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Sat, January 23, 2021 | 06:11
Golf courses face life-or-death crisis
Posted : 2013-07-07 16:02
Updated : 2013-07-07 16:02
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Gov't urged to create favorable environment for golf


By Lee Hyo-sik

When Park In-bee won the U.S. Women's Open in New York a week ago, Korea shouted in jubilation. The 24-year-old, the world's top-ranked female golfer, made history with the title by becoming the first player to win the first three majors of a season since 1950.


Besides Park, many other Korean golfers are making headlines across the globe, raising the country's profile as the world's golf powerhouse.

However, Korea's golf courses, the backbone of the successes of these Korean golfers abroad, are reeling from deteriorating bottom lines due to multiple factors. For one, the ongoing economic downturn has hit many courses hard by discouraging people from playing golf.

Many new golf courses have opened over the past few years, but the number of golfers has increased at a slower rate. The larger supply than demand has aggravated the financial health of most golf courses, particularly those in provincial areas.

Additionally, heavy taxes and other government policies unfavorable toward golf course operators have made it more difficult for them to stay afloat.

During the previous Lee Myung-bak administration, the government virtually banned public officials from playing golf, viewing it as the source of corruption and other irregularities among those in power. The situation has not changed much under President Park Geun-hye.

"Half of the green fees alone cover taxes. That is why golf courses are forced to charge customers more. This makes golf an extremely expensive sport in Korea," said Lee Jong-gwan, a spokesman for the Korea Golf Course Business Association (KGBA), a lobby group for both membership and public courses with over 18 holes. "We have been asking the government to scrap the special excise taxes imposed on membership golf courses to help support the industry. But it has consistently turned a deaf ear to the concerns of struggling course operators."

Lee urged the government to stop a series of hostile policies against the golf industry, and instead extend financial and other support.

"When Park In-bee won the U.S. Women's Open, President Park and leaders of both ruling and opposition parties sent a congratulatory message. The successes of Park and other Korean golfers playing overseas were possible thanks to golf courses back home that provided full support to young players," the spokesman said. "However, the government imposes extremely high taxes and discourages public-sector workers from playing golf. It must abandon an outdated view of golf and introduce support measures for struggling courses."

Lee then said a sharp rise in the number of new golf courses over the past several years has aggravated the bottom line of the entire industry. "In contrast, the number of golfers has been stagnating. Young Koreans these days seem to be attracted to other leisure and sports activities."

According to the Korea Leisure Industry Institute (KOLE), the number of golf courses in Korea stood at 468 in 2012, up from 440 in 2011 and 369 in 2009. By the end of 2013, the figure is expected to exceed 500.

However, the number of course visitors has largely stalled. In 2012, a total of 27.6 million people visited both membership and public courses, up only slightly from 26.5 million in 2011 and 25.5 million in 2009.

Membership courses on brink of collapse


There are two types of golf courses in Korea — membership and public.

Operators of membership courses sell memberships to individuals and companies in order to finance construction. When courses are completed, membership holders are given the right to reserve tee times and can golf at low costs. Non-members can also play at these courses but have to pay hefty green fees. People with high disposal income prefer to play in membership courses.

In contrast, operators of public courses build holes with their own funds or by borrowing money from financial institutions. When courses open, people wanting to play are given equal rights to book tee times and pay the same green fees, which are lower than those of membership courses. These courses make golf more affordable for those short of cash.

Lee of the KGBA said many membership golf courses are struggling to stay afloat as a result of declining number of golfers amid the economic slump.

"The prolonged economic slump has made people more reluctant to golf, reducing the demand for memberships," Lee said. "The construction of many new golf courses in recent years has put further downward pressure on the value of golf memberships, particularly in provincial areas."

According to Donga Golf Membership Trading, Korea's largest membership dealer, the average price for life-time golf memberships across the country stood at 119 million won ($104,000) in June, down nearly 63 percent from 2008.

For instance, the value of a membership at Nambu Country Club, one of Korea's most prestigious courses, peaked at 2.1 billion won in 2008. Since then, however, the value has fallen to 910 million won.

"In the 1980s and 1990s, buying golf memberships was a good investment because their values usually went up in line with Korea's rapid economic growth," said Seo Cheon-beom, the head of KOLE. ""But since the early 2000s, golf memberships have been losing value due to falling demand and increasing supply."

With declining membership values, the profitability of membership golf courses has been deteriorating.

According to the institute, the average operating profit ratio of 114 membership courses here dropped to 6.9 percent in 2012 from 19.2 percent in 2009. Nearly 40 courses of the 114 incurred losses, up from 15 three years ago, it said.

Many membership golf courses built after 2005 will continue to face greater difficulty because they are required to return membership fees to members, Seo said.

Under the law, membership courses are obliged to refund the fees if members want the money back, usually five years after the opening of the course.

With the membership value falling below the initial prices, membership holders will continue to demand course operators return their money.

"We estimate that over 100 golf courses opened since 2005 will continue to face the problem of returning membership fees. The amount of money involved is valued at over 2 trillion won," Seo said. "Some membership courses have already gone bankrupt because they were financially unable to meet this obligation. The bigger problem is that no one wants to acquire courses that went out of business because of this obligation."

He painted a gloomy picture for membership golf courses. "Besides those operated by large business groups, the majority of membership courses will be insolvent at some point. I think they will either have to close or turn into public courses to remain in business."

Public courses faring better

Seo projected that the majority of golf courses operating in the country will soon transform into public ones.

"Golfers have begun moving away from membership-courses because they do not want to buy memberships. Instead, they have started to flock to public courses," he said. "No public courses have gone bankrupt yet, and all have maintained an operating profit ratio of about 20 percent. They are not subject to special excise taxes, making it possible for them to keep green fees lower. More membership courses will turn into public courses if they successfully refund membership fees."

About 21,120 won in excise taxes is added to green fees at membership courses.

As of 2011, about 32 percent of Korea's golf courses are public, up from 16 percent in 2001. In 2016, the ratio will likely reach nearly 50 percent, according to the institute. Recently, Pine Hills Country Club in South Jeolla Province and Owners Golf Club in Gangwon Province became public courses.

Cho Chang-gee, secretary general of the Korea Public Golf Courses Association, echoed Seo's views, saying that public courses will soon become mainstream as in Western countries.

"Public courses will continue to fare better than their membership counterparts. But they are also grappling with the declining number of customers," Cho said. "Their survival hinges on whether they will be able to attract more golfers."

He said golf should be viewed and supported as one of Korea's popular sports like baseball and football. "Many Korean golfers excel overseas and raise the nation's profile as a golf powerhouse. So, the government must extend full support to encourage more people to play golf."

The secretary general suggested that the government include golf as part of public school curricula to make the sport more popular with the public.

"Policymakers should end a virtual ban against public officials playing golf. This has also discouraged those in the private sector from teeing off," Cho said. "It needs to lower taxes on golf courses and extend emergency financing to struggling operators."

The secretary general then stressed the importance of self-rescue efforts by golf courses.

"They should introduce a wide range of marketing activities to draw more customers. They need to boost operational efficiency to cut green fees and lower prices of food and beverages inside the courses," Cho said. "Like in the United States, Japan and other countries, golfers will likely be allowed to play without caddies in the near future. This will cut the golf fees by at least 100,000 won."

Emailleehs@koreatimes.co.kr Article ListMore articles by this reporter









 
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