KPMG publishes new study on European Mediterranean golf resorts
Story published at 15:22, Tuesday, April 14th, 2015
KPMG Golf Advisory Practice has published the study titled “Golf Resorts in the European Mediterranean Region” analysing the current trends and future outlook for development and operations.
GBN.com Interview with Andrea Sartori, Partner KPMG Advisory, Head of Golf Advisory Services in EMA
Andrea, KPMG Golf Advisory Practice continues to publish meaningful thought leadership on the golf sector. You have recently produced a new study on golf resorts. Why have you chosen this time for the study?
Yes, you are right; the KPMG Golf Advisory Practice leads the way in thought leadership in the golf industry. Last year we published the Golf Cost Development Survey for Europe, Middle East and Africa and in a couple of weeks we will publish the annual European Golf Participation Survey.
The report on integrated golf resorts comes at a time when the property sector is slowly coming out of the global economic crisis and with this in mind, we believe it is a good time to investigate the development of and future outlook for integrated golf resorts in greater detail. Our analysis has shown that whilst some integrated golf resorts did open during the crisis years, the rate of growth slowed significantly. Today we are seeing a returning level of interest in the sector.
At the same time the golf holiday market has shown signs of continued growth in the past few years, with global golf holiday sales growing by more than 20% between 2011 and 2013.
Explain the general concept behind integrated golf resorts?
First of all is important to observe that there is not a commonly accepted definition of what constitutes a resort. In our study, we have considered a resort as a planned development comprising one or more golf courses, hospitality facilities and/or residential real estate for sale. The subject of our study is golf resorts located within 20 km of the coast of European Mediterranean countries, as well as the coast of Portugal. We also define an integrated golf resort as being planned and developed as one mixed-use project.
The key element of the market that we have analysed is the inclusion of golf as a main feature of the resort. Increasingly the concept of a golf resort has been backed up with a range of other sports and leisure facilities, but it is the combination of all of these components that can contribute to the success of an integrated golf resort.
How has the concept changed over the years?
Golf resorts have existed since the early 20th century. In the early days the concept comprised more simply a hotel and a golf course or courses.
As holiday patterns changed, and with a greater availability of means of travel, the resort market boomed and a holiday residential market started to grow. From the 1980s the proportion of integrated golf resorts featuring residential real estate for sale increased and between 2000 and 2009 as many resorts opened including holiday real estate as those including only a hotel.
Interestingly in many cases developers focussed on real estate sales have chosen to include a hotel as well. This often make sense as the hotel can provide a range of facilities which add to the attractiveness of the resort as a whole, a brand that can help to position the resort and establish credibility in the eyes of real estate buyers.
Why has the residential real estate-golf combination grown in importance?
The key answer to this question lies in the potential returns on investment from residential sales. In terms of positioning the resort in the eyes of potential consumers; golf remains a key driver to higher premiums in real estate or tourist developments. Golf courses come second only to waterfront sites as the most desirable location for a housing community.
In a recent survey of resort developers carried out by KPMG, nearly half of the respondents indicated that the real estate sales price premium generated by a golf course was in excess of 20%. Almost all survey respondents indicated that a premium was achieved on residential real estate as a result of a golf course.
It is important to realise that many people who purchase real estate in an integrated golf resort may not actually play golf. Rather they are attracted by the thought of living on a golf course – the green areas of the fairways, the lifestyle and the sense of “prestige” associated with living beside a golf course. In addition there is a greater potential of increased investment value of a golf course home.
In today’s market, how important is the use of a “branded” golf architect and internationally branded hotels?
This is an area on which we are frequently asked to give advice. Increasingly in today’s golf and hospitality markets, the issue of brand is of key importance. It can be key to raising the profile of a resort.
Our research showed that in the last fifteen years around a third of all new golf courses have been designed by firms of architects associated with a well-known golfer. Interestingly in the last five years, this proportion has grown to 60%. Furthermore, our study demonstrated that residential real estate on a resort with a “branded” golf course achieves a greater premium. 35% of the resorts studied estimated a premium above 10%, and 25% estimated a premium of between 6%-10%.
The same is perhaps true in terms of the use of international hotel brands. Certainly a well-known hotel brand can assist in raising the profile of a resort and nearly 40% of all hotels in resorts covered by our study are operated under an international brand. It is however interesting to note that there is no brand that currently has leadership in this market.
Is now a good time to be developing a golf resort?
It appears that we are into a phase of modest recovery following the economic crisis – our experience shows that this can be seen to an early extent in the second home property market. It appears that it is more in the market for higher quality properties and unique concept that are attracting more attention in the early stages of the recovery.
At the moment we are noticing that second home buyers from key feeder markets – such as UK, Ireland, Germany, and Scandinavia – are beginning to explore once again the idea of buying second or third homes in golf resorts in Southern Europe. The CIS regions and Russia, prior to the Ukrainian crisis, were also emerging as potential buyers.
We are seeing a revival in developer confidence in some areas. This despite the fact that there is still limited debt financing available for green field golf related projects. In facts, banks have not shown the same kind of openness to green field development at this time and they are rather interested in investing in the extension of existing successful properties. Existing resorts are now investing in repositioning themselves and in some cases projects which were halted and are currently under development are revising their original concept in order to become more attractive in the changing market. It is perhaps in some emerging countries that greater future potential exist.
Where in the European Mediterranean do you see the potential for golf resort development?
More established markets such as Spain, Portugal and to a lesser extent France and Italy, have a mature integrated golf resort supply. Especially in Spain, at least for a few years, there will be a limited number of new projects, whereas emerging markets currently have the least supply and potentially offer the most opportunity. Our study has demonstrated that there are improved prospects for new developments in emerging golf resort markets, such as Croatia, Montenegro, Cyprus and Turkey. Despite the uncertain economic and political situation, Greece could also be an interesting market in the mid-term.
In the next five years we expect to see growth in the number of resorts in the above mentioned emerging markets and the South of Italy, which has phenomenal golf tourism potential. One problem that has surfaced in general is the lack of suitable available land and a low prioritization of golf in national tourism program. What we have observed is that if emerging destinations wish to compete against mature destinations, the concepts of resorts need to be based on mix of components focused on niches which differentiate them from competitors.
Andrea Sartori, thank you very much
The report Golf Resorts in the European Mediterranean Region is available here
KPMG Golf Advisory Practice www.golfbenchmark.com