Drive Shack hires former Topgolf CEO to run company

Drive Shack hires former Topgolf CEO to run company

PGA Tour

Drive Shack hires former Topgolf CEO to run company

Drive Shack shook up its management team, hiring Ken May to serve as CEO, a role he previously held at Topgolf.

During his four years at Topgolf, May oversaw the opening of 24 golf and entertainment venues. Prior to that, he was CEO of FedEx Kinko’s and COO or Krispy Kreme.

Sarah Watterson, the previous CEO, will transition to Drive Shack’s board of directors.

The company also hired hospitality industry executive David Hammarley as chief financial officer. He and May officially will join the company Nov. 12.

Drive Shack, which hopes to challenge Topgolf in the golf “eater-tainment” sector, also announced that it will build a golf entertainment venue in Randall’s Island Park in New York. Drive Shack will operate the existing Randall’s Island driving range under its American Golf subsidiary, and hopes to break ground on a new three-story range in 2020.

The company’s first range opened near the Orlando airport in April, and the company plans to open sites in Richmond, Va., Raleigh, N.C., and West Palm Beach, Fla., during the first six months of 2019.

Several start-ups around the country have tried to emulate Topgolf’s formula. Drive Shack, which grew out of American Golf, a course-management firm, appears to be in the strongest financial position to challenge Topgolf.

The company has nearly $100 million in cash on hand and is in the process of selling much of its course portfolio to raise capital to fund the opening of Drive Shack venues. Since July, the company has sold one course, has 15 courses under contract, and two more under letters of intent. Watterson said she expects the course sales to generate $175 million of gross proceeds by the end of the first quarter in 2019.

While shedding courses, the company is trying to add profitable course-management contracts, which Watterson said during a Nov. 8 conference call will produce a new revenue stream at “a 50 or so percent margin.” She said the company expects to add 10 management contracts by year’s end, and a comparable amount annually going forward.

As Topgolf has shown, much of the appeal of the eater-tainment format is the strong food and beverage component. That is true at Drive Shack’s Orlando location, where food and beverage has accounted for 40 percent of revenues, compared to 30 percent for golf. Group events and other activities accounted for the remaining revenues.

During the first six months it was open, Drive Shack’s Orlando location had 82,000 customers, 65 percent of whom are male. The average length of stay was about two hours.

During the three-month period ended Sept. 30, Drive Shack reported that it had total revenues of $87.4 million and a net loss of slightly more than $14 million. The company did not break out the results of the Orlando Drive Shack location.

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