Overview: Current market research on the Irish golf industry

1. Overview: Current market research on the Irish golf industry Ian Duffy, FGS Partner, Corporate Turnaround & Change Management

2. Background to research • Research undertaken during the summer of 2010. • FGS and Carr Golf Services, in conjunction with the GUI and the ILGU. • On-line survey to Ireland’s 433 golf courses.

3. Background to research • A total of 151 actual responses were received (or an effective response rate of approximately 35%). • All survey respondents details were confidential and broken down into regions for the purpose of analysis.

4. Introduction • Significant growth and investment in the industry over the last 15 years. • Excellent courses, facilities and standards with a wide range of availability and choice • Strong international reputation as desirable golfing destination

5. Introduction • However, the industry does face major challenges given: • Decline in golfing tourists • Debt levels • Falling memberships • Excess capacity • Increased costs • Fragmented industry

6. Golf industry in Ireland overview • One in every 25 people a golf club member and these figures (excludes casual golfers). • Golf industry in Ireland gives rise to the employment of approximately 8,000 persons (both full and part-time) • 433 courses throughout the 32 counties (increase of c. 100 clubs over the last 15 years).

7. Trends in the Number of Golf Clubs 1995-2009

8. Golf industry in Ireland overview • Golf club membership growth over the last 10 years was driven by increased; • Population • Disposable income • Profile of the sport. • Tax reliefs for hotel developments (and the expansion in the number of hotels and resorts in recent years) indirectly drove the number of golf courses.

9. Golf industry in Ireland overview • ‘Our golf product is among the best in the world and it is up to us to ensure that all is being done to fully promote what is on offer’.* • Major operation, structural and marketing issues that need to be resolved. • *Chair of Failte Ireland

10. Research findings • The report can be broken down into the key areas of: • Running efficient golf club operations; • Under-utilisation in the Irish golfing industry; • Sustainability; • Representing the Industry and; • Marketing

11. Running efficient golf club operations

12. Running efficient golf club operations

13. Running efficient golf club operations • Higher number of clubs are serving the same pro-rata number of people/members. • The number of members per club in 2002 was 661 and in 2009 was 590. Significant fall there. • Number of Persons (1,000 of population) per Golf Club dropped from 14.87 in 1996 to 14.38 in 2009.

14. Trends in the Number of Golf Memberships (‘000), 1995-2009

15. Running efficient golf club operations • Based upon the data received, the estimated average cost of operating a golf club in 2009 was €990,000. • The equivalent figure in 1999 was €266,000 (in 2009 prices) which indicates that costs have risen by 270% in just over a decade.

16. Running efficient golf club operations • Course maintenance is 40% of operating costs is largest cost centre. • Administration costs are 18% of operating costs. • Clubhouse operations are16% of operating Costs

17. Running efficient golf club operations

18. Running efficient golf club operations

19. Under-utilisation in the Irish golfing industry • The Irish golfing industry has the capacity to support up to 23m rounds of golf in a given year. • Analysis shows that a maximum of 13.3m rounds were actually played in 2009 suggesting that the level of under-utilisation is close to 42%.

20. Under-utilisation in the Irish golfing industry • Oversupply of golf clubs range from 35% in Dublin to 53% in Leinster. • Industry needs to consider new and innovative approaches and solutions, including a programme of consolidation.

21. Under-utilisation in the Irish golfing industry

22. Under-utilisation in the Irish golfing industry • C. 50% of all respondents reported rounds played had decreased over the last 3 years. • This downward trend was most pronounced in Connacht (71%) and Dublin (50%). • However, 40% of respondents in Munster reported that the number of rounds played had actually increased.

23. Under-utilisation in the Irish golfing industry

24. Sustainability • Almost 27% of respondents reported that revenues had increased since 2007. • A further 17% reported that revenues remained unchanged. • Almost57% of respondentsreported that revenues had decreased.

25. Sustainability • Green Fees account for 17% of all revenues nationwide. • Local authority-owned golf clubs Green Fees account for nearly 50% of revenues. • By contrast, Green Fees account for just 15% and 20% of all revenues in the case of member-owned and proprietor-owned golf clubs, respectively.

26. Sustainability • ‘Membership’ fees (i.e. subscription and joining) account for less than 20% of total revenues for local authority-owned golf clubs. • Such fees contribute 65% and 27% of all revenues in the case of member-owned and proprietor-owned golf clubs, respectively.

27. Sustainability • Food and Beverage and, to a lesser extent, the Pro Shop accounted for 35% of the revenues of proprietor-owned golf clubs. • In comparison with member-owned golf clubs (15%). • Suggest that proprietor-owned golf clubs have a greater focus on multiple sources of revenue.

28. Sustainability • Significant amount of debt in the Irish golf industry especially amongst newer clubs who would have made large capital investments in the last 10-15 years. • The level of debt as a % of revenue in 2009 was greater than 100% for 1 in 5 respondents with the highest number of cases in Connacht at 31%. • This represents a clear challenge for industry not renowned for making profits.

29. Sustainability • 3 out of 4 golf clubs in Ireland made capital investments over the past 3 years. • The highest number of these was in Dublin, where almost 93% of all golf clubs incurredcapital expenditure. • The vast majority of this (70%) was targeted at golf courses whereas 17% was applied to clubhouses.

30. Marketing • Less than 2 in every 3 golf clubs had a strategic plan in place for 2009 • 40% of respondents did not have a Strategic Plan in place for 2009 whilst 80% did not have a Yield Management Strategy. • Sales and marketing accounts for just 1% of operating costs nationwide.

31. Marketing • There is clearly a need for strategic planning in the golf industry. • Many golf clubs need help in developing a business turnaround plan that will addresses strategic deficiencies and operational ineffectiveness. • Of those golf clubs that did have a strategic plan, 64% of them saw their membership numbers increase.

32. Marketing • Golf clubs with increasing revenues in 2009 were more than twice as likely to employ a yield management strategy compared to golf clubs with decreasing revenues • Almost 31% of golf clubs with increasing revenues employ such a strategy • New approach to neighbours – Friend or Foe

33. Representing the Industry • Fragmented representation of the industry • Should we look at an umbrella body that could play a constructive role in presenting the industry’s view with regard to issues such as; • Bench-marking • Training • Co op and buying Power • Labour costs negotiations • Liaising with State agencies • Capacity and yield management

34. Conclusions • Running efficient golf club operations; • Marty Carr of Carr Golf Services & Mark Nolan, the Dromoland Collection • Under-utilisation in the Irish golfing industry; • Buddy Darby (Kiawah Partners), Marty Carr • Sustainability; • Declan Taite (FGS) particular emphasis on debt restructuring and management • Representing the Industry and; • Marty Carr, Frank Bowen (GUI), Sinead Heraty (ILGU) and Keith McCormack (Failte Ireland) • Marketing/New Media/Online Sales • Buddy Darby (Kiawah Partners), Keith McCormack (Failte Ireland) and Mike Lasoulat (Golf Channel Solutions)

35. FGS team here today Ian Duffy FGS Partner, Corporate Turnaround & Change Management ian.duffy@fgspartnership.com Dublin Office T: 01 418 2021 Declan Taite FGS Partner, Corporate Restructuring & Insolvency declan.taite@fgspartnership.com Dublin Office T: 01 418 2000

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