Golf Market Analysis What it Lacks in Sex Appeal it Makes Up For in s

1. Golf Market AnalysisWhat it Lacks in Sex Appeal it Makes Up For in $$$s Jim Koppenhaver � Pellucid Corp. Steve Fanning � Fanning & Associates Stuart Lindsay � Edgehill Consulting

2. Rule #1, Discussions are More Productive Than Presentations��.. Main Entry: dis�cus�sion Pronunciation: \di-'sk?-sh?n\ Function: noun Date: 14th century 1 :�consideration of a question in open and usually informal debate 2 :�a formal treatment of a topic in speech or writing

3. Market Analysis is Hard, Non-Local Market Analysis is Harder Local market analysis for golf has historically been challenging- Figuring out �golfers� vs. �population�- Figuring out �frequency� vs. �bodies�- Matching price segments to population affluence/age Most potential owners & service providers consistently overestimate the draw area for the facility But, at least we have a bead on people locally and some constraints on how far they�ll travel Destination golf shares none of these characteristics but it�s too big an investment to �throw in the towel�

4. What We�ve Learned by Trial & Error For new facilities, you either have to start with well-reasoned assumptions or looking for �proxy� facilities For existing facilities, we prefer starting with analysis of the current golfer, hotel guest, member or homeowner- Requires either good point-of-sale (POS) system or periodic survey- Geography as well as perceptions is useful (where do they come from, why do they choose us?) For golf communities, old benchmark of 30-40% of residents joining the club is eroding (�20-30% now) For resort areas, chamber of commerce often has the most-informed opinion on inbound population numbers

5. How the Process Normally Happens Prospective owner has a revelation that they�ll create the next �golfing mecca� in a dream (night version) or vision (daytime version) Willing golf architect expands on the vision and doubles its sublimacy Market analysis �geeks� are called upon to support and bless the vision Economic and analytic reality meets vision Numbers and assumptions are adjusted to meet vision/price tag (also known as Made As Instructed) Resort/development/golf course gets built

6. Might We Suggest an Alternate Approach? Prospective owner has a revelation that they�ll create the next �golfing mecca� in a dream (night version) or vision (daytime version) Calls on the analysis �geeks� to outline the golf�s ability to support and enhance the project (feasibility, facility type, rounds/revenue economics) Call on the architect and planners and outline the financial reality parameters of the development including the golf component Economic and analytic reality meets design utopia Compromises reached between economics/design utopia Resort/development/golf course gets built Lead out to Steve: �That�s the theory, how might it actually work?�Lead out to Steve: �That�s the theory, how might it actually work?�

7. A Six-Step Process for Understanding Key Market DynamicsStephen F. Fanning, MAI, SGA, AICP

8. A Six-Step Process to Recovery Step 1. Define the Product - Property Productivity Analysis Step 2. Market Delineation Step 3. Demand Analysis Step 4. Supply Analysis Step 5. Analyze the Interaction of Supply and Demand (Residual Analysis) Step 6. Forecast Subject Capture Possible joke about AA having a 12-step process, we�ve figured out how to cut the road to recovery from bad analysis in half, set up that we have to modify it somewhat for non-local golf demand projectsPossible joke about AA having a 12-step process, we�ve figured out how to cut the road to recovery from bad analysis in half, set up that we have to modify it somewhat for non-local golf demand projects

9. Step #1 - Define The Type of Product What golf market segment (s) does the subject golf course property (and development) have the ability to serve? Some factors considered are: Course Design & Quality Facilities Design & Quality Legal Social/ Economic Characteristics of the club and community Location: How the golf course fits into the community growth structure

10. Step #2 - Market Delineation What are the characteristics of the golf market segment that desires this type of golf course? Market Area Concepts Time � distance concepts Area over which substitute properties tend to compete Location of current members \users Geographic Market Delineation Consumer Profile of Most Likely Users Type Tourist, second home residence, white collar executives, corporate outings, local residence, etc Demographic Characteristics

11. Step #3 - Demand Analysis What is the golf course demand for this market segment? Inferred Methods Current Market Conditions General Growth Trends of City and Subject Sub-market Fundamental Methods Ratio Methods by golf course type Ratio of Current rounds/memberships to indicator proxies such as: population, age, income, employment, tourists, hotel rooms etc. Segmentation Method (segmentation of golf course types, user types, part. rates and avg. rds played)

12. Step #4 - Supply Analysis What is the competition in this market for this market segment? Current Competitive Courses Planned Competitive Courses

13. Proximity Doesn�t Necessarily Mean Competitive

14. Step # 5- Analyze Supply/Demand Interaction What is the market condition for this market segment? (comparing supply with demand currently and for the future)

15. Step #6 - Forecast Subject Capture How much of this market segment can the subject golf property capture? Current Capture Analysis Methods Competitive Course Rating Methods

16. Now What? Financial Analysis What are the financial implications to the property? Is it a good investment? (investment value to individual or specific group) Is the property�s value more than its cost? (feasibility) Does this market segment produce a higher net income than another segment? (highest and best use) What is the golf course�s market value? (appraisal) Can redirected management/marketing-increase income? (management practices)

17. Golf Supply is Subject to Consumer Segmentation A basic decision tree is Demand Source (local vs. destination, destination could be further subdivided into drive/fly properties), Access (Priv vs. Public), semi-private really isn�t a segment, it�s a payment method, then experience type (regulation length vs. alternative facility), then value points within Private and PublicA basic decision tree is Demand Source (local vs. destination, destination could be further subdivided into drive/fly properties), Access (Priv vs. Public), semi-private really isn�t a segment, it�s a payment method, then experience type (regulation length vs. alternative facility), then value points within Private and Public

18. Golf Market Segments - Public

19. Golf Market Segments- Private

20. Golf Market Segments- Private Specialty

21. Golf Market Segments- Resort

22. Resort - Marketability Analysis Factors Destination Qualities Site Characteristics Golf Course Design and Layout Hotel and Other Building Features Marketing Features

23. Marketability Comparison to Competition:Destination Qualities

24. Marketability Comparison to Competition:Site Characteristics

25. Marketability Comparison to Competition:Golf Course Design & Layout Might have to just pick 5-6 highlights for simplicity and to fit on slideMight have to just pick 5-6 highlights for simplicity and to fit on slide

26. Marketability Comparison to Competition: Hotel and other Building Features

27. Marketability Comparison to Competition: Marketing Features Hand back to Jim, he transitions to Stuart�s more operational view of market analysis/insightHand back to Jim, he transitions to Stuart�s more operational view of market analysis/insight

28. Market Analysis: Not Just for New Developments While most developers aren�t long-term owners/operators of the assets/golf facility, understanding the golf market dynamics will make the disposition smoother or�.. �If you end up managing it longer than expected due to slow sell-through or�.. �If you take over a troubled property for turnaround In these cases, sound market analysis will help you get to the end objective sooner and with less pain Jim covers, hands off to StuartJim covers, hands off to Stuart

29. How Market Analysis Translates to Improved Performance for New & Existing FacilitiesStuart Lindsay:Edgehill Consulting

31. This Standard Approach to Market Analysis Doesn�t Work Well in Resort/2nd Home Situations

32. Where Do Our Customers Really Come From?

33. Sometimes You Need an Even Bigger Map

35. You�re Compelled to Build, Where Can You Find Remaining Pockets of Customers & Demand? Golf Course Supply increased 86.1% 1990-2005 Population increased 62.7% over that period Even 15.9% population growth projected over the next 5 years isn�t going totally to eliminate the problem

36. It Turns Out That Your Current Customer Base Weren�t Existing Local Residents Build up your data points Identify where they came from Collect secondary addresses Direct marketing outside the local market to areas where your members are actually coming from

37. Since They�re Valuable and in Limited Supply, There�s High Incentive to Retain Them How many customers did we retain? How many increased spending (safe) How many decreased spending (at risk)

38. We Can Modify the Approach (and it gets easier) When Dealing In Local Golf Dynamics

39. All Told, We Can Account for 70%+ of Members, 85%+ of Spending Within 10 Miles

40. Profiling Your Current Golfers & Members Provides Another Piece to Puzzle 87% are married, but only 13% have children at home (compared to 33% of US HHs), this private club is at a membership crossroads Average Age is 66 (compared to 54 nationally, down from 60+ in �90s) 57.8% have Income over $75,000 Net, we�re looking for local, mid-age, affluents

41. Even Better, Having a Dialogue With Golfers (Members & Public) Drives Retention Club Staff in all departments got the highest quality ratings Golf Course conditioning got the lowest rating F & B got the highest overall ratings Club Communication was very good Pass back to Jim for summary and begin Q&APass back to Jim for summary and begin Q&A

42. Conclusions Trying to determine the number of potential golfers, where they�ll come from and their involvement in your project is challenging With millions of $$$ at stake however, the WFITA (wet finger in the air) approach is somewhat risky Using the best available information resources, progressive analysis approaches and independent service providers will produce more friction but a better end result The golf component can be a good draw, even in today�s oversupplied environment, if the math is sound and can pass an unemotional test of reason

43. YOU�VE GOT QUESTIONS? WE�VE GOT ANSWERS!(and those we don�t we�ll make up)

44. Resort Golf Myths, Truths and Mysteries All I need is a Beach and a Jack Nicklaus Signature Course and I can have a successful resort golf course We "feel like" a lot of outside demand is coming our way Golf is a major profit center for 2nd home resort communities Cumulative Attraction is good for Resort Golf- The more you build the more will come.. If I have enough sand traps, with white sand and fast enough greens, then I have a resort golf course Resort Golf is the same whether it is in middle of a second home subdivision or tied to a hotel