Domestic Golf Industry "Record-Breaking Boom"..."No Issues from COVID-19~"

Golf Course Operating Profit Margin Averaged 22.5% Last Year, April Visitor Numbers Rebound 17.8%, Membership and M&A Market Golf Course Listings in Short Supply

The domestic golf industry is overcoming COVID-19 and is rather enjoying a boom.

[Asia Economy Reporter Kim Hyun-jun, Golf Specialist] "An unprecedented boom."

The domestic golf industry is experiencing an unexpected surge. It is remarkable that it is growing amid the COVID-19 pandemic. The starting point is the perception that "outdoor sports are relatively safe." In fact, the number of golf course visitors, which had slowed down in March due to the impact of COVID-19, rebounded by 17.8% in April, making it difficult to even book on weekdays these days. The value of golf courses is soaring in the M&A market, and sales of golf equipment companies such as golf clubs and apparel are rapidly increasing.

The operating profit margin of golf courses averaged 22.5% last year. The Korea Leisure Industry Research Institute (Director Seo Cheon-beom) reported, "It rose by 6.5% compared to 16% in 2018," and "public courses reached 33.2%." It is interesting that after staying around 10% since 2009’s 24.1%, it has surpassed the 20% range again after 10 years. Incheon Grand CC is a representative example, with an astonishing 60.1%. Located within Incheon city, it boasts excellent accessibility and attracts the maximum number of visitors through its lighting facilities.

Compared to the 5.09% operating profit margin of 583 listed companies, this is an incredible efficiency. The membership courses, which were only 1.9% in 2018, also improved to 7.3%. Above all, the number of operating days increased. The analysis is that "the heatwave in August was relatively mild, and the winter temperatures from December to February were higher with less snowfall." With the spread of the 52-hour workweek system and the activation of screen golf, the golf population continues to grow, and usage fees appear to be rising further.

This year is similar. According to data from the Korea Golf Course Management Association, the number of visitors per hole increased by 17.8% in January and 21.1% in February compared to 2019. Overseas golf tours were blocked due to COVID-19, which actually increased the number of visitors. It slowed to 0.2% in March with a rapid increase in domestic confirmed cases but rebounded to 17.8% in April. Director Seo Cheon-beom predicted, "Considering the increase in remote work and potential golf population, there will be no business downturn for the time being."

The golf membership market is also in a turnaround mode. After bottoming out in 2014 and the cleanup of insolvent golf courses, it has gradually recovered. At the end of last year, warm winter, zero interest rates, and alternative investments combined to secure a large amount of market funds. In the case of Lakeside, the price rose 54.7% from 420 million KRW to 650 million KRW in early this month. Analyst Lee Hyun-gyun of Ace Membership Trading Center added, "Even if the real economy is not good, the strong trend will continue due to the lack of supply."

The M&A market is experiencing a golf course shortage phenomenon. Large funds such as MBK Partners, as well as small and medium-sized funds, have been joined by demand from mutual aid associations. Golf courses, which were valued at around 3.6 billion KRW per hole during the 2018 economic downturn, have already exceeded 5.5 billion KRW per hole this year by emphasizing exceptional profitability. Golf courses themselves are busy inflating their size by re-evaluating asset values even if it means paying more taxes. The increase in the golf population is acting as an energy that expands the entire golf industry pie.