Thursday, May 29, 2003
Copyright © Las Vegas Mercury

Mulligan stew

Amid mounting debts, rising fees and water restrictions, local golf course industry may be drying up

By Larry Wills

Las Vegas' once-thriving golf industry is heading south--putting a whole new meaning on Mark Twain's description of the sport as "a good walk spoiled."

Too many golf courses, expensive tee times and a looming water crisis are blamed for turning a prime tourist attraction into a economic liability in the Las Vegas Valley, especially for courses carrying large debts. And there's lots of finger-pointing.

"It's getting soft," Paul Charron, of the Golf Authority, says of the market. "The tourists are sick of getting gouged."

Charron, whose organization arranges golf outings for groups and corporations, says the downturn has come from high prices that don't necessarily match expectations in quality. Typically, tourists pay $200 for a round in Las Vegas, compared with $80 at their hometown courses. "The service level is generally pretty decent, but in a lot of these courses, it's not. It doesn't make sense."

Charron says golfers pay more and often get less than at other resorts. "They're playing at the end of a jetway with 747s flying overhead," he says. "Compare that to standing on an ocean with a little ambience. For a while, it was more expensive [here] than going to Hawaii."

Bill Walters, owner of the upscale Stallion Mountain club, with six private courses, says that's not the key point. "The golf course market is severely overbuilt," Walters says. "There's not enough business to accommodate the supply. Las Vegas tourism is stagnant and, until we recover, golf courses are in trouble. The only answer is more golfers. The city is losing its market share [of tourism], and what concerns me is recapturing that share."

He discounts claims that the fees are too high. "Compare apples to apples," he says. "In places like Phoenix, the rates are almost identical. And local fees have gone down."

Charron says the emphasis on tourist business has driven many local players, who provide valuable repeat business, off many courses. Managers shun the local market during cool weather but then try to lure them back in the hot months. "Now they're begging the locals to come back," Charron says.

That's dead wrong, says Walters, who contends the tourist market is completely different from the locals market. "We can't run courses on locals," he says.

Whatever is happening, the implication for the golf industry has not been good. Stallion Mountain is selling off two of its courses for housing development. On those links, "where there are no homes, we will sell those courses," Walters says. "On courses where there are homes, we'll put a deed restriction to protect those homes."

Other courses are for sale or are facing expensive conversions to desert landscaping. Particularly susceptible are the newer courses carrying large debts. One such course, opened in January by Boulder City officials, is carrying $18 million in debt. Older, debt-free courses are in better shape, but things aren't rosy.

Jeff Kindred, general manager of Black Mountain, warns of the "mentality that the sky is falling." "I don't think we've overbuilt, but we could reach that point sometime in the near future," Kindred says. He says there was an expectation of growth based on the explosion of golf courses from 1996 to 2001. "Now we are going through an adjustment." But he expects the tourist-oriented courses to remain strong. "The market here is totally different. The majority of guys who play golf all come to gamble and then to play. The $200 greens fees are cheaper than an hour at the craps table."

Walters, again, disagrees. He lists courses already in bankruptcy, including Legacy and Wolf Creek, and says more are coming. "We'll see another five or six in bankruptcy in the next six months," Walters predicts.

And that's causing a thunderclap to roll over the fairways. It's a big headache for Don Barsky, executive director of Sun City Summerlin, a decade-old senior community created around three golf courses. Older courses such as his face the challenges of getting enough golfers to offset the operational costs and water use restrictions imposed by the Southern Nevada Water Authority in a drought that forecasters say could last 10 years.

Sun City Summerlin, for example, built its all-turf golf courses before any drought was in sight, and now large portions of the courses may be replaced with desert landscaping. Doug Bennett, conservation manager for the water authority, says his organization tried "to spread the weight across the entire community." But he concedes older golf courses may suffer more than others.

"Basically, because of what we did in golf, some courses will have farther to go than others," Bennett says. "Some courses use twice as much water as others."

But even though the water authority will compensate the courses $1 per square foot for the landscape conversion up to $300,000, critics such as Barsky insist that is not nearly enough to cover the costs. "It is estimated to convert one acre of turf to desert landscaping would cost between $30,000 and $60,000 per acre," he says. "To remove enough turf, that could be as much as 30 acres."

Barsky says landscaping rules also could affect the desirability of the courses to outsiders. "Initially when the water authority suggested we reduce 10 percent during the water alert stage, that was no problem," he says. "But then, in a water emergency, they wanted us to make an additional response of 20 percent. We`re concerned that the amount of water saved is not enough to sustain the courses to attract tourists."

Bennett is more sanguine. "We'd like there to be a solution in removing areas that are not part of the field of play," he says. "That landscaping can be just as attractive."

He also says courses will have latitude on how to save water. "The purpose of the water budget is to assure the golf course has as much control as possible," he says. "Golf courses have their own high-level expertise. We know it's a critical issue for golf courses as it is for every business owner."

The landscaping rules couldn't have come at a worse time for the local golf industry. Sun City Summerlin has been struggling with declining golf revenues for years, pitting pro-golfing residents against those who don't want to subsidize the courses. Only about 18 percent of Sun City Summerlin residents play golf. At a recent association board meeting, member John Friar noted the number of members playing golf had dropped from 17,000 to 7,600 as a result of higher fees. Now they're paying $1,200 a year for memberships and $16 a round. Friar wanted the membership fees to drop to $900 to entice more golfers to play.

"Then it would make money, not lose money," Friar said. The board took no action, but a committee is currently studying the finances.

"We are considering a rate structure that would target the Sun City rate at 20 percent below market," Barsky says. "We are actively trying to increase the amount of outside play." But he stresses that the Sun City Summerlin situation is not dire, at least yet. "We're close to breaking even," he says. "We're not losing much money."

Bernard Silver, a Sun City Summerlin resident who been active in the water debate, insists the water costs are getting worse. He says, before the greens fee hikes, there were 170,000 rounds of golf annually in his community, which came to $12.35 in water costs per round. Now, the rounds have dropped to 135,000, hiking the water costs to $15.60 a round. And, he charges, the 68 courses in the Las Vegas Valley are using 61,000 acre-feet of water, or about 20 percent of the water pumped out of Lake Mead. Sun City Summerlin recently was stung by the water district as one of the valley's top water consumers--thanks to the lush courses.

The looming water crisis has forced some serious rethinking of current golf operations as well as future planning. Plans for a golf course at the newest Sun City development, Aliante, include turning the course over to the city of North Las Vegas, removing a potential liability from the community, but also opening the course to the public.

And the situation goes beyond just playing golf for planned communities, Barsky warns.

"About 2,200 homes in Sun City border on golf courses," he says. "The value of those homes depends on open green spaces. Take away the golf course, and the homes on that course plummet in value."

Golfers can expect greens fees to fall as courses struggle to capture the soft market. But Kindred says some operators can't cut their prices because of the debt loads. The answer, he says, is to add amenities to the golf experience. "We need to build more values."

Walters, yet again, disagrees. Only an increase in golfers, he says, will turn the situation around. He acknowledges that three years ago it was impossible to get a tee time in Las Vegas. "It's not impossible now," he says.

As for future golf courses, Barsky says forget it. "It's a given," he says. "It's extremely unwise."