New horizons for golf development

New horizons for golf development

1st September 2008

David Spencer, chief executive of Leisurecorp’s golf division, showcases Jumeirah Golf Estates which is an eye-opening, $10 billion project that will be a city unto itself, boasting a population of 30,000 when completed in 2012.

But the development’s primary focus, make no mistake, is golf: It will feature four courses designed by Greg Norman, Sergio Garcia, Vijay Singh and Pete Dye. Jumeirah Golf Estates also will serve as the new international headquarters of the PGA European Tour, and beginning next year will host the tour’s new season-ending tournament, the Dubai World Championship.

Though a slumping economy has stalled construction in the U.S., golf development is flourishing in many parts of the world, in destinations as diverse as Dubai, Moscow, China and the Dominican Republic.

In fact, it could be argued that development, more than any other catalyst, is driving the growth of the game in these emerging markets where new wealth and golf’s affluent appeal intersect. But it’s important to note that nurturing grass-roots participation often is a byproduct of other motives: selling real estate and fostering tourism.

Developers are doing more than just altering the physical landscape of international golf. In some cases, they’re even shaping the future of professional tours overseas, creating a hierarchy among them and influencing when and where tournaments will be played. And in an ever-shrinking world, that trend ultimately will determine where the world’s top golfers – and sponsors – will go.

“What we’re realizing is the force of golf development,” says George O’Grady, executive director of the PGA European Tour.

Aside from dealing with Leisurecorp, O’Grady also has had first-hand encounters with China’s Mission Hills Golf Club. At first regarded as little more than a novelty by Western golf aficionados, the massive resort north of Hong Kong continues to expand and enhance its global profile.

Initially, Mission Hills marketed itself as the largest golf club in the world, with 180 holes. Today, it still holds that honor, adding two more layouts for 12 courses at a single compound. (“Our members were getting bored with only 10,” says Tenniel Chu, the resort’s executive director.)

Plus, it began in November a 12-year deal to host the Omega Mission Hills World Cup through 2018.

“Let me be very frank: If holding tournaments was for the profit making, we wouldn’t break even, not even close,” Chu says. “At the beginning, we underwrote it all just to make the (World Cup) deal happen. The prize money alone was $5 million last year.

“This is truly to raise awareness of the game in China. If you grow the pie, we will all win at the end of the day.”

Mission Hills’ investment already is paying off. In its early days, the resort relied almost exclusively on golf tourists from Hong Kong. Now, 40 percent of rounds come from domestic play, another 40 percent from Hong Kong and 20 percent from international guests.

“When we first started, there was less than 10,000 golfers in all of China, so it was a very scary proposition to build a golf club,” Chu says. “But we wanted to create a platform to complement the economic boom of China. Mission Hills was made to do business networking, inviting expatriates and foreigners to invest and have confidence in the new China.”

The significance of that mission finally might be dawning, especially with the Beijing Summer Olympics providing a global audience a close-up of China’s economic might. Similarly, many now are beginning to comprehend the potential impact of Jumeirah Golf Estates.

When O’Grady and Spencer announced their partnership in late 2007, O’Grady insisted the deal “was much more than a sponsorship.” But back in the U.S., few could grasp that it was much more than a golf-course development hosting another tournament.

For starters, to consummate the deal, Leisurecorp paid the European Tour $173 million, the two parties revealed at KPMG’s 5th annual Golf Business Forum, a premier international development conference held this summer in Ireland.

The deal gives Leisurecorp the right to host the Dubai World Championship at Jumeirah Golf Estates for five years (plus an option to renew for another five). The sum Leisurecorp paid also includes a $40 million investment to enhance several other European Tour events in various markets.

Leisurecorp plans to use those tournaments not only to attract tourists to Dubai but to increase worldwide recognition of its brand so it can ultimately build golf-course developments outside of its homeland.

“Germany and Russia, for example, are becoming two very key markets for Jumeirah Golf Estates,” Spencer says. “At the moment we see them as key feeder markets for selling real estate and for tourism. But once we get to know those markets and understand those markets, we would look to expand (there).”

In an effort to increase its footprint around the world, Leisurecorp also has acquired Pearl Valley Golf Estates, home to the South African Open, and in May it announced an $108 million deal to add another trophy property: Turnberry, site of next year’s British Open.

“We have hung our hats on men’s professional golf tournaments, especially the European Tour,” Spencer says. “We obviously respect the (PGA) Tour tremendously, but I think the U.S. Tour has a little bit of a vanilla feel to it, whereas the European Tour has morphed itself into this celebration of golf with all different nationalities and cultures. It’s an incredibly colorful vehicle for us to display ourselves as an international company.”

Leisurecorp’s tour marketing is neither extraneous nor extravagant, Spencer says. Rather, it’s been incorporated as an actual cost of development that the company plans to recoup by selling sponsorships and homes.

When finished, Jumeirah Golf Estates is expected to feature 6,000 to 8,000 residential units – an array of homes costing between $1.2 million and $11 million each. (Phase A and its 1,146 villas, to be completed by November 2009, already are sold out, according to Spencer.) The master-planned residential resort community also will include schools, supermarkets, restaurants and as many as six hotels.

“Our premise was, we think you could spend a week within Jumeirah Golf Estates without ever having to leave, whether you’re on holiday or living here,” Spencer says.

For the European Tour, the deal means immediate riches for its players: The partnership calls for renaming the Order of Merit to The Race for Dubai, and also includes an additional $10 million bonus to be shared among the top 15 players on the tour’s money list. The new Dubai World Championship also offers a first-place prize of nearly $1.7 million.

“We’re doing everything we can to make Tiger Woods and the other leading American golfers and world golfers feel welcome,” O’Grady says.

The deal also continues the tour’s push to extend its borders beyond the continent.

“We have requests from South Africa, we have requests throughout Asia and certainly in Australia,” O’Grady says. “We’ve been supported strongly by the golf equipment companies who know the growing markets.

“If you take in the staggering statistics about China, and I can bring you people who will say the same thing about India – if you ignore these markets, you do so at your own peril.”

By: Gene Yasuda of Golfweek