The Pellucid Perspective - September 2013 - (Page 17)

MARKET FOCUS than nationally) to roughly 1.2% annually, continuing to bank on population growth we would presume (which has slowed but is still >2% annual). In the post-2000 period however, we track supply dilution by comparing supply change to change in rounds demand, which shows a slightly different picture. Since 2000, demand has shown annual decline of 1% (consistent with the national trend), translating to 11% cumulatively which, combined with the continued supply growth results in cume supply dilution of -24% (slightly above the national average). Putting together 1990-2000 and 2000-2011 periods and measurement approaches, the average facility in Phoenix has suffered a 31% reduction in revenue driven by some combination of rounds or rate decay when compared to the 1990 baseline (chosen semiarbitrarily by Pellucid as a period of economic health for the majority of US golf facilities). This is comparable to the national average over that same period of -29%. The average facility has throughput of roughly 39K rds/yr, well above the national average before factoring in climate and daylight influences. The more accurate measure is the market’s 53% utilization rate, which is favorable (+9 pts) to the national average. This means that, after factoring out the weather impact of a near12 month season (some of the summer gets kicked out due to extreme heat on the high side), the market’s average golf “factory” runs at higher throughput efficiency vs. the average US course. On the revenue productivity side, the market generates roughly $2.4M per public regulation length EHE, which is significantly higher than the Top 25 Markets average. (Here’s where favorable weather and pricing power during the in-season periods intersect and amplify the favorability. One really needs an expense component in here to balance out some of the full season advan- tage). After factoring that for weather influence, the market’s Greens Fee Revenue per Available Round (RevpAR = Greens Fee Revenue/Available (Capacity) Rounds) registers at $21, well exceeding the Top 25 Markets’ average of $11, which contributes strongly to its 5th most healthy Pellucid ranking. Phoenix has always been a very unique and challenging golf market. Fueled by strong population growth and a continuing influx of retirees annually, combined with a strong destination appeal, should make operating golf here like shooting fish in a barrel. The problem is that such favorable conditions invite two unwanted guests to the party: 1) The attraction to overbuild supply (amplified by the real estate-related golf exuberance) and 2) Cut-throat discounting after over-building and characteristic of a destination market (think about how you’re bombarded from the airport on in places like Orlando where every theme park, dinner theater, etc. is in your face and wanting your business). Despite that, it appears that the weather-factored measures of Utilization and RevpAR suggest that Phoenix has a strong foundation on the fundamentals to rise again from the ashes (bad pun, but just couldn’t resist). Like many other markets, the burning question is how the market will work off their supply excess, how long that will take and whether it will be through multiple iterations of facility transactions or whether some of the supply will be converted to alternate uses, which would be the quicker route to health for all concerned. They parked a bunch of excess airplanes out there in the desert in AZ somewhere to improve the efficiency and profitability of the airline industry; why not do the same with the golf courses? I’ve got to believe that some of them are in locations that the desert would reclaim relatively quickly if just shut down. n UNBIASED, FACT-BASED INFORMATION & INSIGHT l Annual State-of-the-Industry review l Golf Local Market Analyzer software and ad hoc reports l Weather Impact Analysis l Facility Performance Scorecard & Customer Franchise Analysis l Voice-of-the-Local Golfer surveys and Customer Satisfaction tracking l Sharper Edge outsourced marketing services l Outside The Ropes industry issues & solutions newsletter Visit our website and register for more information and free sample reports at www.pellucidcorp.com Or, contact Jim Koppenhaver to discuss your uniqueneeds at jimk@pellucidcorp.com or 847.808.7651 16 The Pellucid PersPecTive September 2013 http://www.pellucidcorp.com/ http://www.pellucidcorp.com http://www.pellucidcorp.com

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

The Pellucid Perspective - September 2013
Contents
Golf industry supply contraction: Not if but how long?
Water “Whoas”
Pricing and Yield Management Can you discount your way to prosperity?
The Dude and Jeff Spicoli Go Golfing
PGA Junior League Golf takes a step forward in 2013
August golf weather impact: Continuing positive; better late than never
Phoenix courses not desert-ed
Sequoia Golf acquires 3 former Heritage courses in Atlanta market, leases California course
Watershed moments for U.S. golf

The Pellucid Perspective - September 2013