KPMG recently published several reports on the golf business in Europe, the Middle East and Africa (EMA) and further afield. Here, Andrea Sartori, head of KPMG’s Golf Advisory Practice in EMA, highlights the key findings and insights.
Tell us about KPMG’s recent work and recently published reports.
Since September 2008, KPMG’s Golf Advisory Practice in EMA has published a number of reports on the golf market as part of our Golf Benchmark initiative, with the contribution of leading industry players including Leisurecorp, Dubai World Championship, Nicklaus Design, Toro, Club Car and Troon Golf. The market intelligence studies – the Golf Course Development Cost Survey, the Golf Travel Insight and the Golf Benchmark Survey comparative report for EMA, plus three new regional reports for China, North Africa and South America – are both fascinating and exciting, and shed light on a dynamic market. In addition, we have also published The Value of Golf to Europe, Middle East and Africa report last year, a groundbreaking study about the golf economy.
What is the size of the golf market in Europe, the Middle East and Africa?
The development of the golf market in the EMA region has been remarkable. In the past 20-25 years, the number of courses has been growing by approximately 3% annually, while the number of golfers has increased by 5% annually. Today there are close to 7,100 regular golf courses across the EMA region and approximately 4.5 million affiliated golfers, in addition to an estimated 1.5 million non-affiliated players. What’s more, golf is globalizing and emerging markets such as India, Eastern Europe, China, South America and North Africa are now seeing significant business opportunities for new courses, resorts and real estate communities.
Can you put a value on the EMA golf market?
Yes – it was the subject of a report we published at The Ryder Cup in September 2008, The Value of Golf to Europe, Middle East and Africa. The research, which is the first of its kind for the region, was conducted in cooperation with Oxford Economics and nine leading golf bodies. It calculated that golf generates total revenues of €53 billion in EMA, supports almost half a million jobs and pays nearly €10 billion in wages.
How does this compare to the United States of America – and what are the characteristics of the EMA market?
The EMA region is about one-third the size of the US golf industry – however, it is growing fast, especially in the golf tourism and golf real estate sectors. In fact, our report showed that these sectors now account for almost half of the game’s total revenue. Real estate is the number-one money earner, bringing in almost €19 billion, which outstrips the total cash generated from on-course activities including green fees and memberships. The report also highlighted that in Europe alone, the number of both courses and players has doubled since 1985 and has continued to grow in recent years, whereas in the US, the number of courses and players has levelled off since 2000.
KPMG recently updated its Golf Course Development Cost Survey – what were the key findings?
Our research showed that it has become significantly more expensive to develop a golf course – more than 20% in the past three to five years. The design and construction costs (excluding investments related to land acquisition, clubhouse, maintenance equipment and cart fleet etc) of an 18-hole golf course now ranges between €1.5 and €5.3 million in Europe, depending on location and quality, €5.1 million in Southern Africa, and €9.5 million in the Middle East, by far the most expensive region to develop a golf course.
Apart from the topographical reasons, why is it so much more expensive to build a golf course in the Middle East?
The costs are highest in the Middle East partly because of the focus on high-end and signature courses, which tend to have a budget of 2 to 2.5 times higher than average. However, golf course revenues and profits in this region are also substantially higher and developers state that the celebrity factor beneficially increases premiums on real estate.
Where are the next golf development hot spots?
As part of the survey, we posed this same question to golf course architects. They were asked where they thought the next golf development hot spots would be and to name the five markets likely to experience the most significant growth in golf course development in the next 10 years. China (58%) and Eastern Europe (55%) topped the list by some distance, with the United Arab Emirates (43%), India (42%) and Russia (30%) making up the top five. However, it is important to state that this research and most of the surveys I am referring to were conducted before the full scale unfolding of the financial and economic downturn. So it is questionable to what degree these changes will affect golf course development activities globally.
What about golf travel – where are golfers going to be taking their holidays in the future?
As part of our Golf Travel Insight report, more than 80 specialist golf tour operators in 21 countries were surveyed to find out where they thought the most popular destinations would be in the coming years. Portugal and Spain, already established tourist destinations, remain firm favourites. However, some surprising destinations are catching up fast. Turkey ranked third on the list of future golf hot spots, and was closely followed by Dubai – despite the fact the UAE has the most expensive green fees in the entire EMA region. A weekend round on a UAE course now costs on average €121, compared with €78 in Portugal (the second most expensive) and just €30 in the cheapest destination, South Africa.
What about the established golf destinations, such as Scotland and Ireland?
The news for these countries is not so good, as operators expect stagnation in inbound golf tourism here. From our research it seems well established destinations are not losing market share thanks to their deep golfing traditions and the quality of their golf, but the growing competition doesn’t leave much room for further growth. However, with a weak Pound, a country like Scotland can benefit from both domestic and international tourism demand. While playing golf in Great Britain is becoming more affordable for foreign tourists, the British travel less today due to their weak currency and the economic recession.
KPMG also published its annual Golf Benchmark Survey – what were the key findings?
The Golf Benchmark Survey analyzes the business performance of golf courses across the EMA region and in 2008 focused specifically on the number of rounds played and total revenues generated (based on golf courses’ performance in the 2007 operating year). Once again, golf courses in Dubai remained the highest earners in the EMA region, with an average annual turnover exceeding €7 million, a slight increase on last year and four times more than courses in Spain, Portugal and the Netherlands.
Besides Dubai, where are the most successful golf courses?
By region, the top performing golf courses (average annual revenues) are in the Middle East (€5.8 million), Western Europe (€1.4 million), Benelux (€1.4 million), Central Europe, comprising Germany, Austria and Switzerland (€1.1 million) and Great Britain & Ireland (€933,000), the largest golf market in EMA by share of courses (42%) and golfers (33%). What I should say by way of a qualification is that although it is growing, the golf market in the Middle East is comparatively small with 26 courses and 17,900 affiliated players.
What about other emerging markets?
Perhaps some of the most striking statistics in this year’s Golf Benchmark Survey were found in the three new regional reports for China, North Africa and South America. While the number of courses in North Africa is set to double to more than 80 in the next few years and the number of registered golfers in South America is increasing by a staggering 10% per year, our report on China revealed a unique and rapidly developing golf market.
Please give some insight on the Chinese golf market.
There are now an estimated 300 courses in China, more than half of which have opened since the year 2000, with an estimated 300,000 people who are either members of clubs or who play golf regularly. However, club memberships and green fees are among the most expensive in the world. The average initiation fee of a golf club is a staggering US$53,000, while green fees are the highest of any country studied by the Golf Benchmark Survey – US$161 for 18-hole weekend rounds.
What has driven the growth of golf in China?
Our report, which surveyed 70 clubs across China, cites three main factors behind the growth in golf: the rapidly expanding economy, which has generated corporate demand for the game, the burgeoning leisure and tourism industry, and media exposure driven by professional tournaments like the World Cup of Golf. If even one in every thousand Chinese played golf by 2030, that would add up to 1.3 million golfers, requiring perhaps 1,700 new courses over the next two decades. But the extremely high pricing policy and the government’s continuing ban on the development of golf courses on agricultural land could be barriers to that kind of growth.
What impact has the recent economic downturn had on the international golf market?
In the next 12-18 months we expect a major impact on discretionary spending and, as such, demand for golf tourism and for golf equipment and apparel is likely to decrease. The economic downturn will also have an impact on golf resort and golf community development because of limited bank financing availability and weak consumer demand for second homes. On the professional side, we also expect a decrease in budgets allocated for sponsorship of both players and tournaments. Some sponsors from specific industries (e.g. automotive and financial sectors) may be replaced with businesses that belong to industries that are proving to be more resilient to the current economic downturn. However, we remain optimistic and believe that the medium to long-term prospects for golf to be very good indeed.
All KPMG reports are available to download, free of charge, from www.golfbenchmark.com