Golf Business Feels the Boom

It was reported earlier this month that the business of professional golf is slumping. Spending by North American companies on golf sponsorships is projected to drop 3.7 percent this year.

A study conducted by IEG, an arm of advertising giant WPP Pic, speculates U.S. and Canadian-based companies will spend $1.31 billion in 2009, down from $1.36 billion in 2008.

"Call it the 'big shrimp syndrome,'" IEG Sponsorship Reports senior editor William Chipps said in a statement released in conjunction with the study. "Many companies are reluctant to sign new deals over concerns about what might be perceived as excessive hospitality."

As can be expected, such theories send a chill through PGA Tour headquarters in Ponte Vedra Beach, Fla., where corporate-title sponsorship of tournaments is its lifeblood.

"I have not delved into their numbers," PGA Tour vice president Ty Votaw said, "but everybody is in a tough environment."

The tour's situation, however, is unique in that the year started with a few grandstanding politicians targeting a lavish pro-am party before the Northern Trust Open in Los Angeles as Exhibit A of corporate waste. Now, just as the season is winding down, comes another suggestion that any company sponsoring professional golf risks the perception of being financially wasteful.

Admittedly, the timing of Northern Trust's long-scheduled festivities -- entertainment included the rock groups Chicago and Earth, Wind and Fire -- could hardly have been worse. The February tournament week arrived only days after the financial institution not only received a $1.5 billion government bailout but had laid off 450 employees. And, granted, the recent IEG study citing corporate uneasiness over any perception of unnecessary spending is only a reflection of financial trends.

But wait just a minute.

"Some people get this idea that because there were some comments about corporate entertainment that has spun off into these decisions; that's not the case,'' PGA Tour commissioner Tim Finchem said. " It has to do with companies reducing their marketing and advertising budgets significantly, 40, 50, 60, 70 percent in some cases. So if you're going to take $100 that you were spending, now you're going to spend $40; $60 isn't going to get spent. So those choices are being made."

For whatever the reason, corporate support for professional golf has dropped, creating an easy target for critics. But a 3.7 percent decrease? In some current financial circles that would qualify as stability.

Arguably, the tour looks surprisingly solid.

"The fact is we are going to come through 2009 still being able to give in excess of $100 million to charity when we gave $125 million in 2008 which was an all-time record," Votaw said. "We are having to work harder, but we always said we were not going to come through this period unscathed."

Plenty of challenge are lining up on the immediate front.

The PGA tour began this year with 13 events sponsored by banks, investment firms and credit card companies. Five other tournaments carried the name of car manufacturers.

Not all of the aforementioned will be back next year.

Most obvious by its absence will be the Buick Open, for 51 years an annual stop outside of Detroit, but now a casualty of the recession-crunched auto market and off next year's schedule.

Also, there are tournaments that will be losing their past corporate identities as Mercedes, U.S. Bank and Stanford Financial step aside. The Bob Hope Chrysler Classic's future is uncertain for obvious reasons.

"I think the economic slowdown will last longer than most people think and some of the tournaments are not going to sustain it," said Kym Hougham, director for the Quail Hollow Invitational, the tournament previously known as Wachovia Championship before the Charlotte-based bank was taken over by Wells Fargo. Interestingly Wells Fargo announced it will honor the existing sponsorship contract that runs through 2014 but will not use its name in the tournament title.

"Nothing we are doing today is the same as we did it two years ago when everything was flowing nicely," Hougham continued. "But the tour is a pretty smart organization and they have done pretty well at filling up title sponsorships. Does that mean they are not going to be challenged in 2010 when a lot of contracts come due? Of course they are. But golf is a pretty good buy if you drill down through what it gives."

Recent dealings support Hougham's optimism.

The Buick Open's place on the schedule already has been replaced with a stop at The Greenbrier Resort in White Sulphur Springs, W. Va. Extensions for existing sponsorship contracts with Bridgestone, Travelers, Accenture and Zurich were all announced this summer. A 10-year deal was reached for SBS to replace Mercedes as host of the season-opening tournament of champions.

"Companies are going to have to go back to advertising; that's the way they do business,'' said Gerald Goodman, tournament director of the Transitions Championship, the third stop in the spring Florida Swing. "That's the way they get their name out there. We all have to show returns for their investment more than in the past, but the golf audience, I maintain, is still the audience they are trying to sell to.

"We're not spittin', and chewin', and fightin' and kicking each other out there. The audience that watches golf is buyers. They are going to continue spending money in golf."