Healthy growth

Despite a steady decline of golf course development during the past four years, builders and architects seem to be happy with the amount of work they’re doing. Quality is overriding quantity, and supply is coming more in line with demand.

Trump National Golf Club, Bedminster (N.J.) is a recently completed project of Fazio Golf Course Design. The firm has remained relatively busy and is selective about the projects it accepts.

In 2000, about 400 new courses (18-hole equivalents) opened, according to the National Golf Foundation. There will be 150 to 160 golf courses (18-hole equivalents) opening this year, according to Jim Kass, director of research for NGF. That range is expected to remain for the foreseeable future, but one variable that would increase the range would be if more of the 78 million baby boomers retired, Kass says.

“That could change the landscape 10 to 20 years out,” he says.

Despite the decline of the number of openings, Kass says the golf course development market is healthy.

“Supply and demand is coming into parity,” he says. “We need to fill existing supply before we increase it. In 2004, same-store rounds increased 0.7 percent more than 2003.

“The number of openings today is what it was back in the early to mid-1980s,” he adds. “It’s more appropriate.”

Courses in planning and under construction account for roughly 60 percent of all courses in development.

“In the boom of the late 1990s, the number of golf courses being built was overstated, which made the contraction look bigger than it really is,” says Tom Shapland, president-elect of the Golf Course Builders Association of America and president of the Midwest office of Wadsworth Golf Construction Co.

Kass says real-estate has been a big part of golf course development – 40 to 60 percent of openings during the past 10 years have been real-estate related, and 22 percent of total existing courses are real-estate related. Courses in planning and under construction still are significantly real-estate related and are in the 60-percent range of all courses in development.

Daily-fee courses also have been popular. In 2004, daily-fee courses were 58 percent of openings, and daily-fee courses consisted of 56 percent of the total supply. Many of the daily-fee courses are high-end and are more income driven than demand driven. In contrast, municipal courses were 10 percent of openings and were 5 percent of the total supply in 2004.

Courses continue to open in familiar areas. The states with the most course openings last year are: Florida, California, Texas, Arizona, New York, Georgia and Pennsylvania. One reason why Florida leads the way (with 13) is because of its increasing population. Even though these states lead, the number of course openings in each state declined compared with years past.

Additionally, rounds played and course closings, which are linked to the economy and 9/11, are two reasons for the development decline. Rounds played decreased 4.5 percent during 2002 and 2003, and there was an increase of closures during the past five years – 200 courses closed from 2001 to 2004. However, there still are a relatively high number of courses in the planning stage – 410 – but not all will come to fruition.

“Golf course development doesn’t always relate to the statistical demand of golfers,” Shapland says. “Most of our projects are an amenity to an overall development.”

In the works
Even though development has slowed, it hasn’t crimped the business of some builders and architects. Lee’s Summit, Mo.-based Mid-America Golf & Landscape is working on four new construction and four renovation projects.

Mid-America Golf & Landscape is working on four new construction and four renovation projects. The Cherokee Hills Golf Club in Cutoosa, Okla., was renovated recently by the company.

“The last nine months have been unbelievable for us,” says president Rick Boylan. “We’re not chasing every job. We’re not trying to mass-produce courses. We bring value to the clients and pay attention to details. We keep overhead costs low and pass that on to the end-user.”

Most of the courses being built are daily-fee and public-sector-types, Boylan says. However, three of the new courses the company is building are private near residences. Four or five years ago, that type of course consisted of 80 percent of the courses that were built in the industry, he says.

Boylan isn’t looking to grow the company significantly. He would like to maintain six to eight projects a year and earn 15 percent to 18 percent profit margins on those projects.

“Our goal is not so much to grow, but to manage better,” he says. “But, there’s a lot of work out there for fall and winter. There are still projects that people want finished in time to meet the grassing window to get play next season.

Bidding intensifies for renovation work

A challenge for some architects and builders lately has been to find enough renovations and international work to fill the void created by the decline of new courses in the United States. Business for Gainsville, Ga.-based Course Crafters, which does renovation work only, started to decline in 2002 and continued through 2003 and the beginning of 2004, according to president Bob Pinson. However, business picked up at the end of 2004 and into the beginning of 2005. “When the economy slowed, golf course construction slowed, and the larger companies that primarily did new construction work started taking on renovations,” Pinson says. “They were able to outbid the medium-size and small companies and took renovation work away from them. From 2002 to 2004, competition stiffened, and bidding became more relevant. Now it seems to be going back to the old way, and a company is being chosen based on the quality of work just as much as the price.” Despite improvement in the market, it’s still difficult to get a job, but it’s not as hard as it was two years ago, Pinson says. A renovation is a whole different animal than a new construction project, according to Pinson. The training of people and the tools are different. Other aspects of a renovation that are different than new construction include: cutting sod, tying sod back in, staying off cart paths with heavy machinery, using smaller equipment, taking care of the land a bit more because of things like the irrigation system, and keeping a portion of the course operating while other sections are being renovated. Pinson says the jobs he takes vary in size, anywhere from $50,000 to $3.5 million. He says the company handles from five to 15 projects a year, depending on the size. It’s been a tough go for Course Crafters during the past few years, according to Pinson. The company’s revenue declined about 50 percent from $13 million in 2001 to $6 million in 2002. Then another decline in 2003 dropped revenues to $4.5 million. But last year, revenue increased 25 percent, and this year, Pinson expects revenue to increase 10 percent to 15 percent. During the 14 years Course Crafters has been in business, Pinson says the decline of the early 2000s was the first in the company’s history. Now he feels business will be steady during the next few years. “I want to be able to put the breaks on and be able to stop if business starts to decline,” he says. “I might not grow the company as much and keep revenues steady and focus on good quality and increasing the profit margin.” Before 2001, Pinson says there was so much work, many jobs had only one or two bidders. But since 2001, architects have gotten more competitive. Private clubs are interviewing 10 architects instead of two or three. Architects then put together a bid list of five to 10 contractors, and many times the clubs end up taking the lowest bidder, and not all of the bidders are on the same quality level, Pinson says. “We are now bidding 10 to 15 jobs to get one,” he says. “We used to bid four or five jobs to get one. I’m spending more time traveling and researching. I see the same competition at every job. On the other hand, some private clubs just call us for work and don’t put out a bid. “One thing that’s been common at older clubs, with younger members coming up into leadership, is that they want to see more length, reposition fairway bunkers, move greens back further, yet still keep the look of the old course,” he adds. Pinson says the company has about 10 architects of which it does a fair amount of work. “Architects like a variety because there are a lot of good contractors out there,” he says. GCN

“Right now, most contractors are as busy as they want to be, but they could be busier, especially since the rules of the game have changed, i.e., some jobs taken in March need to be finished in October,” he adds. “With those jobs, everything has to go right for you. But those jobs will fall off a bit. However, the industry will be strong, and the price for work will be reasonable. If the prices of fuel and building materials come down, it will help everyone.”

Business also is going well for Waunakee, Wis.-based Oliphant Golf Construction, which has been in business since 1997. President Mike Oliphant says the company will work on 10 to 12 projects this year, six of which are new construction. Throughout the years, half the company’s work has been new construction, and half has been renovation.

All of Oliphant’s current jobs, except for two, are west of the Mississippi River – five are in California and two are in Oregon.

And Fazio Golf Course Designers isn’t complaining either. It has remained relatively busy and is selective about the projects it accepts, according to Tom Marzolf, a golf course architect with the firm and president of the American Society of Golf Course Architects.

“We have a relatively full load of projects,” Marzolf says. “We haven’t seen much of a lull throughout the past five years. We are fortunate enough to look at many of the best projects in the country, and because of Tom Fazio’s reputation, we haven’t seen much decline in our business. And we have a lot of repeat business, which has helped us.

“We don’t really turn work away, but we pick and choose to some degree,” he adds. “Our situation isn’t standard in the industry. We look for an owner who is passionate about building quality golf courses. The relationship with the owner is often more important than the site of the golf course.”

The firm’s business is primarily designing new 18-hole golf courses.

“We are very client oriented and try to build what our clients believe will help them achieve their goals and objectives,” Marzolf says. “Since 9/11, most projects are high-quality real-estate golf communities, or real-estate is involved in some way. There are very few stand-alone golf courses being built right now.”

The number of projects Fazio Design works on varies. Marzolf says the firm averaged five to seven new golf courses a year throughout the past several years.

“We also limit renovation work,” he says. “There are so many of our golf courses that need long-range planning and renovation assistance that oftentimes it’s hard to get involved with golf courses where we have no history.”

More work
Oliphant and Boylan are working on more projects now than they were a few years ago. Oliphant, who has grown his business from 10 employees in 1997 to 400 now, says because his company is a small- to medium-size company, it wasn’t affected by the decline of new golf course construction a few years ago. He says the larger companies that were building 35 to 40 courses a year were more affected. Oliphant’s company averaged about six projects a year during ’02 and ’03. Last year, the company completed eight. Of those projects, half were new construction and half were renovation.

“After ’01, we saw a drastic downward spiral with high-risk, high-end projects that we’re seeing back on our desks now,” he says.

Most of Oliphant Golf Construction's work, including the recently remodeled Saticoy Country Club in Somis, Calif., is west of the Mississippi River.

From 2000 to 2004, Mid-America, which has been in business for 13 years, averaged five projects a year.

“We saw a decline in new construction being replaced with remodeling,” Boylan says. “Our gross project value declined about 40 percent, from $12 million to $8 million. The price of work wasn’t as profitable a few years ago. Some projects were taken at cost. Companies were buying work. We participated in that to keep people working, but it wasn’t 50 percent of our work.

“We started to see an increase in October of last year,” he adds. “It just felt like with the low interest rates, the banks had loosened their grip on things, and people who were talking about projects started getting things done. However, the increased cost of building materials and fuel has been dramatic, and we eventually pass those costs to the end-user. During the past 12 months, we doubled what we normally would generate in revenue: We just broke the $22-million mark.”

A look ahead
Despite the increase of business, Oliphant is cautious about the development market in the future.

“To go from six projects to 10 in a couple years, I didn’t have to add a lot to the company – we can handle it,” he says. “But to take on several more projects, I will have to add overhead to the company. We will level off at 10 projects. I don’t want to get any bigger. We’re a medium-size company, and I’d be tickled to keep eight to 10 projects a year. I want to stay solid and build relationships with the architects we work with.”

There are 320 golf courses under construction throughout the country, according to the National Golf Foundation. Many of those are on the East Coast.

Oliphant says golf course development won’t boom any time soon. He says the development boom of the late ’90s was an anomaly and the industry will not see that much development for a long time, if again. He says the market is healthy, but can improve.

“There have been golf courses built for X value and twice as many being sold for half that, and some are foreclosing,” he says. “We all know stand-alone golf courses are difficult to make work, and there’s not a quick return on investment with a golf course.”

Marzolf says slow construction growth will continue.

“It’s market driven,” he says. “There’s an oversupply of tee times, and we need to increase the number of golfers. Real-estate is the reason there will be 150 golf courses openings this year.

“Existing golf courses need to figure out how to compete with these new facilities,” he adds. “Master planning is the key element to competing. Owners need to study their facilities to find out how to grow their businesses because the market will be tough for many years. My platform as the ASGCA president is to get involved with existing golf courses and work on developing master plans for them.”

Bob Pinson, president of Gainsville, Ga.-based Course Crafters, hopes the industry can get on the same page and encourage more people to play golf because more people playing golf is job insurance for builders.

“We’re pricing ourselves where too many people can’t afford to play,” Pinson says.

Shapland says the housing-development boom isn’t helping golf course development because land values are so high that it’s difficult to designate 200 acres to a golf course. However, he says development will remain healthy.

“Golf course development is attractive and will sustain itself for a while longer.” GCN

John Walsh is the editor of Golf Course News. He can be reached at jwalsh@gie.net.