Greener Pastures : Golf Firm Moves to Cash In on New Interest in Sport

The sight of hordes of kids cheering on Tiger Woods at the Nissan Open Golf Tournament in Pacific Palisades recently was enough to give golf course mogul David G. Price goose bumps.

“Golf used to be a white-male-dominated sport,” says Price, chairman and CEO of American Golf Corp. “Now we see kids in baggy pants in the gallery. Women and minorities who weren’t welcome 30 years ago are feeling more comfortable on golf courses.”

And that means more customers for Santa Monica-based American Golf, the nation’s largest golf course operator, with 250 properties. Its publicly traded sister company, National Golf Properties Inc., owns 113 of the courses.

After stagnating for years, golf’s popularity is soaring like a Tiger Woods or Kelli Kuehne tee shot. Both young talents have become symbols for the sport’s changing image.

With a long history managing affordable, quality public courses, American Golf is ready to tap the new interest in the sport. To help fuel its growth, the company is targeting women and other key markets, improving service and consolidating courses in regional hubs.

American Golf is aggressively marketing itself to women, who account for 20% of all golfers but 40% of new players.

The company recently abandoned the industry’s long-standing practice of separate tees for men and women, and on May 17 is hosting the second annual “Women in Golf Day” with free lessons, clinics and seminars.

“They are practicing what they’re preaching,” says Patricia Baldwin, editor of Golf for Women magazine.

“The majority of their courses have a nine-hole rate, which makes golf accessible to many women. Because they’re such a large operator, their commitment sends a message to the industry that being women-friendly is good for the bottom line.”

Demand is still off about 3 million from the industry’s peak of 27.8 million players in 1990. Meanwhile, the number of courses keeps growing--up 12% over the last five years, according to the National Golf Foundation, a trade group based in Jupiter, Fla. More than 400 golf courses were built last year, many in the $15-million to $20-million range, driving greens fees sky-high.

Keeping its prices low--greens fees average only $16 nationally--is another way American Golf is trying to build its clientele in the fiercely competitive industry.

“There’s not an infinite supply of golfers with $125 to pay,” says Price. “Greens fees are market-driven, and people vote with their feet very quickly if you’re priced incorrectly. The huge growth is going to be at the top with fine public golf courses that welcome everyone.”

To that end, American Golf is trying to create a country club experience at its public courses.

“We have to go to great lengths to create loyalty,” says Price. “From the moment a guest pulls into the parking lot to the moment he or she leaves, we strive to make the atmosphere wonderfully pleasant.”

American Golf is refining a number of services. Its toll-free tee-time reservation system will soon go online. Food and pro shop operations continue to offer more variety. And the company is expanding membership programs that feature reciprocal privileges among its courses.

The emphasis on services comes as American Golf finds itself competing against a growing number of industry players. Rivals include ClubCorp, the next-largest golf management company; Golf Trust of America, the only other publicly held golf real estate investment trust; U.S.A. Golf Properties Inc.; and Arnold Palmer Golf Management. New competitive pressure is heating up from driving range operators such as Family Golf Centers, Jack Nicklaus’ Golden Bear and Michael Jordan Golf.

Such competition didn’t exist 29 years ago when Price began in golf management, buying his first golf course in Yorba Linda with a $1 down payment.

“When we started, the golf industry wasn’t known for being a good place to be--it was just the reverse,” says Price, the son of Welsh immigrants who holds an undergraduate degree from USC and a law degree from UCLA. “You had to be a risk taker to get into the business and pretty optimistic to see a course in its eventual stage.”

Price built his reputation rescuing ailing municipal courses from oblivion: leasing them, turning them around and sharing the profits with municipalities. During the late 1980s, American Golf expanded into private and daily fee courses. In 1990, the company’s focus shifted toward high-end resorts and private country clubs.

Last year, American Golf, which employs more than 14,000 people, had $457 million in revenue, lofting its CEO into the Forbes 400, an annual list of the wealthiest Americans. But you won’t find him out on the golf course, swinging away at any small, dimpled ball. Price, 64, a former Navy fighter pilot who still races vintage World War II planes, prefers to manage courses rather than play them.

“Typically, a course is run by a golf pro or someone who just likes golf, not business people,” says Jim Wilson, an analyst with Jefferies & Co. “American Golf is really the first to bring professional management to the golf business.”

Despite an increasingly crowded playing field, Price sees opportunities in the highly fragmented golf industry. Three quarters of the nation’s 15,700 golf courses are owned by sole proprietors. American Golf continues to consolidate, adding about 10 properties a year.

The financial engine behind American Golf Corp. is National Golf Properties Inc., the nation’s first golf REIT. Since its initial public offering in August 1993, National Golf’s share price has risen from $20.375 to a high in March of $33.375. National Golf shares eased 50 cents to $30.125 on the NYSE on Wednesday. Its holdings have grown to 117 courses in 27 states and Britain. The REIT leases almost all its properties to American Golf.

Regional acquisition teams scour the country for existing golf courses that can be enhanced. National Golf Properties stays clear of the new $15-million to $20-million courses--except to occasionally snap up a property below cost from a struggling developer. “The best places are where the people are, in regional hubs like Los Angeles, San Francisco, New York, Atlanta and Phoenix,” says Price.

These hubs create efficiencies. By sharing management and purchasing in bulk, American Golf has been able to reduce the costs of operating its courses.

But one potential area for growth still eludes Price: the federal government’s 400 military golf courses.

“They should privatize and let people in the community play, but every time I try I become very unpopular,” he says. “A long time ago, I learned that you shouldn’t make a deal with someone who doesn’t want to.”