A new wave in Golf industry

TopGolf

2017.06

TopGolf: The Ultimate Fusion of Golf and Entertainment
A new wave in Golf industry
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I. The decline of the global golf market

Until the mid-2000s, the global golf market was growing at a relatively stable pace.

  • Because golf is a sport that goes hand in hand with business, the market’s growth has kept pace with that of the world economy.
  • The golf equipment market grew 6% yearly from 2004 to 2007.
  • The golf market also benefits greatly from high-profile golfers such as Tiger Woods and Annika Sörenstam of the early 2000s.

However, after the mid-2000s, the market’s growth began to plateau, particularly in the United States.

  • Since 2007, the number of golf facilities around the world has increased by 10% (due to market growth in SE Asia), but the percentage of the population that plays golf has stalled at 3.3%. As a result, the golf market has become a [1]red ocean.
  • Even worse, the golfing population is shrinking in developed countries. In the US, between 2012 and 2016, the golfing population fell by 13% and the number of golfers aged 16-25 fell by 45%.
  • Consequently, in the past decade, over 800 golf facilities have shut down.
  • When compared to other sports in the US market, golf has been more sluggish than soccer, basketball, football, and baseball.
  • The global golf market has shrunk by 6% each year from 2007 to 2014.

⇒ With the arrival of the age of information technology, people have access to a diverse array of recreational activities. Therefore, younger generations in developed countries opt for more active and dynamic sports than golf.



The expansion of golf in some countries is unlikely to offset global trends moving away from this social sport.

  • The golfing population is rapidly shrinking in the US and Japan while it is increasing in China, Germany, Australia, and several SE Asian countries. The global population, then, is expanding, but very slowly.
  • However, the amount spent by the average golfer in the countries experiencing market growth is much smaller than what the average golfer spends in the US and Japan. Thus, the outlook of the overall golf market is [2]bleak.
  • In China, the government strongly supports the domestic golf market, but the country’s severe air pollution is expected to stymie growth.
  • In Australia, the federal government-backed Sporting School program has led to a rise in the number of young golfers and golfing families. Nonetheless, the country’s small population is unlikely to have a significant impact on the global golf market.

⇒ The rising popularity of golf in the handful of developed and newly-developed countries is unlikely to make a dent on the international golf market.


In conclusion, the golf market is facing a major existential crisis.



II. The rise of new players in the golf industry

Golf-based offshoot services are adding to the market.

  • Screen golf: Developed in the US in the early 1990s, screen golf systems helped players view, analyze, and improve their swings. South Korea commercialized this technology and has established a 1.5 trillion KRW market as of 2015.
  • Golf entertainment: In the US, after the mid-2000s, golf facilities began to offer golf-based games and refreshments, transforming the grassy expanses into a playground for golfers. Two million people seek out such spaces annually.

In Korea, screen golf, which was first commercialized by the company Golfzon, is leading the growth of the domestic industry.

  • Screen golf utilizes 3D motion graphics, sound and visual effects, and swing analysis technologies to simulate the experience of outdoor golfing indoors.
  • A golf simulator projects a lifelike course onto the screen. When the player strikes the ball, cameras enable close monitoring and analysis of the ball’s spin, speed, and direction. This information is then applied to the outcome of the simulated ball on the screen.
  • The first company to commercialize this technology in Korea was Golfzon. Golfzon began as a venture in 2000, and after two years of R&D, the company released a line of screen golf equipment into the domestic market. The yearly revenue in 2002 was KRW 10 million, but this figure skyrocketed to 120 million in 2006, 1 billion in 2008, and 3.65 billion in 2013.
  • Golfzon is evolving in three ways: 1) Expanding to China, Taiwan, Japan, the US, and other countries with significant golfing populations; 2) Investing in screen golf technology (e.g. using tech to correct posture) or becoming a comprehensive golf-tech solution company; 3) Applying the technology to other sports like baseball.

In the US, Topgolf, a sports entertainment company offering “games, food, and fun”, is rising above the faltering golf market.

  • Topgolf is an entertainment complex where friends and family can play golf but also enjoy refreshments and other recreational activities.
  • Topgolf operates 29 venues worldwide, employs more than 10,000 associates, and serves 13 million guests annually.

III. Topgolf: the perfect blend of golf and entertainment

Topgolf’s vision was to provide a space where rookie golfers can [3]ease into the sport through related games.

  • Topgolf’s mission: “To create a fun, non-intimidating way to hit a golf ball but also to make it into a friendly competition.”
  • Topgolf’s history: Topgolf was founded by two English brothers, Steve and Dave Jolliffe. They both enjoyed playing golf but also spent time playing non-traditional golf games, like trying to hit a target with the golf balls. They exercised entrepreneurship by inventing a “smart” golf ball implanted with a RFID chip that would help players locate their balls. Eventually, while brainstorming ways to liven up their range experience and improve their skills at the same time, the Jolliffe brothers decided to launch Topgolf.

Though primarily operating in the western and southern United States, Topgolf has succeeded in expanding internationally using an [4]airtight business model.

  • In 2000, Topgolf opened its first venue in Watford, England. The second and third venues opened in Surrey and Chigwell respectively.
  • Founder and CEO of a PE firm in the US, Erik Anderson joined the Topgolf Entertainment Group as its Co-Chairman and CEO, and obtained a license from the Jolliffe brothers to bring Topgolf to the US in 2005.
  • In 2009, Anderson invested heavily in Topgolf’s facilities and technology, upgrading the venues to include areas to eat and drink and transforming the company to what it is today. Anderson added 23 venues in the US.
  • In the US, Topgolf has been a huge hit in areas known for their hot climate and resorts, like Texas, Florida, Arizona, and Las Vegas. Topgolf is also expanding to three locations in Australia and Mexico.

Topgolf’s service model: to be a premier golf entertainment complex where the competition of sport meets your favorite local hangout.

  • About 10 golf games available: Guests can enjoy a variety of golf-based games in an indoor golf arena. One of these games is to hit the ball into a target. (https://www.youtube.com/watch?v=ykKjoWogAmI)
  • Food and beverages: Guests have access to tables where friends and family can enjoy food and beverages. Sale of refreshments accounts for 50% of Topgolf’s revenue.

Top Golf has made meaningful progress in the US and continues to expand globally.

  • In 2016, Topgolf generated $300 million in revenue from 8 million customers. Also, it is estimated that the driving range and family fun centers industry in the US generates about $10 billion in annual revenue.
  • 80% of guests are aged 18 to 34, and 65 to 70% of the customers are self-proclaimed non-golfers that enjoy the sport only casually. Topgolf has been responsible for attracting new customers to the golf market.
  • Topgolf recently secured an investment from Providence Equity Partners at an undisclosed valuation believed to be close to $2 billion.
  • In 2016, Topgolf acquired mobile and web gaming app World Tour Golf, which has 14 million users worldwide. Topgolf’s and WTG’s businesses have benefitted one another by promoting one another.
  • In 2016, Topgolf launched four new divisions.
    • TEG: a DBA for Topgolf International, Inc.
    • Topgolf: the venues in the U.S. and U.K.
    • Topgolf International: focus on Topgolf’s international expansion
    • Topgolf Media: enhance the Topgolf experience through advanced digital media, strategic partnerships, and sponsorships

Experts cite four main reasons to Topgolf’s success in the US.

  • The golfing experience reinvented: Golf was a sport notorious for its high cost of entry and a reputation as a boring sport. Topgolf eliminated such barriers by putting a fresh twist on the sport.
  • The social aspect: Golf is traditionally played by a small group of people at a very slow pace. Millennials, who seek sports often for their social elements, thus believed the sport had lost relevance with their generation. Topgolf brought entertainment back to golf by re-inventing the sport.
  • Competition: Topgolf is the perfect venue for friendly competition, which is largely absent from traditional golf. Guests can even form teams and participate in 8-week-long Topgolf leagues.
  • “Sports pub”: Topgolf customers can take breaks from golfing in the lounges, where drinks and food are served and dozens of TV screens are installed.


IV. Where the Korean golf market stands

Though Topgolf has been successful in the US, this does not necessarily mean that it will be received as well in Korea.

  • Pros
    • Golf, games, and socializing are obviously something Koreans like to do.
    • Topgolf is an outdoor activity. This is a change from the typical indoor games that are popular in Korea (e.g. Internet cafes, pool, and board games).
  • Cons
    • Topgolf facilities require a lot of real estate. This may be difficult to accomplish in a city as expensive as Seoul.
    • Sports are not as central to Korean culture as it is to American culture. Only those who are familiar with such dynamic recreational activities would seek out these venues. Whether customers will warm up to Topgolf as much as they have to screen golf is up for debate.


Will Topgolf become successful globally? If Topgolf were to launch in Korea, do you think it would be as popular as screen golf? What must the golf market do to usher in a second “renaissance” of the industry?

Please discuss the golf market and Topgolf with your Ringle Tutor. Take the opportunity to improve your spoken English.

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