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KPMG Golf Course DevelopmentCost Survey in the EMA Region

KPMG IN CENTRAL AND EASTERN EUROPE

Sponsored by:

The credo of Robert Trent Jones II – “of the earth, for the spirit” – reflects thecompany's passion for golf and our commitment to the values of the game. Webelieve golf courses are places of tranquility, conviviality, and aesthetic beauty,providing sanctuaries from the cares of daily life. At the same time, we recognizethat golf is a challenging game that can command a lifetime's devotion, but cannever truly be conquered. During the nearly forty years of its existence, RTJII hasdesigned more than 230 courses in 38 countries. Numerous championships andvarious professional tour events have been played on RTJII courses, including theGrand Slam of Golf. Many RTJII courses are ranked among the world's best byvarious rating organizations. Among the countries where RTJII courses have beenrated “Number One” are China, Norway, the Philippines, Russia, Thailand, Taiwan,and Malaysia. The company currently is active in Europe, Asia, and the Americas.RTJII is involved in all phases of golf course design, from master planning throughdesign implementation.

Penha Longa Golf Club

Lisbon (Sintra), Portugal

Designer: Robert Trent Jones II

Photo: Henebry Photography

Golf Course Development Cost Sur vey 3

Recent research confirms that there are approximately 32,000 golf coursesworldwide. Presently, some 50 million people play golf throughout the world.Although the United States represents the largest golf market in the world witharound 17,000 courses and approximately 27 million golfers, the game itselforiginates in Europe and continues to have a strong presence there, with more than6,000 golf courses and roughly 4 million registered golfers.

Golf course development is a growing business all over the world. In recent years,approximately 1,000 new golf courses have been established annually worldwide.More mature markets include the U.S., Japan, South Africa, the United Kingdom,Ireland, Sweden and Spain; moreover there are also a number of countries andregions (e.g. South America, the Middle East and Eastern Europe) where golf isbecoming increasingly popular.

International experience proves that, especially when combined with real estateand/or tourism development, a golf course can often offer an exciting investmentopportunity.

Having comparable primary information on golf course development costs can beof prime importance for developers, operators, as well as public institutions whenthinking strategically about golf development.

KPMG's Travel, Leisure and Tourism Network has prepared the followingcomprehensive study of golf course development costs in Europe, Middle East andAfrica (EMA). This research aims to provide investors, developers and other industrystakeholders with a better understanding of the factors that influence theconstruction cost of golf courses, their typical development timing and the processof selecting golf course architects and construction companies.

As initiator and coordinator of this study I hope you will find our results bothinteresting and enlightening.

I would like to take this opportunity to thank all of the golf course developers,owners, operators, designers and many KPMG colleagues who have contributed toour survey, making it possible.

If you would like to receive any clarification or discuss the survey results, pleasefeel free to contact me.

Andrea Sartori Partner, Head of Travel, Leisure and Tourism Group CEEKPMG Advisory Services Ltd.

[email protected]

Dear Reader,

Machynys Peninsula Golf & Country Club

Carmarthernshire,Wales

Designer: Nicklaus Design


Countries and sub-regionsconsidered in the survey

The target countries in our researchwere clustered into sub-regions basedon geographical proximity and similarityin economic development. The following groups were defined:

In order to prepare the Golf Course Development Cost study we have carried out aquestionnaire-based survey among developers and operators of golf courses openedafter 1 January 2000

1. Sending questionnaires to more than 500 golf courses, we

recorded an 18% response rate covering 25 countries from the EMA region.

The detailed questionnaire was structured around the following topics:

What are the key motivations for developing a golf course?

What factors influence developers in selecting course designers andconstruction companies?

How long does it take to develop a new golf course in the EMA region?

What are the main difficulties arising during construction?

How much does it cost to develop a golf course in the EMA region?

The golf courses constituting the base of our sample were identified bycomprehensive secondary research, utilising statistics from national andinternational golf associations.

In order to complement the findings of our survey we also sought the opinion ofgolf course architects. By addressing a set of specific questions to designers, weheard their perspective about golf course development costs, as well as theirprofessional opinion about the issues covered by this research.

We have highlighted the main findings from these interviews in the relevantsections of our survey summary.

Objectives and methodology

1Data collection period

February-May 2005.

Regions CountriesEuropeUK & Ireland UK, IrelandScandinavia Denmark,

Finland, Norway, Sweden, Iceland

Central Europe Austria, Belgium, Germany, Netherlands, Switzerland

Mediterranean Spain, Italy, Europe CyprusEastern Europe Poland,

Czech Republic, Slovakia, Hungary, Estonia

Middle East UAE, Turkey, Kuwait

Southern Africa South Africa, Mauritius

6 Golf Course Development Cost Sur vey

Sample description by size of golfcourses (EMA region)

…by golf course quality

Sample description of analysed golf courses

More than half (60%) of the golf courses evaluated in our survey were 18-holedevelopments, 34% were 9-hole developments, while only 6% were 27-hole golfcourses.

The respective quality ratings were reported by the developers/owners participatingin the research. Our sample included four types of courses from "signature" golfcourses (being the highest quality) down to "lower end" golf courses.

As seen in the chart at left, mid- and lower end golf courses were represented inour sample with 43% and 31%, respectively, while a sufficiently large number ofhigh quality and signature golf courses were also included (18% and 8%,respectively) allowing for an appropriate representation for the higher end supply.

Regarding the operational category, a majority of the golf courses included in thesample were operating on a membership (84%) and/or daily fee (55%) basis.Municipal course represented only 6% of our sample.

The most popular locations in the EMA region for developing a golf course wereparks/open spaces (39%).

Methodological notes:

In order to allow for a more significant comparison between different courses thatare part of this research, our survey focuses only on golf course development costsand excludes investments related to land acquisition and other facilities such asclubhouse, car park, driving range, etc. The reader of this study should also beaware of the fact that differences in development time, fluctuation of exchangerates, inflation, as well as differences in the development stage of the differentcountries involved in the research are the limiting factors that could not beovercome. Furthermore one should note that the statistics of different Federationswere often inconsistent for our purposes, as some also classify driving ranges andgolf clubs with less than 9-holes as golf courses.

9-hole34%

27-hole6%

18-hole60%

…by operational category(multiple answers allowed)

…by golf course location(multiple answers allowed)

55%

84%

6%

0% 20% 40% 60% 80% 100%

Municipal

Daily fee

Membership

12%

37%

29%

39%

0% 10% 20% 30% 40%

Residentialarea

Resort

Country Club

Parks/openspace

Signature golf course

8%

High end golf course

18%

Mid quality golf course

43%

Low er end golf course

31%


Europe, Middle East and Africa have over 4.2 million registered golfers andapproximately 6,750 golf courses. Europe, with one in every 200 people a golfer,has the highest golf penetration rate (0.56%) of the three regions.

The golf market in the Middle East is still immature, but with quite a few golfcourse openings since the turn of the century, it has entered a rapid developmentphase.

Considering its natural conditions and population, the potential for golf in Africa, asin many other areas, is yet to be exploited. With a few exceptions such as SouthAfrica, the game has very few devotees on the continent.

Europe

From the analysis of available statistics, it becomes clear that golf in Europe hasexperienced a steady growth over the past two decades. While the number ofcourses has more than doubled in the past twenty years (i.e. an annual growth of4%) the number of registered golfers has tripled and grown by an average of 6% per annum, reaching more than 4 million registered players in 2005.

The following graph reflects the growth in the number of golf courses and thenumber of players in Europe, since year 2000.

Supply and demand trends in the EMA region

Development of European golf courses and affiliated players (2000-2005)

Source: European Golf Association (EGA) with KPMG elaboration

5,881 5,966 6,091 6,0416,224

5,7725,000

6,000

7,000

8,000

9,000

2000 2001 2002 2003 2004 2005

Courses

3,000,000

3,200,000

3,400,000

3,600,000

3,800,000

4,000,000

4,200,000

4,400,000

Players

Golf courses

Registered golfers


These figures highlight that in recent years demand has been growing at a fasterpace than supply in Europe.

In Europe more than 80% of the supply is concentrated in only 7 countries.Traditionally being a golf nation, Great Britain offers some of the best and oldestcourses in the world. It is not surprising that almost half of all golf courses(approximately 2,600) are to be found in the UK. Germany and France also have asignificant share of European supply with 10 and 9 percent, respectively. In theMediterranean region, Spain and Italy have around 250 golf courses each. From thecountries representing the remaining 18% we can highlight from the Scandinavianregion Denmark and Norway, together totalling around 300 golf courses. EasternEurope is also developing quickly with Czech Republic having more than 50 courses,and Poland, Slovenia and Hungary together totalling more than 30 golf courses.

Distribution of supply in Europe in 2005

Source: EGA with KPMG elaboration

Other18%

Germany10%

UK41%

Ireland7%

Spain4%

Italy4%

Sweeden7%

France9%

Regions/ Courses Players Golfer/ Penetration countries course rate

UK & Ireland

UK 2,618 1,269,047 485 2.10%

Ireland 403 266,730 662 6.64%

Scandinavia

Sweden 430 554,293 1,289 6.16%

Norway 155 122,000 787 2.66%

Denmark 148 130,706 883 2.41%

Finland 106 105,576 996 2.02%

Iceland 56 9,793 175 3.30%

Central Europe

Netherlands 139 251,000 1,806 1.53%

Austria 138 86,366 626 1.06%

Europe 6,224 4,101,098 659 0.56%

Since the early nineties, the Nordic countries have experienced an acceleratedgrowth in demand for golf. Today, Denmark, Norway and Finland exhibit a strongdemand for the game, with Sweden achieving an impressive 6% penetration rate(i.e. one in sixteen Swedes are registered golfers). It is important to highlight that inthese countries the availability of golf courses has positively stimulated the creationof further demand.

Source: EGA with KPMG elaboration

Penetration of golf in selected European countries (2005)


France, Spain and Portugal are becoming increasingly popular, hosting golf touristsfrom all over Europe. These counties have long been popular tourist destinationsand golf is an added attraction to the fine weather conditions. As can be expected,most of the courses are situated near traditional tourist regions.

South East European (e.g. Greece, Bulgaria and Croatia) and Eastern Europeancountries (e.g. Hungary, Slovakia and Russia) have enormous growth potential andare likely to follow the development path of Slovenia and Czech Republic.

Middle East

Although the Middle East represents less than 1% of the total supply, it is one ofthe most interesting markets from a growth perspective (+15% per year in termsof number of golfers). In this region some of the highest profile developments arecurrently taking place.

Whilst there has been a sharp increase in the number of players over the last fewyears, the number of courses has remained almost constant.

However, it should be noted that supply in the Middle East (Turkey, Israel, UAE,Qatar and Kuwait) saw a steep increase in 1999-2000 when the number of golfcourses almost doubled from 13 to 23.

Several countries in the Middle East also understand the benefits of golf tourismand their governments are considering supporting the development of additionalgolf courses.

Development of golf courses and affiliated players in the Middle East (2000-2005)

Source: Golf Federations, with KPMG elaboration

23 25 25 26 24 25102030405060708090

100

2000 2001 2002 2003 2004 2005

Courses

1,0002,0003,0004,0005,0006,0007,0008,0009,00010,000

Players

Golf courses

Registered golfers

Although starting from a much lowerbaseline, in recent years the mostdynamic growth in golfers'penetration in Europe was recordedin Eastern Europe. Countries like theCzech Republic and Slovenia havewitnessed spectacular growth in thelast 10 years.


Africa

Currently there is a fairly low penetration of golf in Africa with the exception ofSouth Africa, which is also a popular golf tourism destination. There are about 500 golf courses and over 130 thousand registered players in Africa.

While for the majority of the continent golf is still an unknown game, in SouthAfrica the penetration rate (0.3%) is comparable with those of Spain, Germany(0.5%) or Belgium (0.4%).

Development of golf courses and affiliated players in Africa (2000-2005)

Source: Golf Federations, with KPMG elaboration

501 503 496 506 511504

100

200

300

400

500

600

700

800

900

1,000

2000 2001 2002 2003 2004 2005

Courses

100,000

110,000

120,000

130,000

140,000

150,000

160,000Players

Golf courses

Registered golfers

In the short and medium term, following the path of South Africa and Mauritius, thedevelopment of golf is expected to be linked to the further evolution of tourismdestinations like Morocco, Tunisia, Egypt and Kenya.

Pecanwood Golf & Country Club

Broederstroom, South Africa



Key motivational factors

KPMG's Golf Development Survey shows that developing a golf course in the EMAregion is not always driven by a desire to make money. Very often development isdriven by personal interest in the game.

While 55% of golf course developments were initiated by personal interest, thesecond most important motivational factor was the expected profitability(characterising 46% of developments).

From concept to realisation

Especially in developing regions,many golf course developments aremotivated by personal interest in thegame rather than expectedprofitability.

Motivational factors of golf course development (multiple answers allowed)

Source: KPMG Golf Course Development Cost Survey

29%

82%

55%

35%

46% 6%

7%

12% 18%

20%

71%

12%5%

7%Central Europe

Eastern Europe

EMA region

Personal interest in golf Expected profitabilityNo alternative use of land Possibility to use subsidiesOther motivation factors

Respondents also mentioned other motivation factors including: exploitingsynergies with resort developments; creating a regional attraction; or aiming forregional economical benefits.

From a regional perspective, while in Eastern Europe golf course developments areprimarily motivated by the personal interests of developers/owners (in 82% ofcases), in Central Europe the expected profitability is the main driving force (for71% of the recent developments).

The motivational factors show a strong correlation with the nature of thedevelopments. The main motivation for developing a golf course in a residential orresort area is primarily of profit seeking (75% and 63%, respectively).


Motivational factors of golf course developments by type of location (multiple answers allowed)


64%

58%

13%

38%

39%

50%

75%

63%

8%

13%

14%

23%

25%

4%

6%

12%

4%

13%

Country club

Park/open space

Residential area

Resort

Personal interest in golf Expected profitabilityNo alternative use of land Possibility to use subsidiesOther motivation factors

`

At the same time the development of new country clubs and golf courses located inparks and other open spaces are mainly triggered by personal interest in the game.

The possibility to exploit government subsidies was a relevant incentive in the caseof Eastern Europe.

Miklagard Golf Club

Oslo, Norway



Selecting a golf course architect/designer

Our survey demonstrates that golf course architects are usually selected throughinformal channels: based on referrals (50%) or word of mouth (47%). Formalchannels, like tendering were also mentioned. It is important to highlight that in thecase of 6% of all valid responses developers themselves designed their golfcourses without using external architects.

What do top designers say?

KPMG's survey among signaturedesigners demonstrates that topdesigners' primary channels forgenerating business and reaching golfcourse developers were word-of-mouthand referrals. Furthermore, they oftenmeet with developers in trade fairs,exhibitions, conferences as well as golftournaments.

Based on our research there is acorrelation between the rating of agolf course (i.e. quality) and theimportance of certain decision-influencing factors when selectingthe architects. For example ourresearch clearly proves that theselection of a signature designer isperceived to be linked to themarketing opportunity offered by thename of the golf course architect.

Channels used in selecting golf course architects(multiple answers allowed)


50%

47%

18%

2%

Referral

Word-of-mouth

Internet

Other channels

Regarding factors influencing the selection of an architect we found that 70% ofour respondents considered credentials, brand recognition and reputation as themost important influence upon their choice. 60% of respondents consideredproposed prices and quality playing a very important role in their selection.

Importance of deciding factors in selecting a golf course architect


22%

36%

54%

60%

70%

32%

12%

21%

23%

7%

46%

52%

25%

17%

23%

Payment conditions

Marketing opportunity

Quality of theirproposal

Proposed price/qualityratio

Credential, brandrecognition, reputation

high importance average importance did not affect


Selecting a construction company

The best means for generating business for golf course construction companiesare also the informal channels, like referrals and word of mouth. Recommendationsmade by golf course architects also play an important role in the selection of theconstruction company. Other channels like the tendering procedure,recommendation of financing institutions were also mentioned. In some cases(11%) developers worked with their own construction companies.

Opinions and referrals of architectsare key in the selection of aconstruction company.

Channels used in selecting the construction company (multiple answer allowed)


21%

5%

20%

38%

45%

Other channels

Advertisement

Suggestion ofarchitect

Word-of-mouth

Referral

Considering factors influencing the choice regarding construction companies, themost influential factors were the proposed price/quality ratio and thecredentials/brand recognition of the supplier (66% and 65%, respectively).

Importance of deciding factors in selecting a golf course construction company


48%

50%

53%

65%

66%

19%

33%

21%

19%

20%

33%

17%

26%

16%

14%

Proposed payment conditions

Quality of their proposal

Bring project in w ithin budget and meetingschedule

Credential, brand recognition, reputation

Proposed price/quality ratio

High importance Average importance Did not affect


Delivering the project within planned budget and schedule were also consideredvery important (53%).

The proposed payment terms play a more important role in the selection ofconstruction companies (48% high importance) than in the appointment of the golfcourse architects (22% high importance).

How long does it take to develop a golf course?

Regarding the duration of development we found that a golf course developmentproject takes on average slightly more than four years (49 months).

The pre-construction phase, including obtaining the necessary permits, planningand design, represents more than half of total development time and on averagetakes more than two years. Within this phase obtaining the permits takes thelongest time: 17.8 months on average.

Construction time including golf course grow-in takes 21.8 months on average.

Total construction time in the EMAregion (excluding pre-construction)

Survey results show that 27% of newlydeveloped golf courses are built withina year, and 42% in two years.

Source: KPMG Survey

2 years42%

3 years15%

4 years5%

No answer

11%

1 year or less27%

Average length of development phases


Analysing the length of development phases by different EMA sub-regions, we canidentify a strong correlation between the time period needed for each phase andthe characteristics of specific regions. For example in Europe the pre-constructionphase is the longest in Central Europe (39.9 months) and the shortest inMediterranean Europe (13.5). However, in both Africa and Middle East this phase issignificantly shorter.

Preconstruction27.0 Months

Construction21.8 Months

Construction13.4 Months

Grow-in8.4 Months

Planning &design

9.2 Months

Obtaining permits

17.8 Months


Average length of development stages in different sub-regions (number of months)


6

9.5

13.5

29.9

23.3

32.2

39.9

19.3

17.3

23.6

18.5

25.3

27.2

20.5

0 10 20 30 40 50 60 70

Middle East

Southern Africa

MediterraneanEurope

Eastern Europe

Scandinavia

UK-Ireland

Central Europe

months

Preconstruction phaseConstruction phase

Club de Golf Alcanada

Puerto de Alcudia, Spain



Investment needs in relation to site suitability

In addition to the characteristics of golf course developments (e.g. number of teeboxes per hole, number and size of the bunkers, size of greens, artificial waterhazard etc.), international experience shows that there are certain factors whichhave a major impact on the final development cost of a golf course. These aremainly related to the original site characteristics in terms of soil and terrain nature,water availability, as well as additional/contingent investments needed in theconstruction phase in terms of earthworks, drainage and irrigation system.

Uniqueness of design and major landscaping changes correlate with the highercosts of earthworks, soil and terrain adaptation.

Survey results show that signatureand high quality golf courses requiresignificantly more earthworks thanlower quality developments.

Rating of investment needs by golf course quality(average values where 1=limited investment; 5=significant investment)


1 2 3 4 5

Low end golf courses

Mid quality golf courses

High end golf courses

Signature golf courses

Soil, terrain suitability, drainage capabilityEarthworksWater availability, irrigation


What are the main difficulties during the development of a golf course?

Obtaining the necessary permits was the most frequently mentioned problemfaced during development projects (41.5% indicated this). More than one third ofthe owners and operators mentioned dealing with weather delays as one of themost difficult issues, while a quarter (27%) encountered environmental opposition.Another quarter (27%) mentioned financing as the most problematic issue.

One in four new golf course developments had problems with water availability.Other construction related issues including earthwork, keeping in line with theoriginal budget and the unprofessionalism of contractors were viewed as lessimportant problems.

Difficulties mentioned by survey respondents by frequency (multiple answers allowed)


12.3%

12.3%

15.4%

16.9%

20.0%

4.6%

41.5%

35.4%

27.7%

27.7%

24.6%

Other difficulties

Project logistics

Soil characteristics

Unprofessional contractors

Keeping in line with the original budget

Earthworks and/or rocky terrain

Water availability

Obtaining financing

Environmental opposition

Dealing with weather delay

Obtaining necessary permits


Obtaining the permits proved to bethe biggest challenge for developersin the EMA region.

Regarding construction difficulties some European regions show a different patterncompared to the total EMA results.

In case of Eastern European countries, obtaining the necessary permits is themost difficult issue to overcome followed by environmental opposition andobtaining financing.

In Scandinavia weather delays and earthwork difficulties hindered the most golfcourse developments.

Weather and environmental opposition was also problematic for Central Europeangolf course developments.

Difficulties mentioned by survey respondents in Eastern Europe,Central Europe and Scandinavia (multiple answers allowed)


6%

35%

6%

24%

41%

29%

43%

21%

43%

50%

43%

6%

6%

47%

41%

29%

43%

65%

Soil characteristics

Earthwork and rocky terrain

Environmental opposition

Obtaining financing

Dealing with weather delay

Obtaining necessary permits

Eastern EuropeCentral EuropeSkandinavia


When analysing the total construction budget of a golf course, a good starting pointis the allocation between the pre-construction and construction phases. Thefollowing chart illustrates the average breakdown of development costs throughoutan entire golf course development project.

How much does it cost?

Share of development costs in pre-construction and construction phases(EMA region)


89%11%

45%

32%

23%

Preconstruction costs

Expenses related topermits

Professional fees forconsultancy (e.g. legal,engineering etc.)

Golf course design33%

21%

17%

12%

10%7%

Construction costs

Landscaping

Clearing and preparing site

Car paths

Grassing of greens, fairwaysand tee boxesIrrigation and darainage

Earthworks and shaping

The chart illustrates that actual construction costs of the golf course typicallyaccount for 89% of the total costs (excluding land acquisition, clubhouse, parkingspace and other on-site facilities). Total development costs also includepreconstruction expenses like golf course architect fee, professional fees forengineering, legal and other expenses related to permits - these on averageaccount for 11% of the total budget.

As part of the construction costs we considered:

Earthworks and shaping, representing on average one third of constructionexpenses;

Irrigation and drainage contributing with 21% to the average construction costs;

Grassing of greens, fairways and tee boxes making up 17% of overallconstruction costs.

The remaining 29% can be divided between three components: the cart paths,site clearance & preparation (12% and 10%, respectively) and landscaping (7%).


With the exception of the signature designer fee, pre-construction costs arerelatively fixed. Therefore, we note that as quality increases, preconstruction has adecreasing share of the total costs. The preconstruction costs of signature coursesare significantly higher due to signature designer fees.

Average golf course constructioncost per hole, by sub-regions(including 9-hole golf courses)

Share of preconstruction and construction costs by quality of the golf course


19%

13%

6%

13%

81%

87%

94%

87%

Low er end golfcourse

Mid quality golfcourse

Higher end golfcourse

Signature golfcourse

Preconstruction costs Construction costs

Development costs by region

In the following sections we highlight the distribution of development costs byregion and course quality.

The survey results show that the average construction cost for a typical 18-holegolf course in the EMA region is EUR 3.56 million (EUR 198,000 per hole), whileconstructing a 9-hole golf course in the EMA region is almost a third of the cost, onaverage EUR 1.23 million.

The average construction cost of an 18-hole golf course varies widely, with thelowest recorded in Eastern Europe, at an average cost of 1.25 million Euros, to themost expensive in the Middle East, costing on average 6.14 million Euros.

Regions EUR

Eastern Europe 94,000

Scandinavia 157,000

Central Europe 183,000

UK & Ireland 168,000

Mediterranean Europe 231,000

Southern Africa2

235,000

Middle East 342,000

EMA Total average 187,000

Source: KPMG Survey

2Please note that the sample of Southern

Africa mainly includes higher end and

signature golf courses.


It is also worth mentioning that building an 18-hole golf course in theMediterranean region costs almost four times more (with an averageconstruction cost of EUR 4.7 million) than in Eastern Europe (EUR 1.25 million).

According to our survey,development costs vary widely, thehighest-end being represented by anupper quality 18-hole golf course inthe Middle East (EUR 10.9 million),and the lowest-end by a 9-holePolish public golf course (EUR 150 thousand).

In the EMA region a 9-hole golfcourse costs on average three timesless than an 18-hole golf course:EUR 1.23 million versus EUR 3.56 million.

Average construction costs for an 18-hole golf course by sub-regions ('000 EUR)


1,253

2,694 2,800 3,030

4,2314,709

6,147

3,556

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

EasternEurope

Scandinavia CentralEurope

UK+Ireland SouthernAfrica

Mediterran.Europe

Middle East

Average costEMA average

Development cost by quality of golf course

Obviously the quality of the golf course has a major impact on the constructioncosts. While constructing a lower end 18-hole golf course costs on average EUR 1.79 million, signature golf courses were developed with three times thisbudget.

Average construction costs for an 18-hole golf course by quality of golf course('000 EUR)


1,796

2,879

4,474

5,860

3,556

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Lower end golfcourse

Mid quality golfcourse

Higher end golfcourse

Signature golfcourse

Average costEMA average

Average golf course constructioncosts per hole, by golf course quality(excluding 9-hole courses)

Quality EUR

Signature golf course 325,000

Higher end golf course 248,000

Mid quality golf course 160,000

Lower end golf course 100,000

EMA Total average 198,000

Source: KPMG Survey


Million EURSignature designers

AverageA B C

Most expensive 10.4 8.8 10.0 9.7

Average 5.2 6.4 8.0 6.5

Least expensive 3.9 3.6 6.0 4.5

Construction costs of courses designed by three signature golf coursearchitects (for 18-hole golf course)


The signature designers' perspective

As part of our research we aimed to collect the opinions of professional signaturedesigners about their experiences regarding the level of investments required inthe EMA region.

We have asked three worldwide renowned signature golf course architects (forconfidentiality named A, B and C) to give us an estimate of the construction costsof the most expensive, least expensive, and of an average 18-hole golf coursedesigned by their company in the past five years. The responses of the selecteddesigners broadly confirmed our survey's findings on construction costs.

According to signature golf coursearchitects' experience theconstruction costs of an 18-hole golfcourse range from EUR 3.6 to EUR 10.4 million.

Signature design fees for a typical18-hole golf course

The approximate construction costs of the most expensive 18-hole golf coursedesigned by the three selected signature designers vary from EUR 8.8 to 10.4 million. The least expensive 18-hole golf courses were EUR 3.6 - 6.0 million todevelop. The average development costs of an 18-hole golf course of the threeselected signature designers is EUR 6.5 million.

We then asked signature golf course architects to quote their fees for a typical 18-hole golf course in Europe, Africa and Middle East. It is noteworthy that thegiven range does not vary significantly from one region to the other. A moresignificant difference appears, however, between the average fees of the threecompanies, for A 0.76 million, for B 1.84 million, and C 1 million euros.

Based on their responses we can estimate that the design fee for a typical 18-holesignature golf course in the EMA region is around EUR 1.2 million.

'000 EURSignature designers

A B C

Europe 820 1,760 1,000

Middle East 860 2,000 1,000

Africa 600 1,780 1,000

Average 760 1,840 1,000

Source: KPMG Survey


Non-signature designers' perspective

Putting the same questions to three reputable golf course architects withexperience mainly in Europe, we found that the development costs of coursesdesigned by selected architects are obviously lower, ranging from EUR 1.2 millionto EUR 7.8 million, with an average of EUR 3.6 million.

Million EUR

Non-signature designers from

AverageMediterranean Central Europe UK & IrelandEurope

Most expensive 5.0 7.8 7.0 6.6

Average 3.5 4.3 3.0 3.6

Less expensive 2.7 2.6 1.2 2.2

Construction costs of courses designed by non-signature designers fromselected regions (for 18-hole courses)


Average design fees for the three non-signature architects in Europe wereapproximately EUR 225,000.

These results show that signature design fees in Europe on average can be morethan five times higher than a non-signature architect fees (i.e. EUR 1.19 millionversus EUR 0.22 million).

Non-signature design fees for atypical 18-hole golf course

'000 EURNon-signature designers

A B C

Europe 210 195 275

Source: KPMG Survey

Arosa Golf Club, Switzerland

Designer: Harradine Golf


Although the development of golf still lags well behind more mature markets likethe United States, it is becoming increasingly popular in the EMA region andcertainly presents new exciting investment opportunities for the coming years. Inthe last few decades a great variety of golf courses have been developed, includingshort and inexpensive courses as well as expensive high-end private clubs. Ourresearch has covered a wide range of recent developments from Spain to Kuwait,Iceland to South Africa.

Our study shows that dependence on tourism demand vis-a-vis local demand,coupled with the different stages of economic development of a region, ofteninfluence the type of golf course development in terms of size, and quality, butabove all, development costs.

For example, in less mature markets like Eastern Europe, the development ofrelatively cheap golf courses, affordable to the vast population residing in thesecountries, is important for growing the market penetration of the game in theregion. In certain cases 9-hole courses, which on average cost a third of an 18-holecourse in the EMA region (1.23 million euros versus 3.56 million euros), can be thedriving force behind the development of golf demand at the local level. Thedevelopment of an increasing number of golfers is of vital importance, as ourresearch demonstrates that in less developed markets, personal interests andpassion in the game, rather than expected profitability, is often the driving forcebehind golf course development.

On the other hand, regions seeking to attract the high spending international golftourists will have to develop products of a different type. Developments in theMiddle East, being the most expensive from a developer's perspective amongstthe seven sub regions under review, require on average investments exceeding 6 million Euros. We also found that in Mediterranean Europe, including Spain, Italyand Cyprus, a typical 18-hole development required on average EUR 4.7 million.

In more developed golf markets (e.g. the United Kingdom, Ireland, South Africa, aswell as many golf tourism destinations in the Mediterranean) the development of agolf course is often coupled with a strong real estate, hospitality and leisurecomponent.

Although certain developments can involve tens of millions of Euros, our surveyproves that the business of golf - including golf course developments - stronglyrelies on informal links and connections. Personal referrals and membership in thegolf community were determining factors in the selection of architects andconstruction companies.

KPMG welcomes your inquiries concerning both the results of this survey and thepossible development of golf-related projects.

Conclusions


For further informationplease contact the research coordinator:

Andrea SartoriPartner, Head of Travel, Leisure andTourism Group CEE Tel: +36 1 887 7100Fax: +36 1 887 7392E-mail: [email protected]

KPMG in HungaryH-1139 Budapest, Váci út 99Hungary

KPMG offices contributing to the survey:

KPMG in CyprusChristophoros AnayiotosE-mail: [email protected]

KPMG in ItalyRoberto MollicaE-mail: [email protected]

KPMG in the NetherlandsTinge BoudewijnE-mail: [email protected]

KPMG in PolandAndrzej GojnyE-mail: [email protected]

KPMG in South AfricaKirsty StewartE-mail: [email protected]

KPMG in SpainFrancisco Diaz TorrenE-mail: [email protected]

KPMG in the UKNick PattieE-mail: [email protected]

KPMG in the United Arab EmiratesNeeraj DassaniE-mail: [email protected]

For over 30 years, the mission of the Nicklaus Companies has been to enhancethe golf experience, and to bring to the national and international consumer golf-related businesses and services that mirror the high standards established inthe career and life of Jack Nicklaus. These services include golf-course design,the development of golf and real estate communities, and the marketing andlicensing of golf products and services. Nicklaus Design, recognized as the worldleader in golf course design, has been involved with 288 courses open for play in28 countries and 37 states. Of those, Jack Nicklaus has designed, co-designed orre-designed 241 courses around the globe, 45 of which have been ranked invarious national or international Top-100 lists.

Pearl Valley Signature Golf Estate & Spa

Franschhoek, South Africa


Photo: Grant Liversage

kpmg.com

The information contained herein is of a general nature and is not intended to address the circumstances ofany particular individual or entity. Although we endeavour to provide accurate and timely information, there canbe no guarantee that such information is accurate as of the date it is received, or that it will continue to beaccurate in the future. No one should act on such information without appropriate professional advice after athorough examination of the particular situation.

© 2005 KPMG CEE Ltd., a member firm of KPMGInternational, a Swiss cooperative. All rights reserved.

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