By Robert Bicknell

March 2008

Killing the Golden Goose..

Any experienced golfer will tell you that there are days when it seems nothing can go wrong out there. Even poor shots work out great and putts that shouldnít drop, do. They will tell you that when itís like this, donít think about it, just ride it for as many holes as possible because it will not last forever.

Apparently, the golf market in Vietnam is the same way, but the government is getting ready to drop the other shoe.

The Long An Peopleís Committee apparently decided that it was getting a bit ridiculous after 13 golf course projects were approved for their province. After realising how much farmland they would lose, they decided to scale back to only three projects for the time being.

Smart move.

Ha Tay Province, which once ranked 65th in the nation for FDI, is expecting to become a "golferís paradise" with four golf projects slated to spring up there relatively soon. I doubt this fact has the owner of Kingsí Island jumping for joy..

For 10 years, Kingsí Island was the only course in the north, but suffered bad luck with owners from the start and never realised its true potential. Sadly, it might never do so now due to all the competition popping up next door.

Which raises the question, how much of a good thing is a good thing?

There is no doubt that golf is good business, but when too many people pile on the wagon, it eventually buckles under the weight and this is the danger of what we are facing now...


I have a report on my desk which shows almost 150 golf projects slated for Vietnam. Granted, a few of them are wishful thinking by various local peopleís committees who have land but lack money, or investors who want to build a project, but lack the land / licenses or finances.

They all dream about making Vietnam a "golf tourist destination" and point to Thailand as a prime example due to the amount of available golf courses at very cheap rates.

What they donít say is that many of those golf courses are on the verge of bankruptcy and the reason for the cheap rates is because there are too many of them all fighting for the tourist dollar. Itís estimated that, of all the golf courses in Thailand, only 20% of them would be considered "profitable".

It might be good for the tourists and the tour operators, but itís horrible for the majority of golf course owners and even worse for the members of those clubs. Let me explain why...

In Vietnam, most of the earliest clubs sold their initial memberships at around $7,000. If you consider the average "value" of a weekend round of golf to be $100 (visitor green fee), then once a member plays 70 rounds of golf, he has, in effect, "paid" for the cost of the membership and every round after that is free.

Now, consider that the average membership duration is 25 years, so if the member played those 70 rounds during the first year, which is highly possible as its only 1.35 rounds per week, he will play for free for the remaining 24 years.

Wait, it gets worse...

Suppose, five years later, the street value of the membership has increased to $15,000 and the member decides to sell. Not only does the member make a profit of $8,000, he also played for free for four years.

Not a bad deal...for the member, but the club earns practically nothing except the original $7,000 and a small transfer fee, which is basically bupkis. So, in order to pay the bills, the club must try to pack the course with people who pay money...i.e., tourists.

Unfortunately, most clubs try to sell as many memberships as possible, which limits up the amount of potential tee slots for green fee customers, resulting in a horrible situation and its the member who loses out as it cannot be helped if the club is to survive.

Most golf course managers are walking a tightrope between keeping the members happy and keeping the owners happy. In the old days, happy members = increased revenue = happy owner, but that isnít the case anymore because, as demonstrated, members are not providing income for the club, unless each member brings in a LOT of guests each month and they donít because the market is too small. Most players are members somewhere, and some are members everywhere.

Since weíre having fun with theoretical numbers and scenarios, letís look at why semi-private clubs in Vietnam are doomed.

An average 18 hole course should do around 36,000 rounds per year. If they were charging a $50 green fee they would see an income of $1,800,000 per year. Over 25 years thatís $45 million. On the other hand, if a club sells 800 memberships at $7,000, they earn $5,600,000 over 25 years if only the members played, so memberís guests and visitors are vital.

Uh-oh...can you say "bad business plan?"

Personally, if someone dropped $30 million into my lap and said, "build me a profitable club", I wouldnít have members...not one. Iíd charge a reasonable green fee, market the hell out of the place and keep the course filled every day.

But if the same guy said, "build me a memberís course", Iíd make it "exclusive" and those 800 memberships would be priced at around $50,000 minimum, which equals $40 million in revenue and Iíd sell a lot of upscale villas as well.

In other words, Iíd build either a resort like Ocean Dunes in Phan Thiet, or a private club like Van Tri.

So, the next time you want to complain about club owners making a lot of money from the members, think again...because, theyíre not.

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