By Don Miller
The global economic meltdown has struck golf industry, dragging on tourism and travel, delaying golf course construction, and curbing club membership rolls.
Now, even the crown jewels of the sport – the Professional Golfers Association (PGA) and Ladies Professional Golfers Association (LPGA) – have been tarnished by financial scandal and sponsorship defections
The most recent scandal to hit Wall Street had PGA Tour players concerned about more than just tournament highlights as they teed off Thursday at the Northern Trust Open at Riviera Country Club in Los Angeles.
Many tour members at Riviera were struggling to comprehend the potential implications of the financial scandal involving tournament sponsor Robert Allen Stanford., and that company’s chairman,
As reported by Money Morning on Friday, the U.S. Securities and Exchange Commission is investigating the company for allegedly defrauding investors of $8 billion, in part, the SEC said, by selling certificates of deposit (CDs) that promised “improbable if not impossible” investment returns.
Stanford’s involvement in professional golf is extensive and problematic for the PGA Tour. Its reach includes business deals with giant management firm IMG, and IMG’s prized client, Tiger Woods. Stanford also has a three-year founding sponsorship of the AT&T National, a Tiger Woods Foundation event, GolfWeek reported.
Singh, an IMG client, just signed a major endorsement deal with Stanford, including sponsorship of his bag, visor, shirts and sweaters. The company logos were prominently displayed as he teed off in the first round of the tournament Thursday.
“I haven’t heard anything from them,” Singh said after his practice session at Riviera. “I’m not in a position to comment..”
Recession Tightens the Sponsorship Spigot
The Stanford fiasco is just one of professional golf’s problems stemming from the economic downturn. Both the men’s and women’s tours rely heavily on corporate sponsorships in order to run tournaments, and they are by no means immune to the recession.
The LPGA and PGA are looking at some major cutbacks in tournaments as sponsors trim spending. 84 Lumber Co., the largest privately held building materials firm in the U.S. market, the largest privately held building materials firm in the U.S. market, abruptly canceled its sponsorship of a tournament in its home state of Pennsylvania. The annual AT&T Classic was played for the final time in May, and the International tournament in Denver announced it would be ceasing operations.
The LPGA tour will offer three fewer tournaments in 2009 than it did last year because of sponsorship losses. Prize money will also drop by about $5 million.
The PGA Tour is suing Ginn Development, citing breach of contract, . Ginn had planned a $2.5 million purse for 2009. The company also offered a $2.5 million purse for its LPGA event last year, the third largest on that tour.
But the troubles in the golf industry go much deeper than just the loss of the television exposure for the game’s upper echelons.
In Scotland and Ireland, where there are more golf courses per person than anywhere else in Europe, the pain is being felt most keenly in the loss of tourist traffic – especially traffic that once originated in the United States.
Golf tourists spend an average of $315 (250 euros) a day on a weeklong holiday, with a quarter of that spent on teeing off, and the rest going to travel, hotels and food, a report by KPMG’s Golf Benchmark shows. That means golf across Europe, the Middle East and Africa is a $67 billion (53 billion euro) industry.
But that’s all changing now that companies spend less on entertaining, Andrea Sartori, author of the KPMG report, told Bloomberg News.
“Corporate events like golf days, taking a client out for a round of golf, those kinds of activities will suffer. There will definitely be a cut.”
Workers at Gleneagles, the five-star Scottish hotel set to host the 2014 Ryder Cup, have until today (Friday) to take buyouts because of a slump in bookings, spokesman Simon Brown told Bloomberg. In Ireland, Dublin’s Luttrellstown Castle, where England soccer player David Beckham married his wife Victoria in 1999, has said it will close in 2009.
Ireland’s economy is shrinking at a record pace amid a real estate slump, while the United Kingdom is facing a recession that may be the worst since World War II. Golf contributed about $5.1 billion (4 billion euros) to the gross domestic product (GDP) in Britain and Ireland in 2006, the most current figures available, the report shows.
Scotland, the cradle of the game itself, is using the 250th anniversary of the birth of national poet Robert Burns to boost golfer numbers.
Scotland is also relying on the decline in the British currency, the pound sterling to attract more tourists. The pound has fallen 15% against the euro and 27% against the dollar in the past year.
Dromoland Castle, a club in the west of Ireland where then-U.S. President George W. Bush stayed during an economic summit in 2006, has cut its green fees in half and is offering a mid-week round of golf and a steak dinner for $75 (60 euros).
“We decided a year ago to get realistic with our pricing,” said Mark Nolan, Dromoland’s managing director. “It’s kept the clubhouse going.”
Business from North American visitors is expected to be “substantially” lower in 2009 and 2010, Nolan said.
In the United States, the golf construction boom of the 1990s is not only over; it’s been shifted into reverse. According to the National Golf Foundation, the number of new courses expected to open in the United States in 2009 is the smallest in 20 years. About 100 courses are expected to close this year, versus the 80 or so that are expected to open.
The housing market’s collapse has slammed development, since most golf projects these days are tied to on-site housing. And getting the financing to needed to build a new course is tougher than it has been in decades.
One bright spot: China, which has thrown a lifeline to architects like Rick Jacobson, a golf course architect in Libertyville, Ill.
Last month, Jacobson – who has worked with golf legend Jack Nicklaus on a number of projects – agreed to design a 27-hole course in Hong Kong. It’s his third venture in China, following the 36-hole Lion’s Lake Resort course near Guangzhou and an 18-hole resort course near Chaozhou.
“The heyday of golf course construction is over in the U.S.,” Jacobson told MSNBC. “Some of the projects were ill-conceived. Some courses were just a temporary fad until they could flip it to a developer.”
News and Related Story Links:
- Money Morning:
Stanford Scandal Ignites Bank Runs in Latin America
- Golfweek: .
Robert Allen Stanford..
Golf Recession Strikes Ireland, Scotland as Clubs Shed Workers
Golf Industry Gets Hit Hard
- Ryder Cup:
Official Web Site.
- Luttrellstown Castle:
Official Web Site.