The Pellucid Perspective - May 2018 - 5

Their take on Supply and Development is interestingly positioned and nuanced. The summary positioning on the continued supply drawdown in this section is comical to anyone
who has been in the industry pre-2000 as they call the current
contraction "the ongoing byproduct of an unsustainable period
of growth in the world's best-supplied market." Conveniently
omitted is the observation "which we fueled by our incorrect
forecast of golfers and demand and associated PR campaign to
build-a-course-a-day and which we profited from handsomely
by selling favorable feasibility studies for 90%+ of the sites and
projects which underpinned that unsustainable growth in supply." Those facts aside, their overall assessment of the supply
drawdown (~2% contraction for the year) is consistent with our
observation and we agree that it's necessary pain we're going to
have to suffer through en route to a more reasonable supply/demand equilibrium balance. The final curious observation in this
section is they point out graphically that we increased supply by
40%+ during the '86-'05 period and have contracted ~7% from
'06-'17. I think they view that as a positive but I look at it and
ask, "Does that mean we still have 30%+ to go?" (I hope not, our
projection is that we're still ~7 years away from equilibrium on
current trend which, unusually, makes us more optimistic than
NGF). One other interesting fact that they bring to the table
which Pellucid hasn't historically tracked is that the pervasiveness of multi-course management companies is continuing to
slowly expand annually as a percent of total US courses. That's
supported by the callout of the fact that >2,000 facilities are now
"under professional management." What I think (hope) they
meant was "under multi-course management companies" in order to not suggest that individual owner/operators don't represent a facility being "under professional management." They did
several ago years however come out with that infamous general
media quote which laid the woes of discounting at the feet of
individual owner/operators' lack of business acumen and pricing
strategy so it's possible that it's not a Freudian slip.
The final happy chapter in this year's report is the logical extension of latent demand into the industry's Overall Reach. Beyond the growing group of non-players that are very interested in
taking up the game, there's an even larger, growing circle of folks
who are "tuned into" our sport in the form of watching TV golf
or reading about golf at least once in the past year. By my calculation, this number climbed about 3M in '17 according to NGF
and that, combined with the Off-Course Only Participants gain,
teamed to more than offset the 500K drop in traditional golfers walking across actual grass, swinging a club and driving the
much-touted $84B economic impact, 2M employees juggernaut
industry that is claimed to be golf. So the PGA TOUR and the
various associations who own the rights to TV golf and major
championships (USGA, PGA of America, Golf Channel, etc.)
continue to be able to find ways to expand their audiences and
make more money. I'm not saying that's a bad thing but, as I've
said numerous times, there are no facts to support the argument
that when the media side of golf does well, the operational side
benefits in parallel. That said, multiple entities continue to push
the golf media to golf operations "prosperity by association" narrative; adopt it at your own risk.
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So the storyline appears to be that the concentric circles outside golf are large and growing larger, all of which eventually and
somehow magically have to positively impact the shrinking core
at the middle (the number of people and frequency of playing
traditional golf which feeds course operations revenue as well as
golf equipment purchases). We're going to stick with our narrative that the industry is finding its way (slowly) to stabilization,
its state is more reflected in rounds demand (holding its own)
and in the consumer base (still shrinking) or the supply/demand
balance (not shrinking enough in size or speed) and there's a potential next cliff coming in 5-10 years as the Baby Boomers age
and the replacement base in Gen Next (X, Y, Millennials) falls
well short in bodies and rounds due to their lower introduction
to/adoption of golf in the key 25-35 lifestage. The good news
is, since 2001, you've now had a choice between two versions of
truth and that period of history has shown intelligent, informed
and independent thinkers that the "contrarian" point of view has
instead turned out to be "realistic." Can we now officially say that
the industry associations' perspective from '00-'17 has turned out
to actually be the contrarian view? Your call.
n

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Table of Contents for the Digital Edition of The Pellucid Perspective - May 2018
