GOLF ADVISORY PRACTICE IN EMA An overview of …An overview of golf in the Gulf Cooperation Council | 3 Dear Reader, I am delighted to present our 2011 report on golf in the Gulf Cooperation

GOLF ADVISORY PRACTICE IN EMA

An overview of golf in the Gulf

Cooperation Council (GCC)

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An overview of golf in the Gulf Cooperation Council | 3

Dear Reader,

I am delighted to present our 2011 report on golf in the Gulf Cooperation Council (GCC). Having worked extensively in the region over the past decade, it is with great pleasure that we present this intriguing piece of research.

The report provides an overview of the golf market in the GCC and its future prospects, supported by a survey of local golf course owners and operatorsabout their operational performance.

Our survey confi rms that the GCC region still proves to be the highest performing region in all of Europe, the Middle East and Africa from a golf course revenue perspective. Local golf course operators have pointed out that demand for golf in the GCC continues to outstrip supply during the peak seasons and golf is starting to establish itself as a major pastime albeit mainly for the expatriate population.

The key fi ndings of this study include:

• GCC countries are still the highest performers in Europe, the Middle East and Africa in terms of average revenues achieved (over US$8.5 million) with, on average, over 30,000 rounds played at 18-hole golf courses. Prices inthe region are among the highest in the world, with annual dues averagingUS$ 6,400 and peak-season green fees averaging US$179.

• Only half of the total revenues are made up of membership and green fees while food and beverage facilities contribute signifi cantly to the total golf course income.

• Staff costs account for more than 40% of the total operating costs, due to the high staffi ng levels of facilities with an average of 150-200 full-time employees.

• Only half of the participating golf courses reported a positive gross operating profi t, recording an average GOP of US$2 million which equates to a 15% profi t margin.

• With several developments currently in place and with programs being introduced to encourage participation in the game, the future of golf inthe GCC still provides plenty of space for growth.

I hope that this report will provide a wealth of valuable information to help support your business, and I would like to express my appreciation to all golf course owners and operators who have contributed to this research.

If you would like to receive any clarifi cation or discuss the survey results,please contact the Golf Benchmark team or myself.

Yours sincerely,

Andrea Sartori

Andrea SartoriPartner, KPMG Advisory Ltd.Head of Golf Advisory Practice in Europe, Middle East and Africa

E: [email protected]

4 | Golf Benchmark – The source of industry knowledge

Overview of the GCC’s golf market

The Gulf Cooperation Council (GCC) incorporates Bahrain, Kuwait, Qatar, Saudi Arabia, Oman and the United Arab Emirates, and was formed in 1981 with the objective of establishing political and economic unity among these countries. With a total population of approximately 43 million and a GDP per annum estimated at just under US$1,000 billion, supported by some of the world’s largest oil and gas reserves, many consider the GCC as one of the world’s true emerging hotspots.

The GCC economy in 2010

Key indicators Population(m)

GDP at current market prices (US$ bn)

Real GDPgrowth %

Consumer price infl ation %

Bahrain 1.2 20.8 5.7 2.7

Kuwait 3.5 117.3 3.1 5.4

Oman 2.9 53.8 1.1 4.0

Qatar 1.7 126.5 12.9 6.4

Saudi Arabia 27.1 434.4 2.7 5.3

UAE 6.7 239.7 5.1 7.7

Total 43.1 992.5 - -

Source: Economist Intelligence Unit & CIA World Factbook, April 2011

Golf in the GCC is still very much in its infancy. The game was traditionally played on sand-based courses, with Emirates Golf Club in Dubai opening the fi rst grass course in 1987. Fuelled by a burgeoning economy, a growing number of expatriates working in the region and an increase in tourism, the rapid development of grass courses took off in the late eighties.

Currently there are 29 grass golf courses in the GCC region. The Emirate of Dubai is home to 10 courses and, with Yas Links and Saadiyat Beach as recent additions, the United Arab Emirates now has 18 courses in total. Along with Kuwait, Oman has two courses, and Bahrain and Qatar currently have one each, with the remaining fi ve found in Saudi Arabia.

While the region no longer sees the booming construction rate of the early to mid 2000s, there still appears to be plenty of space for growth in the region. Only in the last three years fi ve new courses have opened and one of the world’s richest tournaments – the European Tour’s Dubai World Championship – has been successfully hosted twice.


Developers especially have an appetite for high-quality facilities that incorporate residential and lifestyle real estate. Although several projects have been stalled or placed on hold and the residential product mix of some developments is still to be decided, there is no doubt that the golf courses in the region collectively provide a world-class golfi ng destination offering all year round playability.

The economic downturn has presented the same challenges to the GCC golf industry that have been common across the globe over the past two to three years, with declining membership demand, consumer-driven pricing and an increased scrutiny of operational costs in an attempt to protect profi t margins. However, people are continuing to enjoy playing golf and clubs are still offeringan unrivalled level of service.


Kuwait

BahrainUAE

Oman

Qatar

Saudi Arabia

Saudi Arabia

Course Name Year open Designer Type

Dirab 1991 Hydroturf Semi-private

Arizona 1994 Unknown Private

Riyad Greens 2004 RDCC Semi-private

Rolling Hills 2005 Unknown Private

Kaust 2009 EGD Private

Kuwait


Sahara 2005 Peter Harradine Semi-private

Kuwait International 2010 James Ruelle Public

Bahrain


The Royal Golf Club 2010 Colin Montgomerie Semi-private

Qatar


Doha Golf Club 1997 Peter Harradine Semi-private

United Arab Emirates


Emirates 1987 Karl Litten / Nick Faldo Semi-private

Dubai Creek 1993 Thomas Bjorn Semi-private

Jebel Ali 1998 Peter Harradine Public

Abu Dhabi City 1998 Ian Scott-Taylor Semi-private

Abu Dhabi National 2000 Peter Harradine Semi-private

The Montgomerie 2002 Colin Montgomerie Semi-private

Arabian Ranches 2004 Ian Baker-Finch Semi-private

Al Badia 2005 Robert Trent Jones Semi-private

Ras Al Khaimah 2005 Hydroturf Semi-private

Sharjah 2006 Peter Harradine Semi-private

Al Hamra 2007 Peter Harradine Semi-private

Palm Sports 2007 Neil McTavish Semi-private

The Els Club 2008 Ernie Els Semi-private

Saadiyat Beach 2009 Gary Player Semi-private

Jumeirah Golf Estates 2010 Greg Norman Semi-private

Yas Links 2010 Kyle Phillips Semi-private

Oman


Muscat Hills 2010 Dave Thomas Semi-private

Ghala Wentworth 2011 Kitco Semi-private

Major golf facilities in the GCC members


The region’s golf events have taken their place among the world’s best with golf courses across the GCC showcasing the game’s greatest players while raising global awareness of what the region offers.

In 2010 the European Tour’s ‘Race to Dubai’ calendar concluded with the Dubai World Championship at Jumeirah Golf Estates. A fourth tournament in Bahrain has also been added to the desert swing schedule. HSBC sponsored theAbu Dhabi Golf Championship for the fi rst time, increasing the prize fund toEUR 2m and bringing the four Major champions of 2010 to the event. Along with the continued success of the Dubai Desert Classic and the Commercial Bank Qatar Masters, several world-class pro-am and charity events have also taken place generating a high visibility and a global TV audience for the GCC.

The prize money on offer to the world’s best players in the GCC’s events totalled EUR 12.55m – an impressive EUR 2.5m average per tournament.

The table below details the most recent European Tour events:

Date Event Prize fund Champion Venue Promotor

Dec 8th – 11th Dubai World Championship

7.5m US$ Martin Kaymer

Jumeirah Golf Estates, Dubai

European Tour

Jan 20th – 23rd HSBC Abu Dhabi Golf Championship

EUR 2.0m Martin Kaymer

Abu Dhabi National

ADTA & IMG

Feb 10th – 13th Omega Dubai Desert Classic

EUR 1.8m Alvaro Quiros

Emirates Golf Club, Dubai

Golf in Dubai

Feb 3rd – 6th Commercial bank Qatar Masters

EUR 1.8m Thomas Bjorn

Doha Golf Club, Qatar

QOC & QGA

Jan 27th – 30th Volvo Golf Champions

EUR 1.7m Paul Casey

Royal Golf Club, Bahrain

IMG

Source: The European Tour

Professional tournaments


Demand characteristic

Registered participation in the GCC has grown to well over 10,000 golfers over the years. With the infl ow of an expatriate population, there has been an increasing demand for golf (especially from traditional golf markets such as the US, UK and South Africa) outpacing growth in supply, which has also been refl ected in the pricing of clubs.

Pricing

More than 90% of the facilities in the GCC operate a semi-private business model, with most courses providing a membership option while also open for pay-and-play visitors.

Almost 80% of courses with memberships request a joining fee – 45% for all memberships and 33% for certain membership types. This joining fee typically ranges between US$2,000-5,0001.

Annual dues cost US$6,000-8,000 with only a couple of courses charging less than US$5,000 per year.

While courses in the GCC region can be played year-round, the peak season lasts from October to May. The summer months are considered as off-season because of the heat and high humidity levels.

Source: Golf Benchmark Survey

45

33

22

Does your membership scheme require the payment of an initiation/joining fee?

� Yes, for every type of membership� Yes, but only for certain types

of membership� No


8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0Dubai

7,268

4,538

UAE

6,336

2,836

GCC

6,362

2,714

� Annual subscription

� Initiation fee

Average membership fees (US$)


250

200

150

100

50

0Dubai

199

94

UAE

185

91

GCC

179

91

� Green fee peak-season

� Green fee off-season

Average green fees for 18 holes (US$)

1 Some facilities may charge a simple administrative fee of just a few hundred dollars


Peak-season weekend green fees for 18 holes average around US$200 in Dubai and somewhat less in other parts of the region. In the low season, green fees are available for US$90-100. For nine-hole rounds prices are typically 40-50% lower.

Price levels in the GCC region are among the highest in the world. Only courses in China and Japan, of our surveyed regions, charge higher fees.

Published rack rates have remained relatively consistent throughout the GCC in recent years. However, it is important to highlight that the achieved green fee rate of most facilities across the region has begun to decline – most noticeably in the UAE – as discounting and packaging has become very popular.

With the recent opening of several new courses, combined with the emigration of expatriate workers due to recessionary pressures, the marketplace has become more competitive and operators are more motivated to introduce aggressive sales and marketing campaigns.

Membership

While the semi-private membership model has previously proved very successful, several courses in the region have recently experienced a decline in membership numbers. With rounds played remaining relatively stable, increased supply and more competitive pricing seem to have swayed many golfers’ decision to choose the more fl exible option of paying individual green fees rather than committing to annual fees at one specifi c club.

In comparison to other surveyed regions, courses in the GCC region have a relatively low membership base. While in Northern Europe or South Africa,for example, facilities can boast an average of over 1,000 members, the average membership size of golf courses in the GCC is around 450-5002.

The economic downturn has certainly affected demand for golf in the region, with the UAE suffering more than most due to the increased number of competing courses springing up. In an attempt to maintain the previous year’s membership levels, several clubs have waived initiation fees and removed waiting lists.

Facilities with minimum competition in other GCC countries (ie. Qatar, Bahrain, etc) have reported a minor participation and revenue loss. Course operators have attributed this decline to demographic change along with recent concerns over regional political stability that remain prevalent.


Bottom 50% Top 50%

800

700

600

500

400

300

200

100

0

238

696

Average number of members at courses with the highest and lowest membership base


Dubai

499

UAE

456

Average GCC

467

600

500

400

300

200

100

0

Average number of members – 18-hole courses

2 Only one or two courses recorded 500-1,000 members in the GCC while some had a much lower base at 200-300 – although all of the latter opened after 2005.


Rounds played

According to our survey the average number of rounds played at 18-hole golf courses in the GCC region was approximately 30,000 in 2010, equating to an average of 80-90 per day. While many courses recorded a total of 30,000-40,000 rounds last year, some newer facilities experienced a lower demand with around 20,000 rounds.

Member rounds account for about 45% of the total played throughout the region. According to our survey, about 15-20% is played by overseas visitors (mainly from the UK, Germany and Scandinavia) and some 30-40% by locals/expatriates who are not members of a club.

Members in the region have been relatively active playing about 30 rounds a year on average. Corporate rounds and those played by overseas visitors have declined at most courses; many facilities confi rmed that the number of local rounds had stabilized and have continued to fi ll the tee-time sheets especially on weekends.

There has been a noticeable shift in reservation trends as more groups are attracted to the bulk-buying opportunities the current market has to offer.Many operators have commented on how the collaboration between hotels, destination management companies and tour operators has resulted in more affordable and appealing packages for groups.


Bottom 50% Top 50%

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

22,421

38,853

Average number of rounds played at courses with highest and lowest performance levels


35

30

25Dubai

34

UAE

30

GCC

29

Average annual rounds playedby members


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Dubai

55

45

UAE

56

44

GCC

55

45

� Green fee rounds

� Member rounds

Average number of rounds at 18-hole golf courses30,600 31,600 38,000


Revenues, costs and profi tability

This section provides information on the key operating indicators expressed in terms of revenues, operating costs and operating profi tability.

Revenues

In 2010, the average revenues achieved at 18-hole golf courses in the GCC region totalled US$8.6 million. The range in revenue levels was extremely wide, from US$1 million to over US$20 million. However, it should be noted that the food and beverage revenues at some golf course facilities account for 40-50%of turnover, providing a signifi cant income stream for the facility.

In the typical revenue structure of a golf course in the GCC, membership income accounts for 28% of the total with a relatively small part (about a tenth) generated by joining fees.

About a fi fth of the total revenues are achieved from green fees. We have calculated that, based on the total green fee income and the total green fee rounds played, the average net green fee achieved from a round of golf wasaround US$100.

Operating costs

The main components of operating costs are staff and maintenance that account for 42% and 21%, respectively. Courses generally have very high staff levels of 150-200 full-time employees, also owing to the extensive food and beverage facilities connected to the golf courses. Other costs include cost of sales, general admin, and sales and marketing expenses.

Profi tability

In terms of profi tability, only half of the participating golf courses in the GCC region reported a positive gross operating profi t (GOP) in 20103. However, it should also be highlighted that generally the loss-making courses are the relatively new or reopened facilities.

Profi t-making courses achieved an average GOP of close to US$2 million that is equal to a 15% revenue/profi t ratio. On the other hand, loss-making courses averaged a negative GOP of US$1.9 million.


� Membership revenue� Green fee revenue� F&B revenues� Pro-shop revenue� Other revenues

28

1932

8

13

Typical revenue structure at golf courses in the GCC region


� Staff cost� Maintenance cost� Other cost

42

21

37

Cost structure at 18-hole golf courses in the GCC region


14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

-2,000

-4,000

Th

ousa

nd

s

Top 50%Bottom 50%

4,601

12,765

6,507

10,820

-1,905

1,945

� Revenues� Costs� Profits

Average gross operating profit and loss at 18-hole golf courses (US$ ‘000)

3 We considered as profi table those golf courses where total revenues exceeded gross operating costs, excluding fi nancial charges, depreciation and taxation.


To cover the relatively high operating costs of facilities in the region there is a clear necessity to maintain price and demand levels. Although there have beenno course closures (due to poor fi nancial performance), the increasing competition will certainly lead to questions being asked regarding the viability of future developments.

Measures taken to offset the crisis

As part of our research, we have also asked golf course operators aboutthe measures they have taken to offset the negative effects of the economic downturn and to increase profi tability.

All respondents have taken operational cost-cutting measures, primarily through the reduction of staff costs. Some operators also commented on reducing operational and maintenance supplies.

Many respondents had actively increased their marketing efforts by targeting specifi c international and local segments. This included a concentrated effort to combine and package green fees and club services with complementary products, such as hotels and inbound travel. The local market was targeted through media campaigns, website promotion and social-network platforms, with many operators realizing the value of this more recent form of communication.

Effi cient use of technology was also considered a major advantage in yield management with operators specifi cally looking to maximize their softwareand database capabilities to not only effi ciently organize daily operations but also pinpoint key revenue opportunities and minimize attrition rates.

Capital Expenditure

Operators have continued to reinvest in capital replacement funds to maintainthe fi ve-star standard for which the region is renowned.

Examples of this have been the integration of further holes and fl oodlights at facilities, course renovations, machinery replacement and the refurbishment of clubhouses. All are considered a real necessity as facilities strive to remain competitive and keep revenues at a sustainable level.


Looking to the future

In recent years the real estate boom has unquestionably been linked to the growth in expatriate population. The question now is whether without the same level of growth there would be a requirement for more courses, and especially those of the highest calibre.

Many key industry personnel have realized the need to look more closely at the local markets and establish a more solid base of core players.

Participation in the game is being driven by several initiatives – generated by individual clubs with support from the national golf associations – that focus on introducing youngsters to the game.

It is commonly thought that if participation rates are to grow, accessible and affordable golf will need to be available for younger players, families and the local population. This would create the required product mix in the market for sustainable demand during the off-season and as further supply enters the market.

For international visitors looking to take advantage of the 360 playable days per year, the UAE will provide the majority of supply for the short to mid term; however, its neighbours are actively working to increase their number of golf courses. Oman is aware of golf’s benefi ts to its tourism plans and Qatar is also recognizing that further development will be required for the preparation and hosting of the FIFA World Cup in 2022. The adjacent table displays several new developments that are publicized throughout the region.

Market optimism, tempered by concern about the current unrest in the Middle East, was expressed by all respondents and it is clear that the GCC golf industry is now entering a more mature stage.

United Arab Emirates

Course Name Year open Designer

Bawabbat N/A GregNorman

Saadiyat Wetlands

N/A RobertTrent Jones

Meydan 2011 PeterHarradine

Oman


The Wave Muscat

2012 GregNorman

Qatar


Education City 2013 N/A

Lusail 2015 N/A

Methodological note and survey limitations

The analysis presented in this report has been performed based on the responses of more than a dozen golf course operators participating in the Golf Benchmark Survey 2011 from the GCC region. Requested information mainly relates to the 2010 operating year.

Due to the diversity of our survey sample in terms of size of golf course, our analysis is refl ective of 18 holes.

Financial data was submitted in the home currency of the respective countries and was converted into US$ at annual average exchange rates of 2010. Respondents were requested to present all pricing-related information and fi nancial data inclusive of taxes.


KPMG’s Golf Advisory Practice in EMA continuesto strive to add value to the golf industry. Through our thought leadership programs, KPMG undertakes various initiativesthat can help those with a stake in the golf industry to make informed decisions.

In 2006 KPMG launched the inaugural Golf Benchmark Survey, one of the largest ever golf research projects. The GBS is a market intelligence study designed to collect and share comparable golf industry benchmarks. The primary objective of the Golf Benchmark reports is to allow golf courses to compare their individual performance against high, average, and low performers in their geographic markets. Since its fi rst launch, the survey has been extended to new regions including India, China, Japan, South America and the Caribbean in addition to several regional reports within Europe, Middle East and Africa (EMA).

KPMG’s Golf Advisory Practice in EMA has also published a number of additional market intelligence studies under the Golf Benchmark initiative, including theGolf Course Development Cost Survey in EMA, the Value of Golf to Europe, Middle East and Africa, and the Golf Travel Insights report.

For more information on our thought leadership and to download all our reports free of charge please visit golfbenchmark.com.

The Golf Business Community is an exclusive online platform forindividuals within the golf industry who are interested in building andmaintaining relationships, gathering the latest golf research and golf industry news, and staying in the loop.

This is a virtual, interactive meeting place for the international golf business community. Complementing this website is a regular ‘e-newsletter’ providing a steady fl ow of news/interviews, surveys, latest industry research, choice picks from quality golf business intelligence, and an opportunity to do online networking.

For more information, we invite you to visit golfbusinesscommunity.com.

The Golf Business Forum is a unique platform for professionals involved in the golf business industry to meet, learn, exchange ideas and do business at an exciting and memorable event. The Forum has quickly established itself as the foremost golf industry event in Europe, Middle East and Africa and brings together major stakeholders in the business of golf including: golf and real estate developers, investment groups, banks, equity funds, master planners, golf course architects, suppliers and operators. The event attracts participants from fi ve continents, and is supported annually by many of the leading market players in the golf industry.

For information on forthcoming events, visit golfbusinessforum.com.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).

© 2011 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.Printed in Hungary.

For further information please contact the Golf Benchmark Team:

KPMG’s Golf Advisory Practice in EMAH-1139 BudapestVáci út 99Hungary

T: +36 1 887 7100E: [email protected]

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GOLF ADVISORY PRACTICE IN EMA An overview of …An overview of golf in the Gulf Cooperation Council | 3 Dear Reader, I am delighted to present our 2011 report on golf in the Gulf Cooperation