Business London Magazine April 2005
Club Paradise: We’re living in a golfer’s wonderland. Is it too much of a good thing?
by Jeffrey Reed
In 2003, Mike Olizarevitch, long-time head professional at Fanshawe Golf Club, produced a study for the City of London confirming what many golf club operators already suspected. Olizarevitch revealed that there were enough golf courses in and around London to support a population of 1,050,000 people, more than three times London’s population of 348,000.
Operating any business that relies heavily on ideal weather conditions is tough enough. Add intense competition to the equation and you have a business climate with more hazards than Augusta National on a gusty Sunday afternoon.
Indeed, there’s a growing consensus amongst London and area golf course operators that only the fittest will survive in what has become a cutthroat industry. It’s a player’s market, brimming with an oversupply of courses and an ever-increasing selection of green fees and membership packages.
Today, local golf industry professionals speak of clubs chasing their “piece of the pie” and the necessity to think more like business people than golfers. Cool, wet springs have become the norm, lowering the number of rounds played and forcing golf courses to take a financial hit – all at a time when costs to operate a golf course are ballooning.
And that’s not all. Reports indicate golf participation per capita may have peaked. Florida-based research firm Golf Datatech reports rounds played in the U.S. in 2004 fell 0.1%. Latest numbers from the Royal Canadian Golf Association indicate a decline of 5.4% in all golfers from 1998 to 2001. The most avid golfers showed a drop of a whopping 12.1%.
But it’s numbers of a different sort that are impacting golf course operations most. While the Canadian Golf Course Superintendents’ Association reports close to $400,000 as the average maintenance budget for an 18-hole golf course in Canada, a million-dollar budget to run an 18-hole golf course is not uncommon says Sunningdale Golf and Country Club general manager John Adams.
Founded in 1934, the private Sunningdale Club spent $12 million between 1999 and 2003 on a complete overhaul of its 36 holes of golf, and the construction of a new 32,000-square-foot clubhouse. J. Gordon Thompson developed Sunningdale’s first 18-hole course, opened in 1934, while a second 18-hole layout opened in 1971.
“Improvements to our course go beyond just improvements necessary to remain competitive,” says Adams. “Changes are needed as a course ages. Irrigation, a new clubhouse, a golf course get tired over the years.”
Sunningdale now boasts 1,700 individual members, none of whom were on the hook for recent club changes. “It was an expense to the (Thompson family) ownership,” Adams explains. He says basic annual membership dues total $4,500 per couple or $1,300 per couple plus discounted green fees for those who expect to play fewer rounds.
“London golfers are spoiled,” notes Adams. “Are there too many courses? That’s an interesting question. There are so many different kinds of golfers. I think there is still room for growth. Look at the housing market. We have golfers show up at our door. They’ve moved from Toronto and want to join our club.”
Leo Larizza, general manager at the private Highland Country Club, calls the environment “tough and competitive.” He hints that only the fittest will survive in London’s golf market.
“Eventually, the clubs doing a better job can count on membership,” he states. “Highland is unique to London because of its central location and because it is active 12 months a year.”
With 600 golfing members and 400 curling members, Highland’s initiation fees total $12,000, with all-inclusive annual dues at $2,400, and $1,500 for a member’s spouse. Resting on a 140 urban acres, the club was founded at a farmhouse in 1922. Expansion in 1959 added a new clubhouse and six-sheet curling arena, and there was a $750,000 renovation project in 1985. A $1.5-million clubhouse upgrade and halfway house addition is now under way and follows a recent $1.4-million course upgrade, including the addition of fairway bunkers, a new irrigation system and the lengthening of tees to challenge today’s golfers benefiting from game-improving clubs and balls.
But if Highland has an advantage over its private club competition, Larizza believes it’s “the friendliness of the members and staff. The facility is important, but people make the difference.”
In fact, softer tangibles like service, atmosphere, prestige, exclusivity and longevity within the community are often calling cards for private facilities. London Hunt and Country Club, the city’s most guarded and storied golf club, was founded in 1885. It hosted the PGA Tour’s 1970 Canadian Open, and LPGA Tour’s 1993 du Maurier Ltd. Classic. With 1,800 members, new applicants must be proposed by a member and seconded by another.
So Yeon Ryu lines up putt at London Hunt’s No. 18 at the 2014 CP Women’s Open. Photo: Jeffrey Reed/LondonOntarioGolf.com.
“Every year we have attrition,” says club general manager Larry McKenzie, “but there is very low turnaround, perhaps less than 10 members each year.”
In 1999 and 2000, the club spent about $2 million tweaking its classic design, including bunker changes, to bring it up to par to modern standards. Like Highland, London Hunt had fallen victim to “modern technology and improved distance,” says McKenzie.
While London Hunt enjoys a certain immunity to market conditions, McKenzie is nonetheless an astute observer of the local scene. “Golf is a local industry now,” he says, referring to a more-fickle golfer, increased golf competition and the market demand for top-notch courses and facilities.
It’s for those very reasons that Walter Spivak says that those clubs that do not do well” in maintaining and upgrading their amenities will likely not be profitable. Owner of the Oaks Golf and Country Club in Delaware, and the new upscale public course, FireRock, in nearby Komoka, Spivak says the Oaks – like Highland – depends on young demographics for its private membership of 350 golfers. There is an initiation fee of $12,000 plus basic annual dues of $2,700, and $1,100 for a member’s spouse.
According to Spivak, he and his father Nick established the Oaks in 1993 because of an under supply of private clubs in the London area. Now he says, “We’re all looking for members.” But Spivak stops short of saying there are too many private operations. “We’re all holding our own. If you offer a good product, reasonable prices, you’ll do well.”
The Oaks members have playing privileges at FireRock which joins Forest City National as the area’s second upscale public course. Launched in July 2004, FireRock will open a new clubhouse this May. Golfers across Canada have been buzzing about the Thomas McBroom-designed FireRock which the architect calls “explosive by nature and stunning by design.”
Spivak has been aggressive and creative in marketing his new course, which charges $80 green fees including range balls, cart and a yardage guide. A limited number of season memberships are available at $3,500. As well, a foursome can book an annual weekly tee time for $6,000.
FireRock’s hole No. 15
Custom playing packages like those offered at FireRock are a sign of the times, says Brian Holmes, director of operations at Forest City National. “Ten years ago, specials didn’t exist,” he says.
Forest City, boosting its bottom line by hosting 70 charity tournaments this season, has only 15 members and builds its business model around 18-hole packages, including six rounds for $269. Host of high-profile events like the 1994 and 1995 Ontario Open tournaments and 1998 CPGA Championship, Forest City relies on high-quality amenities in order to challenge competing courses – not an easy job, says Holmes.
“The local golf industry is no different than the automotive industry of 20 years ago when rebates appeared,” he says. “The number of courses (42 within a half hour of city hall, 112 across Southwestern Ontario) affects the entire London market. It slices up the pie.”
Although Holmes recognizes that FireRock and Forest City are two very different types of courses, he does point to FireRock and RiverBend Golf Community – the two latest additions to London’s golf landscape – as big reasons why pieces of the pie are now smaller.
London’s first gated golf development, RiverBend is part of a master-planned community slated to eventually total 500 villas and single-family homes. The golf course was a $5-million project for developer Sifton Properties Ltd., and the 28,000-square-foot clubhouse rang up an additional $4 million. Resting in northwest London and overlooking London Hunt, Riverbend allows residents to park their golf carts at home and ride them to and from the course.
Photo: RiverBend Golf Club
Sifton president Richard Sifton says 100 aggressively-advertised Riverbend homes were occupied through 2004, with 175 residents expected by December 2005. Sifton says there are currently 275 golf club members, half of them residents, with a target membership cap of 450. RiverBend memberships are sold to non-residents for $6,500, with a $500 refund each year since eventually all 450 memberships will be filled by RiverBend community residents.
Sifton says a golf course can act as a magnet when marketing homes. “We’re selling a lifestyle,” he says, “but 75% of our purchasers are golfers.” Like Adams, Sifton believes you have to first define a golf course type before determining whether or not there is an oversupply in London. “Private courses are fighting for people,” he states. “Overall, there is an abundance of opportunities to play golf in London.”
Sal Bruni, general manager at West Haven Golf and Country Club, tees up a somewhat harder-hitting assessment of the local golf market. “It’s over-saturated,” says Bruni. “RiverBend and FireRock will affect everyone for the next three to four years. The pie just got divided.”
Opened in 1990, West Haven is the area’s only course with equity shareholders, 350 in total, each paying $10,000 plus annual dues of $2,600. Advertising a “young, more casual” membership, Bruni says West Haven is also tinkering with its course and clubhouse in order to offer top-notch amenities and to “keep competitive with the Sunningdale’s of the world.
“It’s tough for any new course,” says Bruni. “I wouldn’t want to build one unless I had deep pockets, but golfers want to play what’s new. In 1990, we were the new kid on the block.”
In Canada’s golf world, pockets don’t come much deeper than ClubLink Corporation, the country’s largest operator of high-end golf clubs, and owner of Greenhills Golf Club in Lambeth. In 1999, the golf syndicate purchased the club, built in 1975, from the Sonar Group. Six years ago, Greenhills had a membership of 350. Today, more than 400 of ClubLinks 12,000 members call Greenhills their home.
ClubLink has a series of membership fees and annual dues. At Greenhills, a principal entry fee costs $5,000 and permits play at 26 ClubLink courses. Greenhills director of golf Brad Esler says, “The club would like to boost its membership to 550. There are too many public courses,” he says of the local market. “Even the private clubs are fighting for a piece of the pie.”
Greenhills continues to improve its amenities, most recently sprucing up its entrance and parking lot. Likewise, when the Ublansky family purchased Echo Valley Golf Club west of Lambeth for $2 million in 2001, they were well aware that today’s golfer demands more bang for the buck.
Established in 1971 and considered one of Ontario’s most challenging semi-private courses, Echo Valley has 175 members. Ublansky says even daily green fee golfers are demanding better amenities.
“Golfers are getting smarter. It used to be they wanted a beer and a round of golf. Not anymore. Whether they pay $10 or $100, they want more value for their money. A farmer used to be able to cut a field and create a golf course. Not anymore.”
Ublansky has spent well over $1 million on course upgrades with designs from renowned Strathroy-based golf course architect Rene Muylaert. “We’ve redone 14 of 18 holes,” says Ublansky. “We wanted a private club feeling. The London market is competitive and at the saturation point.” For that reason, Ublanksy says he is holding off on plans to add another nine holes on adjacent land.
Certainly, golf is a life-long passion for tens of thousands of Londoners, but it has also developed into a multi-million-dollar industry locally, and it’s as much about dollars and cents as it is birdies and eagles. With many club owners and managers believing the area has reached a critical level of supply, it’s a good bet many courses will continue to offer even more competitive pricing. Invariably, some will struggle, perhaps even fail.
But as Walter Spivak points out, operators offering a good product, good plan and good value should do well, even in a crowded marketplace. If that’s the case, London just might be able to support a paradise found.
Jeffrey Reed has been covering golf in Southwestern Ontario since 1980. Contact him at firstname.lastname@example.org.