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The Great Golf Course Contraction Might Be Over

The 21st century so far hasn’t been good to the business of developing and running U.S. golf courses. After a boom in the sport in the 1990s, the game has lost some popularity in the past 15 years, taking many golf courses out of circulation, some of which have been fully redeveloped as residential or mixed-use properties.

Yet the game, and the business, might be stabilizing, if not making a comeback. Last year saw more golfers out playing and fewer courses closed. The data isn’t conclusive yet, but as the golfing world turns its eyes to Royal St. George's Golf Club for The Open Championship Thursday, golf’s worst days may be behind it.

The golf course boom peaked in the 1990s, but that led to a contraction that resulted in many redevelopments.

Golf in recent decades has been boom-then-bust. Between 1987 and 2020, the number of 18-hole equivalents, or 18-HEQs, that opened totaled 4,567, while the number that closed totaled 1,645, according to the National Golf Foundation.

An 18-hole equivalent is a measurement of golf course supply that divides the total number of golf holes by 18, with one 18-hole course equaling one 18-HEQ and two nine-hole courses equaling one 18-HEQ.

Almost all of the growth in golf course development was before 2005, according to foundation data, with the peak number of HEQs added in the 1990s, perhaps not coincidentally as Tiger Woods' star was rising in golf and attracting more players to the game. 

After 2005, and especially after the financial panic at the end of the 2000s, the U.S. began losing courses. The contraction of golf arguably had a spillover impact in retail as well. In 2016, Golfsmith, once the largest U.S. golf retailer — the chain had more than 100 stores when it filed for bankruptcy — collapsed under a mountain of debt as the company continued to open stores in the face of a decline in business. 

Redevelopment was the fate of some closed courses. In 2010, the storied, 18-hole daily fee Evergreen Country Club in the Chicago suburb of Evergreen Park — old enough to have counted "Machine Gun" Jack McGurn, Al Capone’s chief triggerman, as a regular player — closed and was sold for $7.5M for redevelopment. Sterling Bay developed a 450K SF retail property to take its place.

More recently, JLL has taken Silver Lake Country Club, a 300-acre course also in south suburban Chicago, to market. It includes two 18-hole golf courses and a nine-hole track.  

Other courses nationwide are being redeveloped or are the subject of local political debate about what to do with them, such as in New Jersey and Akron, Ohio, and Kent, Washington, among others. 

It isn’t always clear what to do with former courses.

“What a buyer wants doesn’t always match up with what the community wants,” NAI Hiffman Executive Vice President Chris Gary told Bisnow. “Even the non-golfers say, ‘I don’t golf, but I like having a golf course next to me,’ and the towns have to listen to that.”

In 2019, the U.S. lost 246 18-HEQs, more than in any previous year, according to the National Golf Foundation. The coronavirus pandemic year of 2020 saw shrinkage in the number of golf courses as well, but only a loss of 169 18-HEQs, as golf became a way to engage with other people yet remain socially distant.

In fact, according to the NGF, there were 24.8 million golfers in the U.S. in 2020, up 500,000, or 2%, compared with 2019, the largest net increase in 17 years.

Chicago Golf Club

The long-term impact of the pandemic on golf, of course, isn’t clear. It is possible that the 2020 uptick will fade as more people return to their normal lives. But there is some evidence that at least some of last year’s players will stick around.

May 2021 rounds played were up 18.1% month-over-month and are now up 33.6% year-to-date, according to the Golf Datatech’s latest National Rounds Played report, which is produced in cooperation with the NGF. 

"The overall financial health of U.S. golf facilities has improved significantly since 2016," NGF President and CEO Joe Beditz said. "That's a function of stabilizing participation, an improved overall economy and the closing of many lower-performing courses, and now the surge in rounds played."

With fewer facilities now financially at risk, Beditz argues that the rate of closures and conversions will slow, with the market finding its way closer to equilibrium.

The U.S. still has an elevated number of golf courses, a supply (at 16,000-plus) that is about five times higher than any other country. There are historical reasons for that. Golf has long been popular in the United States, the country has been affluent for a long time and, unlike geographically smaller nations, the U.S. has always had plenty of land on which to build courses.

Beditz characterizes the closures of courses in the early 21st century as a correction for the excesses of the late 20th-century development boom, with a winnowing of the weaker courses in recent years.

“The supply-demand correction has cut down on some lower-performing courses in the U.S., which is the world’s best-supplied golf market," he said.

The foundation did surveys of golf course financial health in 2009, 2016 and 2020, of both public and private courses, that point to increased health in the industry as the weaker courses disappear. In 2009, 24% of public courses and 21% of private ones said their facility’s financial health was poor or very poor, while 28% and 39%, respectively, characterized their health as good or great.

In 2016, fewer courses said their financial health was poor or very poor, and more said it was great or good. By 2020, the difference was even more pronounced: Only 8% of public courses and 7% of private ones said their financial health was poor or very poor, while 56% of public courses and 64% of private ones said it was good or great.

Another hint of better times to come is the attitude of millennials toward golf.

The millennial concept of "golf lifestyle" is evolving, according to a 2020 report by golf course consultancy GGA Partners. Golfers or would-be golfers of that generation want more flexibility from their courses and various other experiences besides the game, the report found. Golf courses that can offer younger players what they want stand to not only survive but flourish.

“Millennials are enjoying golf as a means to an end, a conduit for other lifestyle attributes they value: socialization, spending time outdoors, sharing experiences with others, and exercise,” the report states. “In other words, it’s not necessarily the sport itself attracting them as much as it is the lifestyle benefits it brings to bear.”

The 1990s surge in golf course development is thought to be in part because of golf star Tiger Woods' immense popularity. The surge didn't last.

Then there is the matter of fees. The report suggests that millennials are strongly interested in joining private clubs, but not necessarily under conventional fee structures that require large sums upfront. Theirs is a relatively cash-poor generation, so they are more interested in more manageable fee structures, such as annual memberships.

Another indication that the worst might be over for golf courses is that the market for the implements of the game, golf clubs — an indirect but fairly strong indicator of the use of golf courses — is expected to expand at a compounded annual rate of 2.5% from 2020 to 2027, according to a 2020 report by Grand View Research.

The market will largely be driven by the adoption of golf among younger players, but also by resorts and hotels incorporating sporting activities, including golf, into their facilities, the report says. Even the growth of miniature golf courses will add to the demand for clubs. 

Older players are still a factor in golf course health as well, especially those wanting to live near a course, so proximity to golf courses can still be an important amenity for residential properties. Tides Equities acquired the 264-unit multifamily community Palm Valley in Goodyear, Arizona, for $71.8M from Avanti Residential in a deal brokered by CBRE.

“The community was the first multifamily project built in Goodyear’s Palm Valley master plan and benefits perpetually from occupying the best site in the entire master plan, right on the golf course,” CBRE Vice Chairman Sean Cunningham said.

Surviving golf courses are now the targets of renovation and upgrading, the better to attract existing and new players. One major specialist in golf course management and renovation, KemperSports, oversees more than 130 facilities nationwide and is at work on numerous renovations.

In suburban Dallas-Fort Worth, the company rolled out plans for a three-month renovation project as the next step in a larger $6.5M effort to upgrade Buffalo Creek Golf Club in Rockwall, Texas, a par-71 course developed in 1992. All of the course’s tee boxes will be leveled, and new grass and bunker sand will be added. The owners of the course, the Perry family of Dallas, tapped KemperSport to manage the course in 2020. 

“Buffalo Creek has a rich history in the Dallas community,” KemperSports CEO Steve Skinner said in a statement. “Our team will be focused on upgrading the customer experience, improving course conditions, enhancing local marketing efforts and developing relationships within the community to promote the golf experience at Buffalo Creek Golf Club.”

Privately owned courses aren't the only ones that will see renovation, not if an initiative started in Washington, D.C., gains wider traction.

Last year, the National Park Service inked a deal with National Links Trust to operate three historic golf courses in Washington under a 50-year lease. Under the terms of the lease, the nonprofit NLT will undertake restoration of the courses and expand opportunities for underserved communities at the course, including seniors, individuals with disabilities and those new to golf.

The renovations are just the beginning of a partnership that might see publicly owned courses — courses affectionately called "munis" after their ownership by municipalities — renovated nationwide.

The NLT tapped Sinclair Eaddy Jr. as its first executive director to oversee the work. Eaddy is a former president and executive director of the First Tee of Greater Baltimore, a nonprofit created by the PGA Tour and the World Golf Foundation to promote the sport among young people.

“This role aligns with my passion for making the recreational and social benefits of golf available to an ever wider audience by making it affordable and accessible to all,” Eaddy said at the time of his appointment. “I’m also eager to begin working with community leaders and NLT partners on projects that will benefit not just the communities surrounding these parklands, but the city of Washington as a whole.”

As the golf industry aims to hold onto the players it welcomed aboard during the pandemic and add still more, there may not be as many places for new duffers to play as there were five, 10 or 15 years ago. But the number of options may finally be working its way toward holding steady.