The Pellucid Perspective - July 2019 - 6

INDUSTRY TRENDS
& INSIGHTS

Drive Shack vs. TopGolf:
A Tale of Two Cities
By Jim Koppenhaver

''I

https://www.driveshack.com/locations/orlando

t was the best of times (Topgolf ), it was the worst of
times" (Drive Shack). Colleague Harvey Silverman recently forwarded me the most recent Seeking Alpha assessment for Drive Shack and it's a considerably different picture
than the media attention, glowing reviews and investor interest
in privately-held, first-mover TopGolf. Being a public company, Drive Shack is required to provide more transparency into
their operations and many of the metrics that TopGolf has been
reluctant to share with investors and analysts. It makes for an
interesting investigation regarding how (or if ) these two similar
operations can be so diametrically opposed in their market and
financial performance to date. So let's take a look.
Giving credit where credit is due, Seeking Alpha analyst William Daniel provides what I think is a well-founded, balanced
perspective on the current state of Drive Shack summed up in
his headline: "Drive Shack: New Leadership, New Venues, New
Opportunity But With Great Risk." I'd encourage you to read
his analysis and support points.
While he points out that making a "read" on exclusively the
Orlando facility is fraught with peril, some of the early numbers
for Drive Shack are underwhelming and the upcoming facilities
of Raleigh, Richmond, West Palm Beach and New Orleans are
going to have to punch well above their weight class to balance
the portfolio and make up some of the apparent ground lost in
Orlando. One of the things that I've observed in my couple of

Drive Shack, Orlando

6 The Pellucid PersPecTive

trips to TopGolf is that it appears to me to be a special event
place so getting the local population to make it a regular trip (i.e.
weekly) seems to be a stretch. If I'm right, then facilities in high
tourist/turnover locations should have an advantage over localdominated metros like Chicago. Part of that is due to the expense of the golf + dining + drinking trifecta which, for my son
and I (who are both modest drinkers) was well over $125 for
our 2 and a half hour visit to TopGolf here in Chicago. At least
for me, that's not a weekly destination type expense. That said,
where TopGolf appears in the early running to be significantly
advantaged is in the F&B side of the house in both customer
counts and average ticket size. One Golfweek writer summed
up a comparative visit of the two competitive Orlando facilities
this way, "TopGolf seems like an F&B place with golf attached
while Drive Shack seems like a golf driving range with an F&B
add-on." That assessment could prove prescient in that the staying power of a restaurant/bar/social gathering place likely far
outweighs that of a fun, novel place to hit golf balls. That said,
the capital expense and maintenance of that huge golf "add-on"
if it loses its bloom in the future, is going to be an awfully heavy
anchor to pull for the F&B core business.
That's really the crux of the argument that Mr. Daniel is making regarding the challenging start for Drive Shack and why
TopGolf is currently getting the benefit of the doubt among
investors and leveraging some first-mover advantages (interestingly, first-mover here is actually
the fact that they've been at this
since the mid-2000s before catching the current tailwind of money
and media attention making them
a 10+ year "overnight success").
An interesting development that
should be a significant tailwind for
Drive Shack is trading in their 29
year-old, Fortress/Goldman Sachstrained CEO Sarah Watterson
for the former TopGolf top dog,
Ken May (55+). It's an unusual,
but likely advantageous, situation
where you can hire the former, recent CEO of your primary competitor to jump-start a struggling
business venture in a relatively new
market space. From the Q1 investor call, it appears that Mr. May
has quickly and correctly identified
that the size, speed and adoption
rate of their Orlando facility are in
July 2019


https://www.seekingalpha.com/article/4273255-drive-shack-new-leadership-new-venues-new-opportunity-great-risk https://www.seekingalpha.com/article/4273255-drive-shack-new-leadership-new-venues-new-opportunity-great-risk https://www.driveshack.com/locations/orlando

The Pellucid Perspective - July 2019

Table of Contents for the Digital Edition of The Pellucid Perspective - July 2019

TOC
Does enjoyment trump time & money?
Golfertainment; Drive Shack vs. TopGolf
“Does my course website need to be secure?”
June: Another underwhelming performance
Weather disappoints, rounds lag disappointment
DC golf like politics, fragile coalitions
Light month as industry hits mid-season
The Pellucid Perspective - July 2019 - TOC
The Pellucid Perspective - July 2019 - Does enjoyment trump time & money?
The Pellucid Perspective - July 2019 - 3
The Pellucid Perspective - July 2019 - 4
The Pellucid Perspective - July 2019 - 5
The Pellucid Perspective - July 2019 - Golfertainment; Drive Shack vs. TopGolf
The Pellucid Perspective - July 2019 - 7
The Pellucid Perspective - July 2019 - 8
The Pellucid Perspective - July 2019 - “Does my course website need to be secure?”
The Pellucid Perspective - July 2019 - June: Another underwhelming performance
The Pellucid Perspective - July 2019 - 11
The Pellucid Perspective - July 2019 - Weather disappoints, rounds lag disappointment
The Pellucid Perspective - July 2019 - 13
The Pellucid Perspective - July 2019 - DC golf like politics, fragile coalitions
The Pellucid Perspective - July 2019 - 15
The Pellucid Perspective - July 2019 - Light month as industry hits mid-season
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