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					AUGUST 2010




Golf and Resorts – Why Golf is
Still Relevant
DARIUS HATAMI, Managing Director




HVS GOLF SERVICES
2229 Broadway
Boulder, Colorado
Tel: +1 303-301-1126
E-mail: dhatami@hvs.com
HVS Golf Services, Boulder, Colorado                                                      Golf and Resorts, Why Golf is Still Relevant 1




                                       Golf development in the United States like other real estate asset classes, is
                                       cyclical, with booms occurring in the 1930's and the 1960's. The modern golf
                                       boom started in the 1990's and stretched into the mid 2000’s. This latest stage
                                       of golf course development began at an unprecedented rate of 400 courses a
                                       year. Although new golf course development started out as for-profit
                                       endeavors, numerous alternative motives for development were also at
                                       work. Eventually these forces led to an overbuilding of the market, and a
                                       question of the relevancy of the future of the golf market.

                                       In order to understand these forces, it is necessary to understand who is
                                       developing golf courses and for what purpose. There are myriad of reasons
                                       for creating golf courses, but the commonality is that the primary motivations
                                       in the past decade had little to do with the long term profitability of the golf
                                       course, and even less to do with short term profitability.

                                       The entities seeking to develop golf courses were diverse and included real
                                       estate developers, resort developers, municipal agencies, economic
                                       development, reclamation projects, as well as wealthy individuals. While the
                                       profit motive was in play, the vehicle that generates the profit has rarely
                                       been the golf course. It’s the real estate, the resort, as a service to citizens, to
                                       develop a property tax base, or even ideas further afield. Our involvement
                                       with projects includes motivation such as reclamation of a superfund site, a
                                       source to utilize gray water from an adjacent treatment plant, or the allure of
                                       golf to create a private playground, or to attain status among peers.

                                       The addition of a golf course or club to a residential community, and the
                                       corresponding impact has been fairly well documented. The golf course or
                                       club ends up increasing the pricing of the for sale real estate, and provides
                                       for faster absorption rates for the for sale properties. At a time when golf
                                       courses were profit-making ventures, this was a win-win proposition.

                                       As the supply of golf courses increased, market share declined, and the profit
                                       margins eroded to the point where there are now significant annual deficits
                                       at many of these properties. These deficits are causing golf course closures of
                                       more than a hundred courses a year. With the market turned on its head, the
                                       allure, motivations and intentions of building the golf courses are having the
                                       exact opposite of the intended impact.
HVS Golf Services, Boulder, Colorado                                                    Golf and Resorts, Why Golf is Still Relevant 2




                                       There has, however, been little analysis on the financial impacts to hotel
                                       properties of having onsite golf available to guests. This article will review
                                       and analyze the current status of golf resort properties in the United States,
                                       and provide an understanding of the dynamics at play.

                                       This article utilizes the extensive HVS hotel database, as well as independent
                                       data from STR Analytics to gain an understanding as to how resort hotels are
                                       impacted by having an onsite golf course. The first data analyzed includes
                                       the luxury and first-class hotels in the United States as well as internationally
                                       that are part of the HVS Database hotel operating statements and statistics
                                       which includes over 4,000 first-class and luxury properties and over 20,000
                                       records. The second was gathered through STR Analytics. By in large, both
                                       databases produced similar conclusions, and the primary data presented is
                                       comes from STR analytics.

                                       The first important aspect of resort golf properties is that although there is a
                                       limited number of mid level golf resorts, the majority of hotels with golf
                                       courses operate in the luxury end of the market and are full service hotels.
HVS Golf Services, Boulder, Colorado                                                                            Golf and Resorts, Why Golf is Still Relevant 3




                                       Secondly, golf resorts are typically larger than luxury resorts without golf, all
                                       resort properties as well as the general hotel stock. According to statistics
                                       provided by STR Analytics, the average number of rooms for golf properties
                                       is 367.5, while the average number of rooms for luxury resorts is 298.4, and
                                       146.5 for Resort properties. Viewed from an alternative perspective, larger,
                                       luxury resort properties tend to have golf courses.

                                       Luxury and First Class Rooms
                                                                          Ave ra ge N u m b e r o f R oom s
                                                                       S o u rce : S m ith Tra ve l R e s e a rch




                                           4 00.0                                                                                     3 67.5


                                           3 50.0

                                           3 00.0
                                                                                                           298 .4

                                           2 50.0

                                           2 00.0

                                           1 50.0
                                                                          14 6.5

                                           1 00.0
                                                          9 1.4
                                            50.0

                                             0.0
                                                     N a tion a l     R e s o rt                  Lu xu ry R e s ort             G o lf
HVS Golf Services, Boulder, Colorado                                                   Golf and Resorts, Why Golf is Still Relevant 4




Performance Measure                    The performance of the resort properties are measured on three different
National Resort                        levels; occupancy, average daily rate and revenue per available room. The
Statistics                             analysis was structured to look at the past ten years performance for each of
                                       these measures, and understand how the presence of the golf course impacts
                                       hotel operations, and how these dynamics have changed over the past 10
                                       years, as well as in the current economic environment.

                                       Occupancy
                                       A most interesting trend over the past decade is that while annual average
                                       golf resort occupancies were similar to national averages in 2000, the events
                                       of September 11, 2001 led to a steady decline in occupancy relative to
                                       national averages through 2003. The occupancies of golf resorts eventually
                                       settled at around 1% below national averages, and the margin remained
                                       fairly consistent through 2008, when the global financial crisis impacted the
                                       markets again. This current crisis has seen the spread grow to about 3%
                                       below national averages, where they have settled for the time being.

                                       Another notable trend is that seasonal variations in occupancy favored golf
                                       resorts in and around 2000, as the resorts had a longer high season, although
                                       a more severe off season. The latest data after the financial crisis show that
                                       the seasonality of occupancy at golf resorts is now very similar to national
                                       averages.
HVS Golf Services, Boulder, Colorado                                                                                                                                           Golf and Resorts, Why Golf is Still Relevant 5




Occupancy--STR Analytics Data

                                                                                               A n n u al O cc u p an cy T re n d s B y H o te l T yp e

                         70.0



                         65.0



                         60.0
      O c c u p an c y




                                                                                                                                                                                                                 N a tiona l
                                                                                                                                                                                                                 R e sort
                                                                                                                                                                                                                 G olf
                         55.0



                         50.0



                         45.0
                                   T otal 2000   T ota l 2001   T otal 2002   T ota l 2003    T otal 2004          T ota l 2005          T ota l 2006     T ota l 2007   T ota l 2008   T ota l 2009
                                                                                                  H V S G o lf S erv ic es an d S T R A n alytic s



                                                                                             A nn u al O cc u p an cy T ren ds B y H o tel P ro pe rty

                         80.0

                         75.0

                         70.0

                         65.0
      O c c u p an c y




                                                                                                                                                                                                                 N a tiona l
                         60.0                                                                                                                                                                                    R e sort
                                                                                                                                                                                                                 G olf
                         55.0

                         50.0

                         45.0

                         40.0
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                                                                                               S ource : H V S G olf S e rvices & S T R A na lytics
HVS Golf Services, Boulder, Colorado                                                                                                                      Golf and Resorts, Why Golf is Still Relevant 6




                                                  Average Daily Rate
                                                  An analysis of the average daily rate for golf resorts illustrates a primary
                                                  motive for the development of golf courses as a part of the resort. The golf
                                                  properties have the ability to generate significantly higher average rates than
                                                  non-golf properties.

                                                  The statistics illustrates approximately $50.00 in difference in the average
                                                  daily rate for golf properties in comparison to resort properties, and an
                                                  additional $30.00 difference over all properties. Thus the golf course serves
                                                  as an integral lever for the market positioning of the resort hotel.

Average Daily Rate -- STR Analytics

                                                                          A n n u al A ve rag e D aily R ate T ren d s B y H o tel T y p e

          250.0



          200.0



          150.0
                                                                                                                                                                                               N a tiona l
  A DR




                                                                                                                                                                                               R e sort
                                                                                                                                                                                               G olf
          100.0



           50.0



            0.0
                  Tota l 2000   T ota l 2001   T otal 2002   Total 2003       T ota l 2004         T otal 2005           T otal 2006    T ota l 2007   T otal 2008   Total 2009
                                                                                   H V S G o lf Se rvice s an d S T R A n alytic s



                                                                          Mo n th ly A verag e D aily R ate T ren d s B y H o tel T yp e


          240.0

          220.0

          200.0

          180.0
                                                                                                                                                                                               N ational
          160.0
   A DR




                                                                                                                                                                                               R e sort
          140.0                                                                                                                                                                                G olf

          120.0

          100.0

           80.0

           60.0
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                                                                                S o urce : H V S G olf S e rvice s & S T R An alytics
HVS Golf Services, Boulder, Colorado                                                                 Golf and Resorts, Why Golf is Still Relevant 7




                                       The spread in the rates over time had also proven to be fairly consistent until
                                       2005. From 2006 through 2008, during the bubble preceding the global
                                       financial crisis showed that the margin over national averages actually
                                       increased to $40.00. It should also be noted that the difference between
                                       resorts and golf resorts average daily rates has been eroded by about 10%
                                       during the past decade. Data in 2009 show a return to historical margins.

                                       Average Daily Rates--Annual Changes
                                                                                                     G o lf/R es o rt G o lf/N atio n al
                                                                 N atio n al   R es o rt    G o lf    D ifferen c e       D ifferen c e
                                               T ota l   2000         85.1       112.3     168.5               56.1               83.4
                                               T ota l   2001         83.9       113.4     169.7               56.3               85.8
                                               T ota l   2002         82.7       112.9     170.4               57.5               87.7
                                               T ota l   2003         82.8       114.6     169.6               55.0               86.8
                                               T ota l   2004         86.2       119.2     173.8               54.6               87.6
                                               T ota l   2005         91.1       126.5     179.0               52.6               88.0
                                               T ota l   2006         98.0       136.3     190.9               54.5               92.9
                                               T ota l   2007       104.2        144.3     197.0               52.7               92.7
                                               T ota l   2008       107.2        146.7     200.2               53.5               93.0
                                               T ota l   2009         97.8       129.6     179.8               50.2               81.9

                                               S ource : S T R A na lytics

                                       Revenue per Available Room
                                       In the final analysis, the most important metric for hotels is Revenue per
                                       Available Room, or REVPAR.

                                       Factoring in both the occupancy and the rate, the REVPAR for golf resorts
                                       was $33.50 greater than resort properties and $54.90 greater than all
                                       properties in 2000. The REVPAR margin for golf over resort properties began
                                       to erode in 2003, but leveled and remained constant through 2008. In 2009, it
                                       is apparent that while REVPAR was down for all property types, golf resorts
                                       suffered to a greater degree, and the margins were decreased to about $20.00
                                       above resorts and $40.00 above all properties. But while REVPAR is down,
                                       there is still a substantial benefit to having golf as part of the resort, even in
                                       the midst of the current economic malaise.
HVS Golf Services, Boulder, Colorado                                                                                                                              Golf and Resorts, Why Golf is Still Relevant 8




REVPAR--STR Analytics

                                                                                         A n n u al R evP ar T ren d s B y H o tel T yp e

             140.0

             130.0

             120.0

             110.0

             100.0
                                                                                                                                                                                                       N a tiona l
  R evP ar




              90.0                                                                                                                                                                                     R e sort
                                                                                                                                                                                                       G olf
              80.0

              70.0

              60.0

              50.0

              40.0
                          T ota l 2000   T ota l 2001   T ota l 2002   T ota l 2003   T ota l 2004         T ota l 2005         T ota l 2006   T ota l 2007   T ota l 2008   T ota l 2009
                                                                                         H V S G o lf S ervic es an d S T R A n aly tic s


                                                                                        Mo n th ly R evP ar T ren d s B y H o tel T y p e



             170.0

             150.0

             130.0

                                                                                                                                                                                                       N atio nal
  R evP ar




             110.0
                                                                                                                                                                                                       R e so rt
                                                                                                                                                                                                       G olf
              90.0

              70.0

              50.0

              30.0
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                                                                                       S ou rce : H V S G olf S e rvice s & S T R A nalytics
HVS Golf Services, Boulder, Colorado                                                                 Golf and Resorts, Why Golf is Still Relevant 9




                                       Average REVPAR--Annual Changes
                                                                                                     G o lf/R es o r G o lf/N atio n a
                                                                 N atio n al   R es o rt    G o lf                 t l D ifferen c e
                                               T ota l   2000         53.8        75.2     108.7              33.5              54.9
                                               T ota l   2001         50.1        70.5     100.7              30.2              50.6
                                               T ota l   2002         48.8        69.6     100.0              30.4              51.2
                                               T ota l   2003         49.0        71.9      98.3              26.4              49.3
                                               T ota l   2004         52.8        78.3     104.2              25.9              51.4
                                               T ota l   2005         57.4        83.8     110.0              26.2              52.6
                                               T ota l   2006         61.9        89.8     117.1              27.3              55.2
                                               T ota l   2007         65.5        94.6     121.5              27.0              56.0
                                               T ota l   2008         64.2        90.3     116.6              26.3              52.4
                                               T ota l   2009         53.5        73.8      92.6              18.7              39.1

                                               S ource : S T R A na lytics



Conclusions                            It's pretty clear that for larger resort properties operating in the luxury end of
                                       the market, there are substantial benefits to the hotels performance from
                                       having a golf course onsite. Golf properties can expect higher rates, which
                                       more than offset the slightly lower occupancy rates of the typical golf resort.
                                       While the benefit of golf has deteriorated over the past decade, there remains
                                       a significant impact from presence of the golf course at the resort, in the most
                                       important indicator of REVPAR. Consequently, golf is likely to remain key
                                       part of the resort development equation at the high end of the market, and
                                       for larger hotels in the future, and it is the expectation that golf will remain
                                       relevant at resorts well into the coming decade.
HVS Golf Services, Boulder, Colorado                                       Golf and Resorts, Why Golf is Still Relevant 10




           About the Author            Darius Hatami is Managing Director of HVS Golf Services, based in
                                       Boulder, Colorado. Darius is a graduate of the University of
                                       Colorado and has been involved in various aspects of golf and
                                       community development for over 20 years. In 1995, Darius
                                       founded Golf Catalyst after beginning his career with THK
                                       Associates. In 2004, Darius became part of the HVS family, and
                                       provided studies to hundreds of golf and resort community clients
                                       throughout the Untied States, Canada, Mexico, the Caribbean,
                                       Central America, Asia and Europe. His expertise encompasses
                                       valuation and feasibility studies as well as strategic, financial,
                                       residential economic planning, membership planning as well as
                                       integrating golf with residential and resort aspects of master
                                       planned communities.

                                       Darius worked with a variety of clients, including investment
                                       bankers, developers, exclusive private clubs and communities,
                                       resorts, as well as municipal and governmental entities. Specific
                                       clients have included international lenders and owners such as
                                       Lehman Brothers, Deutsche Bank, Barclays Capital, Club Corp, and
                                       CNL. Mr. Hatami has also provided litigation support, and testified
                                       as an expert in US Bankruptcy court. Properties appraised include
                                       Pinehurst, Peninsula Papagayo, The Yellowstone Club, Vilamoura,
                                       PGA West, PGA National TPC Sawgrass, La Quinta, Boca Raton CC,
                                       and Cordillera. He is a certified general appraiser in numerous
                                       states and has been a guest speaker on golf community and
                                       feasibility issues.

                                       From 1998 until 2005, Darius served as Managing Partner of the Rio
                                       Grande Club, a high end resort/private golf club in South Fork,
                                       Colorado. This course was named as the 6th Best Upscale Public
                                       Course by Golf Digest in 2003. As Managing Partner, Darius has
                                       been involved in the day to day management of facility, as well as
                                       the integration of the golf club with the residential and resort
                                       aspects of the community. The range of responsibility included,
                                       defining the membership structure, assisting on management and
                                       personnel decisions and consulting on amenities and clubhouse
                                       design.
HVS                                                                                          About HVS




About HVS


HVS is the world’s leading consulting and services organization focused on the hotel, restaurant,
shared ownership, gaming, and leisure industries. Established in 1980 by President and CEO Steve
Rushmore, MAI, FRICS, CHA, the company offers a comprehensive scope of services and
specialized industry expertise to help you enhance the economic returns and value of your
hospitality assets.

Steve began his career in the 1970s as a consultant in the hospitality division of a prominent New
York City real estate firm. Through that experience, Rushmore noted the limited body of
knowledge available to assess the value of hotels and motels, taking into consideration both the
business and real estate components. Rushmore's first book, The Valuation of Hotels and Motels,
quickly became the definitive work on the subject, and soon after, HVS was born. The HVS method
of providing an economic study and appraisal for hotels and motels immediately became, and
continues to be, the industry standard.

Over the past three decades, HVS has expanded both its range of services and its geographical
boundaries. The company’s global reach, through a network of 30 offices staffed by 400 seasoned
industry professionals, gives you access to an unparalleled range of complementary services for the
hospitality industry:

Consulting & Valuation                          Convention, Sports & Entertainment Facilities
Investment Banking                              Interior Design
Asset Management & Advisory                     Sales & Marketing Services
Hotel Management                                Shared Ownership Services
Hotel Parking Consulting                        Golf Services
Executive Search                                Eco Services
Food & Beverage Services                        Risk Management
Gaming Services

Our clients include prominent hotel owners, lending institutions, international hotel companies,
management entities, governmental agencies, and law and accounting firms from North America,
Europe, Asia, Latin America, and the Caribbean. Our principals literally ‘wrote the book’ on
hospitality consulting, authoring numerous authoritative texts and hundreds of articles. HVS
principals are regarded as the leading professionals in their respective regions of the globe. We are
HVS                                                                                        About HVS




client driven, entrepreneurial, and dedicated to providing the best advice and services in a timely
and cost-efficient manner. HVS employees continue to be industry leaders, consistently generating
a wide variety of articles, studies, and publications on all aspects of the hospitality industry.

HVS is the industry’s primary source of hotel ownership data. Our 2,000+ assignments each year
keep us at the forefront of trends and knowledge regarding information on financial operating
results, management contracts, franchise agreements, compensation programs, financing
structures, and transactions. With access to our industry intelligence and data, you will have the
most timely information and the best tools available to make critical decisions about your
hospitality assets.

For further information regarding our expertise and specifics about our services, please visit
www.hvs.com.

				
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