"Entertainment Golf Expenses May Exceed National Defense Budget"... Golf Industry on Alert Over Corporate Card Usage Restrictions [CorporateCardGolf]

③ Lost 30 Years of Japanese Golf Due to Inflated Corporate Card Expenses
Entertainment Golf Disappeared with '5000 Yen' Limit on Hospitality Costs
Aging Golf Population as Young Generation Fails to Join

Editor's NoteCorporate entertainment golf using corporate credit cards has driven the golden age of the golf industry since COVID-19, but recently, as companies have restricted corporate card payments at golf courses, the golf industry is facing a crisis. The "golf fever" surged so much that the term "gollini" (golf + child) emerged during the COVID-19 boom, but now the enthusiasm is rapidly cooling amid economic uncertainty. In fact, golf courses, which were the biggest beneficiaries of increased entertainment expense limits in 2020 leading to growth in corporate card sales, have seen a decline in visitors since last year, worsening their business conditions. The trend of large companies restricting corporate card use at golf courses is also increasing.

Panoramic view of Fuji Classic Golf Course in Shizuoka Prefecture, Japan. [Image source=Fuji Classic Golf Club official website]

Japan is a representative country where the golf industry has been severely contracted due to a prolonged economic downturn and the resulting reduction in entertainment expenses. During the boom in the 1990s, entertainment golf expenses were said to exceed the annual national defense budget, and since most golf sales relied on corporate credit cards, Japan experienced a long-term recession known as the "Lost 30 Years," which led to a sharp contraction of the entire golf market.

The Japan Golf Course Management Association announced this month that the total number of golf course users in Japan last year was 89.82 million. This is a decrease of 12.5 million people, or 13.9%, compared to the record high of 102.32 million in 1992. The number of golf courses in Japan also declined from the record high of 2,457 in 2002 to 2,120 last year, a reduction of 337 courses.

The direct cause of the contraction in Japan's golf industry was the prolonged economic downturn and the consequent decrease in corporate entertainment expenses. The golf course industry, which grew through corporate entertainment expenses, failed to adequately respond to restrictions on corporate card use, resulting in prolonged revenue decline.

According to the Japanese National Tax Agency, in 1990, Japan's annual corporate entertainment expenses (entertainment expenses) reached 4.55 trillion yen, easily surpassing the defense budget of 4.15 trillion yen that year. After peaking at 6.2078 trillion yen in 1992, entertainment expenses steadily decreased during the long economic downturn. Last year, Japanese companies' entertainment expenses were 2.8507 trillion yen, a 54% decrease compared to 1992.

The Japanese government significantly lowered the deductible limit for entertainment expenses starting in 2006, citing economic deterioration, which directly caused a sharp decline in corporate entertainment golf and reduced golf course revenues. At that time, the government revised tax laws to limit the deductible entertainment expenses to 8 million yen per company annually (about 70 million KRW) and 5,000 yen per employee. The main reasons were that extravagant entertainment golf during a recession was inconsistent with public sentiment and created social disparities.

Golf Courses Unable to Respond to Reduced Entertainment Expenses... Calls to Expand Deductible Limits Again

With the government drastically restricting entertainment expenses, corporate entertainment golf almost disappeared during the prolonged economic downturn. As a result, the number of young people exposed to golf sharply declined, leading to a decrease and aging of the golf population. Golf courses shifted from being perceived as an "expensive sport" to a "sport only for the elderly," and those unable to devise countermeasures have become increasingly disconnected from the public, experiencing a vicious cycle of industry contraction.

The Sankei Shimbun pointed out, "As corporate entertainment expenses decreased, the young people who typically first encountered golf through entertainment golf have lost their golf touchpoints. More than 20% of golf users in Japan are aged 65 or older, and it has become rare to see business clients playing golf on weekends." It further explained, "Some golf courses suffering from poor management have faced lawsuits because they could not return membership fees to members even after the refund period expired due to financial difficulties."

Recently, various sectors in Japan have criticized that excessive restrictions on entertainment expenses have further deepened the domestic economic slump. After COVID-19 severely impacted not only golf courses but also the food service industry, the Japanese government changed its stance. From April this year, the government increased the deductible limit for entertainment expenses per corporate employee to 10,000 yen. However, this is still below the average green fee of 15,342 yen at golf courses near Tokyo, leading to strong calls for further increases.

The Japan Chamber of Commerce and Industry has urged the government to raise the deductible limit for entertainment expenses to at least 20,000 yen. The government, having increased the limit from 5,000 yen to 10,000 yen for now, plans to monitor the situation further before making a decision.