The pit falls of golf investment

Golf, to many, is a sport of a simple concept: getting a small white dimpled ball into a minuscule hole a few hundred yards away, nevertheless when mentioning names like: Tiger Woods, Severiano Ballesteros, Jack Nicklaus, and Rory McIlroy we are easily able to associate them with the bigger picture of golf. How so? It starts with the golf economy around the world which has an estimated value of $177 billion when all is included. What has happened to make this sport such an eminent part of the world’s economy, society, as well as a part of the local community. Golf courses or golf related companies are able to make, in some cases, millions of dollars, so how do they make their money? What has changed in the investors mindset that has made them so successful? Why is it one of the world’s largest sporting economies?

Golf of course has many upsides, however, I must begin with some of the pit falls. Not all investments work out in the financial world and this is especially true in golf. The reason as for why it is difficult is because the adjustment of investors and CEO’s mindsets were too late. Investments in golf courses are dangerous when looking behind it all; golf courses have high fixed costs meaning that this will be a source of constant substantial instability for many smaller enterprises. Having said that, when clubs price valuations are compared to what they were before the recession, many have gone down, showing the market’s difficulty. Investment in golf is becoming so convoluted that the 3 big players of golf investment: GE Capital, Textron and Capmark, have seen a 75% decrease in their joint portfolio between 2007-2012, starting at $2 billion decreasing to $0.5 billion. If you examine the investing side of the golf economy you deduce that since there has been overbuilding of golf courses, due to the property price’s bubble, lenders are reluctant to provide financial backing due to too much risk. Overall golf course investment has been and will be beneficial due to its implications on employment along with providing monetary help for many people. However, in the words of Larry Hirsh, President of Golf Property Analysts, when you invest in a golf club ‘They’re like new cars, they’re worthless the minute you drive off the lot.’