Has the Pandemic Increased the Value of Golf Courses?

Rewind back to the spring of 2020, where for many of us, our daily routines came to a halt and boredom was making its presence known. Hobbies and passions were developed to pass time. One of the most popular activities adopted was golf.

Prior to 2020, finding a tee time was simple, and consisted of calling the local golf course, getting a time locked in, and heading to the course. Now, almost two and a half years and many swings later, landing a tee time is still a challenge. According to an article in Forbes, in the summer of 2020, 67% of golfers claimed that their increased golf play was related to lack of activities available for leisure time. In late 2021, 56% of golfers had deemed golf as a priority. Golf play had increased by 6% nationwide in 2021, which resulted in an additional 30 million total rounds. According to the National Golf Foundation, 3.2 million people in the U.S. played golf for the first time in 2021. The total U.S. golf population was closing in on 25 million people, including 3.1 million junior players. Of the 3.1 million juniors, 36% were females. In comparison to the last golf surge prior to 2020 when Tiger Woods’ success and popularity in 2000 inspired many to pick up the clubs, just 15% were females. Now, 25% of all golfers are women, and represent over 1/3 of total beginner golfers. More than 20 years ago, just 6% of golfers were minorities, but now more than 25% of total golfers are non-Caucasian. The game is growing across the board, in all categories.

However, while demand has picked up, so have the costs to maintain the conditions of the course. Golf course owners have had to raise their spending on maintenance to keep up with the increased volume of action their course experiences regularly. Industry experts state that costs have had an equal response to the rise in revenue. Depending on location, golf course maintenance ranges from $500,000 - $1.5 million annually. Additionally, the supply of golf courses has historically exceeded consumer demand, therefore greens fees remain competitive. So, while Ibis World predicts that revenue will grow by 1.4% annually from 2022 through 2027 the supply of golf courses combined with the required maintenance makes it unclear what the impact to cash flow would be and is likely specific to each individual golf course.

The valuation of a golf course, much like any other business, is a complicated process that takes many factors into account, with cash flows being critical along with things like land value and market multiples. The recent surge of interest in golf has most likely impacted the cash flow, and ultimately, the value, of golf courses overall. 

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