The Pellucid Perspective - April 2013 - (Page 14)

MARKET FOCUS Military spending cuts threaten VA golf market Virginia Beach/Norfolk, VA Core Business Statistical Area (CBSA) A s we enter month two of the federal funding cuts affectionately known as “the sequester,” we’ll take a look at one of the many markets in the US with a sizeable federal employee base (the military men and women and the government service workers who work in support roles at many of our bases), but with an eye toward the golfer population, rounds and supply trends. Fortunately for market golf owner/operators, this area is also a heavily trafficked tourist area, so that will help somewhat in offsetting any impact resulting from the Washington, DC “dithering” over things like budgets, taxes, spending and the like. By number of golfers, Virginia Beach/Norfolk ranks number 33 of US markets with 176K golfers estimated in the local population (not counting tourists). That golfer base is served by a relatively sparse 67 18-hole equivalent (EHE) facilities, producing a ratio of roughly 2.6K golfers per EHE, which is well above the national average - 59 percent higher. The supply mix vs. the national distribution across Pellucid’s five access/value/usage segments shows a welcome bias to Public-Price (affordable, entry-level) golf with all other segments, with the exception of Learning & Practice, fairly balanced in their representation compared to the national supply distribution. The balance of Value-added golf supply (Private & Public Premium) vs. Value golf (Public Value, Price and Learning & Practice) is 50%/50%, which is right on the national distribution of 50%/50%. Within Public-Regulation golf, the distribution between Premium/Value/Price is 34%/38%/27%, which suggests a slight bias to more affordable golf compared to the national distribution of 34%/42%/24%. All in all, it’s not a bad distribution, especially in light of the fact that these figures include a moderate number of resort facilities, which tend to skew the supply distributions higher (because they’re classified by their highest, in-season price). So we’ve got a solid golfer base and a reasonable amount and mix of supply as a foundation. During the “go-go” years of supply development (19902000), Virginia Beach/Norfolk was at or near the top of the leaderboard, adding 324 holes of supply, or a staggering Compound Annual Growth Rate (CAGR) in excess of 3%! Mitigating that industry-pacesetting annual increase in supply was modest annual population growth of about the national average (1%), meaning the market entered the 21st century with a 27% supply “overhang” (significantly higher than the national average, which was 10% supply dilution vs. 1990). Since 2000, the rate of supply growth has moderated to <1% against a similar, steady population growth rate. In the post-2000 period however, we track supply dilution by comparing supply change to 14 The Pellucid Perspective Private PublicPremium PublicValue PublicPrice Learning & Practice Future Facility Virginia Beach/ Golfer Base Norfolk, VA Tot US 176.0 24,400 – Est. # of Golfers (Ks) 67 14,675 – # of 18 Hole Equivalent Facilities 2,647 1,663 – Golfers per 18-Hole Equiv. Supply Mix – Private – Pub-Prem – Pub-Val – Pub-Price – Learn & Prac 159 25% 25% 28% 20% 3% 27% 23% 28% 16% 6% 93 109 100 125 50 8% –9% 8% –10% 98 88 –17% –18% 93 28.4 26.7 106 42% $1,093 52% $983 81 111 $16 $16 101 Supply/Demand Balance – ’00-’11 Cume Supply Growth/Decline – ’00-’11 Cume Rds Demand Growth/ Decline – ’00-’11 Cume Mkt Supply Dilution (-)/Absorption (+) Level* – Avg Ann Rds Velocity (ks per 18-hole Equiv.) Rounds & GF Revenue Health – % Utilization Rate – Avg. Ann. Rev. per Public Regulation EHE ($Ks) – Revenue per Available Round (RevpAR) Index vs. US * Period % Chng in Rds vs. Period % Chng in Supply + Inverse index, lower is better Above average level vs. US (Index >105) Average level vs. US (Index 95-104) Below average level vs. US (Index <95) April 2013

Table of Contents for the Digital Edition of The Pellucid Perspective - April 2013

The Pellucid Perspective - April 2013
Contents
Phoenix shifts municipal golf to General Fund subsidy
Filling the junior golf gap
One shot at a time
Plumbing the depths of the on-course restroom issue
Online golf store a solution for pro shop sales?
March golf weather impact: Hibernation mode for golf nationally
Military spending cuts threaten VA golf market
First phase of golf resort with Kidd-designed course in Oroville, CA up for approval
Nice guys finish last ... in Tax Court

The Pellucid Perspective - April 2013