2009-01-30 Golf Course Market Review

Presentation Fort Sheridan Golf Course Market Review Presented to: The Lake County Forest Preserve District Presented by: ERA|AECOM January 30, 2009

Approach  Review and comment on past reports by Golf Resources Associates (GRA)  Highlight the overall state of golf participation, supply, and demand locally  Evaluate financial linkage between construction cost estimates and likely greens fees  Consider the impact of the proposed course on other primary market golf offerings  Evaluate options – ERA experience

Market Perspective GRA golf demand analysis  Studies in 2001, 2004, 2005, and 2008  Focus on a 15-mile primary market around Ft. Sheridan  2001: unmet demand for 195,000 rounds  2008: unmet demand for 80,000 rounds ERA Perspective  General agreement with their conclusions  Bottom line: local golf market is saturated

Market Perspective  Golf rounds have decreased since 2000 – From 28 to 22 rounds per person per year – Annualized: 3.9% decrease per year  Since 2002, national golf participation rates have decreased – Participation rates down from 11.1% to 9.3% – Annualized: 2.2% decrease per year  Since 1988, the region has added about 7 courses per year – Since 2003, the pace is down to 2 per year

National Trends: Rounds Played 30 Decrease from 28 to 22 rounds per person 28 26 24 Rounds / Year 22 20 18 16 14 12 10 2000 2001 2002 2003 2004 2005 2006

National Trend: Participation 11.5% 11.2% of population 11.0% 10.5% Participation Rate 10.0% 9.3% of population 9.5% 9.0% 8.5% 8.0% 2000 2001 2002 2003 2004 2005 2006

Local Golf Course Supply Growth 16 1994 – 14 courses opened Chicago Metro Area 14 1998 to 2007 12 10 2 courses 8 opened - 2007 6 4 2 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

LCFPD Golf System Impact  Countryside, Brae Loch & ThunderHawk  Annual Rounds Played - 2004 to 2008 – Decrease from 135,772 to 115,069 – Overall decrease of 15% – Annualized decrease of 3.4%  Overall change by course – 2004 to 2008 – Brae Loch – rounds down 20% – ThunderHawk - rounds down 16% – Countryside – rounds down 13%

LCFPD Golf System Impact  Operating Revenue - 2004 to 2008 – Down from $5.2 million to $4.7 million – Overall decrease of 10% – Annualized decrease of 2.7%  Operating Expenses – Up $3.82 million to $3.99 million – Overall increase of 4% – Annualized growth of 1.1%  Increased pressure on the bottom line – Cash flow is still positive

Market Considerations Primary Market  Large:1.3 million  Affluent: $113,000  Median age: 38 years  Built-out  Slower growth rate County perspective  Growth: north & west  Median Age: 35 years

Primary Market Golf Supply  39 golf courses within 15 miles  6 more golf courses within 15 to 20 miles – Includes ThunderHawk  87% of supply is publicly-owned  Publicly-owned high end: $80 to $90 / round – The Glen: Peak weekends at $175 / round  Private clubs impact the high end market – Current concerns about instability

Golf Course Cost Estimates  The Fort Sheridan 18-hole scenario – Construction would begin in 2010 – $17 million to $25 million – Exclude banquet – Hard & soft costs, grow-in, & escalation  Estimates are tied to: – Specific course routing plans – Timing of specific contractor bids  Fort Sheridan has special considerations – Cost premium

Proposed Business Plan  Total project cost range as noted  LCFPD already has $2 million allocated to lower debt requirements  Average greens fees start in the $140 range  20,000 average rounds per year – Conservative but realistic  ThunderHawk’s $1.3 million operating budget would be low for a high-end course

Key Findings: 18-Hole Proposals  GRA: greens fees at $100 - $120 per round – Insufficient to support operations and debt  ERA: greens fees at $140 - $170 per round – Minimum to break even on operations and debt  Reality #1: Pricing below $100/round will impact the primary market: – 5% to 15% of play will be reallocated – Older near-by courses will bear the burden  Reality #2: Construction costs have grown faster than revenue – Golf oversupply has constrained revenue growth

Key Findings: Other Proposals 9-Hole Golf Course / Open Space Scenario  Market penetration is lower  Limited ability to drive premium rates  More expensive per hole to build & operate – An operating subsidy is realistic  Linkage with golf education and training  ERA experience: open space would support residential real estate value premiums

Key Findings: Other Options Privatized Golf Scenario  Could require preferred resident access  Traditional private financing would be more expensive – higher greens fees  Access to public financing would need to be evaluated  Balancing public and private access is a question

Core Policy Questions  In the current / near-term market context: – Course development below $140 per round is not feasible – Lower fees will impact adjacent courses  Board comfort with “high-end” greens fees is in question  Privatization is an interesting but complex alternative  The 9-hole / open space concept would require more study

2009-01-30 Golf Course Market Review

by Lake County Forest Preserves on Dec 04, 2009

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2009-01-30 Golf Course Market Review — Presentation Transcript