The Pellucid Perspective - December 2014 - (Page 7)

STATE OF THE INDUSTRY 2014 in review: Where is the hope? By Jim Koppenhaver A s 2014 winds to a close, given the macro conditions and general industry performance, I imagine there have to be a number of stakeholders across the industry asking themselves the above question. After multiple years of costcutting, deferring capital expenses and trying every possible means of discounting to stimulate demand and steal share, we've collectively struggled to find stabilization, let alone any kind of growth. With less than a month to go and the northern geographies entering their icebox period, the "tale of the tape" at a macro industry level is going to read like this when we gather in Orlando in January: * Average Facility Total Revenue - Basically flat * Rounds Demand - Dropped a couple percentage points * Rate per Round Played - If we believe the above two facts via PerformanceTrak, then Rate will be up a couple percentage points * Golfers - Lost another million (this is '13 vs. '12 change, '14 survey will field in January, we'll know that number come May next year) * Golf Playable Hours - Off slightly (vs. marginal '13 and several percentage points below the 10-yr average) * Utilization - Off another point or two, marginal weather combined with slightly more marginal rounds demand * Supply - Don't know yet but looking like another net loss of 50-100 18-hole equivalents (or another <1% reduction in supply, only ~10 more years to equilibrium at this rate) * Velocity (Rounds per 18-hole equivalent) - Based on the differential between rounds demand and supply reduction, velocity will decline once again * Total Revenue-per-Available Round (RevpAR) - If we believe the PerformanceTrak Total Revenue call of flat, RevpAR will be up slightly For the glass-half-full crowd, we've got 3 of the indicators flat or up (but, all of those rely on the flat Total Revenue projection being accurate). For the realists in the crowd, it's going to go down in the books as another year of industry downward drift. At the State of the Industry presentation in Orlando, we'll take a look at whether the rate of decline is decelerating, steady or accelerating. Right now it's looking like the slightly positive news is it will be the former rather than the latter. The challenge however is that we continue to have a number of stakeholders out there who don't have the luxury of even a sideways year, let alone a decline that's not as steep as the previous year's. True to the principles of math and basic probability however, it's very rare that the pain of industry decline is shared, or shared equally, by all participants. Such is the case here as evidenced by the below, somewhat subjective, list of stakeholders who are either minimally affected by the downward drift or WWW.PELLUCIDCORP.COM who are actually improving their lot in the current cycle: a) The larger management companies with longevity - More courses are looking for stability and experience of 3rd party management as well as the larger management companies buying the smaller firms (in several cases due to the availability of new money or a rotation of the investors). b) Course buyers who don't require traditional financing - It continues to be a buyer's market with more sellers than buyers and the ask/bid spread continuing to narrow (the passage of time will do that to you as the seller). If you don't need conventional lending, you're good to go. c) Specialty lenders - The above notwithstanding, we're also seeing a return and rotation of lending entities which are being picky but don't have the "baggage" of the former lenders (and their parent corporations and their shareholders) who got burned in golf and banned from the kingdom as a result. d) 3rd party internet tee time distributors - While it hasn't been barnburner success and I'm somewhat throwing a blanket over several very different business models, it seems like the fate of this sector is inversely correlated to the industry. GolfNow is on a somewhat flatter trajectory to world dominance via continued acquisition, as well as upping the ante on the number of barter times for new or improved features. e) Industry trade associations - Start with the PGA TOUR, then, with new TV contracts, work your way down through the USGA and the PGA of America. All actually got significantly healthier this past year. Missing out on the trade association "halo" are the NGCOA (until they sign that GolfNow deal; just kidding!), the GCSAA and the NGF. The latter group has to learn the secret of the former group which is, "You sign the backs of checks, not the fronts of them." All that said, you know I'd never leave you for the year on a complete downer, so let's revisit the question posed in the headline, "Where is the hope?" Contrary to the general media's steady drumbeat of "Golf is dying!" we're not going into extinction. We'd better not; I've got 13 years of my life and professional career invested in this somewhat crazy and confounding industry. One of our Outside the Ropes readers summed it up nicely in response to our November issue, "Golf is dying!" Shuddaaaap! Golf will be around longer than anyone breathing today - unless that mean group in camel-country takes over." I'm encouraged by the fact that we're retaining the core golfer group and disproportionately losing those on the fringe; we can rebuild a franchise much quicker with new consumers replacing fringe defectors than the math on replacing core golfers (10+ rds/yr) with new golfers. I'm encouraged by the fact that rounds THE PELLUCID PERSPECTIVE 7 http://WWW.PELLUCIDCORP.COM

Table of Contents for the Digital Edition of The Pellucid Perspective - December 2014

TOC
The Northern Golf Alliance – A new challenge to the NGCOA?
Troon strengthens Southeast presence with Honours Golf acquisition
2014 in review: where is the hope?
A new day indeed, or in Breed, for Independence
New payment processing technology offers challenges and opportunities for courses
November golf weather impact: A parting shot from Mother Nature
Orlando operators need some magic to be in the black
Tucson muni courses struggling despite turnover to private management
Tiger: balm, or bomb

The Pellucid Perspective - December 2014