R&A chief issues warning of hazards ahead

Mike Aitken, The Scotsman, 27 February 2009

Golf won't escape the clutches of the economic downturn any time soon and has yet to face all the consequences of a deep recession, according to Peter Dawson, the chief executive of the Royal and Ancient, the game's worldwide governing body outside America and the organisers of the Open championship.

Looking at what the future holds for a sport with many ties to business, Dawson fears the golf industry will find itself snared by the hazards of declining equipment sales, falling membership numbers at club level and professional tournaments which struggle to retain sponsors.

"I don't think we've seen the bottom of this and I don't think anyone is immune," said Dawson. "I'm no economic forecaster, but it's hard to see the situation turning around quickly. There may be quite a way to go.

"I think people who are members of golf clubs will be thinking twice about their subscriptions. Like everything else which is discretionary (spending], people will ask, 'Do I need to buy a new driver this year?' All these things will contract.

"Talking commercially, overall this economic recession is so widespread and so deep that golf will not come out of it unscathed. That would be impossible. These are difficult times. We've seen an event go in India (the Indian Masters] as well as the English Open at St Mellion. And in America, we'll have to see what happens with the Stanford St Jude Championship (the PGA Tour says it will still take place in June]. What's clear is that you don't see the full force (of the recession] in year one. Many companies are contracted (to sponsor tournaments] one, two or three years ahead. So you don't know how deep this will go once these contracts expire."

As far as this year's Open at Turnberry in July is concerned, Dawson is reluctant to speculate too much. "Contractually things are okay, though we do know that some companies, like all businesses, are facing challenges," he added.

"Whether we come through this year with a patron programme exactly as it's been in the past, or come to some modified level with companies, remains to be seen. That's not been determined yet. But, fundamentally, we're all right."

With a broad spectrum of patrons, including RBS, Lexus, Nikon and Rolex, Dawson insists the R&A won't be phoning their lawyers if a sponsor is struggling. "I would like to think at the R&A if we had a patron or a company in difficulty that we would try to help rather than get into some sort of contract battle," he said. "That's because we like long-term relationships."

A fall in the value of sterling – today £1 buys $1.42 compared to around $2 last summer – means the R&A will need to look at prize money levels in late spring and compare its numbers to the American majors. The Open fund was worth £4.2million in 2007 and 2008, or $8.4million. That same sterling figure is now worth under $6million. "The Open is in a slightly peculiar position because of the movement in the exchange rate," Dawson admitted. "Last year, in dollar terms, we were the most lucrative major. This year we've fallen back to bottom of the heap. So that's something we might need to look at. For us, of course, that's offset by the rise in our TV revenue. We won't make a determination on prize money until nearer the championship.

"The rise of the dollar against the pound is good news for us because so many of our TV revenues are dollar denominated. But it's fair to ask if it's right to put more into prize money at a time when things are so difficult. Frankly, I wouldn't expect golf tournaments generally to be raising prize money this year."

While the omission from the Race to Dubai schedule of the English Open at St Mellion in August serves as a reminder the European Tour is not immune to the downturn – the event hopes to return in 2011 – the involvement of Leisurecorp, a subsidiary of Dubai World with assets of £50 billion, in backing the Tour could not have been more timely. After losing long-term sponsors such as Smurfit and Deutsche Bank, the Tour has been fortunate to enlist the support of backers with deep pockets. When details of the Race to Dubai were revealed at Turnberry in October, Leisurecorp casually announced they'll be injecting $40million (£27.9million) to support tournaments over and above their backing for the Dubai World Championship worth a combined $20million (£14million) each year in prize money and bonus pool.

Although George O'Grady, the chief executive of the European Tour, is shrewd enough to insist his organisation is "ready for the bumps", he can only feel relieved to have avoided the dependence on dodgy banks and struggling car manufacturers which defines the state of sponsorship on the US PGA Tour.

With a third of its backers drawn from the financial sector, the game's most powerful Tour knows dark clouds lie ahead when existing contracts with one or two years left eventually run out. In a bid to improve value for sponsors, Tim Finchem, the commissioner of the Tour, has encouraged players to tee up in more events and spend more time visiting corporate hospitality facilities. In other words, don't take your blessings for granted.

The re-emergence of Tiger Woods from injury in Tucson this week was a boon for the game since even Phil Mickelson, his main rival, is quick to acknowledge that "the reason we want Tiger back is because he drives the game of golf."

Whether even a player of Tiger's stature can protect golf from the storm clouds gathering remains to be seen. "The Tour is obviously feeling it, just like any other part of business," noted Woods. "I think it is very important for all of us to understand how (vital] the sponsors are to our sport.

"It's one of those times where we may be losing a few tournaments, and a lot of tournaments are coming up on their contract years. This is a very important year going forward for us."

According to Brandt Snedeker, though, Tiger's return at least gives the sport a seasoning of hope. "This economy, these times, it's a hard sell for a lot of sponsors," observed the golfer. "But with Tiger back and doing what he does, that makes it a whole lot easier."