Golf glut

Florida leads the nation in the number of golf courses (1,261). Thirty-three of them recently opened. Another 45 are under construction. A whopping 65 are planned. And there's no end to their proliferation in sight.

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By ROBERT TRIGAUX

© St. Petersburg Times,
published July 29, 2001

Can Florida ever learn from past excess?

Once again, another construction glut is under way that threatens the Sunshine State and its economy.

But this time, we're not talking about commercial real estate.

The new headache: golf courses. Statewide, dozens upon dozens of golf courses are about to open, even more are being built and still more are in the formal planning stages.

What is it about Florida and golf courses? The state already leads the nation in the sheer number (1,261) of courses. Many existing courses are struggling to attract enough players to survive. And every indicator of the sport says the golf boom of the late 1990s -- even the sports marketing phenom that is Tiger Woods -- is unsustainable and runs counter to some basic industry facts:

1. Nationwide, the number of golfers (more than 26-million) is no longer increasing. While as many as 3-million new players try golf each year, about an equal number drop the game because it is too time-consuming, too expensive or too intimidating.

2. The sheer volume of new courses is making it tougher for more courses to break even. At the same time, after peaking in 1999, the number of rounds of golf played nationwide is slipping, down 1.2 percent in 2000 and off 5.2 percent so far this year, according to Golf Data Tech in Kissimmee.

3. A growing number of companies that own and operate golf courses, including some in the Tampa Bay area, are struggling financially. Increasingly, these companies are declaring bankruptcy or liquidating their golf course assets at fire-sale prices. In a few instances, poorly performing golf courses are bulldozed and replaced with retail shops or, in the case last December, even a Home Depot.

None of these trends requires a brain surgeon to realize the golf glut, left unchecked, is setting up the industry for a nasty meltdown.

Just listen to some of the recent warnings by industry experts.

"Florida is out of control," Richard Creed of PricewaterhouseCoopers' golf consulting group tells one business magazine.

"The industry is in free fall," adds golf finance consultant George Marderosian.

So how are golf course developers responding? The same way commercial real estate developers did in the late 1980s when they ignored signs of overbuilding.

Most golf course developers seem hellbent on 18-holing every remaining acre in the state.

In Florida, 33 golf courses recently opened. Another 45 are under construction. And a whopping 65 are planned.

In southwest Florida's Collier County alone, 20 new golf courses just opened, are being built or planned. Yet the Collier community of Naples already boasts the nation's second-highest density of golf holes to population. (South Carolina's Myrtle Beach is No. 1.)

Even the crowded, six-county Tampa Bay area (from Manatee to Citrus counties) has 19 courses recently opened, under construction or in the planning stage.

Sure, demographics suggested a golf bonanza was a no-brainer. Aging yuppies, armed with stock market wealth, a country club mentality and a yearning eye toward a retirement hobby, were supposed to flood the golf course market.

Perhaps it was that ill-founded assumption that prompted the National Golf Foundation, based in Jupiter, in 1998 to issue to its golf course members this overzealous challenge: Open a new golf course every day.

Unfortunately, too many members listened.

Golf Trust of America was sure it was about to become the next best thing. Formed as a publicly traded real estate investment trust in 1996, the South Carolina business bought an array of upscale golf courses throughout the United States.

The strategy seemed sound. Golfers were fighting for tee times at high-priced golf courses that could benefit from consolidated, more professional management.

It was not long before Golf Trust owned (and overpaid for) an interest in 44 golf courses in 16 states, including 14 courses in Florida. Among them: five golf courses at or near the Westin Innisbrook Resort in Palm Harbor, plus courses in Brooksville, Fort Lauderdale, West Palm Beach, Delray Beach, Boynton Beach and Orlando.

Everything looked promising. But when the golf course industry went from good to glut, Golf Trust found itself in trouble. In May, the golf course REIT voted to liquidate its entire portfolio of properties after organizations it had hired to manage more than a dozen of its courses defaulted on their lease payments.

Some of the golf courses Golf Trust sold off this spring went for 50 cents on the dollar. In April, Golf Trust sold Silverthorn Country Club and its 18-hole golf course near Tampa for a mere $4.25-million.

Such deep discounting is depressing golf course prices nationally. And it's scaring investors away from many public companies in the golf business.

Golf course builders can't take all the blame for the glut.

Let's not forget real estate developers (surprise!), especially those in Florida, who add golf courses to their upscale housing developments.

In the process, developers ignore whether there is a real market for the new golf courses. Why? Because developers can charge a lot more, often as much as $20,000, for a home that sits on or near a golf course.

That means a developer of a 1,000-home community can reap an extra $20-million on house sales by building an $8-million golf course.

To home builders, the golf course becomes a loss leader, an expendable lure to help sell their main product: housing.

If the course (and those nearby) later suffers from a lack of business -- hey, that's not the builder's problem!

To many high-end developers, including Toll Brothers and St. Joe's Arvida, building new communities without dazzling golf courses designed by Jack Nicklaus or Greg Norman is almost unthinkable.

Listen to St. Joe president Kevin Twomey recently gush about the company's pace of golf course construction on the Florida Panhandle.

"We've already begun to see the impact of the Camp Creek Golf Club on our properties," he says. "We have begun the permitting process for another 18-hole golf course, also to be designed by Tom Fazio, adjacent to the present course."

"Premium golf," Twomey says, "is a real attraction and an outstanding amenity for Arvida property owners."

By a wide margin, Florida leads the country in housing lots linked to golf courses. It has twice as many as No. 2 Texas and three times that of No. 3 California.

So who's right? The real estate developers who add golf courses to their communities as nonchalantly as potted plants?

Or the Golf Trusts of America that are busy selling off their courses at fire-sale prices and the Links Group in Myrtle Beach that filed for bankruptcy early this year?

(Let's not forget the environmentalists who consider the runoff from a typical golf course, with its huge dependence on fertilizers and pesticides, a major polluter of our waterways.)

In 1990, there were 2,250 golfers in this country for each golf course. Ten years later, as the number of golfers stagnated but golf courses grew rapidly, there were 1,970 golfers per course. The number continues to drop.

When it comes to its blind obsession with golf courses, Florida can't seem to learn the lesson of excess.

Too much of the sport leads to economic indigestion.

- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

By the numbers

17,108: number of golf courses in the United States

1,261: number of golf courses in Florida

28 percent: growth rate of golf courses from 1986-2000

$22.2-billion: how much golfers spent in 1999 on equipment and fees

22 percent: how many golfers regularly score better than 90 on 18 holes

20 percent: how many golfers maintain a handicap

$40: median cost of weekend round at municipal golf course

26.7-million: number of U.S. golfers over age 12

6.3-million: number of avid golfers

5.1-million: number of women golfers

3-million: estimated number of new golfers each year

3-million: estimated number of golfers who quit sport each year

- Source: National Golf Foundation

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