Golf industry during war time
If the future of golf remained as much a mystery as the future of the nation itself early this week, this much was clear: Both have proven themselves to be amazingly resilient in the past. Golf, like the country, not only survived two World Wars and The Great Depression in the last century, but actually emerged stronger from each challenge. Slowly, America is getting back on its feet. Weekend tournaments were canceled, the Ryder Cup was postponed. But now all eyes are starting to focus on what will be rather than what was.
President George W. Bush has cautioned that Americans will face sacrifices and warned that victory in his declared war on terrorism will require time and patience. Economists cast wary eyes to the re-opened Wall Street–which dropped 685 points in its first day of trading after the attack–and whispered the word recession, a possibility already put into play by a slumping economy even before the assaults on the World Trade Center and the Pentagon.
By some estimates, golf is a $22-billion industry in the United States. Generally speaking, war and the prospects of recession are not a good thing for leisure activities, especially high-end leisure activities like golf. But in a very large sense reality was redefined Sept. 11 for everyone. The world of golf, like the world at large, is moving into unexplored territory.
“If you ask me what the future holds, I’m going to answer you honestly and say I don’t know,” said Bob Wood, the president of Nike Golf. “It’s almost too soon to figure out, but to this point in the year all the numbers relating to consumer confidence have not been great.”
Still, Wood found a reason for cautious optimism.
“People need to recreate and get their mind off their troubles,” he said. “In the golf business, 4 to 5 million people play a lot of rounds, they buy most of the golf balls and most of the equipment. I don’t think they are going to stop playing because of this. Golf is part of their life. I think it might hurt the growth of the game, as anemic as it has been. I think it might hurt big-ticket purchases, $500 drivers, second homes on courses. Socially, barring unforeseen catastrophe, like a real war, I think the game will be largely intact. They may not be going to Europe, but they could go down the street and hit a bucket of balls.”
Even before all this happened, the golf industry hadn’t seen many bright spots in its own two leading economic indicators–rounds played and player participation–over the last four years. There was a major spike in rounds played during the first wave of Tigermania, jumping from 477 million to 547 million rounds a year from 1996 to 1997. But participation has been flat since at around 550 million rounds, and through the first seven months of 2001 rounds played were off 2.4 percent from last year.
Then in the midst of those doldrums came last Tuesday’s cataclysm, and from there came the forecasts by many economists of a U.S. recession. By one example, the airline industry (no small part of the travel segment of the golf industry) lost between $250 million and $275 million daily after being grounded Tuesday morning by the FAA. One ray of hope was that the $40 billion for relief and rebuilding pledged by Congress will help jump-start the economy.
Relationships between golf and economy
“If the economy slowed further and there were a further deterioration in consumer confidence, golfwould see some slowdown,” said Tim Conder, senior vice president and golf analyst for A.G. Edwards in St. Louis. “Even when times get difficult, leisure is not totally eliminated. Still, the leisure activities that cost the most money may be cut back first.”
Recent history provides no salve for economic fears. During the Persian Gulf War in 1990-91, consumer confidence declined at a higher rate than it did during the 1987 stock market crash. The Gulf War was followed by the greatest peacetime economic boom in American history, but it took time to get started. Five years after the war the stock market was up 151 percent. But the first two years after the war it was down.
“[Chicago public golf patriarch] Joe Jemsek once said his business improved when there was a recession because more people had more time to play golf,” said Mike Hughes, executive director of the National Golf Course Owners Association. “But I think the golf business has changed substantially since he drew those conclusions. A lot more golf is higher cost now. The general economic outlook impacts golf more now than it did in the past.
“With the economy suffering and corporate profits down, some of the high-end places that depended on corporate meetings for a lot of their business could be affected. I think golf in this latest round was a little behind the economy. When corporate earnings [are] down and people start to realize earnings [are] going to be down, then they start making adjustments to their budgets to reflect that reality, and then you see golf rounds go down.”
There seems to be little question that high-end golf and the golf travel industry will take a hit. A recent Harris opinion poll shows 39 percent of Americans say they plan to avoid flying in the next few months–that means fewer trips to spots such as Hawaii to play golf. But it may provide some optimism for regional travel destinations like Ocean City, Md., or the Mississippi Gulf Coast or Northern California. And the muny down the block may be in its strongest position in years. Says Hughes, “Most golf is local. I don’t think the average round will be affected as much.”
Analyst Conder agrees. “After we get past this initial period of mourning, where we’re saying, ‘I really shouldn’t be out there doing a leisure activity,’ local golf could potentially benefit,” he says. “If people are going to have a set pool of money to spend on leisure activities, golf could benefit relative to some of the other destination-type activities.”
But golf as an industry is much more than rounds played and drivers sold. Today, it is a truly global enterprise, impacting everything from television advertising revenue at the largest networks to the sales of T-shirts by a street vendor at an LPGA event in upstate New York. Should the economy stagger and stumble further, new questions will arise:
* PGA Tour players, finally approaching equal financial footing with the stars in other pro sports, perhaps have to deal with purses that decline for a year or two, a phenomenon the organization hasn’t experienced in years? After the Gulf War, from 1991 to 1992, the total PGA Tour purse actually declined from $49.6 million to $49.3 million before escalating near the turn of the century, to more than $185 million this year.
* Will high-end daily fee and resort golf courses have to reduce what they charge to compensate for canceled corporate outings and reduced travel?
* And what of the European Tour? Does it become a better place to play professional golf, or a worse one? And what happens now that the Ryder Cup and its huge profit, something the European Tour was deeply counting on, has been postponed in the wake of the Sept. 11 attacks? The expected $15-million windfall for the European Tour and the British PGA is now delayed a year.
Importance of golf in the country’s economy
Golf doesn’t drive the overall health of the economy, but it certainly does its part to facilitate it. If golfall of a sudden seems expendable, it takes a lot with it. Phil Cannon, the longtime tournament director at the FedEx St. Jude Classic, has seen a lot of uncertainty in his line of work in the last few months. The instant social, political and economic upheaval of the week’s events were a body blow.
“You keep hoping every day that there’s going to be a silver lining in this very dark cloud [we’ve had] for the past three or four months,” he said. “We keep waiting for the economic picture to brighten, but to be frank with you, it hasn’t yet.” Cannon says many tour events are in the process of renegotiating sponsor commitments this year. With some second-tier events such as Hartford and Greensboro announcing $4 million purses, the challenge became that much more intense.
“We were all taking a deep breath, and then we got the breath taken right out of us Tuesday morning,” he said. “I think there are a lot of people waiting to see how it shakes out right now.”
Amid the turmoil of larger world events, not many people may feel comfortable upping the ante another $1 million for a golf tournament. So now Cannon finds himself in idle moments imagining worst-case scenarios. He refuses to think about scaling back his event to meet the demands of a sagging economy, and at the same time he admits, “I have begun to think about thinking about it.”
But as proud as Cannon is of his tournament and the more than $11 million it has raised for Memphis’ St. Jude Children’s Hospital in the last 15 years, he is prouder still and ebulliently confident in the strength of the appeal of the game that is his business. “Golf has set itself up as a very clean sport, a sport full of integrity, a real class group of athletes putting on a great show,” Cannon said. “We are not worried that the bubble has burst on professional golf.”
Golf’s leaders are well aware that PGA Tour commissioner Tim Finchem has envisioned a future in which golf might be the No. 1 spectator sport in America, as well as its most popular leisure-time activity. And while Tiger Woods and other top players hailed the decision to cancel events last week, there still undoubtedly were millions of fans searching the television Sunday afternoon for a golftelecast. Morever, some of the nation’s courses experienced some of their busiest days of the year last week as many golfers sought a release from the uncertainty, the anger and the fear. “Golf has a unique appeal,” said Hughes. “It can be someone’s sanctuary for a few hours.”
But the wounds will heal slowly. “It’s going to be interesting to see what our condition is in in another six months,” said Cannon. “This story is obviously a lot bigger than golf, but it will change our lives more than a lot of us understand right now.”
The golf industry is built around a diversion. In the wake of last week’s disaster–when people need more than ever to walk around, breath some fresh air, clear their heads–golfers could need that more than ever. Golf will be a part of life, but it just won’t be such an easy metaphor for it–at least not for a long while.
Stachura, Mike^Sirak, Ron.