

Hawaii - 15.1%

Phoenix + 2.0%

Las Vegas - 4.0%

Orlando - 9.9%

Myrtle Beach - 1.8%

Hilton Head - 6.6%

Has the recession ended for golf?The answer is mixed after we look at the

Weather.• We look at Weather in a

variety of ways with a set formula of static data points (monthly, day of the week and Year to Date)

• If we look at Orlando through the first half of the year, they lost a lot of Playable Hours to poor weather

• Orlando’s 1st four months were off 9.9% - the same amount as their rounds decline

JAN 166 196 -15%FEB 158 198 -20%MAR 205 245 -16%APR 264 241 9%

HISTORY - Golf Playable Hours

1,260

1,280

1,300

1,320

1,340

1,360

1,380

1,400

1,420

1,440

1,460

201020092008NORMAL

Weather had a major impact to start 2010

2010 (Jan – April) Rounds WeatherNational - 3.0% + 4.0% Hawaii - 15.1% - 4.3%Phoenix + 2.0% - 1.7%Las Vegas - 4.0% - 2.6%Orlando - 9.9% - 9.9%Myrtle Beach - 1.8% - 8.0%Hilton Head - 6.6% - 10.7• With the exception of Hawaii and Las Vegas, the others out-

performed the weather.• While nationally the northern climate courses got an early break of

favorable weather, warmer resort areas have mostly been hammered with very poor weather to start 2010.

You’ve never met a one-armed Economist

On One Hand• The Recession is

supposedly over• Resort areas have out-

performed poor weather to start 2010

• Consumer spending is picking up

On the Other Hand• The recovery is “shallow”• We have only recovered

a portion of the household wealth destroyed in the stock and home equity markets.

• Consumers appear to be taking a conservative approach to spending.

Golfer/Consumer FundamentalsDo Resorts all Chase the Same Consumers?

Are they really the same?

Bucket List Golfers

1. Affluent

2. Avid Golfers

3. Want to play as many top courses as possible

4. More likely to come from public golf ranks

Comfort Golfers

1. Affluent

2. Avid Golfers

3. More likely to return to same resort every year

4. More likely to come from private course ranks

What both Types Have in CommonAffluent, Avid and Older

• Golf Population and rounds played is skewing older – This is being confirmed as we see our projection of 50% of all golf being played by golfers over 55 in 2010 holding true.

• Golfers are becoming more concentrated in higher income levels

• Internet Adoption not keeping pace with other industries

• Internet Usage 55+ = 55.9%*• Internet Usage All = 71.0%*• Golf’s primary market segment is

using the Internet 21.4% less than the general population

*Source: Pew Research

% of Golf Rounds By Age-2010

30%

21%

50%

Age <40

Age 40-54

Age 55+

6%6%

11%

18%

25%

34%

4%4%7%

12%

24%19%

30%

4%4%

6%

11%

23%20%

32%

2000, 2006, 2007 Golfer Composition by HH Inc.

<$15K

$15-$24.9K

$25-$34.9K

$35-$49.9K

$50-$74.9K

$75-$99.9K

$100K+

You Have to Market to both GroupsCustomer Information is Key

1. Who are our customers?

2. Do they come back?3. How often do they

return?4. What % of our revenues

does each group represent?

5. What customer Information have we collected? (Name, Address, Phone, Email)

Where do my Customers Really Come From?

AlabamaAlabamaAlabamaAlabamaAlabama

AlaskaAlaskaAlaskaAlaskaAlaska

ArizonaArizonaArizonaArizonaArizonaArkansasArkansasArkansasArkansasArkansas

CaliforniaCaliforniaCaliforniaCaliforniaCalifornia

ColoradoColoradoColoradoColoradoColorado

ConnecticutConnecticutConnecticutConnecticutConnecticut

DelawareDelawareDelawareDelawareDelaware

FloridaFloridaFloridaFloridaFlorida

HawaiiHawaiiHawaiiHawaiiHawaii

IdahoIdahoIdahoIdahoIdaho

IllinoisIllinoisIllinoisIllinoisIllinois

IowaIowaIowaIowaIowa

KansasKansasKansasKansasKansasKentuckyKentuckyKentuckyKentuckyKentucky

LouisianaLouisianaLouisianaLouisianaLouisiana

MaineMaineMaineMaineMaine

MichiganMichiganMichiganMichiganMichigan

MinnesotaMinnesotaMinnesotaMinnesotaMinnesota

MissouriMissouriMissouriMissouriMissouri

MontanaMontanaMontanaMontanaMontana

NebraskaNebraskaNebraskaNebraskaNebraska

Nev adaNev adaNev adaNev adaNev ada

New HampshireNew HampshireNew HampshireNew HampshireNew Hampshire

New JerseyNew JerseyNew JerseyNew JerseyNew Jersey

New MexicoNew MexicoNew MexicoNew MexicoNew Mexico

North CarolinaNorth CarolinaNorth CarolinaNorth CarolinaNorth Carolina

North DakotaNorth DakotaNorth DakotaNorth DakotaNorth Dakota

OhioOhioOhioOhioOhio

OklahomaOklahomaOklahomaOklahomaOklahoma

OregonOregonOregonOregonOregon

South CarolinaSouth CarolinaSouth CarolinaSouth CarolinaSouth Carolina

South DakotaSouth DakotaSouth DakotaSouth DakotaSouth Dakota

TennesseeTennesseeTennesseeTennesseeTennessee

TexasTexasTexasTexasTexas

UtahUtahUtahUtahUtah

VirginiaVirginiaVirginiaVirginiaVirginia

WashingtonWashingtonWashingtonWashingtonWashington

WisconsinWisconsinWisconsinWisconsinWisconsin

WyomingWyomingWyomingWyomingWyoming

BostonBostonBostonBostonBoston

HartfordHartfordHartfordHartfordHartford

BrocktonBrocktonBrocktonBrocktonBrockton

BrooklineBrooklineBrooklineBrooklineBrookline

CambridgeCambridgeCambridgeCambridgeCambridge

ChicopeeChicopeeChicopeeChicopeeChicopee

Fall RiverFall RiverFall RiverFall RiverFall River

FraminghamFraminghamFraminghamFraminghamFramingham

LynnLynnLynnLynnLynn

MaldenMaldenMaldenMaldenMaldenMedfordMedfordMedfordMedfordMedford

New BedfordNew BedfordNew BedfordNew BedfordNew Bedford

QuincyQuincyQuincyQuincyQuincy

SomervilleSomervilleSomervilleSomervilleSomerville

SpringfieldSpringfieldSpringfieldSpringfieldSpringfield

TauntonTauntonTauntonTauntonTaunton

WalthamWalthamWalthamWalthamWaltham

WeymouthWeymouthWeymouthWeymouthWeymouth

WorcesterWorcesterWorcesterWorcesterWorcester

CranstonCranstonCranstonCranstonCranston

PawtucketPawtucketPawtucketPawtucketPawtucket

ProvidenceProvidenceProvidenceProvidenceProvidence

WarwickWarwickWarwickWarwickWarwick

Hartford CountyHartford CountyHartford CountyHartford CountyHartford County

New London CountyNew London CountyNew London CountyNew London CountyNew London County

Tolland CountyTolland CountyTolland CountyTolland CountyTolland County

Windham CountyWindham CountyWindham CountyWindham CountyWindham CountyBristol CountyBristol CountyBristol CountyBristol CountyBristol County

Essex CountyEssex CountyEssex CountyEssex CountyEssex County

Franklin CountyFranklin CountyFranklin CountyFranklin CountyFranklin County

Hampshire CountyHampshire CountyHampshire CountyHampshire CountyHampshire County

Norfolk CountyNorfolk CountyNorfolk CountyNorfolk CountyNorfolk County

Plymouth CountyPlymouth CountyPlymouth CountyPlymouth CountyPlymouth County

Worcester CountyWorcester CountyWorcester CountyWorcester CountyWorcester County

Kent CountyKent CountyKent CountyKent CountyKent County

Newport CountyNewport CountyNewport CountyNewport CountyNewport County

Prov idence CountyProv idence CountyProv idence CountyProv idence CountyProv idence County

1. Are we National or Regional?

2. How Much Play is actually “local”?

Area % Local DemandMyrtle Beach < 10%Hawaii < 10%Williamsburg < 25%Phoenix > 60%Orlando > 60%Las Vegas > 60%Sources: Pellucid Golf Local Market

Analyzer, Arizona State University

Customer Attraction and RetentionEnhance Total Guest Experience to Boost

Customer Attraction and/or LoyaltySurvey Results

Reasons for choosing a course to play:

Condition: 1.6Price: 1.7Pace of play: 1.8Layout: 1.9Availability of promo prices: 2.0Availability of tee times: 2.0

Key satisfaction areas of client courses:Overall enjoyment: 2.1

Condition: 2.2Customer service: 2.2 Price: 2.6Pace of play: 2.6

Do we know who our customers are, how much they spend and whether they come back?

YTD Unique Customers

0

5,000

10,000

15,000

2007 1,605 2,497 3,882 5,224 6,591 7,896 9,227 10,349 11,135 11,903 12,573 13,049

2008 973 2,153 3,920 5,296 6,892 8,331 9,681 10,874 11,635 12,431 13,177 13,671

2009 1,739 2,525 3,645 4,922 6,394 7,687 8,963 10,178 11,053 11,954 12,713 13,194

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Year to Date Player Retention

0

2,000

4,000

6,000

2007

2008 279 574 1,075 1,509 2,056 2,543 3,057 3,528 3,866 4,199 4,561 4,797

2009 315 605 1,022 1,427 1,983 2,467 2,986 3,448 3,809 4,121 4,444 4,694

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

ConclusionCustomer Relationship Marketing (CRM)

Customer Segmentation and Targeted Marketing• Golf fared better in the Recession than many other industries, but

Resorts generally got hammered worse than the golf industry in general.

• Resorts are showing better early 2010 results than the general golf industry, especially on a weather adjusted basis.

• Golf in general and Resorts in particular will continue to fight over the same golfers, even though resort golfers are generally more affluent and avid.

• In spite of economic “recovery”, golf will continue its relatively stagnant growth pattern into the foreseeable future.

• Courses will have to adapt using more modern CRM principles and customer service tools that will require better staff selection and training.

• Management will have to provide better technical tools and better customer analytics in order to grow revenues.