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Sun 8 Feb 2009 04:00 AM

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State of play

KPMG recently published four reports on the golf business. Andrea Sartori, head of KPMG's Golf Advisory Practice for EMA, highlights the key findings and insights.

KPMG recently published four reports on the golf business. Andrea Sartori, head of KPMG's Golf Advisory Practice for EMA, highlights the key findings and insights.

The development of the golf market in the Europe, Middle East and Africa (EMA) region has been remarkable. In the past 20 to 25 years, the number of courses has been growing by approximately 3% annually, while the number of golfers has increased by 5% annually.

Today there are close to 7100 regular golf courses across the EMA region and around 4.5 million affiliated golfers, in addition to an estimated 1.5 million non-affiliated players.

It has become significantly more expensive to develop a golf course — costs have increased more than 20% in the past three to five years.

Like many businesses, golf is globalising, and emerging markets such as India, Eastern Europe, China, South America and North Africa are now seeing significant business opportunities for new courses, resorts and real estate communities.

Since September 2008, KPMG's Golf Advisory Practice for EMA has published four important reports on the golf market as part of our Golf Benchmark Initiative, with the contribution of leading industry players including Leisurecorp, Dubai World Championship, Nicklaus Design, Toro, Club Car and Troon Golf.

The reports - The Value of Golf to Europe, the Middle East and Africa, the Golf Travel Insight report, The Golf Course Development Cost Survey and The Golf Benchmark Survey comparative report for EMA, plus three new regional reports for China, North Africa and South America - are fascinating and exciting, and shed light on a dynamic market.

One key statistic we wanted to put a value on, which had not been researched before, was the subject of a report published at The Ryder Cup in September 2008 - The Value of Golf to Europe, the Middle East and Africa.

Our research, conducted with Oxford Economics and nine leading golf bodies, calculated that golf generates total revenues of €53 billion (US $68 billion) in EMA, supports almost half a million jobs and pays nearly €10 billion ($13 billion) in wages.

And while golf in the EMA region is about one-third the size of the US golf industry, it is growing fast, especially in the golf tourism and golf real estate sectors.

In fact, our report showed that these sectors now account for almost half of the game's total revenue. Real estate is the number-one money earner, bringing in almost €19 billion ($25 billion), which outstrips the total cash generated from on-course activities including green fees and memberships.The report also highlighted that in Europe alone, the number of both courses and players has doubled since 1985 and has continued to grow in recent years, whereas in the US, the number of courses and players has levelled off since 2000.

However, what was striking about our Golf Course Development Cost Survey, was the finding that it has become significantly more expensive to develop a golf course - costs have increased more than 20% in the past three to five years.

Our report, an updated version of a study first conducted in 2005, showed that the design and construction costs (excluding investments related to land acquisition, clubhouse, maintenance equipment and cart fleet etc) of an 18-hole golf course now ranges between €1.5 and €5.3 million ($2 and $6.9 million) in Europe, depending on location and quality, €5.1 million ($6.6 million) in Southern Africa, and €9.5 million ($12.3 million) in the Middle East, by far the most expensive region to develop a golf course.

The reports were conducted before the unfolding of the financial downturn; however, we believe the medium to long-term prospects for golf to be very good indeed.

While the costs are highest in the Middle East, partly because of the focus on high-end and signature courses - which tend to be two to two and a half times more expensive to construct - golf course revenues and profits in this region are also substantially higher. Interestingly, the celebrity factor beneficially increases premiums on real estate surrounding the course by more than 10%.

Golf hot spots

As part of the survey, golf course architects were asked where they thought the next golf development hot spots would be and to name the five markets likely to experience the most significant growth in golf course development in the next 10 years. China (58%) and Eastern Europe (55%) topped the list by some distance, with the United Arab Emirates (43%), India (42%) and Russia (30%) making up the top five.

As part of our Golf Travel Insight report, more than 80 specialist golf tour operators in 21 countries were surveyed to find out where they thought the most popular destinations would be in the coming years.

Portugal and Spain, already established tourist destinations, remain firm favorites. However, some surprising destinations are catching up fast. Turkey ranked third on the list of future golf hot spots, and was closely followed by Dubai - despite figures that reveal the UAE has the most expensive green fees in the entire EMA region.

A weekend round on a UAE course now costs on average €121 ($156), compared with €78 ($101) in Portugal (the second most expensive) and just €30 ($39) in the cheapest destination, South Africa.

The news for established golf destinations such as Scotland and Ireland was not so good, as operators expect stagnation in inbound golf tourism here.

From our research, it seems well established destinations are not losing market share thanks to their deep golfing traditions and the quality of their of golf, but the increasing competition doesn't leave much room for further growth.

And so to our annual Golf Benchmark Survey, which analyses the business performance of golf courses across the EMA region. In 2008 it focused specifically on the number of rounds played and total revenues generated (based on golf courses' performance in the 2007 operating year).Golf courses in Dubai remained the highest earners in the EMA region, with an average annual turnover exceeding €7 million ($9 million), a slight increase on last year and four times more than courses in Spain, Portugal and the Netherlands.

By region, the top performing golf courses (average annual revenues) are in the Middle East (€5.8 million / $7.5 million), Western Europe (€1.4 million / $1.8 million), Benelux (€1.4 million / $1.8 million), Central Europe, comprising Germany, Austria and Switzerland (€1.1 million / 1.4 million) and Great Britain & Ireland (€933,000 / $1.2 million), the largest golf market in EMA by share of courses (42%) and golfers (33%).

However, although growing, the golf market in the Middle East is comparatively small with 26 courses and 17,900 affiliated players.

Perhaps some of the most striking statistics in this year's Golf Benchmark Survey were found in the three new regional reports for China, North Africa and South America. While the number of courses in North Africa is set to double to more than 80 and the number of registered golfers in South America is increasing by a staggering 10% per year, our report on China revealed a unique and rapidly developing golf market.

There are now some 300 courses in China, more than half of which have opened since the year 2000, with an estimated 300,000 people who are either members of clubs or who play golf regularly.

However, club memberships and green fees are among the most expensive in the world. The average initiation fee of a golf club is a staggering $53,000, while green fees are the highest of any country studied by the Golf Benchmark Survey - $161 for 18-hole weekend rounds, outstripping the average green fee in Dubai.

Our re port, which surveyed 70 clubs across China, cites three main factors behind the growth in golf: the rapidly expanding economy, which has generated corporate demand for the game, the burgeoning leisure and tourism industry, and media exposure driven by professional tournaments like the World Cup of Golf.

If even one in every 1000 Chinese people played golf by 2030, that would add up to 1.3 million golfers, requiring perhaps 1700 new courses over the next two decades. But the extremely high pricing policy and the government's continuing ban on the development of golf courses on agricultural land could be barriers to that kind of growth.

It should be pointed out that all of the reports outlined here were conducted before the full scale unfolding of the financial and economic downturn. So it is questionable to what degree these changes will affect golf course development activities globally. However, we remain optimistic and believe the medium to long-term prospects for golf to be very good indeed.

All reports are available to download, free of charge, from www.golfbenchmark.com

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