20% of Scots golf clubs 'in financial difficulty'

20th July 2008

20% of Scots golf clubs 'in financial difficulty'

As golf's multi-millionaires battle it out today for the £4 million-plus Open Championship prize money, Scottish golf business experts predict as many as 20% of Scotland's cash-strapped golf clubs are performing well below par, with some threatened with extinction.

Haddington Golf Club in East Lothian was recently forced into a public denial that it was about to go bankrupt, and the Glen Golf Club at North Berwick last month announced redundancies, while the proprietor of Castle Park Golf Club committed suicide last year, reportedly as a result of business and personal problems.

Meanwhile, rumours abound about the plight of several high-profile golf clubs in Ayrshire, while Loch Lomond Golf Club, home to last week's showpiece Barclays Scottish Open is, according to its latest accounts lodged at Companies House, showing a 300% increase in annual losses to £19.2m, with the shareholder's deficit reported at £70m amid reports of crisis talks with its bankers, itself the troubled HBOS.

Nick Hunter, of Niche Marketing & Training, has worked directly with many golf clubs in Scotland and says: "There is no doubt there are a lot of clubs out there having trouble on the business front."

He explains: "The Scottish golf sector falls into three categories, namely the exclusive top-end private members' clubs, which are commercial ventures with exclusive, well-off memberships and are therefore largely insulated from the effects of the credit crunch, as are the hotel-led courses such as Turnberry, Fairmont St Andrews and Skibo Castle.

"At the other end of the spectrum are a number of well-run pay-to-play facilities, which appeal to the younger, more informal type of golfer.

"Then, in the middle, is a raft of members' clubs of varying standards with an ageing membership."

Hunter, a director of Golf Tourism Scotland and a prime mover in golf's Driving Change agenda, adds: "There are a number of clubs out there in a perilous position and there will be some that go to the wall during this economic downturn, because golf revenues are all predicated upon disposable income, which is being squeezed all round at present."

But, as some clubs stare into the financial abyss, top-end development continues, as Hunter explains.

"There is the 18-hole Jack Nicklaus championship course at the Ury Estate with a hotel, shooting range, tennis courts and equestrian and fishing facilities; Blairs College, a signature championship golf course, designed by former Open champion Paul Lawrie; and, of course, the Trump International proposal at the Menie Estate. So the top of the market is buoyant."

He predicts: "At that lower end, there will inevitably be casualties."

Golf business consultant Mike Williamson, of Edinburgh-based MW Associates, agrees the sport is in trouble, but says: "Over the past 10 to 15 years there has been a 20% growth in supply, but much slower growth in participation and golf tourism, and, given the demands on people's leisure time and disposable incomes, and changing social trends, it is not difficult to pinpoint why there are problems today."

He warns: "As many as 20% of traditional mid-range members' clubs could be in financial difficulties, faced with the double whammy of rising costs and falling revenues.

"Some may have to think the unthinkable of folding, amalgamation, or at least considering sharing clubhouse, management or greenkeeping operations. Rationalisation may be unpalatable, but it may become inevitable if they are to survive."

The winning bid for the 2014 Ryder Cup was supposed to provide a panacea for growth, but Williamson is sceptical: "The 2006 Ryder Cup Ireland experience shows the commercial reality did not measure up to the hype, and there has even been a negative, the rip-off Ireland' effect, which Scotland must avoid.

"The reality is that some golf clubs may not be around when the Ryder Cup comes to Gleneagles unless they take radical action now."

But Williamson insists there is no "silver bullet", explaining: "Housing might have been an option, although some traditional clubs have turned down joint ventures with developers and the current economic downturn has put such schemes on the back burner for the moment in any case."

Hamish Grey, CEO of the Scottish Golf Union, which is largely responsible for club golf in Scotland, said: "There are pockets of difficulty such as East Lothian and Fife, brought about by growth in supply allied to static demand and current problems over people's discretionary expenditure."

However, he insisted: "It is too early to speculate on foreclosures, although golf clubs, like any business, need to find solutions to the challenges they are facing."

The picture is not much brighter on the inward tourism front. Gary Wilkinson, managing director of golf tour operator Wilkinson Golf, says: "Times are tough for everyone. If the Old Course at St Andrews, previously considered recession-proof, has vacancies, then other courses are in trouble, and many of the prestigious hotel/golf course operators are offering deals that ensure only turnover and cash flow."

By Mike J Wilson -Sunday Herald