Nearly 50% of courses in Europe, Middle East and Africa report reduced revenues

Two-thirds of golf courses in the Europe, Middle East and Africa (EMA region) report that the financial crisis has impacted them negatively in their operations, with nearly half of all courses reporting reduced revenues and profitability, KPMG’s Golf Advisory Practice announced March 8.

Golf courses forming part of a mixed-use residential community or a tourist resort were worst hit with 78 percent saying they had experienced a negative impact on operations.

More worryingly, 35 percent of golf courses said they were experiencing lower or stagnant revenues without being able to reduce costs, raising the prospect of unsustainable business operations based on current trends.

Half of the golf businesses surveyed – totaling more than 300 courses in 32 countries – said they had made redundancies or cut staff jobs.

The regions worst affected by the crisis, measured by revenue, were golf courses in Western Europe (-8%), Great Britain and Ireland (-6%) and South Africa (-5%), the average for the EMA region being -4%.

However, there are rays of hope with golf courses in some regions actually increasing their revenues, namely Eastern Europe (6%), the Middle East and North Africa (4%) and Central Europe (3%).

Golf course managers are also relatively optimistic for 2010 with 54% predicting excellent or good performance in the coming year, although managers in Great Britain and Ireland are the most pessimistic with 49% expecting ‘medium performance’ and 11% foreseeing poor or very poor performance.

While golf course operators, on average, are feeling more positive about their future prospects, two fundamental business factors suggest the way back to the fairway will not be straightforward,” said Andrea Sartori, head of KPMG’s Golf Advisory Practice in EMA. “Firstly, 35 percent of the golf courses surveyed are facing the worrying combination of decreasing revenues and increasing costs. For some golf courses, the narrowing of profitability might come sooner than expected and it would not be a surprise if we saw some golf courses going out of business in 2010. The depressed transaction prices of golf courses are evidence to the fact that the industry is really struggling.”

“Secondly, nearly half of all the courses surveyed reported a drop in revenues, fuelled in part by one or more of the following: a fall in memberships, green fee revenue, as well as food and beverage spending. While this decline in revenue may not be significant when averaged out (-3% to -5% across the EMA region), it is still worrying that 13 percent of courses have reported a reduction of more than 20 percent in the number of rounds played.”

Andrea Sartori added: “Golf courses – particularly those linked to tourist resorts and the ones operating in mature markets like Great Britain and Ireland – will have to work very hard on their relationship marketing, pricing strategies and service levels to attract new customers or lure back the old ones.”

The report, Golf and the Economic Downturn, is available to download, free of charge, from the new website: www.golfbusinesscommunity.com

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