Corporate downsizing at U.S. Open
Monday, June 15, 2009
Within financial circles these days, the word is bank chairmen won’t post handicap scores anymore out of fear someone will discover they’ve enjoyed the luxury of golf.
It sums up the sobering reality that, too many, an association with golf suddenly is taboo. That has placed golf marketers in the equivalent of a very bad lie, and the timing couldn’t be worse, considering many companies are reining in spending.
“It’s shaking up the sports world, the corporate-hospitality world,” said Pete Bevacqua, chief business officer for the U.S. Golf Association, “and we haven’t been immune to it.”
A slump in corporate sales hasn’t spared this year’s U.S. Open at Bethpage Black, either. The event didn’t sell out tickets in advance for the first time since 1986. With less corporate interest, 1,000-1,500 additional tickets became available daily and were to have been releasedto the public on June 11. Initially, 8,000-10,000 were reserved for corporate sales. The USGA expects the tournament still will sell out its daily allotment of 42,500 tickets.
“Being down 10-15 percent from what we budgeted is pretty good,” Bevacqua said. “I wouldn’t say we are disappointed.”
The last time the U.S. Open visited Bethpage Black, in 2002, the USGA sold hospitality packages on the heels of the previous year’s Sept. 11 terrorist attacks. Then, New York businesses rallied around the tournament as one of the first major sporting events to return to the region.
That year, the USGA sold 78 hospitality tents at the U.S. Open, which fueled the association’s then-record of $92.6 million in total tournament revenue (including broadcast fees and money generated from its 12 other championships.)
“There was an outpouring of pride,” Bevacqua said.
This year corporate support has been more subdued: As of June 2, the USGA had sold 42 tents. At Bethpage, hospitality packages on the course range from $32,500 for a table of 12 inside a pavilion to $230,000 for a sprawling 40-foot-by-40-foot air-conditioned chalet decked with furniture fit for a living room. Higher-end packages come with 100 weekly tickets. Prime locations such as Empire Village (along the 18th hole) and Tillinghast Village (along the first hole) still sold out. But space remained in Liberty Village (a short walk from the first fairway), which offers 30-foot-by-30 foot tents with seating for up to 40 people for $125,000.
USGA officials insist that even with a decline in sales, a U.S. Open held in a major market such as New York still will be a financial success. They say it will generate as much revenue as the 2007 championship at Oakmont, which was held during better times but at a smaller venue in Pittsburgh.
Aside from budgetary pressures, another factor hurting sales is a matter of perception. Fearing public backlash, high-paid executives don’t want to be seen strolling the fairways when their companies could be facing financial peril. Call such concern a residual from grass-roots outrage directed at AIG – which threw a lavish employee event after accepting federal bailout money – or Northern Trust Co., another recipient of government funds, for what was considered excessive spending at the bank-sponsored PGA Tour event in Los Angeles.
Casey Alexander, a special-situations analyst who covers the golf industry for Gilford Securities in New York, said corporations are taking a pass on sponsoring golf and predicts the trend will continue for a while.
“Golf has a high boondoggle factor at a time when everyone is afraid of shareholder reaction,” Alexander said.
Many companies participating at the U.S. Open are downsizing, buying a table for 12 instead of a tent for 100.
The USGA’s four major corporate partners – IBM, RBS, Lexus and American Express – as well as Rolex are maintaining their commitment to the championship.
American Express, however, eliminated client entertainment and is offering activities just for card members. Those who purchase special packages, for example, gain seating in a tent by the 15th hole.
“Our card members love the game,” said Leslie Berland, an American Express spokesperson. “We can give them unique access to the U.S. Open.”
Carl Winston, director of San Diego State University’s School of Hospitality & Tourism Management, expects golf event marketing to bounce back – but not nearly as fast as it went away.
“Golf isn’t a gold-plated toilet in someone’s office,” Winston said. “Businesses want to reach customers. Pound for pound, golf has proved to be one of the most powerful vehicles for experiential selling and marketing.”
Open’s economic impact
The USGA’s revenue from corporate hospitality is minor compared with the economic impact it creates for a host city. Last year’s U.S. Open at Torrey Pines generated an economic impact of $142 million to San Diego County, according to a report issued by San Diego State University.
>> $73.62 million in direct spending (lodging, entertainment, shopping, food and beverage included)
>> $68.46 million indirect impact based on the projected effect of that spending to pay for local labor, goods and other business
>> 64 percent, or 62,950, of spectators were from outside of San Diego
>> Some 94 percent, or 58,835, of out-of-town attendees reported that attending the U.S. Open was the primary reason for their trip to San Diego
>> $11 million in logo sales at the Torrey Pines pro shop before the event
>> $14.5 million in merchandise sales during the event
>> Estimated 74,318 hotel rooms were sold as a result of the U.S. Open
>> $641,500 spent on lodging for USGA staff (total includes use for up to two years before start of championship)
Notes: Based on survey of 1,450 spectators conducted during the event; Friends of Torrey Pines, a private group of investors that supported the city’s U.S. Open bid, paid about $20,000 for the study