As Arizona Courses Thrive, Investors Give Golf Properties A Closer Look
While well over 90% of the United States observes mandatory lockdown requirements to prevent the spread of the coronavirus, observers locally have been startled to see people golfing across the state of Arizona.
How is that possible?
“Social distancing is a part of the sport of golf, so it is easy to adhere to,” Arizona Golf Association Executive Director Ed Gowan said.
“Courses have enacted dozens of measures to further promote sanitary conditions, whether you are on the course, at the pro shop or picking up food. Our Arizona golf courses have gone out of the way to be a model for the sport on how to stay within guidelines, but we have gotten a bad rap from people who do not know about either Arizona or golf.”
To ensure Arizona golf courses remain a safe alternative activity within Centers for Disease Control and Prevention guidelines, they have done everything from removing putting flags to using foam doughnuts in holes, so that touching the flag stick is not required. They have even been offering individual golf carts to maintain social distancing.
Driving range hitting bays have been extended at many golf courses, and most courses are offering online payment systems for golf, retail and restaurant services to minimize customer interaction.
As with all customer-facing industries, increased sanitizing is paramount, with the elimination of traditional services like golf bag assistance and seated dining at the clubhouse.
“People think that every golf course makes a million dollars a year because they do not know any better,” Gowan said.
“In reality, most golf courses have a small profit margin of 3 to 5% and that puts a lot of places and people in serious jeopardy if the entire industry is shut down for no real reason other than public pressure," he said. "These golf courses are staying in business so they can try to pay their bills, not so they can get rich.”
Not all Arizona golf courses are open. But while over a dozen golf courses across the Phoenix metropolitan area are closed, it is still a fraction of the more than 350 golf courses across the state.
The few golf courses that are closed tend to have one thing in common: owners with financial interests and resources beyond golf revenue. Resort brands Biltmore, The Omni and Marriott have long since closed their golf courses at the Arizona Biltmore, The Omni Scottsdale Resort and Spa at Montelucia and the JW Marriott Phoenix Desert Ridge.
Two of north Scottsdale's most popular courses, Talking Stick Golf Club, owned by the Salt River Pima-Maricopa Indian Community and McCormick Ranch Club, with the same private owner for over 40 years, have not even suggested return dates for their courses.
Other golf courses have remained open but have restricted access to members and their spouses, and have banned guest golfers in an effort to minimize liability.
The emergence of golf in Arizona as a ‘"coronavirus-proof" industry has sparked conversation in the commercial real estate industry, which is eyeing the value and future pricing of courses when they hit the market.
Karla Schmick Vandenberg knows both industries. A Scottsdale-based Canadian golf pro turned industry consultant, she also has held residential real estate licenses in Arizona. She said she believes that the perseverance of the industry will reap benefits for values.
“The entire state of Arizona, and the country as a whole, now sees the value of the logistics of golf,” Schmick Vandenberg said. “Now when golf courses hit the market, instead of potential buyers looking at them as some elusive piece of property that is only relevant for an exclusive few, now they will be looked at as part of a durable industry that stayed relevant in even the worst of times.”
Not all Arizona insiders agree.
Bob McNichols, general manager of the 160-acre Longbow Golf Course in Mesa, employs 40 people, none of whom have had to be laid off. He said he believes that the industry’s future in Arizona is still closely tied to the potential economic effects from the coronavirus.
“It is hard to say any business will thrive if these conditions last long,” McNichols said. “This affects everybody and if people do not have disposable income then there will definitely be a ripple effect and we are not protected from that.”
Longbow also owns an adjacent 150-acre retail and entertainment complex in a fast-growing part of east Mesa, near where a Hilton Home 2 Suites broke ground on Feb. 2. The golf course is on pace to match its sales performance from April 2019.
Protection is also a prevalent theme on Arizona golf courses, which have also removed rakes and sand bottles from the course to protect players, and have ordered a detailed sanitization process for golf carts before and after each use.
“The industry is a big employer and we are all holding each other accountable and helping each other out so our players remain safe and the industry can stay up and running,” McNichols said. “It helps when you have a governor [like Doug Ducey] who has real corporate experience and understands the economic ripple effect of our industry.”
Golf-adjacent subsidiaries like Benjamin David Golf, a retail firm that offers clubs, club fittings, bags, shoes, golf grips, shafts and leather goods, has felt the pandemic's effects differently. For Benjamin David, online sales have increased 80% in the last six weeks.
“So far, it looks like golf in Arizona may be recession-proof,” Benjamin David Golf President Benjamin Harrah said. “People do not think about the affiliated industries that go with golf like lawn care, landscaping, and food and beverage services. The snowbirds come and go, baseball spring training comes and goes, but golf is a constant driver of our state’s economy.”
Another contributor to that economy is the Cactus Tour, an Arizona-based "mini-tour" and the only active women’s golf tour in the country right now. Unlike a major tour like the Ladies Professional Golfers Association Tour or the Symetra Tour, the Cactus Tour does not have crowds or staff, so maintaining social distancing guidelines has been simplified.
The tour gets an average of 20 to 25 players every week, and as the flag bearer for the women’s game across the U.S., it has received an unprecedented level of attention.
“Our players made the decision that they want to stay competitive,” Cactus Tour President Mike Brown said. “We are not being mavericks, we are simply providing the same opportunity we have since 2005.”
Brown has owned and operated the tour since 2011, performing all scoring, ruling and on-site services himself, prompting the Golf Channel to nickname him the "Czar of the Cactus Tour." The tour typically lasts nine months from January to September.
“This is the one time being a small tour with no sponsors is really paying off,” Brown said. “I am a wave-maker in life, but this is not the time to be trying to make waves. If it is not good for the players, it is not good for anyone else.”
A handful of tournaments have had to move after golf courses have closed, or closed to members only. But the state's wide variety of courses has been a boon, Brown said.
“As long as we continue to adhere to state of Arizona and CDC guidelines, we will keep playing and keep giving the young players an opportunity,” Brown said. “With the new national media attention we have received, people think it is about the money, but we have no major national sponsors. I lost money for the first three seasons I owned the tour, but now we are having a million dollars’ worth of fun out here on the courses in Arizona.”