Golf in Hungary Facing Dynamic Growth

15 new courses likely to be built in the next ten years

Golf has seen a dramatic development in the last two decades worldwide. Although still regarded as the sport of the elite, it is becoming more and more popular in Central and Eastern Europe too. An estimated number of 10,000 golfers in Hungary within 10 years from now can be considered realistic and would imply that Hungary should increase its current supply of golf courses to approximately 20-25, says Andrea Sartori, senior manager and head of Travel Leisure and Tourism group at KPMG Consulting in Hungary.

According to the Professional Golf Association, there are currently more than 30,000 golf courses registered worldwide. Although the United States is the largest market for golf in the world with over 17,000 courses and approximately 25 million golfers, the game itself derives from Europe and continues to have a strong presence there with approximately 6,000 golf courses and roughly 6.2 million golfers.

Golf in Europe has experienced a steady growth over the years. While the number of courses has more than doubled in the past sixteen years, the number of registered golfers has grown with an average of 16% per annum, reaching close to 3.5 million in 2001. It is estimated that there are up to a further 2.7 million players in Europe who are not affiliated to any specific club.

Traditionally Ireland and Great Britain have shown the greatest enthusiasm towards this sport. Ireland and the UK, particularly Scotland, are steeped in golfing tradition and offer players some of the best and oldest courses in the world. Of all the golf courses in Europe, the largest share is located in Great Britain (i.e. about 2,600 or approximately 45%).

Number of registered golfers and golf courses in Europe as of 2001:

Source: European Golf Association with KPMG elaboration

Since the early nineties the Nordic countries have experienced an accelerated growth in the demand for golf. Today Denmark, Norway and Finland are showing a strong demand for this sport, with Sweden achieving an impressive 5.4% penetration (i.e. one in twenty Swedes are registered golfers). It is important to highlight that in these countries the availability of golf courses (i.e. high number in terms of supply) has positively stimulated the creation of further demand.

Spain and Portugal are becoming increasingly popular with golfers from all over Europe. These counties have long been popular tourist destinations and golf is an added attraction to the fine weather conditions and the availability of golf course. As can be expected, most of the courses are situated near the traditional tourist regions.

According to the statistics one third of all registered golfers are currently female. The Netherlands, Austria and Germany lead this trend with female participation reaching more than 40% last year.

As a result of the rises in both leisure time and disposable income, golf is forecasted to experience continued growth all over Europe, especially in non-traditional golfing regions like Central and Eastern Europe and countries like Italy and France.

Golf in Hungary

Most of the Central and Eastern European countries, mainly due to the fact that golf as a sport was banned during the socialist time, have a very low level penetration of the game. Golf in Hungary has only had the chance to properly develop after 1989. With a population of roughly 10 million, the country has approximately 1,000 domestic registered golfers. Compared to the other countries in the region such as the Czech Republic and Slovenia, Hungary’s golfer penetration is considerably less (i.e. eight and sixteen times less respectively).

There are currently seven registered 18-hole golf courses and one 9-hole course operating in Hungary. The current supply of golf courses is concentrated in the western part of the country. In fact, the majority are situated where the traditional demand has been: either near Budapest, where there is the largest share of the country’s expatriate community (e.g. Pannonia Golf Club in Alcsútdoboz, Kisoroszi Golf & Country Club in Kisoroszi, Pólus Palace Golf & Country Club in Göd, Old Lake Golf Club in Tata) or close to the Austrian border (e.g. Birdland Golf & Country Club in Bükfürdő and the 9-hole Princess Palace Golf & Resort Club in Dunakiliti).

Beyond the existing golf courses, there are several planned golf developments in Hungary, most of them concentrated around major tourist areas (e.g. the Balaton lake and well known spa towns) and urban centres such as Budapest and Székesfehérvár.

Current memberships at the top golf courses in Hungary range from 150 – 250 members, which is significantly less than the average members at a typical Western European golf club (i.e. 450 – 500 members). This is a consequence of the lack of awareness in the sport and relatively high membership fees charged compared to average earnings.

According to the Hungarian Golf Federation, in the past four years the number of golf club members has doubled to reach approximately 1,000 this year. It has also becoming evident that the share of golfers that are not affiliated to any club is slowly but surely increasing. Although there are no official figures available, it is estimated that there are currently close to 1,500 golfers in Hungary that still do not have membership status.

As the economic situation of Hungary continues to develop and households have more discretionary income for leisure activities, the number of golfers and members of the golf clubs are expected to increase. This will also occur through television coverage, successful organization of championships in Hungary and a greater proliferation of courses offering different challenging standards. In light of this, it can be estimated that the growth of the number of golfers is expected to increase during the next 10 years at an average annual rate of 25% (in Europe the expected growth is 15%). This translates into approximately 11,000 registered golfers in Hungary by 2012.

An expected number of 11,000 golfers can also be considered realistic if we assume that by the year 2012 the penetration rate of golf in Hungary will reach 0.10% of the population (this is a slightly higher penetration rate in comparison to the one of the Czech Republic today, which is 0.08%). Such an expected penetration rate is still well below when compared to the current penetration rate of golf amongst the Austrian (0.74%) and the Slovenian population (0.16%).

From the supply perspective, an estimate of 10,000 registered golfers within 10 years from now would imply that Hungary should increase its current supply of golf courses to approximately 20-25 in the next ten years, if we assume an average membership base of around 400 members. In other words, in ten years we should reach the current level of the Czech Republic, where there are currently 23 registered golf courses 18 and 9-hole golf courses.

But how much does it cost to develop a golf course, together with its clubhouse? Experience in Europe shows that a low-medium budget golf course would cost between USD2.5ml. and USD3ml; a high quality golf course (but not an internationally recognized signature course) would require an investment of USD5-6ml; and, a top signature golf course can easily cost more than USD7.5ml. It is important to stress that such development costs do not take into account the highly variable cost for acquisition of the land (minimum 70 hectares), which is greatly dependent on location; pre-opening expenses (in this regard at least USD75,000 should be budgeted); machineries and equipment for the maintenance of the golf course (approximately USD200,000), which are often leased rather than purchased.

Regarding profitability, experience in other European destinations proves that a golf course alone is hardly a lucrative business. However, a golf course is often the draw card to attract demand to other more profitable components of developments including a residential real estate component, one or more hotels, conference facilities, a spa and wellness centres, casino, etc. The experience of the US, Australia and South Africa and in Europe, Spain, Portugal, Austria and the United Kingdom can teach a great deal to anybody thinking of undertaking a golfing estate development in Hungary.

In conclusion, golf as a sport is certainly expecting to receive more interest and gain in domestic popularity in the future. Expected growth in supply of golf courses will also help to stimulate demand for golf. However, if golf is to continue to grow in Hungary, it should become more affordable through the realisation of new projects having an international standard, but which do not imply development costs that make green fees and membership unaffordable.