90 cash-strapped clubs forced to sell up at a loss

John Gaskell, The Daily Telegraph, 10 January 1999

Golf courses, created an unparalleled rate over the past decade, are proving to be albatrosses around the necks of their owners who find they must accept large losses to get out of the business. An estimated 90 courses are up for sale.

"The market is still picking up casualties," said Peter Gwilliam an agent in Surrey. "Course are being sold at a big discount to project costs."

Paradoxically, the glut of courses for sale, some on offer for less than £500,000, coincides with a record number of people playing golf - more than three million.

But many of the new course have been modelled on unrealistic assumptions of what golfers are prepared to pay on the greens and in the club dining room.

A firm of industry analysts, the Golf Research Group, calculated that 87 per cent of the new clubs were 'in serious financial difficulty' at one point and that the sport needed another million players to restore its financial health.

East Sussex National Golf Club, the 36-hole complex near Uckfield, is on the market for £13 million to £15 million, although it cost more than £22 million to build. One analyst said last week that £10 million would be a more realistic price for the course, which has twice hosted the European Open but struggles to make money.

The club intended to attract debenture holders but when losses were heading towards £2 million a year an ordinary annual membership fee was introduced.

The owners, the Kuwait Investment Office, the club and estate agents, who all denied it was for sale one month ago, now refuse to comment. News of the sale came from disgruntled staff about to be made redundant.

The future of the Oxfordshire Golf Club, whose Japanese owners, Nitto Kogyo, were the sellers of the Turnberry in Strathclyde, is even cloudier. The club is expensive to maintain and there are fears that buyers may be put off by the possibility of having to pay off the club's debenture holders.

The seeds of the golf course building boom were sown in the 1980's. Increasing demand followed successes for the European Ryder Cup team in the 1980's and the emergence of role models in Sandy Lyle and Nick Faldo.

The public became aware that it was possible to make a very good living from the sport. Fathers and sons would sleep outside courses in their cars overnight to be first in the queue.

In 1989 the Royal and Ancient Golf Club at St Andrews, the sport's governing body, produced a report, The Demand For Golf, forecasting the need for 700 new courses by 2000.

In some cases funding for new courses came from businessmen seeking to avoid tax by rolling over capital gains made in other industries into golf, a move accepted by the Internal Revenue.

Farmers and landowners, sensing a killing, set to work and by last year more than 600 new courses had been built. Now the queues of golfers have vanished and memberships are readily available almost everywhere.

Last year the English Golf Union found almost 80,000 memberships on offer, many in the South-East with nearly 4,000 in Surrey and 2,500 in Kent. London had 3,5000 vacant memberships and Essex more than 7,000.

Prices have been forced down and the rapid change from scarcity to abundance has left many golf course owners badly out of pocket.

Many are too remote to attract the numbers needed to make them profitable. Others are sited too close to established clubs and drain the financial prospects of both. Far too many had grandiose ideas of luxurious clubhouses and had to scale back.

The Royal and Ancient had been correct in anticipating growth - there has been a record increase of 200,000 new players in five years - but many developers ignored it's warning that courses should be low-cost and close to centres of population.

Lord Thurso, hotelier and creator of Chamneys, who was brought in to help steer the East Sussex club out of the red, said: "I think golf is a difficult business to make profit out of, partly because there is a tradition in this country of private clubs owned by members and they are run on the basis of the lowest possible subscription.

"They accept low levels of service and clubhouse facilities and slightly eccentric old staff.

"Consequently if you are running a commercial club you are being compared with clubs charging £500 a year, instead of £3,000."

At today's bargain prices the American golf industry has been snapping up one or two clubs, notably the Turnberry for £32 million last December, yet remains wary of those with less prestige.

But optimism came from Colin Hegarty, of the Golf Research Group, who said: "Whatever happens, golf is a sexy industry to get involved in."