Yukyeong Choi Senior Researcher, Yanolja Research / [email protected]
The COVID-19 pandemic has led countries worldwide to implement social distancing and containment measures to prevent the spread of the virus. This has resulted in repercussions such as the inability to travel abroad and even restrictions on leisure activities that were once freely enjoyed in everyday life. Particularly, popular venues like movie theaters and indoor sports facilities experienced group infections, leading to stricter regulations on capacity limits for indoor multi-use facilities. Moreover, private gatherings were limited to 4 or 6 people depending on the spread of COVID-19, making group gatherings difficult.
While many leisure industries suffered greatly due to the unprecedented COVID-19 pandemic, there were also industries that experienced a boom as a result. One prominent example is the golf industry.
Domestic Golf Demand Surges During the Pandemic
According to statistics from the Korea Golf Course Business Association, there were 514 golf courses nationwide in 2022, and the number of users reached 50.58 million. This marked a steady increase from the 490 golf courses recorded across the country in 2018.
However, this growth trend varied depending on the type of golf course. The number of membership-based golf courses experienced a gradual decline, with 21 fewer courses in 2022 compared to 2018. On the contrary, the number of non-member golf courses saw an increase of 45 in 2022 compared to 2018. This indicates that some existing membership golf courses might have been converted into non-member golf courses to ensure profitability.
Furthermore, the total number of users showed a steady rise. In 2022, there was a notable increase of about 12.64 million users compared to 2018. Particularly noteworthy was the surge during the COVID-19 pandemic, where there was an annual increase of approximately 10%. In 2021, the number of annual users surpassed 50 million, and the number of annual users per hole exceeded 5,000.
As of 2022, Gyeonggi-do has emerged as the region with the highest number of golf course users, constituting approximately 33.8% of the nation's total. The number of users in Gyeonggi-do reached around 17.12 million in 2022 (4,985 users per hole), showing a notable 5.3% increase compared to 2018 when it had 3.91 million users (4,232 users per hole).
Conversely, Chungbuk experienced the most significant growth in users, with a remarkable 12.1% increase from 2018. In 2018, there were around 2.64 million users in Chungbuk, but during the COVID-19 pandemic, this number steadily surged to about 4.17 million in 2022. The number of visitors per hole also saw a rise, climbing from 3,813 in 2018 to 5,209 in 2022. This trend suggests a phenomenon where the demand for golf has expanded from Seoul and Gyeonggi-do to the Chungcheong.
Surging Golf Demand Among Women and Youth
The main reason behind this trend is the "expansion of the golf users". For several decades, golf has been perceived as a high-end or luxury sport due to the substantial initial costs associated with starting golf, including equipment and lessons, and the relatively burdensome cost of rounds compared to other sports. However, this perception has shifted during the COVID-19 pandemic as certain age groups with higher disposable incomes have taken up golf.
According to a golf-related word analysis conducted by 'Sometrend', a social data analysis service provided by VAIV Company, there was a notable increase in the ranking of the term 'lesson' during the years 2020 and 2021, when COVID-19 had the most significant impact. In 2021, a new word, 'gollin-i' (a blend of golf and children, signifying beginner golfers), emerged and ranked high. This indicates a rise in interest in golf and an increase in the number of consumers wanting to learn golf.
Furthermore, the term 'women' also rose in ranking compared to the pre- pandemic period, suggesting that golf, which was traditionally dominated by men, has expanded to include more women as the number of female golfers increased during the COVID-19 pandemic.
According to data released by AGL, a golf tech venture company, there was a significant increase in golf consumption among individuals in their 20s and 30s in 2021. While the 50s (34.4%) and 40s (21.8%) age groups, who were the main consumers in the past, still accounted for a considerable share, the greater Seoul area saw a notable growth rate of 52.4% and 40.3% among those in their 20s and 30s, respectively. This trend can be attributed to the emergence of the MZ generation (Millennial and Generation Z cohorts), as a new consumer demographic, characterized by their willingness to spend money on consumption aligned with their personal values.
Similar trends are observed beyond Korea's borders. According to the National Golf Foundation in the United States, the total number of golf rounds played reached 502 million in 2020, indicating a significant increase of approximately 13.9% compared to the previous year. Moreover, the golfing community expanded by roughly 3 million individuals, reaching a total of 36.9 million, primarily driven by a surge in participation among junior and female golfers.
Meanwhile, Japan, despite its shrinking golf market, experienced a distinct impact from the COVID-19 pandemic. The year 2021 witnessed a remarkable rise in golf course visitors, totaling 10.02 million, showcasing a notable increase of 10.4% from the previous year. Household expenditure on golf courses also exhibited growth, with a 0.5% uptick compared to the prior year, particularly pronounced among the younger demographic.
Impact of Pandemic: Golf as an Alternative to Overseas Travel
The expansion of the golf consumer base appears to be closely linked to the decline in overseas travel demand. The COVID-19 pandemic resulted in a dramatic decline in international travel due to widespread lockdown measures and reduced air travel in various countries. In 2019, a staggering 28.7 million Koreans embarked on overseas journeys, a figure that plummeted by a staggering 85.1% to a mere 4.28 million in 20206. Moreover, the number of flights decreased by 44.3% from 459,514 in 2019 to 256,010 flights in 20207. This trend was mirrored in tourism spending, which saw a precipitous 54.4% drop, plummeting from $31.5 billion in 2019 to $13.4 billion in 2020 compared to the preceding year8. While the subsequent years registered a steady 10% annual growth, the expenditures are yet to rebound to pre-pandemic 2019 levels.
As a result of reduced tourism spending, consumers sought alternative avenues for consumption, leading to a potential shift towards domestic consumption during the pandemic. In this regard, domestic travel and certain leisure industries seem to have absorbed the redirected demand. Among them, golf is believed to have experienced significant growth in demand. With restrictions in place for other leisure activities due to social distancing measures, golf, being an outdoor activity and less subject to strict regulations, emerged as an appealing option for individuals seeking safe recreational alternatives.
Forecasting a Rise in Overseas Travel, Decline in Domestic Golf Demand After the Endemic
Looking ahead, the golf industry is expected to undergo changes as the transition to the endemic phase began last year. With the shift, the quarantine rules and regulations that were in place during the COVID-19 pandemic have been eased. In particular, in October 2022, there was a notable surge in demand for overseas travel as the PCR test obligation for domestic travelers was suspended.
According to national overseas tourist statistics, the number of overseas tourists started to significantly increase from July of the previous year, with a remarkable surge of over 400% and up to 1,430% compared to the same month in the preceding year. These figures demonstrate the rapid rebound in travel activities as restrictions were lifted and the appetite for international travel resurged.
The existing expedition golfers are also resuming overseas trips. The travel industry has responded to the growing demand by developing various products for overseas golf. For instance, Kyowon Tour established a new overseas golf team in July 2021 to introduce strategic products. As a result, the company achieved a remarkable growth rate last year, with a 47% increase in the second quarter, a 271% increase in the third quarter, and a 194% increase in the fourth quarter compared to the previous year's respective quarters. Interpark, an online travel agency, reported a significant 1240% increase in demand for overseas golf packages in January and February this year compared to 2019.
Southeast Asian and Japanese destinations like Vietnam and Thailand have become popular choices due to their mild winter climates, affordable green fees, and attractive tourism and recreational offerings. However, there has been a demand-supply imbalance during the winter season, as overseas golf demand outpaced the recovery of accommodations and flights to pre-pandemic levels. As supply stabilizes, a more steady increase in demand is expected in the future.
On the other hand, domestic demand for golf is expected to gradually decline. Based on the analysis of consumption data from domestic golf courses, golf course spending has been steadily increasing since 2018, regardless of the impact of the COVID-19 pandemic. However, recently, this trend has reversed, showing a downward trajectory. In particular, the year-on-year declines in December 2022 and January 2023 were -25% and -23%, respectively, indicating significant decreases in spending during those months.
Golf, being greatly influenced by weather conditions, typically experiences an off- season during winter, with some golf courses not operating during this period. However, even during the pandemic, demand steadily increased throughout the winter season. Nevertheless, as the endemic period emerged, domestic winter demand appears to have significantly declined, with many opting for milder regions abroad.
Furthermore, in the last three months, domestic golf consumption expenditure showed a downward trend when compared to the same months of the previous year. From April to June 2023, it exhibited decreases of -5%, -9%, and -5%, respectively, compared to the corresponding months in the previous year. Although the overall scale of consumption expenditure still surpasses the pre-COVID-19 levels, the declining trend that began in December of the previous year suggests that the continuation of the pandemic's special effects is unlikely to persist much longer.
Moreover, examining the rate of increase in golf consumption expenditure in comparison to the same quarter of the previous year, Gyeonggi and Chungbuk surpassed the previous year's levels in the first quarter of 2023. However, all other regions experienced a declining trend. As a result, on a national basis, the first quarter of this year saw a decrease of 2.7%.
The decline in golf consumption expenditure intensified further in the second quarter. During the second quarter of 2023, all regions recorded a decrease in golf consumption expenditure compared to the same quarter of the previous year, resulting in a nationwide decline of -6.44%. Notably, the Jeonbuk and Jeju regions experienced substantial decline rates of -25.2% and -20.7%, respectively. Gyeonggi and Chungcheong areas, which are relatively accessible from Seoul, displayed a lower rate of decrease than other areas, but they also demonstrated a declining trend from the second quarter of 2023.
Immediate Action Required: Facing Decreased Golf Demand in Korea
Golf is known for being a costly sport, and during the COVID-19 pandemic, the surge in golf course fees has become a prominent social issue. Not only green fees, but also caddy fees and cart fees have been subject to scrutiny. When comparing the trend of golf course usage fees with the consumer price index, it becomes evident that the rate of increase in golf course usage fees is notably high.
Particularly noteworthy is the fact that the consumer price index related to golf course fees significantly surpassed the averages of both the total price index and the leisure industry price index, starting from the period after the outbreak of COVID-19. This surge in prices is primarily attributed to the increase in demand for golf during the pandemic.
The remarkable rise in golf course fees has drawn attention to affordability concerns, posing challenges for golf enthusiasts, especially during economically challenging times. Policymakers and industry stakeholders may need to address these issues to ensure accessibility and sustainable growth in the golf industry.
The current situation can be seen as a trend where the concentration of consumption on golf is gradually dispersing, as people now have the option to engage in overseas travel and other leisure activities. This dispersal comes amid complaints about the high usage fees of domestic golf courses. In essence, the decline in domestic golf demand since last December can be attributed not only to the rise in overseas travel but also to the issue of high usage fees.
Golf courses share a unique characteristic with hotel rooms or airline seats – unsold tee times or slots cannot be sold at a later date. This inventory constraint means that golf course operators must consider effective ways to sell the available tee times through price adjustments, aiming to maximize sales. In times when demand is on a declining trend, as seen currently, adopting strategies to create demand becomes essential. Implementing a Revenue Management System, such as dynamic pricing, in the golf industry could be a viable approach to stimulate demand and optimize revenue during these challenging periods.
Domestic golf courses often set different prices for weekends and weekdays, but they could benefit from adopting more precise pricing strategies, similar to those used by overseas golf courses. These strategies involve factoring in elements like golfing time, season, weather, and age group, in addition to the day of the week. For instance, some U.S. golf courses consider these variables to establish detailed rates.
During high-demand weekends, higher rates are applied, while lower rates are implemented during super twilight hours on weekdays, attracting consumers with lower willingness to pay. By employing such dynamic pricing approaches, golf courses can increase sales by selling tee times that would otherwise remain unsold, thereby optimizing revenue and resource utilization. Adopting a Revenue Management System with multiple pricing factors could enhance the competitiveness and efficiency of domestic golf courses.
Based on the analysis, the domestic golf market in 2023 is anticipated to move away from the booming phase experienced during the COVID-19 pandemic and continue the decline observed in the first half of the year if no other factors intervene. To counteract or reverse this decline, golf courses should adopt an active strategy to attract not only existing customers but also lapsed customers through price reduction policies and enticing special promotions.
Drawing from Japan's past experience, it is essential to learn from the struggles faced by golf courses that were not competitive during the booming golf market and suddenly emerged. In Korea, golf has attained popularity as a sport, but the sustainability of the market's boom during the pandemic remains uncertain in the short term.
In conclusion, proactive measures and strategic initiatives will be vital for golf courses to navigate the changing landscape and secure a steady position in the market, especially considering the evolving consumer behaviors and preferences post-pandemic.
*To reference this article, please use the below citation: “Yukyeong Choi (2023). COVI-19, the Surge in the Golf Industry, and the Endemic Outlook, Yanolja Research Insights Vol. 5.”
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