2005: Getting down to Business
Monday, September 26, 2011
When Jim Awtrey, the PGA of America’s longtime chief executive, took the podium at the organization’s 2004 annual meeting to give his report to the membership, he pointedly began his remarks by saying, “Good morning, stakeholders.”
In using the term “stakeholders,” Awtrey wanted to hammer home his view that PGA members have a stake not just in the association, but in the health of the golf industry.
“When we look at everybody as stakeholders in the game, we all have a reason to get together and talk,” Awtrey said in a recent interview, explaining his choice of words.
The conversations those stakeholders have these days are nothing like 18 years ago, when Awtrey first began running the PGA. Like the entirety of the golf industry, the PGA has undergone dramatic changes during Awtrey’s tenure.
As Del Ratcliffe, a course owner and longtime PGA member from Charlotte, N.C., says, “For an industry that is so steeped in tradition, we have compressed a lot of change into a short period of time.”
It was during that presentation a year ago that Awtrey announced his intention to retire. His longtime lieutenant, Joe Steranka, the PGA’s managing director of communications and broadcasting, will succeed him (see page 4) and be introduced to the membership as the next CEO at the PGA’s annual meeting this week in Scottsdale, Ariz. He’ll inherit an organization whose membership has nearly doubled over the past 20 years, in part reflecting a dramatic boom in course construction, and hence employment opportunities.
In addition, the PGA now has a growing portfolio of business interests that extends far beyond its two top-shelf properties, the Ryder Cup and PGA Championship. The once cash-strapped association now is awash in cash – so much so that Awtrey, fully recognizing the irony of his words, says his successor’s “toughest (job) will be spending the money” because tax laws prevent the not-for-profit association from providing direct benefits to its members.
But while the PGA’s revenues have ballooned, Awtrey acknowledges there has been griping from some quarters that the national headquarters in Palm Beach Gardens, Fla., is more concerned with continually strengthening its balance sheet than addressing members’ day-to-day concerns and promoting the value of PGA membership to employers.
“When people say there’s a disconnect in Florida, they’re often saying, ‘What do I get? Why can’t I get free dues, free benefits?’ ” Awtrey says. “It’s hard for people to understand that you can’t spend revenues directly on them, no matter how often you explain that.”
In fiscal 1989, Awtrey’s first full year as the PGA executive director, the association had revenues of $16.5 million. (Awtrey was appointed as the PGA’s first chief executive officer in 1993.) In fiscal 2005, which ended June 30, that figure had grown to $226.7 million.
The engines driving that growth are the Ryder Cup and the PGA Championship, along with the timely decision seven years ago to sell the two domestic PGA trade shows to Reed Exhibitions for $120 million. The association’s TV rights have increased tenfold since the late 1980s, and event merchandising, which was brought in-house 10 years ago, now approaches $10 million annually, according to Steranka.
“The PGA Championship is far and away the biggest asset for the association in terms of the direct dollar revenue and all of the pubic relations benefits it generates,” Steranka says.
He notes that the Ryder Cup’s impact is limited by the fact that it’s held in the United States only once every four years, but in those years, it provides a huge windfall. In fiscal 2005, which included the period covering the 2004 Ryder Cup at Oakland Hills Country Club in Bloomfield Township, Mich., total revenues from spectator tournaments soared to $157.2 million; the previous fiscal year, that figure was $65.3 million.
Those tournaments, particularly the Ryder Cup, used to receive virtually no attention. Awtrey recalls that ABC Sports paid a modest sum to televise the PGA Championship, while the Ryder Cup received irregular coverage and the Senior PGA Championship wasn’t televised. That began to change in 1987, when the European squad won the Ryder Cup at Muirfield Village in Dublin, Ohio. Suddenly, the once-lopsided competition had become competitive, and the sight of the Euros celebrating on U.S. soil only fueled the budding rivalry.
When the Ryder Cup returned to the United States in 1991, it had network coverage through a new contract with NBC. It also had an unlikely venue, the result of an agreement with Landmark Land Co., then a PGA licensee.
Shortly after being elected secretary of the PGA in 1989, Gary Schaal got calls from other officers who told him of plans to hold the 1991 Ryder Cup in Kiawah Island, S.C. His response: “You guys call me back tomorrow when you’re sober and we’ll talk about it again.” But Pete Dye’s Ocean Course, which opened just a couple of months before the 1991 Ryder Cup, proved to be a dramatic venue for the infamous “War by the Shore,” helping to turn the event into a major spectacle and a cash cow for the PGA.
Either directly or through licensing arrangements, the PGA’s brand now stretches into everything from e-commerce to tournament hospitality to travel services. Traffic on PGA.com is growing 40 percent annually, according to Steranka, and through the PGA Trade-In Network, a partnership with eBay and 3Balls.com, the association now is getting a cut of the booming used-equipment business.
A year-old effort to market surplus tee times through e-commerce partner Turner Interactive, however, apparently has gotten off to a slow start.
Those ventures eventually might be dwarfed by the PGA Village at Coyote Springs, a 43,000-acre development near Las Vegas that eventually could be home to as many as 16 golf courses and 150,000 homes. Construction at Coyote Springs began earlier this year, with the first two courses scheduled to open in 2007, and Awtrey views the project “as something that would generate well over $100 million” for the PGA. Golf course licensing and ownership now accounts for nearly $17 million in annual revenues, more than the PGA’s total revenues when Awtrey first took the job.
In addition, each association president typically promotes at least one major business initiative during his two-year term. Under M.G. Orender, the association’s president from 2003-04, the PGA took the lead in promoting participation through its Play Golf America campaign. While that campaign generally has been well received, there’s a strong sentiment that the PGA needs to do more – whether that means dedicating more money to participation programs or better mobilizing the membership to address the issue.
“If they’re saving that money for a rainy day, I gotta tell you, it’s been pouring down rain,” Ratcliffe says.
More recently, Roger Warren, now finishing his first year as PGA president, has made the PerformanceTrak statistical research program a cornerstone of his administration, hoping to provide members with better data on course operations. In September, about 1,100 PGA pros responded to the PerformanceTrak survey, which seeks data on such things as rounds played and revenue per round.
Ted O’Rourke, a PGA board member and head pro at Morris County Golf Club in Morristown, N.J., believes PerformanceTrak will help pros who “need tools to show their value (to employers).” PerformanceTrak will become part of the PGA’s education programs, and could become a new product for the PGA to sell, competing with data sold by other industry groups. But many have expressed doubts that course owners will allow PGA pros to share proprietary data, particularly as PerformanceTrak probes deeper into operational details.
“I don’t think it’s a difficult sell for a golf professional to go to a facility (owner) and say, ‘If we provide this information, we’ll get like information back,’ ” Warren says.
As evidenced by PerformanceTrak and its revamped educational programs, the PGA has placed increased emphasis on course operations in recent years. Many PGA pros got into the business because of their interests in teaching and playing, but the increasingly competitive nature of the industry and the demands of course owners have put a premium on other skills.
“If I’m going to entrust anywhere from $350,000 to $3 million in inventory to a golf professional or entrust him to analyze a tee sheet, it doesn’t really matter how well he plays,” says Steve Lesnik, chairman of KemperSports, a major course-management firm.
This shift in focus, however, has been a contentious issue among members, as illustrated by the heated debate at last year’s annual meeting about the decision to make further cuts in the number of spots reserved for members in the PGA Championship. Wayne DeFrancesco, a PGA teaching pro and tournament player from Maryland, says the association should have “protected its base” rather than focusing on maximizing revenues.
“They’re saying that it’s more important for the PGA to make a lot of money than for more than 25 pros to play in the PGA,” DeFrancesco says.
In addition, many established PGA pros have concerns about the future for younger members. The association is thriving financially, but the industry’s economic fundamentals stink.
“I constantly hear golf pros tell me, when they interview quality young people, are they leading these kids down the wrong path to even get in this business,” says Roger Maxwell, a PGA member for more than 30 years, who operates In Celebration of Golf specialty shops in Scottsdale, Ariz. “There seems to be no upward mobility, and I’m not sure that’s going to change.”
Bob Dolan, head pro at Columbia (Md.) Country Club and a former Mid-Atlantic section president, says two of his assistants left the golf business this year.
“There was no real hope for them,” Dolan says. “You can understand where they’re coming from.”
Hank Majewski, another former Mid-Atlantic president who owns Wakefield Valley Golf & Conference Center in Westminster, Md., raised similar concerns about a system where “these guys go through hell (earning PGA certification) and somebody offers them a job for $40,000.”
“The PGA of America as a corporation has been very successful,” Majewski says. “But have we brought the PGA members along financially?”
That issue is likely to become more pressing. O’Rourke notes that the management firms that slowly are consolidating course ownership are demanding more business skills from PGA pros while taking a harder line on compensation.
“It’s a bottom-line thing, and they’re cutting back on salaries,” O’Rourke says.
The PGA nearly doubled its membership over the past 15 years, but Dolan and other pros see some younger members and apprentices leaving a business that often has less to do with golf than balancing a P&L sheet.
Mike Thomas, director of golf at Harmony Landing Country Club in Goshen, Ky., is a second-generation PGA pro who’s struck by how much the job has changed since his father was spending his workdays giving lessons and playing with members. Thomas, by contrast, says he hasn’t played two rounds with his members this year because of the time required to manage the club.
“It kind of weeds out the guys who are just sitting by the phone waiting for someone to call with a job offer,” he says. “At the end of the day, we’re going to have a much stronger group of golf professionals.”
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