Overview: Current market research on the Irish golf industry Ian Duffy, FGS Partner, Corporate Turnaround & Change Management Background to research Research undertaken during the summer of 2010. FGS and Carr Golf Services, in conjunction with the GUI and the ILGU. On-line survey to Ireland’s 433 golf courses. Background to research A total of 151 actual responses were received (or an effective response rate of approximately 35%). All survey respondents details were confidential and broken down into regions for the purpose of analysis. Introduction Significant growth and investment in the industry over the last 15 years. Excellent courses, facilities and standards with a wide range of availability and choice Strong international reputation as desirable golfing destination Introduction However, the industry does face major challenges given: » » » » » » Decline in golfing tourists Debt levels Falling memberships Excess capacity Increased costs Fragmented industry Golf industry in Ireland overview One in every 25 people a golf club member and these figures (excludes casual golfers). Golf industry in Ireland gives rise to the employment of approximately 8,000 persons (both full and part-time) 433 courses throughout the 32 counties (increase of c. 100 clubs over the last 15 years). Trends in the Number of Golf Clubs 1995-2009 Golf industry in Ireland overview Golf club membership growth over the last 10 years was driven by increased; » Population » Disposable income » Profile of the sport. Tax reliefs for hotel developments (and the expansion in the number of hotels and resorts in recent years) indirectly drove the number of golf courses. Golf industry in Ireland overview ‘Our golf product is among the best in the world and it is up to us to ensure that all is being done to fully promote what is on offer’.* Major operation, structural and marketing issues that need to be resolved. » *Chair of Failte Ireland Research findings The report can be broken down into the key areas of: » » » » » Running efficient golf club operations; Under-utilisation in the Irish golfing industry; Sustainability; Representing the Industry and; Marketing Running efficient golf club operations Table 3.2: Overall Membership Trends, 2007-2010 Members Increasing Members Decreasing (23.1%) (55.4%) Members Stayed the same (21.5%) Scale % Scale % Increased between 10% and 20% 41.8 Decreased between 10% and 20% 28.6 Increased by less than 10% 47.8 Decreased by less than 10% 57.1 Increased by more than 20% 10.4 Decreased by more than 20% 14.3 100.0 N = 121 cases Note: discrepancies may arise due to rounding Analysis: FGS Consulting 100.0 - Running efficient golf club operations Table 3.1: Membership Trends (disaggregated by region) Increasing Decreasing Stayed the same Province % % % Connacht 14.3 78.6 7.1 Dublin 9.5 57.1 33.3 Leinster 23.3 50.0 26.7 Munster 34.6 46.2 19.2 Ulster 26.7 56.7 16.7 National 23.1 55.4 21.5 N = 121 cases Note: discrepancies may arise due to rounding Analysis: FGS Consulting Running efficient golf club operations Higher number of clubs are serving the same prorata number of people/members. The number of members per club in 2002 was 661 and in 2009 was 590. Significant fall there. Number of Persons (1,000 of population) per Golf Club dropped from 14.87 in 1996 to 14.38 in 2009. Trends in the Number of Golf Memberships (‘000), 1995-2009 55 250 50 200 45 150 40 100 35 50 30 0 1995 1996 1997 1998 1999 2000 2001 Female Members (LHS) 2002 2003 2004 2005 Male Members (RHS) 2006 2007 2008 2009 Running efficient golf club operations Based upon the data received, the estimated average cost of operating a golf club in 2009 was €990,000. The equivalent figure in 1999 was €266,000 (in 2009 prices) which indicates that costs have risen by 270% in just over a decade. Running efficient golf club operations Course maintenance is 40% of operating costs is largest cost centre. Administration costs are 18% of operating costs. Clubhouse operations are16% of operating Costs Running efficient golf club operations Table 5.1: Composition of Operating Costs (disaggregated by region) Course maintenance Food and Beverage Clubhouse operations Any other costs Total Administration % % % % % % Connacht 34.2 17.9 2.4 20.8 24.7 100.0 Dublin 48.2 14.5 12.5 13.3 11.5 100.0 Leinster 48.6 19.3 7.7 12.5 11.9 100.0 Munster 30.1 22.7 18.1 17.2 11.9 100.0 Ulster 37.5 11.7 16.4 20.9 13.6 100.0 National 40.1 17.8 13.2 16.0 12.9 100.0 Province N = 81 cases Note: discrepancies may arise due to rounding Analysis: FGS Consulting Running efficient golf club operations Table 5.3: Operating Cost Trends (disaggregated by region) Increasing Decreasing Stayed the same Province % % % Connacht 25.0 66.7 8.3 Dublin 33.3 53.3 13.3 Leinster 25.0 60.0 15.0 Munster 12.5 75.0 12.5 Ulster 34.8 43.5 21.7 National 26.7 58.1 15.1 N = 86 cases Analysis: FGS Consulting Under-utilisation in the Irish golfing industry The Irish golfing industry has the capacity to support up to 23m rounds of golf in a given year. Analysis shows that a maximum of 13.3m rounds were actually played in 2009 suggesting that the level of under-utilisation is close to 42%. Under-utilisation in the Irish golfing industry Oversupply of golf clubs range from 35% in Dublin to 53% in Leinster. Industry needs to consider new and innovative approaches and solutions, including a programme of consolidation. Under-utilisation in the Irish golfing industry Table 3.10: Estimated under-utilisation (disaggregated by region) Projected Total Rounds Played Estimated Maximum Capacity Underutilisation Connacht 1,346,454 2,242,619 40.0 Dublin 2,084,378 3,203,741 34.9 Leinster 2,935,688 6,140,504 52.2 Munster 3,065,392 4,859,007 36.9 Ulster 3,883,594 6,567,669 40.9 National 13,315,507 23,013,540 42.1 Province Analysis: FGS Consulting Under-utilisation in the Irish golfing industry C. 50% of all respondents reported rounds played had decreased over the last 3 years. This downward trend was most pronounced in Connacht (71%) and Dublin (50%). However, 40% of respondents in Munster reported that the number of rounds played had actually increased. Under-utilisation in the Irish golfing industry Table 3.6: Rounds Played Trends (disaggregated by region) Increasing Decreasing Stayed the same Province % % % Connacht 7.1 71.4 21.4 Dublin 27.3 50.0 22.7 Leinster 31.0 48.3 20.7 Munster 40.0 40.0 20.0 Ulster 37.0 37.0 25.9 National 30.8 47.0 22.2 N = 117 cases Note: discrepancies may arise due to rounding Analysis: FGS Consulting Sustainability Almost 27% of respondents reported that revenues had increased since 2007. A further 17% reported that revenues remained unchanged. Almost 57% of respondents reported that revenues had decreased. Sustainability Green Fees account for 17% of all revenues nationwide. Local authority-owned golf clubs Green Fees account for nearly 50% of revenues. By contrast, Green Fees account for just 15% and 20% of all revenues in the case of member-owned and proprietor-owned golf clubs, respectively. Sustainability ‘Membership’ fees (i.e. subscription and joining) account for less than 20% of total revenues for local authority-owned golf clubs. Such fees contribute 65% and 27% of all revenues in the case of member-owned and proprietorowned golf clubs, respectively. Sustainability Food and Beverage and, to a lesser extent, the Pro Shop accounted for 35% of the revenues of proprietor-owned golf clubs. In comparison with member-owned golf clubs (15%). Suggest that proprietor-owned golf clubs have a greater focus on multiple sources of revenue. Sustainability Significant amount of debt in the Irish golf industry especially amongst newer clubs who would have made large capital investments in the last 10-15 years. The level of debt as a % of revenue in 2009 was greater than 100% for 1 in 5 respondents with the highest number of cases in Connacht at 31%. This represents a clear challenge for industry not renowned for making profits. Sustainability 3 out of 4 golf clubs in Ireland made capital investments over the past 3 years. The highest number of these was in Dublin, where almost 93% of all golf clubs incurred capital expenditure. The vast majority of this (70%) was targeted at golf courses whereas 17% was applied to clubhouses. Marketing Less than 2 in every 3 golf clubs had a strategic plan in place for 2009 40% of respondents did not have a Strategic Plan in place for 2009 whilst 80% did not have a Yield Management Strategy. Sales and marketing accounts for just 1% of operating costs nationwide. Marketing There is clearly a need for strategic planning in the golf industry. Many golf clubs need help in developing a business turnaround plan that will addresses strategic deficiencies and operational ineffectiveness. Of those golf clubs that did have a strategic plan, 64% of them saw their membership numbers increase. Marketing Golf clubs with increasing revenues in 2009 were more than twice as likely to employ a yield management strategy compared to golf clubs with decreasing revenues Almost 31% of golf clubs with increasing revenues employ such a strategy New approach to neighbours – Friend or Foe Representing the Industry Fragmented representation of the industry Should we look at an umbrella body that could play a constructive role in presenting the industry’s view with regard to issues such as; » » » » » » Bench-marking Training Co op and buying Power Labour costs negotiations Liaising with State agencies Capacity and yield management Conclusions » Running efficient golf club operations; » Marty Carr of Carr Golf Services & Mark Nolan, the Dromoland Collection » Under-utilisation in the Irish golfing industry; » Buddy Darby (Kiawah Partners), Marty Carr » Sustainability; » Declan Taite (FGS) particular emphasis on debt restructuring and management » Representing the Industry and; » Marty Carr, Frank Bowen (GUI), Sinead Heraty (ILGU) and Keith McCormack (Failte Ireland) » Marketing/New Media/Online Sales » Buddy Darby (Kiawah Partners), Keith McCormack (Failte Ireland) and Mike Lasoulat (Golf Channel Solutions) FGS team here today Ian Duffy FGS Partner, Corporate Turnaround & Change Management [email protected] Dublin Office T: 01 418 2021 Declan Taite FGS Partner, Corporate Restructuring & Insolvency [email protected] Dublin Office T: 01 418 2000 For further information about FGS visit our website: www.fgspartnership.com Thank you Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in Ireland (ICAI). 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