Golf vs. Recession: An Unlikely Leader

One would think that golf, like most discretionary income-based activities, is struggling to maintain its financial status in a downtrodden economy. One would think, right? Though decreased consumer spending has (somewhat) hurt the retail side of the game, the overall impact has been less significant than many, including myself, expected.

Before this discussion makes any sense, I must first define what factors contribute to making a fair assessment of the status of the sport. The golf industry, by revenue drivers, consists of green fees, equipment sales, instruction, membership fees, and on-course food and beverage. An assessment of this industry will yield a fair evaluation of how golf courses and country clubs are performing in our economy, but I believe more factors matter. What about the professional tours? Television viewership of the major tournaments gives us a key indicator of the game’s popularity. Furthermore, statistics such as total number of rounds played, total number of participants, and average green fee measure popularity and industry revenue growth. And what about the foundations, like the USGA, that exist solely to building the game, and corporate sponsors that make the regional professional tournaments possible? Each of these aspects of the sport contributes to the game of golf; and each has fared differently through our country’s financial troubles.

Surprisingly, through 2008, total revenues to golf courses and country clubs have only dropped 0.7% compared to 2007 revenues. When compared to other consumer spending based businesses, like travel, retail, and lodging, of which many have seen revenues decline 5% or more, the golf industry is getting along just fine. Furthermore, based on the data compiled by PerformanceTrack (click on Jan 2009 report), last year’s total number or rounds played only dropped 0.8% compare to 2007. If you compare that with the decrease in number of days the courses were open due to playable weather, which went down 0.7%, the number of rounds played in 2008, during a recession, held constant. This report, which only looks at golf fees, merchandise, and food, indicates an increase in total revenues compared to last year. Convincing evidence if you ask me, but we must consider more.

Has the game become less popular to watch as Americans face more and more financial troubles? If one looks to recent TV ratings, one would definitely think the game has a problem. But, we can not make that assessment without a key factor to the game of golf: Tiger Woods. Since June 2008, when he won the US Open in historic fashion (see picture below), Tiger has not played in a single golf tournament. Unfortunately, one can directly correlate TV viewership to whether or not Tiger is playing in the tournament and if he is in contention to win or not. (See graph; Tiger joined Tour in 1997 and won this tournament in 2000, 2002, and 2008). The 2008 PGA Tour Championship, the next major tournament played in America, was watched by 55% less people than the previous year’s event (which Tiger won). Less people watching a tournament does not necessarily man less people playing the game, but it does have implications for corporate sponsors.

Two such sponsors have filled recent headlines. First, Travelers, a large American based insurance company, just renewed their contract to continue hosting the Travelers Championship in Hartford, CT. This news came as a big relief to the PGA Tour, which was uncertain whether a company so closely tied to the financial meltdown would still be able to support the tour, and Hartford economy for that matter. On the other hand, Ginn Resorts announced in January of this year that they are pulling their sponsorship deals with the LPGA Tour’s Ginn Open and the Champions Tour Ginn Championship, which will likely kill the two tournaments. Both companies are facing challenging environments, as the insurance companies were hit by loses in the credit default swap markets and resort hotels, like those operated by Ginn, do not have the same traffic as before. So far, the PGA Tour has yet to lose any sponsors, despite challenging circumstances and lost viewers in the absence of Tiger Woods. Though the loss of sponsors hurts the smaller tours, and in turn the local communities that the events support, the overall impact on the game is less significant.

Did you know that the USGA posts its annual income on the Internet? I didn’t, but it turns out the data (select Financial Summary link) is promising. Last year, their revenues increased by almost 14%, and amount of money received from sponsors increased 113%! So, even though the PGA Tour is uncertain about continuing contracts, the USGA, which operates the US Open and many charitable organizations, should be pleased with their prospects.

Frankly, I’m impressed by how well the revenue side of the game, the side that is so closely tied to consumer spending, has endured this recession. I believe that the game underwent a decline after the Tiger boom of 1997-2002, when the number of total golfers jumped nearly 20% in just a few years. Much like the resurgence of the game after Bobby Jones in the 1920s, and exciting years the 1970s when Arnold Palmer, Jack Nicklaus, and Gary Player duked it out for top billings, the game had to steady itself after Tiger. I will go into the details of this transformation later on the 6º Driver, because it interests me very much, but for now, and by now I mean 2008 compared to 2007, the game of golf remains resilient. The data shows that people are still hitting the links, and I find that comforting. And, with talk of Tiger returning any week (link), TV ratings will go up. Corporate sponsors will be reassured that they can receive large advertising audiences with a healthy Tiger Woods. I know I’ll be watching.