Tough Times Ahead
Filed in archive Golf Business on November 2, 2008
Tiger in Dubai. Courtesy: The Telegraph
There is a dark cloud looming for the PGA Tour in America.
No, it's John Daly's latest drunken binge, although that is bad enough (the man is through, is he not?).
The dark cloud is deflation. I am certain that Tim Finchem looks at the headlines each day and cringes.
Deflation is coming. What is it? In its baldest terms, it's the opposite of inflation. With deflation, prices fall because no one is interested - or able - to buy anything.
Supply outstrips demand. Falling prices mean job losses. Job losses mean consumers in America can't afford to buy anything. Prices fall more. More jobs are lost.
We are at the start of a vicious cycle that could last for several years as the global economy staggers towards outright recession. Or worse.
Now, here's the connection with the PGA: tournament sponsors will start to disappear.
Consider who sponsors tournaments on the PGA tour. Financial corporations, car companies, lumber companies, farm equipment manufacturers, food companies, couriers. There is not one sponsor whose core business will not be impacted in a severe way by deflation.
We know the state of the banks and other financial corporations that were the heartbeat of Wall Street. We know how the global auto industry is staggering. General Motors and Chrysler were dealt a blow in their efforts to forge a merger when the U-S Treasury turned down GM's request for a bailout. Ford is suffering. Toyota, Honda, Mazda (part owned by Ford) are going through the worst drop in sales in decades.
Lumber and construction companies are floundering in the aftermath of the real estate bubble in the U-S. Farmers can't afford fertilizer, can't get loans, so what happens to the John Deeres of the world?
What of Federal Express? Shipments of everything are slowing and that is how Fed Ex makes its money, a large chunk of which goes to the FedEx Cup.
They all sponsor golf tournaments as part of their global marketing efforts. Marketing always gets cut first in downturns.
And we've got the Mother of All Downturns developing.
At best, the PGA's purse for next year will remain flat. At worst, it will drop considerably. I'm betting on the latter.
This crashing-to-earth will not be limited to the PGA Tour in America. The European Tour will suffer in the inaugural year of its salute to excess, the Race to Dubai.
You may think the oil-rich Arab states are immune. You are wrong. They are all running budget deficits that will grow and grow as oil prices remain soft. Dubai, which turned away from oil some 20 years ago to pursue the wealth brought about by globalized trade, is now suffering as well. Foreign investment is fleeing the country as business people repatriate their money at a time when the Emirate has over-extended itself in a massive construction boom.
Global trade is stagnating; export-based countries in Asia - including China - are facing hard times and are ill-prepared to do so. Dubai's world-leading shipping interests are practically dry-docked.
So, 2009 is going to be no picnic for either the PGA or the European Tour. Attendance will drop at tournaments and the players will think twice about traveling longer distances to play in order to pare their expenses back.
Everyone will re-trench. And it won't be pretty.
Permalink: Tough Times Ahead
Tags: golf pga tour european pga tour deflation economic downturn general motors chrysler ford mazda toyot
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Response from:
golfgirl
(11/17/08 12:29pm)
Response from:
Andy Brown
(11/22/08 10:04am)
Now that’s a terrifying picture that you have painted and the terrible part is most of what you say is true. I thought the most important line in your piece was the bit where you said “They all sponsor golf tournaments as part of their global marketing efforts. Marketing always gets cut first in downturns.” I am only aware of very few companies who have vowed to increase their intake, who have promised to increase their marketing investment but that could also be more loose talk than anything else.
There was a very interesting piece I read somewhere which pointed out how the PGA Tour lives on an inflated image and at the first opportunity there will be sharp cut backs. So if the marketing whizids decide to back out of PGA Tour events then we must assume that it is a long overdue correction that is taking place.
Perhaps also the sponsor base of all these events on tour is something of a worry. But unfortunately the kind of audience a golf tournament attracts merits these sponsors and hence the real desperate call to take the game to the masses. It’s a hollow cry now but one that we must persist with!
Putt for dough!
Andy Brown
GolfSwingSecretsRevealed.com
There was a very interesting piece I read somewhere which pointed out how the PGA Tour lives on an inflated image and at the first opportunity there will be sharp cut backs. So if the marketing whizids decide to back out of PGA Tour events then we must assume that it is a long overdue correction that is taking place.
Perhaps also the sponsor base of all these events on tour is something of a worry. But unfortunately the kind of audience a golf tournament attracts merits these sponsors and hence the real desperate call to take the game to the masses. It’s a hollow cry now but one that we must persist with!
Putt for dough!
Andy Brown
GolfSwingSecretsRevealed.com
Response from:
chris
(11/22/08 11:25am)
Andy and Patricia, thanks for your comments. The fact of the matter is golf is not de-coupled in any way from the greater financial reality. Therefore, it too will suffer. And since, as Patricia says, we're entering uncharted waters - and, indeed, we are - anything can happen. But I know only too well that the reality of a situation lies somewhere between the doom and gloom headlines and the rosy picture painted by politicians. Unfortunately, the headlines are growing worse while the rosy viewpoints are becoming fewer and fewer. Professional golf is in for serious re-trenching. On the brighter side, Patricia, the recreational game should become far cheaper for those of us already playing golf. As for newcomers, nothing has changed in terms of the challenge posed in getting them to take up golf. Good times or bad, it will always be necessary to attract that new blood you speak of.
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Many golf businesses will fail in the next couple of years and my biggest fear is that golf may emerge to find itself looking more like the elitist, exclusionary sport it was decades ago, once the dust has cleared courses have closed and it's once again become unaffordable for the average person to be a golfer.
I feel it's vital that we who care all become evangelists for the game we love. We've got to come up with unconventional, innovative way to make the game more fun, less time-consuming and ... more affordable so that we can attract new players and maintain current ones. This may not appeal to the wealthier golf purests...and often it's this group that wins out...but this time we can't let them.