Whither Goes the Gated Community?...Part 2 - Demand and Golf

In the previous posting, I presented the problem of the highly-amenitized gated golf community and looked at supply issues. In installment 2, I continue with a discussion of the demand challenges and the game of golf.
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Demand

The demand side is just as challenged. Why is the Internet killing the highly-amenitized gated community model? Because it is now easier than ever to spend your discretionary income via the Web. It is a mistake to think that only other gated communities are your competition when it comes to people buying club memberships or even current members spending money there.

With a wealth of information at their fingertips, people can find the latest “hot” restaurant, get reviews, make reservations, buy movie and concert tickets online and find a whole host of other things to do than spend yet another Friday night at the club. This is particularly true of the Baby Boomers who are used to trying new things and going new places. Anyone can go online and in 10 minutes have plane tickets and hotel reservations to spend this weekend in Paris, next weekend in Vail and the following weekend at some

spa or buy an iPad. Consumer purchases in general were simply not that easy a generation ago.

Why buy a house and spend $50,000 or more on a club membership + annual dues when you can spend that same money traveling to exotic locations or doing something different each month instead? A limited club membership would seem to be much more appealing than a full one. The consumer wants variety in their leisure time and it is easily available. Provide it or get out of the way.

Even jet travel is more commonplace than ever before. Only 30 years ago flying someplace was considered somewhat exotic even if it was to Detroit. But with the Boomers flying everywhere for work during their careers and frequent flyer/credit card programs (FF programs turned 30 this year), people think nothing of hopping aboard a plane these days. Add to it that most extended families in the US today are spread across

the country, and people are flying to visit each other far more often than a generation ago (find stat about increase in number of flights compared to population increase).

Trends in Golf

The game of golf itself, and demographic and economic trends in the US, also do not paint a rosy picture for the gated golf course community.

According to the National Golf Foundation’s (NGF) report Golf Participation in America, 2010-2020, “…since the year 2000, the number of golfers plateaued and has been slowly declining, raising concerns about the future.” And let’s face it – despite recent in-roads made by such pro golfers as Tiger Woods and

Vijay Singh, golf is still overwhelmingly a middle-aged, upper-income white man’s game. Of all rounds played in the US, men play 80% and of those men, approximately 55% are between 30 and 59 years old, over 40% have a household income over $100,000, 52% are college graduates4 and they are 79% non-Hispanic whites.

Combine that with demographic trends in the US and the prospect for golf does not look too promising (despite the NGF’s forecasts; which honestly are not that upbeat to begin with). According to the US Census6, the percentage of non-Hispanic, white males in the US between 2010 and 2050 will fall from 31.9% to 22.9% of the population. Black and Native American populations will remain steady with a slight gain in the Asian male population from 2.2% to 3.5%. The big gain will be seen in the Hispanic population

where those men will grow from 8.2% of the population in 2010 to 15.1% in 2050.

Without participation growth by minorities and women, it is uncertain where golf will gain in play over the next few decades other than through an absolute growth in the number of middle-aged white men even as they become a smaller piece of the population pie.

Despite stating, “Golf participation is highly correlated to income, regardless of race” one of the key challenges to golf that the NGF studies do not address is the growing income gap and decline of the middle class in America. Unless this trend reverses, the segment of roughly 60% of all golfers who have household incomes under $100,000 is going to find it increasingly difficult to pay for expensive equipment and rounds. This is especially true with younger golfers (18-29) who are currently facing a much higher unemployment rate and a somewhat dim economic future – these are the very people golf needs to maintain its ranks as older players either stop playing or die.

Part of the trouble is the game of golf itself. We all have seemingly less and less time. Other than what the NGF calls “core golfers”, who has time to spend 6 hours playing a round of golf? Unless the game of golf adapts to serve younger and “non-traditional” players, its growth will remain relatively flat at 1%. While there are purists who want to defend the traditions of the game there is plenty of room for variation. One such way is to adapt by building courses with 3 sixes instead of 2 nines. It is still 18 holes but if you could play 6 holes in 90 min or so, more people would most likely play more often. There are now some courses designed this way, but the problem is - who needs more golf courses? Already the NGF is predicting that over the next ten years, the US will lose around 750 of them.

In Part 3 - What to do to survive?