Booming golf course market in Korea
The COVID-19 outbreak spurred the popularity of outdoor activities such as golf which heightened investors’ sentiment toward golf courses.
The pandemic has impacted every aspect of life, from personal lifestyle to the global economy. While several industries have been adversely affected, COVID-19 has helped create a golf boom.
What triggered the golf boom in Korea?
Amid social distancing measures, outdoor activities such as golf, tennis and camping benefited from the restrictions. In particular, there has been a growing number of golf players across all age groups, which surged after the COVID-19 outbreak. According to the Korea Leisure Industry Institute (KOLE), the number of golfers in 2021 was about 564 million, up 94 million from the previous year. Given the total population of Korea as of 2021, roughly one in every ten people played golf. Amongst them, about 22% or 1.15 million were in their 20s and 30s, which nearly doubled in two years after the outbreak of COVID-19. From the prolonged pandemic restrictions as well as travel curbs, the Generation MZers notably contributed to the golf industry, the golf-related markets, including fashion, sporting goods and golf courses, demonstrated a bullish trend. The recent number of golf courses in Korea is 514, and the total area is about 510 million sqm. As Seoul’s land is roughly 605 million sqm, the total area of golf courses is about 84% of the city.
Figure 1: Number of Golf Courses in Korea
Source: Ministry of Culture, Sports and Tourism
Golf course investment market
Amid the upbeat market sentiment and growing popularity, investors ardently sought investment opportunities to acquire golf courses. The public golf courses witnessed a stronger investment appetite on the back of the higher expected return. According to the KOLE, the operating profit margin (OPM) of public courses in Korea (excluding Jeju Island) hit a record high, marking 48.6%, while private courses recorded about 24.2% as of 2021. The public courses are open to a larger pool of customers, while the private courses are open to selective customers. Therefore, there has been a larger interest in public or private courses that could be potentially converted to public.
In addition, raising green fees also lifted the OPM of public courses. As the KOLE report noted, the average green fees of public courses on weekdays and weekends soared by about 29.3% and 22.0% in two years, as of May 2022, respectively. An upsurge in green fees also increased acquisition prices. The recent sales price per hole skyrocketed compared to the pre-pandemic level. The highest price per hole so far was KRW 15.0 billion per hole, which was Jack Nicklaus Golf Course sold to Posco O&M.
Nevertheless, there are mixed signals in the outlook of golf courses. The hawkish monetary policy contracted liquidity in the market significantly, and expensive green fees pressured golf players, which may soften demand for the time being. Moreover, the government announced the removal of tax exemptions for public golf courses, exceeding a cap on green fees from July 2023, which could act as a headwind.
Figure 2: Major Transactions of Golf Courses in Korea
*Price is based on the transaction price on the title.