The 11th KPMG Golf Business Forum, recently held in Dubai, addressed a host of industry issues, including golf in the Gulf Cooperation Council and the development potential of golf in the so-called 'emerging markets', such as the Middle East. Chris White, General Manager of Aldar Golf and responsible for the running of the acclaimed Yas Links Abu Dhabi facility, was a panel guest at the Forum and offers his thoughts and insight in the light of the current economic climate.
"I have been very fortunate to participate in several business conventions over the years and there is no doubt we can all learn a few important things from situations or experiences others have had.
The KPMG Golf Business Forum (GBF) offered a tremendous opportunity to network and share best practice ideas with fellow industry professionals and it was incredibly positive to note the geographical diversity of participants from Asia, Africa, Europe, and North and South America along with representatives from some of the 'emerging markets', including those in the Gulf Cooperation Council (GCC).
Representing one of these GCC areas, the UAE, I felt it important to impress upon the GBF audience the current challenges facing golf operations in the Middle East - especially with the global perception being of a region of much wealth where everything that's touched turns to gold.
Admittedly we do boast amazing facilities with courses created by great architects and perfect conditions. And, yes, Middle East courses charge relatively high green fees, with a round at Yas Links costing $135-215, to offset the relatively low annual membership income across the region - but the costs associated with delivering and maintaining these high standards are among the reasons golf courses in the region are finding it hard to break even.
Let me highlight four of the key factors why golf facilities in the Middle East are struggling to make their hoped-for profits.
Clubs, like ours, are proud of their reputation for providing incredibly high levels of service - but it does come at a cost, particularly in terms of significant staffing requirements. The reasons: clubhouses are large and often operated like a hotel with a bag drop/concierge service, fully serviced locker rooms and course marshals; all this often necessitates two shift patterns and some clubs may have up to 300 full-time staff. Critics may argue that salaries are low (junior staff receive an average wage of $5000 per year), but again this highlights a huge misconception: an employee's salary is almost doubled when the additional costs of accommodation, visas, medical fees, return air tickets, meals and so on are taken into account.
Maintenance equipment at Middle East golf clubs is significantly different to that used in other global regions. Most use abundant fleets of ride-on mowers, tractors and trailers. Why? Well, grass is not designed to be grown in the desert - doing so successfully creates a piece of real estate that has to be managed carefully every day of the year, with no respite from the seasons as in other parts of the world. It is no surprise that maintenance costs are high.
Allied to this, many of the newer facilities, such as Yas Links, don't yet have the associated real estate that allows them to benefit from the less expensive Treated Sewage Water subsidies and are forced to maintain their grass with expensive desalinated water. Indeed, even at subsidised rates water bills can be over $1 million a year.
Finally, plant disease is a big factor - and concern - given the Middle East's high humidity levels. The applications to treat, control and prevent such disease can be extremely expensive.
Aside from the GBF, KPMG recently published its latest Golf Benchmarking Survey - covering Europe, the Middle East and Africa - which offered some fascinating statistics and insights about the state of the golf industry in 2010.
The business of golf is, in principal, the same the world over: green fees are largely based on the expectation, reputation and, ultimately, the experience the facility delivers. Operators, therefore, have to target their audience carefully and offer something unique to capture a good share of the market.
Until recently the supply to demand ratio for golf in the Middle East was heavily in favour of demand with limited supply; such a ratio tends to equate to a strong and successful model. However, in early 2008 we witnessed a virtual reverse of that dynamic. New courses and a global recession that appeared to lead to discretionary spend have now resulted in an incredibly competitive playing field. These days operators are having to pay as much attention to rising costs as they have to reducing revenues.
Going forwards like any business plan and market study, the development of new golf facilities needs to be strategically planned and realistically considered in order to ensure the market doesn't become in some way saturated - and, in doing so, dilutes the audience. There is still, most definitely, room for golf course expansion but it needs to support residential communities or resort facilities and must be seen as much of a driver of tourism as a facility to support a local population.
In line with this we all have a responsibility to maximise the sustainability and minimise the environmental impact the global growth in golf is having. This was brought home by a good, if disheartening, presentation at the GBF concerning the longevity (or lack of) of our planet and natural resources based on current rates of growth. Are we truthfully doing enough to preserve, or even replenish, what we have? I would like to see a complete artificial surface golf course in the region; I believe such a project and design is possible, and would allow a significantly lower operating cost - and, thus, could result in reduced green fees to encourage a greater access to golf for a broader audience.
In short, golf has many plus points for the Middle East. It drives tourism, stabilises the desert, offers value to residential and resort development, creates amenities, encourages sport and outdoor activity, develops a person's education and character, enhances an environment and boosts wildlife.
But the supply of golf facilities needs to be correctly aligned with the demand. Growth needs to be focused on markets and regions where there is currently little golf provision or which can support the far bigger picture of building a thriving community and contributing to an enhanced lifestyle."
For more information about Yas Links Golf Club, Abu Dhabi please visit: www.yaslinks.com.