Golf Business Community

What is the outlook for integrated golf resorts and real estate developments?

Clearly, with the combination of continued liquidity problems and lack of confidence and financing for both developers and real estate buyers, the climate for golf development remains unfavorable. The increasing equity requirements of financial institutions, the growing cost of debt (especially because of the increased country risk in markets which were previously considered to be relatively safe, such as Greece, Italy, Spain and Portugal), and the increasing expectations of investors in terms of returns, means the market for golf resorts with real estate will continue to suffer for quite some time. However, there will be a point in time when the international economy recovers and developers will be looking at markets where there is strong domestic demand and tourism appeal to attract international buyers and golf tourists.

Specifically, what challenges are golf developments with real estate facing?

There are three types of buyers for residences on golf estates – owners looking for a primary residence, international second-home owners, and speculative investors. Overall, there are less international second-home owners since the economic downturn and the speculative investor has virtually disappeared. In my opinion, the first markets to bounce back will be those with a potentially strong domestic demand, which are also appealing to the international market from a tourism perspective. For example, some countries in the Mediterranean region including Italy, France and Turkey have favorable characteristics in this regard.

Will the speculative market ever return?

I think speculators will eventually come back, at a later stage, but on a much smaller scale. Nobody knows when this will happen. I would also like to point out that for the long term success of a project it is dangerous for a developer to rely on too many speculators buying properties. I think the market – especially in the UAE – has learnt the lesson in this regard.

New projects continue to spring up and the KPMG Golf Advisory Practice team is working on some of these. What advice are you giving investors and developers?

We are giving the same advice we have always given – you need to be careful in venturing into a golf development because it is a highly complex process. It is not a straightforward real estate development like an office park or a residential complex. Integrated golf, hospitality and housing estate projects require careful planning and the involvement of many different professionals in a critical time line. Understanding the demand and supply characteristics in these changed economic conditions, specifically where your buyers are coming from, the expected sales velocity, and the price point of different products is more important than ever.

In which regions are you currently working?

We are working on projects in Abu Dhabi, Morocco, Spain and one of the Baltic States at the moment, and I am convinced that there are further opportunities out there.

What type of work are you undertaking and how can you help developers optimize their investment?

Bankable documents are required by both financial institutions and potential equity partners. Therefore, we are still undertaking many market and financial feasibility studies, although less than in the past, and assisting with the conceptualization of complex integrated golf developments. We are also performing an increasing number of valuations for transaction purposes and have more assignments for business reviews to improve the efficiency and effectiveness of golf operations.

You have selected Italy as venue for this year’s Golf Business Forum. Why?

Something has happened with the Italian golf market in the past few years that makes it interesting. The country already has a unique tourism product based on its beautiful natural assets, its culture, people, history and gastronomy. In recent years, we have seen regions such as Sicily, Puglia, Sardinia and Tuscany, where we are hosting the Golf Business Forum, recognize the potential for golf tourism. The international success of Matteo Manessero together with the Molinari brothers has acted as a catalyst in attracting significant media attention for the game, which provides great exposure for golf and is very important in generating additional local demand. Despite the growing interest in golf in Italy, I must say we haven’t seen the development of golf resorts and residential communities springing up yet, except for a few projects. Nevertheless, I believe there is great potential for this.

Italy, alongside other European countries, is facing significant economic challenges. Can it really support integrated golf real estate developments?

When looking at a market, it is of fundamental importance to understand demand and supply trends. There is no doubt that Italy possesses all the key ingredients for the successful development of golf resorts and communities, as well as stand-alone facilities. Despite the economic crisis, Italy is still a large economy with a strong domestic economic power and a tourism product which is second to none. Italy has everything it needs to succeed, so it is now a question of domestic and international economic recovery and the return of confidence of buyers and developers. I am fairly sure this will happen, but I cannot say when. It appears that we have not yet identified the right recipe for resolving issues related to sovereign debt and economic growth. Therefore, the timing of the recovery on both international and national levels is the hardest factor to predict.

What about politics and bureaucracy in Italy?

This is indeed an obstacle and it is true that bureaucracy has made it harder to develop in Italy than some other countries. The length of the administrative procedure required to obtain permits is probably the largest barrier to development in the country. These obstacles have to be eliminated to encourage new golf and real estate projects, especially given the demand and supply potential and the clear socio-economic benefits these developments would bring, including employment creation.

This year’s Lifetime Achievement Award is being given to Dana Garmany, Chairman and CEO of Troon Golf. Tell us what makes Dana’s achievement so special.

Dana is one of the best-known figures in the golf business – in fact, the ‘Most Powerful Person in Golf’ according to Golf Inc magazine’s 2011 rankings – and the achievements of his business, Troon Golf, are outstanding. What I think is remarkable is that Troon Golf, until today, is the only high-end golf operator to successfully expand its business globally while maintaining the highest levels of quality. I think delegates attending the Golf Business Forum will learn a great deal by listening to Dana, especially how the vision of an entrepreneur is realized through commitment to strategic planning.

What can delegates to this year’s Golf Business Forum expect?

You can certainly expect to enjoy Tuscany and experience fantastic Italian hospitality – and I am not just saying that because I am a proud Italian! However, this year’s venue is a little different, in the Apennine Mountains, in a bucolic environment but without a golf course on site. Delegates will have the opportunity to network and do business undisturbed – these are the key ingredients of the Golf Business Forum, mixed with market intelligence and the friendly atmosphere of our event. It’s also in September this year, a time that will suit many in the golf business.
 
Who will be attending and speaking?

A list of speakers will be announced in the coming weeks. As always, we will have some major names from the world of golf joining us to share their experience and expertise. As in Dubai, we will also welcome some very significant global investors and developers from around the globe. Now is an interesting time for some of these companies, especially those who take a long-term view. Within the Golf Business Forum there will be a strong focus on the Mediterranean region.

This year marks the second anniversary of the Golf Business Community website, which was envisaged as a type of online, virtual Golf Business Forum. How has this worked?

The idea was to create an online community for professionals involved in the golf business and publish KPMG’s market research and intelligence, which we continue to do free of charge, for the benefit of our clients and the wider golf community. Our communications now reach approximately 35,000 people worldwide, which is testament to the quality of the content on the site. While we encourage anyone involved in the golf business to join up and interact with the site, there is still no substitute for face-to-face contact, so we look forward to seeing the golf business community in person at this year’s Golf Business Forum.