Overview: Current market research on the Irish golf industry Ian Duffy, FGS Partner, Corporate Turnaround & Change Management

Overview: Current market research on the Irish golf industry

Ian Duffy, FGS Partner,

Corporate Turnaround & Change Management

Background to research

Research undertaken during the summer of 2010.

FGS and Carr Golf Services, in conjunction with the GUI and the ILGU.

On-line survey to Ireland’s 433 golf courses.

Background to research

A total of 151 actual responses were received (or an effective response rate of approximately 35%).

All survey respondents details were confidential and broken down into regions for the purpose of analysis.

Introduction

Significant growth and investment in the industry over the last 15 years.

Excellent courses, facilities and standards with a wide range of availability and choice

Strong international reputation as desirable golfing destination

Introduction

However, the industry does face major challenges given:» Decline in golfing tourists » Debt levels» Falling memberships» Excess capacity» Increased costs» Fragmented industry

Golf industry in Ireland overview

One in every 25 people a golf club member and these figures (excludes casual golfers).

Golf industry in Ireland gives rise to the employment of approximately 8,000 persons (both full and part-time)

433 courses throughout the 32 counties (increase of c. 100 clubs over the last 15 years).

Trends in the Number of Golf Clubs 1995-2009


Golf club membership growth over the last 10 years was driven by increased;» Population » Disposable income» Profile of the sport.

Tax reliefs for hotel developments (and the expansion in the number of hotels and resorts in recent years) indirectly drove the number of golf courses.


‘Our golf product is among the best in the world and it is up to us to ensure that all is being done to fully promote what is on offer’.*

Major operation, structural and marketing issues that need to be resolved.

» *Chair of Failte Ireland

Research findings

The report can be broken down into the key areas of: » Running efficient golf club operations;» Under-utilisation in the Irish golfing industry; » Sustainability; » Representing the Industry and;» Marketing

Running efficient golf club operations

Table 3.2: Overall Membership Trends, 2007-2010

Members Increasing

(23.1%)

Members Decreasing

(55.4%)

Members Stayed the same

(21.5%)

Scale % Scale %

Increased between 10% and 20% 41.8 Decreased between 10% and 20% 28.6 -

Increased by less than 10% 47.8 Decreased by less than 10% 57.1

Increased by more than 20% 10.4 Decreased by more than 20% 14.3

100.0 100.0

N = 121 cases

Note: discrepancies may arise due to rounding

Analysis: FGS Consulting


Table 3.1: Membership Trends (disaggregated by region)

Province

Increasing

%

Decreasing

%

Stayed the same

%

Connacht 14.3 78.6 7.1

Dublin 9.5 57.1 33.3

Leinster 23.3 50.0 26.7

Munster 34.6 46.2 19.2

Ulster 26.7 56.7 16.7

National 23.1 55.4 21.5

N = 121 cases




Higher number of clubs are serving the same pro-rata number of people/members.

The number of members per club in 2002 was 661 and in 2009 was 590. Significant fall there.

Number of Persons (1,000 of population) per Golf Club dropped from 14.87 in 1996 to 14.38 in 2009.

Trends in the Number of Golf Memberships (‘000), 1995-2009

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200930

35

40

45

50

55

0

50

100

150

200

250

Female Members (LHS) Male Members (RHS)


Based upon the data received, the estimated average cost of operating a golf club in 2009 was €990,000.

The equivalent figure in 1999 was €266,000 (in 2009 prices) which indicates that costs have risen by 270% in just over a decade.


Course maintenance is 40% of operating costs is largest cost centre.

Administration costs are 18% of operating costs.

Clubhouse operations are16% of operating Costs


Table 5.1: Composition of Operating Costs (disaggregated by region)

Province

Course maintenance Administration

Food and Beverage

Clubhouse operations

Any other costs

Total

% % % % % %

Connacht 34.2 17.9 2.4 20.8 24.7 100.0

Dublin 48.2 14.5 12.5 13.3 11.5 100.0

Leinster 48.6 19.3 7.7 12.5 11.9 100.0

Munster 30.1 22.7 18.1 17.2 11.9 100.0

Ulster 37.5 11.7 16.4 20.9 13.6 100.0

National 40.1 17.8 13.2 16.0 12.9 100.0

N = 81 cases




Table 5.3: Operating Cost Trends (disaggregated by region)

Province

Increasing

%

Decreasing

%

Stayed the same

%

Connacht 25.0 66.7 8.3

Dublin 33.3 53.3 13.3

Leinster 25.0 60.0 15.0

Munster 12.5 75.0 12.5

Ulster 34.8 43.5 21.7

National 26.7 58.1 15.1

N = 86 cases


Under-utilisation in the Irish golfing industry The Irish golfing industry has the capacity to

support up to 23m rounds of golf in a given year.

Analysis shows that a maximum of 13.3m rounds were actually played in 2009 suggesting that the level of under-utilisation is close to 42%.

Under-utilisation in the Irish golfing industry Oversupply of golf clubs range from 35% in Dublin

to 53% in Leinster.

Industry needs to consider new and innovative approaches and solutions, including a programme of consolidation.

Under-utilisation in the Irish golfing industry

Table 3.10: Estimated under-utilisation (disaggregated by region)

Province

Projected Total Rounds Played

Estimated Maximum Capacity

Under-utilisation

Connacht 1,346,454 2,242,619 40.0

Dublin 2,084,378 3,203,741 34.9

Leinster 2,935,688 6,140,504 52.2

Munster 3,065,392 4,859,007 36.9

Ulster 3,883,594 6,567,669 40.9

National 13,315,507 23,013,540 42.1


Under-utilisation in the Irish golfing industry C. 50% of all respondents reported rounds played

had decreased over the last 3 years.

This downward trend was most pronounced in Connacht (71%) and Dublin (50%).

However, 40% of respondents in Munster reported that the number of rounds played had actually increased.

Table 3.6: Rounds Played Trends (disaggregated by region)

Province

Increasing

%

Decreasing

%

Stayed the same

%

Connacht 7.1 71.4 21.4

Dublin 27.3 50.0 22.7

Leinster 31.0 48.3 20.7

Munster 40.0 40.0 20.0

Ulster 37.0 37.0 25.9

National 30.8 47.0 22.2

N = 117 cases



Under-utilisation in the Irish golfing industry

Sustainability

Almost 27% of respondents reported that revenues had increased since 2007.

A further 17% reported that revenues remained unchanged.

Almost 57% of respondents reported that revenues had decreased.

Sustainability

Green Fees account for 17% of all revenues nationwide.

Local authority-owned golf clubs Green Fees account for nearly 50% of revenues.

By contrast, Green Fees account for just 15% and 20% of all revenues in the case of member-owned and proprietor-owned golf clubs, respectively.

Sustainability

‘Membership’ fees (i.e. subscription and joining) account for less than 20% of total revenues for local authority-owned golf clubs.

Such fees contribute 65% and 27% of all revenues in the case of member-owned and proprietor-owned golf clubs, respectively.

Sustainability

Food and Beverage and, to a lesser extent, the Pro Shop accounted for 35% of the revenues of proprietor-owned golf clubs.

In comparison with member-owned golf clubs (15%).

Suggest that proprietor-owned golf clubs have a greater focus on multiple sources of revenue.

Sustainability Significant amount of debt in the Irish golf industry

especially amongst newer clubs who would have made large capital investments in the last 10-15 years.

The level of debt as a % of revenue in 2009 was greater than 100% for 1 in 5 respondents with the highest number of cases in Connacht at 31%.

This represents a clear challenge for industry not renowned for making profits.

Sustainability

3 out of 4 golf clubs in Ireland made capital investments over the past 3 years.

The highest number of these was in Dublin, where almost 93% of all golf clubs incurred capital expenditure.

The vast majority of this (70%) was targeted at golf courses whereas 17% was applied to clubhouses.

Marketing

Less than 2 in every 3 golf clubs had a strategic plan in place for 2009

40% of respondents did not have a Strategic Plan in place for 2009 whilst 80% did not have a Yield Management Strategy.

Sales and marketing accounts for just 1% of operating costs nationwide.

Marketing

There is clearly a need for strategic planning in the golf industry.

Many golf clubs need help in developing a business turnaround plan that will addresses strategic deficiencies and operational ineffectiveness.

Of those golf clubs that did have a strategic plan, 64% of them saw their membership numbers increase.

Marketing

Golf clubs with increasing revenues in 2009 were more than twice as likely to employ a yield management strategy compared to golf clubs with decreasing revenues

Almost 31% of golf clubs with increasing revenues employ such a strategy

New approach to neighbours – Friend or Foe

Representing the Industry

Fragmented representation of the industry

Should we look at an umbrella body that could play a constructive role in presenting the industry’s view with regard to issues such as; » Bench-marking» Training» Co op and buying Power» Labour costs negotiations» Liaising with State agencies» Capacity and yield management

Conclusions» Running efficient golf club operations;

» Marty Carr of Carr Golf Services & Mark Nolan, the Dromoland Collection

» Under-utilisation in the Irish golfing industry; » Buddy Darby (Kiawah Partners), Marty Carr

» Sustainability; » Declan Taite (FGS) particular emphasis on debt restructuring

and management

» Representing the Industry and;» Marty Carr, Frank Bowen (GUI), Sinead Heraty (ILGU) and

Keith McCormack (Failte Ireland)

» Marketing/New Media/Online Sales» Buddy Darby (Kiawah Partners), Keith McCormack (Failte

Ireland) and Mike Lasoulat (Golf Channel Solutions)

FGS team here today

Ian DuffyFGS Partner, Corporate Turnaround & Change Management

[email protected] Office T: 01 418 2021

Declan TaiteFGS Partner, Corporate Restructuring & Insolvency

[email protected] Office T: 01 418 2000

For further information about FGS visit our website:

www.fgspartnership.com

Thank you

Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in Ireland (ICAI). Chartered Accountants Ireland is the operating name of ICAI. FGS is a member of the RSM International network. The RSM International network is a network of independent accounting and consulting firms, each of which practice in their own right. The RSM International network is not itself a separate legal entity in any jurisdiction.

Documents

Overview: Current market research on the Irish golf industry Ian Duffy, FGS Partner, Corporate Turnaround & Change Management