Global Edition

GBN Interview with Leisurecorp Golf’s David Spencer

9.16am 19th June 2008 - People

Edited transcript of Geoff Russell’s interview for Golf Business with David Spencer, Leisurecorp’s Chief Executive Officer – Golf. The interview was conducted at Powerscourt, Ireland, Monday 12th May immediately prior to this year’s KPMG Business Forum

GBN David, you’re the chief executive of the Golf Division of Leisurecorp – what does the Golf Division include?

DS If you look at what we do, we’re a sort of ‘steak and potatoes’ property development company. We’re developing Jumeirah Golf Estates in Dubai, which is the largest urban golf development in the world, spreading out over 2,750 acres, four golf courses, centrally located in the heart of Dubai between the current airport and the new Dubai airport.

We also own Pearl Valley Golf Estates, the home of the South African Open, the second oldest in the world and we’ll be hosting that for the foreseeable future. It’s just out of Cape Town in the heart of the Cape Winelands region, an absolutely incredible part of the world.

Pearl Valley Golf Estates is a 170 hectare Jack Nicklaus Signature golf course and we’re about to undertake development for a phase two of this development including the building of a hotel. There’ll also be a second golf course in phase two, starting probably in the first or second quarter of next year and some residential development. Next week we’ll be making an announcement at the BMW PGA Championship about a new acquisition.

{This was Leisurecorp’s announcement that it had just signed a Letter of Intent to acquire Turnberry from Starwood Hotels & Resorts Worldwide Inc. for £55 million – see report in Golf Business ‘Turnberry: a perfect fit with Leisurecorp‘}

Also in the Golf Division we are the major shareholder in GPS Industries which is a golf-related GPS company based in Vancouver and we are the smallest shareholder in a company called Troon Golf where we own 2.3%.

I think that our aspiration is to become a very high-end, bespoke, luxury golf developer based in the Middle East but with a global footprint.

GBN I’ll come back to most of those points later but first can you tell me about your background in golf?

DS I used to work for Troon Golf in Australia with Macquarie Bank and came to the Middle East in 2001 when we secured a contract to complete the Montgomerie Golf Course. I was the managing director of Troon Golf in the Middle East and set up their office in Dubai.

I’ve always been in the sports marketing business. It’s all I’ve ever done: sports marketing and sports-related residential development. Going back years ago I used to work for Kerry Packer as a young man and prior to joining Troon Golf I was involved with developing Greg Norman’s first golf course which ended up hosting the Australian Open – in 2001, I think – called ‘The Grand’ on the Gold Coast in Australia.

GBN What about other members of the team?

DB Well I think that the luxury I was afforded by our Chairman, Sultan Ahmed bin Sulayem, is that when I joined Dubai World I joined to set up the leisure golf division so I was able to start with a completely blank canvas with regard to human resources.

The first hiring I made was Tim Prescott as director of development. We had worked together at Emirates Hills and when you think back to September 2004 – so it’s coming up to four years – we have grown the company immensely and it will continue to grow.

We’ve had a great range of hand selected staff. I think that, like any company that has potential, the key hires are the first few hires and one of reasons for Dubai’s success is the ability of His Highness Sheikh Mohammed bin Rashid Al Maktoum and our chairman Sultan Ahmed bin Sulayem to impart their vision and for people to understand that vision and build on it. One of the things that Leisurecorp has been successful at is that our key staff understood the vision very quickly. We built on that vision, added to that vision very quickly and we all agreed on the direction forward.

I am amazed now that I don’t know all the names of the members of staff. It seems to me like yesterday that we started the company with the full support of Dubai World and of the senior management of Dubai World but, you know, whether it’s Rebecca Pearce, our senior marketing manager, or our agronomy team (and we have some of finest agronomists in the world working for us) we went with very young people.

Tim and I are roughly the same age and we decided that with our key positions we would try and employ young people, because we thought that we could help guide those people. People with fresh ideas that would challenge us and we have a very, very young team. Tim and I are the most senior in the Leisurecorp golf team by a long way.

So we have a very accomplished young marketing team and so are the agronomists, the development team, the accounts team and I think that if you look at the one thing that weaves us all together is that we are all immensely proud of the way the company is perceived, the way we market the company, the way that people understand our quality statements – what we’re trying to do.

You know trying to be different in the golf industry is not that easy. You have to stand out from the crowd and we want to stand out from the crowd to help further build the reputation of the dynamic city of Dubai.

GBN Are you still hiring, still building the team?

DS Yes, absolutely. Most of our time now is spent on new acquisitions both from a property and from a human resource side. I think that we’ve got 400 staff now and, when we go operational throughout our different properties, that will grow pretty quickly to between 1,500 and 2,000.

GBN What role is KPMG playing in your development?

DS It’s interesting, our relationship with KPMG. We’ve only ever dealt with Andrea’s team in Budapest. I think that we came to this conference (and, as a rule, we’re not conference goers – the first of these that we attended was at Aphrodite Hills in Cyprus) and we were quite impressed so last year we went to the conference in Budapest.

We had a relationship with KPMG prior to that, using them as an advisory service. I think that it’s very important in any business structure that your consultants, not just your staff, understand clearly what it is that you are trying to do – I mean really crystal clearly – and I also think that it’s important that we’re seen as very loyal not just to our staff but also to our consultants. That loyalty, I feel, allows us to get the best out of our consultants because they’re not feeling that every time we want to do something they are in some form of bid process.

We obviously check very closely and carefully that everything that they do is commercially competitive but we’ve had the same master planners since we started, the same financial consultants, KPMG, since we started.

Looking abroad, outside of Dubai they’ve helped us with our business planning, they’ve helped us with our networking capability and with the KPMG Leisure section in Budapest we certainly feel very, very comfortable with what they bring to the table. We see them as a real value-adding consultant.

GBN You talked about acquisitions. Have you got a particular pro-forma for the targets you are looking for? What sort opportunities are you after?

DS I think that there is such a wide range of opportunities in the market at the moment that if you don’t create some sort of check-list for yourself as a discipline you will end up either doing no deals because you can’t figure where to start or you’ll do very poor deals.

First of all we have a pretty strong check list and, secondly, we stick to that, although we have a certain amount of flexibility. Geographically we like Europe, the Middle East and Africa but that’s not to say we might not look beyond that for several reasons. We might look at some land bank opportunities in the United States, because it’s good buying there at the moment, but also I think that Europe, Middle East and Africa, from a golf developer’s point of view is where it’s at, at the moment.

One of the things that fascinates me about this conference is that all of a sudden this conference has gone from being some developers from Europe, Middle East and Africa getting together and having a barbecue (which is how it may have been perceived by other people) to now, when every American developer and every American golf course designer wants to be at this conference.

So I think that the shift of the focus needle of golf, through a lot of hard work and not just economic circumstance, has moved from America. I think the Europe, Middle East and Africa should be very proud of what they have achieved to date in the golf industry.

I think you will find in the current economic climate that most of the developments that are feasible and ongoing at the moment are based in the EMEA. There’s not a lot going on in the United States.

GBN So you’re looking for courses that have been developed recently or for established properties?

DS We’re a slightly different ‘cut’ to the average developer in that we are very, very keen to keep the amenities. We don’t want to sell the amenities off; we don’t want to sell it to the members. We want to keep the amenities and we want to keep as many possible income streams that we can at each of the developments. So you’ll find that we like a mix of under construction and constructed with development opportunities – income stream opportunities is what we look for.

If you had asked me this question when we first conceived taking our company internationally I think that we would have said that we would be more attracted to green field sites. We saw an attraction to green field sites but at the moment we quite like stuff that is either constructed or semi constructed. That fits our profile at the moment. We don’t want to be all things to all people.

GBN Apart from KPMG who else do you call upon from time to time?

DS Our master planners are EDSA and Greg Norman Golf Course Design have been a big part of our company. Mott Macdonald, project managers, have been with us since we started construction. We call upon a number of people from time to time but if you want to know who we feel most comfortable with on a day to day basis to share our business it would be EDSA, KPMG, Greg Norman Golf Course Design, and Future Brand, our branding company.

We’re fairly closely knit with those companies. One of the hardest things is that whilst we always have to look for fresh ideas, one of the things that we’re looking for in our consultants is continuity so that we don’t have to spend the first day and a half of a workshop briefing them in about what it is that we want to do.

GBN Can I ask you a couple of questions about Dubai? Anyone who looks at a map can see that Dubai is located in a very unstable part of the world. What do you say to people who are concerned about this?

DS Well, I answer them in two ways. First of all, if you’re on a par 3 the safest place to stand is by the pin! But the other way is that (in my opinion and I’m talking as an ex-pat.) I love the vision of Dubai and I love what Dubai stands for.

I think that Dubai is pretty much seen as the Switzerland of the Middle East in some ways. There are a few areas of concern around us but I think that Dubai and the people of Dubai are very aware of where they live. They also see the centrality of where we live as a positive factor.

I feel incredibly comfortable, incredibly safe in Dubai. Dubai is very efficient in the way that it operates everything from its airlines to the way it addresses the new population coming into Dubai, both from a tourism and from a working point of view. We’re addressing issues like traffic and the fact that Dubai has grown faster than the roads can be built and the metro etc, etc.

Dubai invests a lot of its profits into itself as well, into better types of security, better types of screening at airports and so on. I don’t think that anyone would stand there and say that we have nothing to worry about. I think that Dubai has done a very good job in making clear its statement to the world which is that we are part of the new Arabia.

Dubai opens its arms to welcome the rest of the world and wants to be perceived as a safe haven.

When you look at the map of the world and see all the countries that have come up against a bit of strife occasionally I don’t know how they’ve all responded, but Dubai has responded in a very positive fashion by creating the world’s best airline, the world’s best hotels, some of the best tourist attractions and creating a real melting pot of culture and wanting to embrace the cultural differences of the workforce and of the tourism sector.

GBN You’ve seen the recent article from ‘The Daily Telegraph’ in London, which I sent to you as an example of the criticism that golf, not just golf in Dubai, gets from the environmental lobby. What do you think that people in the golf business should be doing to counter this criticism?

DS We have a lot of things to be proud of in our company and one of the things that I am most proud of is what we have done with the Environmental Institute for Golf. Leisurecorp and its affiliates are the biggest contributors to the work of the Environmental Institute for Golf. That’s not just a ‘feel-good’ contribution, by the way. All of our designers, whether it’s Vijay Singh, Greg Norman, Pete Dye, Sergio Garcia – they’ve all made a contribution of a minimum of $100,000 to research and development.

We have created at Jumeirah Golf Estates the first two eco-signature golf courses in the world. That’s why we’ve branded them ‘eco-signature’. It’s a matter of how we built the golf course and, more importantly, how we sustain the golf course, how we use the water.

Water, obviously, is an issue for golf courses. What’s important is how you address that issue. We tertiary-treat all our water, we use it again. We gather the water, we re-use it; we have moisture permeable roads. We have systems at Jumeirah Golf Estates so our run-off water is re-captured and used again. So we feel that our development is very efficient and that we’re very pro-active.

We saw fours ago – and four years ago in the context of golf environment awareness is a long time – that the environment would be a key issue which is why we have themed our courses around the environment which is Fire, Earth, Wind and Water.

We take our pledges and what we have done for the environment seriously and proudly. We have given a grant of $90,000 towards new types of water reclamation plants; the efficiency of the power that they use. We’ve invested about $190,000 into developing a hybrid type of grass which is more salt-tolerant and more water efficient.

Now the issue is, and I would challenge all developers throughout the world, that they should earmark some sort of green imperative about the environment.

We didn’t earmark it and that’s one of the reasons why we’re actually quite quiet about the subject. I mean you don’t see the Environment Institute for Golf logo all over our letterheads etc, etc because we don’t want it said, “Oh they just did that to make them feel good about themselves.”

But I would challenge all developers, particularly in Europe, the Middle East and Africa, to budget in their current operations – for example we’re putting together a scheme to support the Environment Institute from our current revenues – but also in the way that they develop their golf courses to make them as efficient as possible and as sympathetic to the environment as possible.

I am proud of the fact that I can tell environmentalists what we have done to promote the indigenous flora and fauna of Dubai. When we started building the Montgomerie golf course there were 62 migratory birds in Dubai, now there are 186. They are using the lakes on the golf courses as safe haven areas and the wild life, the indigenous flora, the indigenous fauna that we have promoted has been fantastic.

GBN Don’t you think that you should make more of this? You’ve got a great story.

DS No I don’t think that we will. You know one of the things that I love and respect the most about Dubai is that we are very loud on certain things that we want to be loud on, like tourism and having the world’s best airline etc etc but there are other things that we don’t talk about.

You take Hurricane Katrina for example. The single biggest contribution came from the UAE but it’s never mentioned and I respect that. They do the good things quietly. We’ve got enough things going on that, being a ‘good Samaritan’ we can just let it happen quietly.

GBN Let’s turn to GPS Industries now. You have an investment of $20 million.

DS GPS Industries is a publicly traded company and there’s a lot of information about them that is readily available. GPSI is in the process of concluding its purchase of UpLink, its number two competitor.

There are a lot of reasons why we invested in that business and one of those has been demonstrated to me while we’ve been in Ireland. I’ve played both at Druid’s Glen and the Ryder Cup course at the K Club.

Druid’s Glen, which is a beautiful course, didn’t have GPS, the K Club did. The game of golf has evolved and as elder statesmen of the industry, guys like us find the game far more enjoyable. It’s far more fun and adds another dimension and that dimension also appeals to younger people. That’s point one.

Point two is that GPS Industries owns most of the patents. The tremendous thing about that is that as the business grows there’s the possibility of licensing revenues. I think that the other side of it is that with GPS there have been some ‘back-yard’ operators so that it needs to have some strong investment and some regulation and I actually think that it needs to become cheaper.

Golf courses throughout the world, and here I’m speaking personally, find it very difficult to make a capital investment once they’re up and going of upwards of $250,000. During the development stage it’s much easier for them to do that and GPS also adds some other advantages – it creates a sort of Wi-Fi network. I think that the only way you can make these things cheaper is to invest in them and find out either how to make more of them or, by making them more efficiently, make them more affordable for the golf courses.

Because what will happen on the golf courses is that theoretically if you have more of them the golfers will become more efficient. This is an undisputable fact. The golfers will become more efficient in playing the game. They will become quicker. You will create more tee times because instead of playing in 4 hours 20 minutes they will play in 4 hours.

I think that some of golf needs to become more modern in order to appeal to the younger market. I think that in GPS we have the perfect segue to the younger market.

We need to make the game a little more user-friendly to younger people and I think GPS can do that. We need to embrace technology, embrace, of course, respect for the traditions of the game, and find some ways of adding some ‘bling’ to the game. I think that GPS is one way of doing that.

GBN Are all the intellectual copyright issues sorted out now?

DS I don’t get overly involved in GPS Industries but I think that when it comes to GPS some people can see ‘gold at the end of the rainbow’ and it makes them litigious. People will keep having a crack at each other until there is one definitive market leader that has the best technology, the best management, has a very, very stable financial platform. I mean the industry’s gone through a lot of change, but so have many other technology based industries.

GBN Troon Golf: you have a 2.3% shareholding. Who are the major shareholders?

DS Well Dana Garmany, the founder, who is here. He’s an incredible visionary, I had the privilege of working for him for nearly eight years. I think that Troon Golf is a very interesting company. First of all they are the ‘Four Seasons’ or the ‘Ritz Carlton’ of golf. They are founded on that model. They are in the business of golf and they understand how to make your club, your resort, your operations more efficient. They understand how to report financially. Hotels have ‘revpar’ (revenue per available room); Troon Golf has ‘revpat’ (revenue per available tee time).

They understand food and beverage spends; they look at trends etc, etc so it’s a very well run company – point one.

Point two is that our expertise is in selling high-end branded real estate and owning asset managing facilities. If we were going to build our own hotels (and we are, several of them), we’re not going to run those hotels ourselves – we’re going to outsource that to experts. The natural progression is for us to outsource our management.

We had already decided to outsource our management to Troon Golf when the opportunity came up to buy part of the company. We did that and we did that for two reasons.

One is that we would like to own more of the company so we thought that if we get a toehold there may be an opportunity to buy more in the future; the second is that we see Troon Golf has having an ear very close to the ground and this may help us to identify trends globally. In fact it has helped us to do that already.

You could say that investing in Troon Golf is more sensible than investing in GPS. But I like the GPS investment. We invested in GPS before we invested in Troon but we think that somewhat ‘verticalising’ our business makes a lot of sense.

Tim and I and our team, at the end of the day – if you peel back the layers of the onion – we are steak and potatoes property developers. That’s what we are. I just think that in the golf industry we may have more than a lot of the others that are in it.

We have a very clearly defined set of goals that we want to achieve and we have behind us a city that has a ‘get-it-done’ attitude and that in itself makes a very healthy business environment for any young company like ours to grow up in.

GBN What’s your message to colleagues in the golf industry?

DS We are so excited about our alliance with the European Tour, the Dubai World Championship, the renaming of the Order of Merit to ‘The Race to Dubai’ starting in November this year.

We’d like a lot of support from our colleagues in the golf industry in putting this together because, really, by doing this we are reshaping golf into the 21st Century.

I’m sure that there will be a few little hiccoughs and speed-bumps along the way but certainly we’d like our colleagues in the golf industry to come and support the tournament; come and stay in the hotels, and come and experience, in my opinion, the most dynamic city in the world. We are led on a daily basis by a leader in His Highness who says things like, “The race for quality has no finish line.”

The greatest thing that Dubai has going for it is that people understand the vision of Sheikh Mohammed. You can look at the all the economics of it, the socio-demographics of it, and where it’s located, at the end of the day I’m an Australian living in Dubai and I have the utmost belief in what Sheikh Mohammed is doing. I’ve drunk the Dubai ‘Gatoraid’ and by this I mean that I have fully embraced the power and passion of Dubai’s vision. I believe it and I understand it; my colleagues in our company do.

That’s an incredibly powerful dynamic for a place to have. I call it a ‘led-ahead’ city. It’s been an incredible achievement.

GBN David Spencer, thank you very much.

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