May 2008

 

Developers need to increase the environmental safety standards...

The big hue and cry in the newspapers and magazines right now concerns the seemingly uncontrolled proliferation of golf courses, which the Vietnam Government seems to feel are multiplying like mushrooms after the rain.

The Government is not completely wrong.

According to the list on my desk, there are 150 golf course projects either announced or already licensed in Vietnam right now. If even half of them open within the next 5-7 years, it could generate more screams of anguish than the Salem witch hunts once the current golf course owners start losing money hand over fist.

While there is a definite need for a few more golf courses, especially at proposed 5-star resorts in Nha Trang, Da Nang, Phan Thiet and Vung Tau, etc., the big problem is that far too many provinces seem to believe that a golf course is the magic cure which will help their local economies to soar.

Wrong.

Sure, a golf course in the right location CAN make a world of difference to a local economy, but the operative term is "right location" and an additional qualifier would be "right time".

Sticking a golf course in the middle of East Nha Queville where foreigners do not visit unless forced to bail out of their flight enroute to Cambodia or Laos is not a great idea. Unlike the movies, if you build it, they will not always come.

Self-delusion seems to be a big problem in Vietnam when it comes to planning for golf course projects. I am not sure if potential investors are performing their due diligence with their eyes closed on purpose, or just jumping onto the bandwagon as fast as they can for fear of missing out and not really understanding what they are getting themselves into.

Opening a golf course is not as simple as people think, yet as we can all see, that never stopped them in the past and is unlikely to do so in the future either.

What I am concerned about is over-proliferation of golf courses before the market is ready for it. Too many, too soon is a recipe for disaster.

Many people like to point to Thailand as a golfer’s paradise and it is exactly that - "a paradise for golfers".

But it’s a nightmare for golf course owners as only 20 percent of the golf clubs make money and the other 80 percent are sucking wind.

In a market like that, only the tour operators marketing golf packages are sure of making a healthy profit because with all the competition out there, they can demand the lowest green fee packages. Some clubs which have hotels are actually forced to throw in the golf for free to keep the hotel full.

Until recently, Vietnam golf course owners tried to have their cake and eat it too. They sold 25-year memberships and tried to generate a lot of walk-in traffic as well.The problem is that selling cheap memberships might pay off the immediate construction costs, but will leave the owner sucking wind later down the road and forcing them to open the course to more daily play.

While this is ok when you’re the only game in town and nobody dares to complain, once there are more choices, the members who cannot get a tee time due to over-booking vote with their feet and move to another course.

Thus, owners today must consider other possibilities, such as going 100 percent private (like Van Tri), or 100 percent public (which hasn’t happened yet, but is way overdue).

If they chose the private route, the memberships should be priced to ensure a healthy Return on Investment (ROI) comparable to what the club could earn through green fees in 25 years or moderate traffic. Of course, the club would also have to actively promote member-guest participation to ensure daily operating capital.

If the owners decide to go 100 public, then no memberships are sold and its green fee only. The fun thing about managing a course like this is that you can go wild with programs, discounts promotions and the like to keep the place stuffed every day. You have to do a heavy traffic business to make a profit, but there are ways to ensure success...providing you have a good location.

Personally, I always thought that the State itself should open a public course in the middle of Hanoi and put lights on it. If they did it right you’d have players going strong until midnight.

I just hope they’d let me manage the place...I’d have a ball.


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