The Pellucid Perspective - February 2013 - (Page 13)

MARKET FOCUS Golfers not goin’ to Kansas City Kansas City, MO Core Business Statistical Area (CBSA) T his month we feature a market that’s getting an increasing amount of attention within the analyst community (but unfortunately for the wrong reasons), Kansas City, MO. If there were a poster child for the perfect storm of the golf industry since 2000, this middle-size market near the middle of America would most likely adorn the wall. Let’s take a look at what irrational exuberance in supply expansion and declining rounds demand hath wrought upon those who call this market “home.” By number of golfers, Kansas City ranks number 31 of US markets with 160K golfers estimated in the local population (not counting tourists). That golfer base is served by 86 18-hole equivalent (EHE) facilities, producing a ratio of roughly 1.9K golfers per EHE, which is slightly above the national average (here ends the good news). The supply mix vs. the national distribution across Pellucid’s five access/value/usage segments is not dramatically skewed, with a slight bias to Public-Value golf and a slight under-representation to Public-Premium. (That’s not a bad thing and different from the rampant over-building of Public-Premium we see nationwide during this period). The balance of Value-added golf supply (Private & Public Premium) vs. Value golf (Public Value, Price and Learning & Practice) is 46%/54%, which is less concentrated to the high end vs. the national distribution of 50%/50%. Within Public-Regulation golf, the distribution between Premium/Value/Price is 29%/49%/22%, which also shows a meaningfully higher concentration in the Value segment at the expense of the Premium segment compared to the national distribution of 34%/42%/24%. All in all, the mix of the Public supply types in Kansas City is close to what we build our supply distribution curves on, which would be 50% of supply in the mid-range and 25% of supply on both “flanks.” So if we’ve got a good golfer base and we have a nice distribution of supply by type, what’s wrong here? During the “go-go” years of supply development (1990-2000), Kansas City participated at the average rate in the build-acourse-a-day craze, adding 197 holes of golf during the period. Mitigating that 2% annual increase in supply was moderate 1% annual population growth, meaning the market came into the 21st century with a 10% supply “overhang” (right on the national average, which was 10% supply dilution vs. 1990). Since 2000, the change in supply did not moderate (much of this driven, however, by the 2000-2005 period; things have fallen off the cliff since then) against continued population growth of about 1%. In the post-2000 period, however, we track supply dilution by comparing supply change to change in rounds demand, Private PublicPremium PublicValue PublicPrice Golfer Base – Est. # of Golfers (Ks) – # of 18 Hole Equivalent Facilities – Golfers per 18-Hole Equiv. Learning & Practice Kansas City, MO Supply Mix – Private – Pub-Prem – Pub-Val – Pub-Price – Learn & Prac Future Facility Tot US Index vs. US 159.7 24,400 86 14,675 1,868 1,663 112 26% 20% 33% 15% 5% 22% –24% 8% –10% 268 244 –46% –18% 255 22.9 26.7 86 52% $983 80 74 $13 Rounds & GF Revenue Health – % Utilization Rate – Avg. Ann. Rev. per Public Regulation EHE ($Ks) – Revenue per Available Round (RevpAR) 96 87 118 94 83 42% $729 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.) 27% 23% 28% 16% 6% $16 83 * 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) The Pellucid PersPecTive 13 http://WWW.PELLUCIDCORP.COM

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

The Pellucid Perspective - February 2013
Part-time golf courses: A concept worth trying?
Bankruptcy courts protect course revenues from lenders
Show notes from 35,000 feet
Volunteers may not be free
January golf weather impact: Down...but not unexpected
Golfers not goin’ to Kansas City
Movie time: License required
Concert Golf Partners buys CC at Woodmore in D.C. Area
Bishop’s tenure as PGA President promises deep breaths of fresh air

The Pellucid Perspective - February 2013