As Spring settles in, Strutt & Parker assess the year ahead for the golfing industry. As expected, 2010 was a tough year for golf operators. Not only did they have to contend with difficult economic conditions, but snow and freezing temperatures prevented play for long periods in many areas at the start and the end of the year.
Thankfully, the good weather in spring and early summer, together with the positive effect of the successful Ryder Cup Matches, enabled many to regain some of the lost ground.
In 2011 operators will have to decide how to deal with the increase in the VAT rate from 17.5% to 20%. Market conditions are now as difficult as at any time over the last ten years. The number of courses coming to the market in 2010 was high (around a 50% increase on the previous year) as banks chose to bring distressed businesses to the market. Plus, with VAT rates rising, it will be harder to retain members.
“In a small market this put buyers in a position of strength. Our records show that 20 courses sold in 2009 of which two were forced sales. In 2010 this fell to 14 sales of which 11 were forced sales,” says Charles Greville-Heygate, Strutt and Parker Leisure and Hotels department’s golf property expert.
Heygate goes on to explain that new innovative ways of attracting members need to be employed. “The points system and smartgolfer network are growing in popularity. At the same time operators need to give greater priority to controlling costs. We have noticed more golf courses, particularly those held on leases registering as Community Amateur Sports Clubs thereby getting an 80% rebate on their rates.”
Whilst well-located, profitable freehold courses are likely to continue to attract interest and retain their value, others, unless they have some unique selling point, may become increasingly difficult to sell with the result that values could fall further, particularly for those in a forced sale position.
Heygate explains that there are options available for operators looking to move out of the sector: “Over the last year at Strutt & Parker we have advised a variety of clients on alternative routes including finding a tenant to take a lease of the business and engaging a golf course management specialist to review and re-focus the business.
“Options for other clients included retaining a stake in the business by either granting a vendor loan or retaining some shares, and even exploring the potential for alternative use. Freehold golf course investments are well sought after so sale and leasebacks may be considered by some.”“
It is clear that with marker sentiment waning in the golf sector, operators need to have a bold plan to steer a course through 2011 until conditions improve.
Strutt & Parker is one of the largest and most successful independent property partnerships in the UK with a network of offices throughout England and Scotland.
Established in 1885, the business provides professional support on all matters relating to land and property, whether offices or farms, country houses or business parks, leisure centres or shooting rights, new home construction or international real estate.
With a dedicated, forward-thinking team offering expert knowledge and sound, professional advice, Strutt & Parker can ensure that businesses, farmers, landowners, house-buyers and international investors can make their assets perform to their best ability.
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