Golf Benchmark Survey in the EMA region 2006

TRAVEL, LEISURE AND TOURISM PRACTICE Golf Benchmark Survey in the EMA region 2006 Regional Report: Benchmark indicators and performance of golf courses in Western Europe ADVISORY

All seven regional Golf Benchmark Survey reports and the Europe, Middle East and Africa summary report are available for download from the www.golfbenchmark.com website.

Western Europe - Golf Benchmark Survey 2006 3 Dear Reader, Andrea Sartori Partner, KPMG Advisory Ltd. Head of Travel, Leisure and Tourism Practice, CEE info@golfbenchmark.com With more than 4.2 million affiliated golfers and almost 7,000 golf courses, the Europe, Middle East and Africa (EMA) region plays a significant role in the global golf market. With increased life expectancy, improved and cheaper air transport, health and fitness awareness as well as growth in disposable income and media coverage in emerging economies, golf is expected to further develop both in terms of demand and supply. In such an environment there is a clear market need for structured and comparable information regarding the operational and financial performance of golf courses. With the idea of creating benchmark indicators for golf course owners, operators, suppliers, developers and financiers, and with considerable investment by KPMG s Travel, Leisure and Tourism Practice, the Golf Benchmark initiative was set up. The Golf Benchmark Survey is an annual study covering seven geographical areas within the EMA Region: Northern Europe Great Britain and Ireland Western Europe Central Europe Eastern Europe Middle East South Africa. The primary objective of the Golf Benchmark Survey is to allow golf courses to compare their individual performance against high-, average- and low-performers in their geographic markets. In the years to come when a critical amount of historical data will be available, a key goal of the Survey is to determine trends impacting the golf industry in different geographical regions. During our data collection for the 2006 edition, we have contacted more than 6,000 golf course operators in the EMA region and have collected over 800 questionnaires from participants in 27 countries. Hereby, I would like to take the opportunity to thank all the golf course owners and club managers who took the time to participate in the first Golf Benchmark Survey. Your cooperation this year and in the years to come is the key to the success of this initiative. Thank you for your help! As initiator and coordinator of the Golf Benchmark Survey, I hope you will find our seven Regional Reports and the Summary Report both informative and enlightening to support the future operation and development of your golf course. Please note that all reports can be downloaded free of charge at www.golfbenchmark.com. If you would like to receive any clarification or discuss the survey results, please feel free to contact the Golf Benchmark team or myself. Yours sincerely,

4 Golf Benchmark Survey 2006 - Western Europe Western European market overview We have clustered the target countries of our research into subregions based on geographical proximity, similarity in economic development, and maturity of the golf market. The Western European region comprises the following countries: France Italy Portugal Spain Western Europe provides approximately 18% of the European golf market, both in terms of supply and demand. There are around 1,180 golf courses and close to 600,000 registered golfers in the region. The resulting 0.3% golf participation rate is lower than the European average (0.7%), yet reflects a rather strong demand for golf. A large part of Western Europe benefits from favorable weather conditions and consequently a year-round golf season. The Iberian region is a very popular golf tourism destination. In Portugal particularly, golf demand from inbound tourists offsets the relatively low number of local players. Development of golf in Western Europe Since the early nineties, the number of golf courses in Western Europe has doubled, while the number of golfers has tripled. All of the countries in our designated region can claim swiftly growing golf markets. Spain, Portugal and Italy have a high growth rate in supply, while France already showed a rather mature golf market in the late 1980s, and has been the location of the first golf course on continental Europe (which opened in 1856). The following graph demonstrates the growth in the number of golf courses and players in Western Europe since the year 2000. Development of golf courses and affiliated players in Western Europe (2000-2006) Source: European Golf Association (EGA) and national golf federations with KPMG elaboration

Western Europe - Golf Benchmark Survey 2006 5 Distribution of supply in Western Europe, 2006 The number of golf courses has shown a constant growth until 2004, when some course closures lead to a temporarily decreasing supply. Due to new golf resort developments, the number of operating golf courses reached 1,182 by 2006. Since 2000, demand has grown more than twice as fast as supply: 7.7% versus 3.1% annually. In terms of distribution, most of the courses in Western Europe are located in France (46%), followed by Spain (28%) and Italy (20%). Portugal with its 76 golf courses has a significantly lower share of supply, being the smallest among the surveyed countries in the region. Golf participation rate in Western European countries (2006) Source: EGA with KPMG elaboration Countries Courses Players Golfers per course Participation rate France 543 197,454 364 0.3%* Italy 238 81,100 341 0.1% Portugal 76 13,521 178 0.1% Spain 325 294,441 906 0.7% Total 1,182 586,516 496 0.3% Source: EGA and national golf federations with KPMG elaboration * Please note that the total number of golfers affiliated with the French Golf Federation is 368,746. This figure also includes golfers who may not be members of a specific golf club in France. If we consider this figure as the total number of affiliated players, the participation rate is 0.6%. In the Western European region one in 300 citizens is a registered golfer. Domestic demand for golf is significantly stronger in France and Spain than in the other two countries of the region, together comprising about 84% of the local golfers in Western Europe. The golf participation rate is 0.7% in Spain, 0.3% in France, while in Portugal and Italy it is only around 0.1%. Overall, the golf participation rate in Western Europe is 0.3%, which is lower than the European average (0.7%). The number of players per course is approximately 500 (against the European average of 610).

6 Golf Benchmark Survey 2006 - Western Europe Profile of the Western European sample Distribution of golf courses by size This regional report forms part of the Europe, Middle East and Africa (EMA) Golf Benchmark Survey 2006. More than 800 golf courses from 27 countries completed questionnaires, of which over 200 are located in Western Europe. More than half of the golf courses (61%) in the sample were 18-hole facilities, 22% were 9-hole courses, while 16% were 27-hole or larger courses. The majority of the golf courses are privately-owned, with only 11% of the sample being municipal courses. by ownership We asked golf course operators to assess the quality level of their courses according to grades ranging from top quality to low quality 1. High-end and good quality courses comprised 47% and 37% of our sample respectively, while midquality and lower-end courses made up 14% and 2% respectively. Two-thirds of the courses are run on a not-for-profit basis, with the remainder being profit-seeking businesses. by quality As the countries involved are also well-known golf tourism destinations, several additional services and amenities are provided in order to meet demand requirements. A relatively large part (over 30%) of the participating golf courses offers additional, non-golf related sport and wellness facilities, while about 34% provide accommodation facilities. 29% of the courses are located in tourist resorts or golf communities with housing estates. Methodological note and survey limitations The analysis presented in this report has been performed based on the responses of more than 200 participating golf course operators in the Western European region. Requested information mainly relates to the 2005 operating year. Financial data were submitted in EUR. Respondents were requested to present all pricing related and financial information net of VAT or any other applicable tax. by operating entity We wish to highlight that in the case of financial information some cross tabulations may be considered indicative but not representative of the market due to a lower number of responses. Please also note that the rounding of decimal figures may lead to some discrepancies when computing input data. 1 The reader of this report should be aware of the fact that we expect golf courses to assess their quality in comparison with their competitors in the same country or region, rather than on an international basis.

Western Europe - Golf Benchmark Survey 2006 7 Demand characteristics Membership, round information and average course utilization are the key demand indicators of the Golf Benchmark Survey. Membership The surveyed 18-hole golf courses in Western Europe have 543 members on average. Based on our sample, Western European 18-hole golf courses have a lower membership (543) than the average of the surveyed European courses (approx. 740). The highest number of members 976 on average was reported by clubs in Spain. In Portugal, the lower average membership (380) indicates a moderate local demand, which is compensated by the stronger tourism demand. In our sample, France has the lowest number of members per course with 369 on average. Average number of members by country 18-hole courses Note: Due to the low number of responses recorded in Portugal regarding membership information, the results in this country may be considered indicative but not representative. Membership composition of 18-hole golf courses Men account for more than half of the memberships (59%) at 18-hole golf courses within the Western European region. Female and junior members each make up 20%, while corporate membership is slightly more than 1%. High quality courses have on average significantly more members than courses in the good and mid- or lower quality segments. Average number of members by quality of golf course 18-hole courses

8 Golf Benchmark Survey 2006 - Western Europe Round information Average number of declared playable days by country Apart from the number of players members or non-members the demand potential of any golf course is strongly related to the number of playable days. The chart at left indicates the average number of playable days reported by the respondent golf course operators. Spain and Portugal have year-round availability, while France and Italy also enjoy over 300 playable days per year. The average number of total rounds played is above 23,000, with 9-hole courses recording less than 10,000 rounds, and 18-hole courses close to 25,000. 27-hole and larger courses recorded the highest number of rounds, reaching almost 30,000 on average. Average number of played rounds by size of golf course Member rounds comprise approximately one half of the total rounds played with the remaining half being other types of rounds, mainly green fee rounds.

Western Europe - Golf Benchmark Survey 2006 9 To allow courses to benchmark themselves against the average of their performance group, we have calculated the average round information for the top 20% and bottom 20% 2 of the courses based on the number of recorded rounds. Average number of rounds played on 18-hole courses (including 9-hole rounds) Average number of rounds played per playable day 18-hole courses Round Average Top Bottom types Western 20% 20% Europe Member rounds 37 68 9 Other rounds Total rounds 34 57 12 71 125 21 The share of member and other rounds for top performers is in line with the average, while courses with the least recorded rounds show a higher share of green fee rounds. A good benchmark indicator of the demand is the average rounds per playable day. 18-hole courses in the region recorded on average 37 member rounds and 34 other rounds per playable day. The spread of this indicator is also relatively high with 125 rounds per day for top performers and only 21 rounds for the bottom performers. 2 This distribution is also known as top and bottom quintiles.

10 Golf Benchmark Survey 2006 - Western Europe Course Utilization The demand of the surveyed golf courses can also be expressed by the course utilization, calculated as a percentage of the recorded total rounds from the total available tee times. In this regard, although the difference between private and public/municipal courses is less than 6 percentage points, private courses still recorded a higher utilization level with 32.8%. Average utilization of golf courses by ownership type all courses The average utilization of 18-hole courses in Western Europe is 34%. While the average utilization of 18-hole and 9-hole golf courses in Western Europe is between 32-34%, 27-hole courses are less utilized, recording a 24% rate on average. Average utilization by size of golf course

Western Europe - Golf Benchmark Survey 2006 11 Based on our sample, courses in Spain are the best utilized (42%) followed by Portugal (31%), while golf courses in Italy and France have a utilization rate of 27% and 26% respectively. Average utilization of golf courses by country all courses The average utilization for the top performers among 18-hole courses is 59%, while the least utilized golf courses recorded only 9% on average. Average utilization of 18-hole golf courses

12 Golf Benchmark Survey 2006 - Western Europe Revenues and costs Does the membership scheme require the payment of an initiation fee? This chapter provides information on the key operating indicators expressed in terms of pricing, revenues, operating costs as well as operating profitability. Pricing The membership and pricing 3 schemes applied by the surveyed golf courses are extremely variable and therefore difficult to compare. Despite this, we noted some common characteristics. Only one third of the golf courses require the payment of an initiation fee. This initiation fee at Western European courses is EUR 3,166 on average, while the annual subscription for individual full members is EUR 1,813. Does an individual full member need to pay to play? The initiation fee is by far the highest in Spain (EUR 5,107), where members also pay the highest annual subscription (EUR 2,973). Other Western European countries have significantly lower pricing than Spain, between EUR 1,000 and EUR 1,800 for both the annual subscription and the initiation fee. France offers the lowest prices with a EUR 1,226 annual subscription and a EUR 1,092 initiation fee (only required by approximately 15% of the courses). In contrast, more expensive Spain and Italy require an initiation fee for over 40% of their courses. Average membership fees by country (EUR) all courses 3 All pricing information was requested excluding VAT or any other applicable tax.

Western Europe - Golf Benchmark Survey 2006 13 Annual subscription by quality of golf course (EUR) all courses The quality of golf courses appears to influence the cost of annual membership subscription. Clubs with lower, mid- and good quality courses charge an annual subscription of EUR 809 to EUR 1,335, whereas those offering high quality courses charge approximately twice as much (EUR 2,512 on average). The green fees, another important component of the pricing scheme, show a lower spread than the annual subscription. Courses in Portugal, which rely heavily on the tourism market, charge the highest green fees (EUR 71 on weekdays and EUR 75 on weekends), while 18 holes can be played on average for only EUR 43 on weekdays and EUR 50 on weekends in France. Average green fee for 18 holes by country (EUR) all courses The average weekend green fee in Western Europe is EUR 57, while the weekday fee is EUR 50. The average price for an 18-hole buggy rental in the Western European region is EUR 32.

14 Golf Benchmark Survey 2006 - Western Europe Revenues Golf course revenues comprise the following main components: membership fees, green fees, revenue from food and beverage, pro-shop, and others (e.g. sponsorship, lease income, etc). The average revenue of surveyed courses in the Western European region was around EUR 1,260,000 in 2005. Public/municipality-owned courses have the highest revenue (over EUR 1,751,000), while private courses recorded on average 33% less revenue (around EUR 1,179,000). Average revenues by ownership (EUR) all courses 18-hole golf courses in our sample have reported an average revenue of approximately EUR 1,242,000, almost 50% more than 9-hole courses (EUR 845,000), and 18% less than the surveyed 27-hole and larger courses. The average revenue for an 18-hole golf course in Western Europe is approximately EUR 1.24 million. Average revenues by size (EUR)

Western Europe - Golf Benchmark Survey 2006 15 Simplified revenue structure for a golf course in Western Europe all courses Revenues in 2005 were split between membership revenues, green fee revenues and other revenues, with a share of 39%, 33% and 28% respectively. Other revenues include food and beverage, pro-shop, lease fee, advertising and sponsorship revenues. Pro-shop revenues average 5-7% of total revenues, while food and beverage average only between 3-5%. The low contribution of F&B can be attributed to the fact that a great number of the surveyed facilities outsource this function. Courses in Portugal produced the highest revenues in 2005, followed by Italy and Spain, while France with the lowest average pricing recorded 17% less revenues than the Western European average. Total revenues by country (EUR) all courses Revenue indicators RevPUR and RevPATT for 18- hole golf courses Besides total revenue, a good benchmark indicator of operational efficiency for golf courses is the revenue per utilized round (RevPUR), which represents the value of total services sold in relationship with one round played. In this respect, 18-hole courses in Western Europe have an average RevPUR of EUR 43. Another indicator reflecting the operating performance of a golf course in relation to its total revenue generating potential is the revenue per available tee time (RevPATT). 18-hole courses in the Western European region recorded an average EUR 19 RevPATT.

16 Golf Benchmark Survey 2006 - Western Europe Operating Costs and Profitability Operating costs, including wages and maintenance costs, average more than EUR 1,220,000. As is the case for revenues, operating costs are significantly lower in France (about half that of Portuguese courses). Operating costs by country (EUR) all courses The average operating costs of an 18-hole golf course in Western Europe are EUR 1,256,513. Salary costs for a Western European golf course are on average 43% of the total operating costs. In terms of profitability, 69% of the responding golf courses in our sample reported positive gross operating profit (total revenues less operating costs), while 21% were making an operating loss in 2005.

Western Europe - Golf Benchmark Survey 2006 17 Total costs account for more than 97% of the total revenues resulting in a gross operating profit of approximately 3%. However, as stated in the second section of this report, it should be noted that 65% of the surveyed courses are run on a not-for-profit basis. Average revenues, costs and GOP for all courses in Western Europe (EUR) and for profitable courses Note: We considered as profitable those golf courses where total revenues exceeded gross operating costs, excluding financial charges, depreciation and taxation. In the case of golf courses with a positive operating profit, the operating costs equal on average 80% of total revenues, resulting in a 20% gross operating profit.

18 Golf Benchmark Survey 2006 - Western Europe Other operating characteristics In this section we focus on the topics of staffing and outsourcing, both of which contribute toward the operational efficiency of golf courses. Staffing Western European golf courses employ 22 persons on average. The average staffing of a golf course in the Western European region is 22 persons, comprising 20 full-time and 2 part-time employees. The largest numbers of employees work in golf maintenance with 8 persons on average, of which 7 are full-time and 1 part-time. Average number of full-time and part-time employees all courses Outsourcing Several courses outsource some of their activities to external suppliers. Be it golf academy, pro-shop or the food and beverage facilities, outsourcing in many cases proves to be an efficient solution. The following chart compares the level of outsourcing between the courses with the highest revenues (top 20%) and those with the lowest revenues (bottom 20%).

Western Europe - Golf Benchmark Survey 2006 19 Level of outsourcing at 18-hole golf courses with the highest revenue (top 20%) and the lowest revenue (bottom 20%) Courses with the highest turnover outsource a larger proportion of their activities than the lower performers. Pro-shop and food and beverage facilities are outsourced 56% and 67% respectively at the golf courses with the highest turnover. Courses with the lowest turnover outsource the same facilities to a lesser extent. The outsourcing of golf academies is less typical and rather relevant to good performers (in only 22% of the cases).

20 Golf Benchmark Survey 2006 - Western Europe Future market outlook Are you planning any capital improvements, refurbishments in 2006? Valuable information regarding the current market situation can be gained by understanding the plans of golf course owners and operators with respect to capital improvements and their future business performance prospects. Capital improvements Almost two-thirds of the golf courses (63%) were planning capital improvements or refurbishments in 2006. The following chart shows that the share of clubs planning refurbishments is above 60% for both private and public courses. Courses planning capital improvements by ownership

Western Europe - Golf Benchmark Survey 2006 21 Italy has the most courses that are planning improvements. Portugal recorded the lowest score in this respect. Courses planning capital improvements by country More than half of the clubs are planning to upgrade their golf courses, with an average budget of approximately EUR 140,000. Improvements to clubhouses are planned by one fifth of the surveyed courses, with budgets of EUR 160,000 on average. Golf course expansion is planned by 7% of the courses, with an average budget of approximately EUR 1.8 million. Other developments, including machinery and irrigation system replacement, are budgeted at over EUR 360,000 by one fifth of the surveyed courses. Planned capital improvements and average budgets (EUR) Note: Due to the low number of responses recorded for golf course expansion, the results showing the average amount of investment may be considered indicative but not representative.

22 Golf Benchmark Survey 2006 - Western Europe Expected future business performance Almost one fourth (24%) of the Western European courses see their future business prospects as excellent, and two-thirds as good. Spanish clubs are the most optimistic with 39% expecting excellent and 59% good performance. Over 90% of the French and Portuguese clubs view the future positively. Italian courses are the least optimistic, however, but almost three quarters of the respondent courses expects good or excellent performance, while around one fourth just average results. Rating of expected business performance

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www.golfbenchmark.com For further information please contact the Golf Benchmark Team: KPMG Travel, Leisure and Tourism Practice CEE Tel: +36 1 887 7100 Fax: +36 1 887 7392 E-mail: info@golfbenchmark.com KPMG in Hungary H-1139 Budapest, Váci út 99 Hungary 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 endeavor 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. KPMG does not accept any responsibility for errors, omissions or any consequence arising from the use of this report. KPMG reserves the right to alter at any time any element of this report. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 2006 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.