Skip to main content

How will the economy affect the tours

Just after breakfast on Sept. 23, 2008, President George W. Bush dispatched Vice President Dick Cheney to Capitol Hill in an attempt to sell Congress on the merits of the administrations $700 billion mortgage bailout fund. At nearly the same time PGA Tour commissioner Tim Finchem was addressing a group of reporters at the circuits season-ending Tour Championship on the general health of the circuit.
The executives delivered vastly different messages.
Not that the Tour is immune to the financial malaise that has gripped the global economy. Its just that if youre looking for a buy sport during these difficult times, the Tour still has an IBM quality to it.
One of the things that happens in every recession I've been involved in is companies work harder at evaluating their investment, said Finchem, who served as an economist during the unsteady days of former President Jimmy Carters Administration.
That usually works to our benefit, because most companies we deal with are involved in multiple sports. On the value proposition we always pencil out very, very good. Every recession we've had we've come out stronger on the back end.
If Finchems bullishness seems misplaced, consider that while other sports scramble to shore up their financial positions, the Tour will feature the same number of FedEx Cup events in 2009 as it did in 08. There will be modest purse increases this year and more than half of the tournament title-sponsor agreements run through 2012, when the contracts with CBS and NBC end. The Tours contract with Golf Channel runs through 2022.
All this does not mean, however, the Tour is recession-proof.
It seems certain Finchem & Co. will have to diversify the circuits sponsorship portfolio to adjust for the overall financial instability. Financial institution and auto manufactures have historically accounted for a large portion of the circuits sponsorship model. These are the same institutions that have been the hardest hit by the current downturn.
Of the Tours 41 FedEx Cup events in 2008, 15 were either sponsored or presented by financial institutions. Five tournaments in 2008 were sponsored by auto manufacturers.
Any financial firm is backing off on any type of hospitality, said Gerald Goodman, the tournament director of the Transitions Championship near Tampa, Fla. They are examining every dime they are spending now and every tournament will feel that.
Sales of corporate tents at the Transitions are off between 20 percent and 50 percent, Goodman said, and The Sports Business Journal recently reported that spending on hospitality is off at 10 of the 14 first-quarter events this year.
It feels like the whole world has been cut by 30 percent, said Mark Brazil, the tournament director of the Wyndham Championship in Greensboro, N.C.
The general consensus is that the Tour will be dotted with fewer corporate hospitality tents and skyboxes while the economic landscape shifts. Its a reality that has forced organizers to become more creative if they are going to maintain the same level of amenities that players and fans have become accustomed to as well as the charitable contributions that are a cornerstone of the Tours mission.
You dont want your players and fans and the media showing up and saying, They have really cut here, Brazil said.
Goodman, whose event is in the first year of a four-year sponsorship agreement with Transitions, has cut ticket prices from around $55 to $45 for advanced-purchased daily packages to a flat rate of $40.
But the biggest hit individual tournaments are facing is the sale of corporate hospitality tents, an area that has historically been carried by the financial sector. As a result Brazil is marketing these big ticket items ' which include corporate chalets that can cost as much as $40,000 for the week ' to multiple clients instead of a single sponsor.
I would be surprised if any event went up in pricing, Brazil said. There has to be deals cut.
Many tournaments also must fill the courtesy car void that was left when Buick ' one of the Tours largest suppliers of courtesy cars - announced last year it would be scaling back on its commitment. Tournaments like the Transitions and John Deere Classic were left scrambling for replacement vehicles.
We figured it would cost between $80,000 and $100,000 to rent a fleet of vehicles, said John Deere tournament director Clair Peterson. That is not an insignificant amount of money, but who in the car industry are you going to go to?
Peterson filled the courtesy car void by pooling the resources of ten regional Chevy dealers, but other tournament directors are still searching.
Yet amid the economic handwringing that has become something of a national pastime, those on the Tours financial frontline are buoyed by a cautious optimism.
The Tour is in a much better spot than a lot of other sports, said Brazil, whose agreement with Wyndham runs through 2010. The bottom line is companies still need to advertise. They still need to get in front of people and were a very good way to accomplish that.


Related Links:
  • Top 5 Questions of 2009
  • Top 10 Stories of 2008