U.S. Facility Financial Health Update

Back in 2009, towards the end of the Great Recession, we surveyed U.S. golf courses and clubs regarding their financial health. We did it again in 2016 to see how things had changed, and again over the course of the past few months.

In both 2009 and 2016, roughly a quarter of public courses admitted to being in bad shape, financially. Among private clubs, 21% were doing poorly in ’09, but seven years later that proportion had dropped to 14%.

Did these self-reported financial health measures have any predictive validity? Yes, they did.

• Nearly 20% of the public courses in our previous samples who rated their financial health 0-4 on a 0-10 scale are no longer in business – a 4x higher ‘closure rate’ compared to those on the upper end of our health assessment scale
• A third of private clubs who rated their health 0-4 in those previous studies are now either closed (7%) or converted (26%) to semi-public or public facilities (8x higher rate)

So where do things stand today? Much improved. See graphic below.

There’s been a dramatic rise in the proportion of U.S. golf facilities reporting to be in good financial shape compared to our previous studies, including more than half of public courses and nearly 2/3 of private clubs. And, fewer than 1 in 10 (public and private combined) suggest that they’re currently in bad shape (0-4).

For public courses especially, the summer swell has had a profound impact on financial well-being. Coming into 2020, 14% of public courses would have rated themselves in financial distress (down from 25% in 2016), but today that proportion has been cut almost in half (8%), thanks to over 2,000 extra rounds on average.

NOTE: Our 2020 sample consisted of 876 public courses and 337 private clubs, but because 9-hole and value-priced (<$40 rack rate) facilities are under-represented in our sample, a slightly higher overall percentage of public courses may be distressed than our results show.

So, what do the courses and clubs who remain in trouble have in common?

• They are disproportionately 9-hole and/or value-priced facilities (<$40 rack rate)
• They claim to be in oversupplied/bad markets
• They have made little/no investment in capital improvements over the past 5 years, and don’t have plans to make any

The takeaway here is that the overall financial health of U.S. golf facilities has improved significantly since 2016 – a function of stabilizing participation, an improved overall economy and the closing of many lower-performing courses, and now the surge in rounds played. And, with fewer facilities now financially “at risk,” we should expect the rate of closures/conversions to slow down, and the marketplace to find its way closer to equilibrium.