Financial crisis hits golf
2008-10-26 17:47
Marizane Kok
Johannesburg - There are no safe havens in the current economic climate - particularly not on the golf course.
The financial sector - which represents a quarter of the advertising income of the world's biggest golf tournaments and almost a third of the sponsorships - is going through its worst crisis in years.
Thirteen (30%) of the 44 sponsors of the American PGA tour are in the financial sector, with two more in the insurance sector. Some 14% of its sponsors are in the car industry, which is also suffering.
Six sponsors have already pulled out of the Sony Open in Hawaii. The Arnold Palmer tournament has also lost a sponsor.
Wachovia and Merrill Lynch, two title sponsors, have been victims of the credit crisis. The Wachovia tournament will go ahead thanks to assistance from Wells Fargo, its new owner.
Travelers has been hit by a loss of more than $1bn due to claims related to big hurricane and the future of the Memorial tournament, supported by Morgan Stanley, is reportedly uncertain.
The PGA has denied that there are any immediate concerns about the sponsors. Some 75% of its contracts are in place until 2012 or longer. Only the US Bank championship's sponsorship will end before 2010.
Steve Dennis of the PGA says that his organisation has not received any queries from sponsors who want to exit long-term contracts.
With more than 100 sponsors of the PGA, Champions and Nationwide tours, will there always be some who pull out - but so far there hasn't been a big fall-out due to the economic crisis, he added.
However, economists expect the situation to become much worse. After all, overdue payments on debt in the US have ballooned to three times the national GDP - $50 trillion.
Some of the PGA sponsors - like FBR, Northern Trust, Zurich, Barclays, Royal Bank of Canada, Deutsche Bank and Banco Popular - probably won't prioritise golf if their business come under increased pressure.
An additional worry is the PGA's dependence on television networks.
While they deny it, the PGA and television network bosses is counting the minutes until Tiger Woods make a comeback.
Since his last operation, the number of viewers watching golf has declined by 36%.
Women golf tournaments are also badly hit. The LPGA has lost the support of ADT Security and had had to cancel for of its tournaments the past couple of weeks.
In Australasia, the future is also uncertain, with two of the three biggest tournaments currently without sponsors.
The European tournaments are probably best positioned in the current crisis. Its "Road to Dubai" tournament schedule has received a cash injection of €14m from the Dubai-based Leisurecorp. Huge television contracts which were agreed with Sky Sports and the BBC in January, will also come into affect.
The tournaments will also be less affected because fewer sponsors are in threatened industries(three in banking and another three in the car industry). The fact that the tournaments are also spread over a range of different countries, also brings a measure of stability.
South Africa's Sunshine Tour doesn't have that many financial sponsors, which should come as a relief.
But the effect of the recent economic turmoil - which resulted in a much weaker rand - will soon be felt on golfers, who will have to pay much more for equipment and cloths. Higher membership fees, due to the rising maintenance costs of golf courses, will also result in fewer players.
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