2001: Questioning convention
By Dale Gardner
A start-up information company focused on golf estimates the number of U.S. rounds played in 2000 at 499 million, 15 percent below generally accepted figures published by the National Golf Foundation.
Pellucid Corp., a Chicago area-based company founded by a former consumer packaged goods executive, based its findings on an analysis of rounds reported by 8,000 courses in a database maintained by Golf Magazine. The NGF, which reported 586 million rounds in 2000, bases its rounds-played data on household surveys.
While the difference in the numbers may have implications for forecasting and analyzing the U.S. golf market, a bigger question is whether NGF methodologies are appropriate.
“The main issue is you shouldn’t be doing rounds from consumer surveys,” said Pellucid founder James Koppenhaver. “And you shouldn’t be doing consumer sales from surveys, either. . . . We never used that kind of information in the consumer goods business because we knew it was wrong.”
The view that much industry data is flawed is, of course, an affront to the NGF, a dominant source. And sensitivities about Koppenhaver – who aims to compete against the NGF’s consulting division by serving equipment manufacturers, course owner/operators, real estate developers and lenders – apparently run high; NGF president Joe Beditz declined to be interviewed for this article.
Koppenhaver formerly helped grocers devise models for maximizing profits by incorporating research about the demographics and preferences of a store’s consumers into decisions about which products to stock.
Koppenhaver said he thinks one reason the golf business isn’t growing and more prosperous is because much of the information available to it is flawed or inadequate. Others with an interest say they’re equally dissatisfied with industry data.
Stephen Pandos of Mallard Creek Capital, a commercial real estate investment firm in Charlotte, N.C., said he spent 10 months investigating an investment in golf – a Bank of America portfolio of golf-related loans.
“Golf is almost half as big as hotel and lodging,” said Pandos, “so why is it that the information available for golf isn’t nearly as good as what’s available for the hotel business or any other industry?”
One finding that baffled him: The Jupiter, Fla.-based NGF reported that U.S. consumers spent $30.5 billion on the game and related products and services in 1998. NGF report for 1999 showed that golf-related consumer spending reached $22.2 billion. Not all differences in the scopes of the two studies were readily apparent, said Pandos, whose firm eventually offered more than $600 million for the loans but was outbid by Heller Financial.
Koppenhaver plans to build his business by answering questions raised by Pandos and others. A former category manager for Kraft Foods, Koppenhaver first became interested in becoming a golf information provider two years ago while working for Spectra Marketing, a $60 million a year research provider for the packaged goods industry.
He was approached by Beditz while at Spectra and was asked to develop a model to predict potential rounds played. He agreed, but said that when he was ready to begin selling, he and Beditz disagreed over how revenues would be split, and they parted ways.
Koppenhaver, 43 and 18 months into his new venture, now is selling research that focuses on potential rounds played, among other services. A key to his method is a new metric he’s devised: per capita rounds played.
“The industry has this fascination with following participation, but what drives this industry is rounds,” he said, “and rounds are based on how many people are playing and how many rounds they are playing.”
Per capita rounds played incorporates both participation and rounds played – and is a more useful measure of a market such as Michigan, for example, where participation is high but play is limited by weather.
Koppenhaver’s own survey of 80,000 U.S. households reveals variances in per capita rounds played by income and within income groups, by age, for 125 of the country’s 311 metropolitan statistical areas. Overlaying this matrix with U.S. Census data, Koppenhaver predicts potential rounds for golf within an MSA, based on the MSA’s demographics.
NGF data allow for models based on either age or income but not a combination of the two – though that’s a work in progress, according to Darrin Davis, a senior project director with NGF’s consulting division.
For Steve Fanning of Fanning and Associates, whose Denton, Texas, firm appraises golf courses, Koppenhaver’s approach has been helpful.
“I think it’s very promising,” said Fanning, who frequently uses NGF data. “I think Jim’s data is going to bridge the gap between actual rounds and potential rounds.”
Still, Fanning and others – including golf finance veteran Dan Rhodes of Heritage Golf Group in San Diego and Davis – say these predictive models are not substitutes for interaction with people in a given market.
“You have to have intensive, on-the-ground due diligence when you go into a market,” said Rhodes.