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1 January 2017

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3 Trees Resort Darkhorse Golf Club Market Demand Report FINAL REPORT January 2017 Prepared for Asia Pacific Group Irvine, California Prepared by Chuck Nozicka Consulting th Street Tourism and Recreation Planning Sacramento, California

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5 Table of Contents Executive Summary... i Market Demand and Supply... i Opportunities and Constraints... i Economic Impacts... i Observations and Recommendations... i I. Introduction... 1 Project Understanding... 1 Project Scope of Work... 1 Report Content... 3 Research Limitations... 3 II. Site and Facility Profile... 5 Setting and Location... 5 Climate... 7 Current and Proposed Facilities... 8 Implications for Darkhorse... 9 III. Market Demand Demographic Factors Location Population Statewide Regional and Local Markets San Francisco Bay Area Visitor Origin Domestic International Gold Country Visitation Seasonality Golf and Recreation Trends... 21

6 Implications for Darkhorse IV. Market Supply Regional Supply Implications for Darkhorse V. Market Opportunities Demand and Supply Analysis Opportunities Constraints Implications for the Darkhorse VI. Economic Impacts Direct Impact of Travel for Nevada County, California Visitor Expenditure Trends Visitor Expenditures in the Gold Country Golf Related Expenditures in California International Visitor Expenditures in California Implications for Darkhorse VII. Observations and Recommendations Observations Recommendations Appendix A: References... 41

7 Executive Summary The following summarizes findings and observations developed during the course of our research for the Trees Resort at Darkhorse Golf Club, Market Demand Report. Market Demand and Supply Darkhorse is an established destination golf club notable for its course design and beautiful setting; user ratings place Darkhorse in the upper tier of Gold Country golf courses. The facility provides excellent access from major population centers via primary travel corridors in a Sierra Nevada foothills location that allows for an active nine month season. Population trends in regional source markets are strong and are augmented by very robust in-bound travel trends. International travel is especially promising, with dramatic growth among those from China. The Gold Country region is expected to see steadily increasing visitation. In addition to golf, Darkhorse provides access to a full range of Gold Country attractions and activities. Despite reported declines, golf participation has stabilized in recent years similar to other destination oriented activities. Emerging youth and growing international markets indicate an opportunity to attract destination golfers to Darkhorse. Opportunities and Constraints No overnight accommodations exist in the immediate area of Darkhorse for stay-andplay golf. Darkhorse represents a high quality niche resort development that is well positioned to attract visitation. Darkhorse operator, Asia Pacific Group (APG), has a market advantage to attract international golf and other visitors from Asia, with particular knowledge of markets in China. Darkhorse education programs provide a unique opportunity to attract both youth and adult golfers from China. Darkhorse will need an astute marketing program to realize its market demand potential among domestic and international visitors. Economic Impacts The proposed Darkhorse development can add millions of dollars in visitor expenditures to Nevada County s important tourism and recreation economic sector. Observations and Recommendations Overall market demand is determined as positive for the proposed Darkhorse stayand-play resort project. Creative communications, activity programming, and exemplary hospitality services can enhance the Darkhorse project s unique market position. Chuck Nozicka Consulting, Tourism and Recreation Planning i

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9 I. Introduction The Trees Resort at Darkhorse Golf Club Market Demand Report profiles the market demand outlook for golf and other associated recreation opportunities that may be provided at a redeveloped Darkhorse Golf Club (Darkhorse). This document is intended to provide a market overview for Darkhorse managers as well as source of information for interested stakeholders and residents in the neighboring community. Project Understanding This project is in context of Darkhorse as an in-progress planning and redevelopment project. We understand that Darkhorse was recently acquired by the Asia Pacific Group (APG), an international company dedicated to golf development and education. The company also operates a golf resort facility in the Carson City, Nevada area. Darkhorse was opened to acclaim in 2002 with design by nationally recognized course architect Keith Foster. Darkhorse has consistently received high ratings from professional and consumer reviews. However, the facility has not been operating to its fullest capacity in recent years. APG emphasizes the educational side of golf with a mission to educate international golfing students and provide career opportunities to those students. APG sponsors the U.S. International Golfing Association which features a Professional Exchange Training Program that provides education programs for professionals in Asia who may be interested in an opportunity to train in the U.S. In addition, APG interests at Darkhorse include redeveloping the facility to enhance its market position with the U.S domestic market by providing a premier stay-and-play golf and resort facility in the California Gold Country. From a tourism and recreation planning perspective, the Darkhorse project is located in a desirable region of California with a full range of visitor experiences in addition to its golf specific facilities, and is set in a stunning location among the oak and pine of the Sierra Nevada foothills or the Gold Country Region. In short, Darkhorse project provides an opportunity to offer a premier stay and play golf experience that may be augmented by the region s array of other visitor opportunities. Project Scope of Work This scope of work was designed to assist APG with planning for the proposed destination golf resort and associated accommodations development at Darkhorse. The scope of work consisted of a baseline market demand analysis which includes the following: 1. Project scoping, attend public meeting, and background review 2. Market supply/demand analysis 3. Opportunities and constraints 4. Economic impacts 5. Draft and final report Chuck Nozicka Consulting, Tourism and Recreation Planning 1

10 Task 1: Project Start-Up/ Background Review As part of the project kick-off we have attended an initial public information session at which we met the team of project consultants and APG staff as well as observed public comments. We also have gathered any readily available and pertinent background reports, reference materials and data including, but not limited to, facility profile information such as types of facilities and associated amenities, preliminary design concepts, and comments from early public meetings. In addition, we have discussed APG s to-date marketing and operating proposals with the company. Task 2: Market Supply and Demand Analysis In order to accurately assess market demand factors for Darkhorse we have reviewed market demand conditions pertaining to the proposed facility uses. This analysis has primarily reviewed the supply and demand factors most likely to affect the Darkhorse as described in meeting records and background materials. As part of this task we have conducted the following: 1. Profile demand for Darkhorse using demographic trends, domestic and overseas visitation to California, trends for golf activity, trends for any associated destination activities or overnight accommodations in the region. 2. Profile regional supply for the Darkhorse location and current and potential activities including but not limited to comparable golf facilities, numbers and locations for these facilities, accommodation profiles at said facilities, and associated recreation amenities. The following products are included in this task: Market demand and supply analysis. Provides a summary of findings per each of the above and outlines a series of observations describing market supply and demand as it applies to proposed Darkhorse project. Task 3: Opportunity and Constraints By applying our market analysis tasks, including any applicable Nevada County input, we profile the range of Darkhorse market and economic opportunities as well as issues that may constrain market demand. The following products have been included: Opportunities and constants profile. We outline potential market opportunities and identify constraints per the supply and demand review. Chuck Nozicka Consulting, Tourism and Recreation Planning 2

11 Task 4: Economic Assessment The task uses the gathered regional market demand information and applies these figures to the Darkhorse project. This will inform project development planning and describe potential economic benefits that Darkhorse may provide to Nevada County. 1. Concurrent with the supply and market demand research tasks we have reviewed any readily available average annual and/or daily/weekly visitor expenditures, regional seasonal use or occupancy data, available economic impact reports, and associated information that may describe potential economic benefit for Nevada County. The following products have been provided: We have provided an economic profile for the proposed Darkhorse project and its potential economic benefits to Nevada County. Task 5: Draft and Final Report We have provided a draft report for APG review and comment. We have integrated comments and revisions into this final document. The following report provides a clear, concise, graphically-oriented document that is easily read and understood. Report Content In addition to this introductory chapter, the report presents: Chapter II Site and Facility Profile; Chapter III Recreation Demand; Chapter IV Recreation Supply; Chapter V Recreation Opportunities; Chapter VI Economic Impacts; Chapter VIII Observations and Recommendations. Research Limitations This assessment reviews market trends and associated economic benefits for the Darkhorse project. As such, this market demand review represents a perspective of what could happen at Darkhorse in the future and not a review of what will happen at Darkhorse. This report is intended as tool for APG and the planning team s internal planning programming discussion. Final investment and operations decisions remain those of APG. Accordingly the information provide for this analysis is a hypothetical look at a future market demand. While market demand potential and related benefits constitute the bulk of our attention, we also apply a range of overarching assumptions to the results. These assumptions include: Macro-economic conditions, and regional population and employment will remain consistent or increase per data reviewed in this report and conditions in 2016 and not experience significant contraction. Future travel and trade activity between the United States and international markets, especially China, will not experience any disruptions. Other than the recent recorded drought conditions, long term climate impacts are assumed to not negatively affect future destination golf activity and visitation. Chuck Nozicka Consulting, Tourism and Recreation Planning 3

12 Facilities which are developed at other regional sites by the public and private sector providers and which can alter the supply will complement the region s position as a golf destination area rather than directly compete with Darkhorse. For this report we necessarily rely on secondary sources and information provided by APG and the project planning team. There has been no comprehensive and detailed survey of recent visitation and recreation activity in the immediate region. Furthermore, we do not have access to formal occupancy data for privately operated resort facilities. We utilize secondary data to profile market demand that may apply to the Darkhorse project. The future Darkhorse facility management and marketing program will have a direct impact on eventual user demand patterns. Destination facility management practices and modern up-to-date marketing and communication programming are assumed. Chuck Nozicka Consulting, Tourism and Recreation Planning 4

13 II. Site and Facility Profile This chapter presents a profile of Darkhorse including setting, geographic location, and built and proposed facilities. This overview of the site and facilities provides a perspective for the sites potential appeal to domestic and international golf visitors. Setting and Location Darkhorse is set within the Sierra Nevada mountain foothills, between the communities of Auburn and Nevada City California. Note that Darkhorse has an Auburn address and is somewhat closer to that community. The immediately surrounding area is largely rural residential and within an unincorporated area of southern Nevada County, California. For purposes of regional reference and destination tourism and recreation, the wider area is known as the California Gold Country. Darkhorse is sited on lands that were part of a 1,100 acre cattle ranch. The site is comprised of elevation changes and rolling hills with groves of California Oak and various species of pine and fir trees. The golf club is described on golf and travel rating internet sites as having beautiful scenery with many references to the trees and wildlife. See Photo II-1 and Photo II-2. Photo II-1 Darkhorse Golf Club, Oaks and Foothills Setting Source: Darkhorse Golf Club. Chuck Nozicka Consulting, Tourism and Recreation Planning 5

14 Photo II-2 Darkhorse Golf Club, Pines and Foothills Setting Source: Darkhorse Golf Club. In addition to the scenic setting Darkhorse also provides excellent highway access to major regional population centers via U.S. Interstate 80 (I-80) and State Highway 49 the property is approximately a 6 minute drive from Highway 49. The site is about 10 miles from the City of Auburn and the Interstate 80 corridor. In addition, the facility is easily accessible for many communities in Nevada County and Placer County. Notably, Darkhorse provides excellent access via I-80 to major population centers in Northern California, Northern Nevada and the Lake Tahoe region. A distance of miles is considered suitable for long day trips, and is associated with nearly 5.7 million people, including the Greater Sacramento-Stockton area and other Central Valley communities. Extending beyond 120 miles includes the San Francisco Bay Area and opens the total market area up to over 14 million people. See Table II-1. Chuck Nozicka Consulting, Tourism and Recreation Planning 6

15 Table II-1 Population Centers by Travel Distance/Time* Distance Miles Drive Time Auburn, CA minutes Nevada City, CA minutes Sacramento, CA minutes Truckee, CA 65 1 hour, 15 minutes Lake Tahoe, CA 85 1 hour, 45 minutes Reno, NV hours San Francisco, CA hours, 30 minutes Source: Travelmath.com; Chuck Nozicka Consulting (2016); *rounded. Climate The foothills location provides Darkhorse Golf Club with a year round climate. Summers are warm and dry with cool and rainy winters. The Gold Country Region s winter season is often described as above the fog and below the snow with this referring to fog in the Sacramento Valley during winter inversions and below the snows which typically occur at much higher elevations in the Sierra Nevada. See Table II-1. Nevada City, CA Table II-1 Darkhorse Area Climate Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Mean Max. Temperature (F) Mean Temperature (F) Mean Min. Temperature (F) Mean Precipitation (in.) Auburn, CA Mean Max. Temperature (F) Mean Temperature (F) Mean Min. Temperature (F) Mean Precipitation (in.) Source: Western Regional Climate Center; Chuck Nozicka Consulting (2016). Chuck Nozicka Consulting, Tourism and Recreation Planning 7

16 Current and Proposed Facilities Current operations at Darkhorse feature the Golf Club s scenic 18 hole professional course supported by a club house, restaurant and bar (breakfast and lunch), and pro shop (including custom club fitting). The golf club also features practice facilities including a driving range and grass pitch and putt greens. Darkhorse emphasizes its golf academy with the services of a professional teaching team. The academy provides 25 grass station tees, target greens, short game practice areas, and fairway and green side bunkers. Services are also provided to assist those interested in scheduling large group golf outings or tournaments up to 144 players. Course green fees include golf cart use. See Table II-2. Table II-2 Darkhorse Green Fees Monday - Weekends Holidays Friday 7:30 am - 11:00am $50.00 $ :00am - 12:00pm $40.00 $ :00pm - 1:00pm $35.00 $39.00 After 1:00pm Twilight $25.00 $25.00 Source: Darkhorse Golf Club. The current facility is very highly rated on several golf and travel internet consumer rating services. In fact, as recently as 2014, GolfAdviser.com staff rated Darkhorse as the 4 th best course in California. Golf Advisor consumers have been equally supportive giving the facility a stellar approval rating, with a positive rating from 97.0% of respondents. According to golfadvisor.com users, Darkhorse scored highest for value (4.7 average), and course layout (4.5 average), followed by off course amenities (4.2 average), staff friendliness (4.5 average) and pace of play (3.6 average). Table II-3 Darkhorse Consumer Ratings Reviews Percent 5 Stars % 4 Stars % 3 Stars % 2 Stars 5 2.5% 1 Star 1 0.5% % Source: golfadvisor.com; Chuck Nozicka Consulting (2016). Finally and most notably, the current facility does not include on-site or nearby overnight accommodations. For destination visitors interested in a stay-and-play multiple day experience or for those interested in hosting tournaments as well as group activities such as weddings and meetings, lodging facilities in the City of Auburn vicinity are the most convenient. Chuck Nozicka Consulting, Tourism and Recreation Planning 8

17 The Darkhorse development plan addresses the limited availability of convenient visitor accommodations by proposing on-site overnight units to be augmented by a redeveloped clubhouse and restaurant. This includes the following: Lodging: 26 duplex buildings (52 total units); these include 3 to 4 bedroom units ranging from 2,160 square feet to 2,400 square feet. Clubhouse: new clubhouse facility with a total of 8,590 square feet. Deck amenity: associated with the club house a 6,685 square foot deck These proposed improvements are intended to augment the Darkhorse Gold Club s currently positive appeal by providing support for multiple day visitors and special golf and other events typical of a destination resort. Implications for Darkhorse The setting and location indicates several initial observations for future market demand use. The Darkhorse setting will continue to distinguish the facility from other Northern California golf resorts. Darkhorse is sited within a classic Sierra Nevada foothills landscape and offers the potential visitor an exemplary experience amid California oaks and pines that enhance the course s highly rated design. In addition, the foothills location provides a potential year round operation, with peak use that may well extend from the spring and summer warm weather months well into the fall season. In short, Darkhorse is located in an attractive Goldie Locks climate zone neither too hot nor too cold. Darkhorse provides superb access to surrounding communities, and most importantly, to major travel corridors and large population centers. This also provides easy access to entry points for those visiting California from outside of the state and who may seek a stay and play travel experience in the California Gold Country. The proposed plan will improve an already well-regarded facility. Per our observations, this is not a situation that requires investment to turn around a poorly designed course or a setting that lacks significant appeal. The proposed redevelopment can only enhance the facility s positive existing status among consumers. Moreover, the Darkhorse education and game improvement programs seem to be well positioned to retain existing customers and attract new guests, while helping the regional golf industry in its effort to expand golf s market appeal to new to returning participants. Chuck Nozicka Consulting, Tourism and Recreation Planning 9

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19 III. Market Demand This chapter presents a market demand profile for the Darkhorse. For this section we utilized a series of secondary data sources to describe potential future use for Darkhorse as a stay-andplay golf and recreation destination. Forecasting demand in an area like rural Nevada County with no readily available visitor survey data is necessarily educated guess work; however, the range of available secondary data and the Darkhorse setting and character allows us to provide a reasonable finding that future demand is positive. Accordingly, the data sources used to describe potential market demand include but are not limited to: Demographic factors including population growth in key markets Visitation and visitor origin Golf activity trends Associated recreation trends Demographic Factors Location As discussed in the setting review, Darkhorse features access within 100 miles of the Sacramento area as well as the Reno/Sparks population centers and the Lake Tahoe regional visitor populations. In addition, Darkhorse may serve as a destination for California golfers throughout the state so overall resident population within California may have an impact on Darkhorse as a destination. Finally, the immediate region is within the influence of the enormous San Francisco Bay Area market, with these travelers already visiting established Gold Country destinations as well as the Reno and Lake Tahoe areas via the I-80 travel corridor. Population Statewide Population data show significant grow projections for all regional markets in California. If Darkhorse, and the golf industry in general, can retain the current rate of market capture then population growth should fuel ongoing and long term visitation. Other population findings indicate changes to population composition with respect to ethnicity and age. Findings include the following: Statewide, California s population is projected to increase each year from approximately 39 million as estimated in 2015 to approximately 45 million residents in 2035 (See Figure III-1). Overall ethnic diversification in California will continue with the portion of Hispanic residents expected to increase from 39% in 2016 to 44% of the total population in 2033; Asian and multiple race proportions also increase while those recorded as white or black will decrease as a percent of the total though overall population growth will continue for all ethnic groups. (See Figure III-2). Chuck Nozicka Consulting, Tourism and Recreation Planning 11

20 Among selected age groups, the most notable increase in proportion of California residents is projected to occur among those 70 years and over, with an increase from 9% in 2016 to 15.5% in 2033 (See Figure III-3). 48,000,000 46,000,000 44,000,000 42,000,000 40,000,000 38,000,000 36,000,000 34,000,000 Figure III-1 Population Projections, California, Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Figure III-2 Population Composition by Ethnicity California Statewide, 2016 and Hispanic 39.3% Multiple 2.7% White 38.1% Asian 13.3% AIHN* 0.8% Black 5.7% Multiple 3.5% 2035 Hispanic 44.3% White 32.0% Asian 14.3% AIHN 0.8% Black 5.2% Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016); * American Indian Hawaiian Native/Pacific Islander Chuck Nozicka Consulting, Tourism and Recreation Planning 12

21 Figure III-3 Population Composition by Selected Age Group California Statewide, 2016 and or Over 9.0% 0-14 Years 19.3% 15 to % 50 to % 35 to % or Over 15.5% 50 to % 0-14 Years 17.8% 15 to % 35 to % Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Regional and Local Markets The following presents population projections for selected counties in the region including selected Sacramento area counties as well as a specific look at Nevada County. Like the statewide population figures, projected growth for the immediate region of Darkhorse is strong, with significant average annual increases each year from 2016 through These increases may impact both day use and overnight visitation at Darkhorse throughout the time frame. Other population findings include the following: Nevada County is expected to experience steady growth, adding over 10,000 new residents by (See Figure III-4). Sacramento region counties are projected to increase from just over 2.2 million residents estimated in 2015 to nearly 2.8 million residents in A net increase in the regional market of over 500,000 persons (See Table III-1; Figure III-5). Chuck Nozicka Consulting, Tourism and Recreation Planning 13

22 Figure III-4 Population Projections, Nevada County, California, , , , ,000 95,000 90, Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Table III-1 Population Projections, Sacramento Region, El Dorado 184, , , , ,624 Placer 373, , , , ,196 Sacramento 1,475,381 1,554,022 1,639,613 1,730,276 1,823,985 Yolo 209, , , , ,163 Total 2,243,364 2,360,490 2,488,934 2,621,308 2,766,968 Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Figure III-5 Population Projections, Sacramento Region, ,000,000 2,500,000 2,000,000 1,500,000 1,000, Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Chuck Nozicka Consulting, Tourism and Recreation Planning 14

23 San Francisco Bay Area By virtue of its size and economic strength, the San Francisco Bay Area affects visitation to many Gold Country destinations including Nevada County. As indicated in Table II-2 and Figure III-6, the San Francisco Bay Area population will continue to grow by adding nearly 1.1 million new residents over the next twenty years. Due to this robust growth, visitation to Nevada County from San Francisco Bay Area residents wishing to recreate in the region will rise accordingly; with demand for recreation destinations such as Darkhorse likely to increase. Table III-2 Population Projections, San Francisco Bay Area, Alameda 1,599,888 1,682,348 1,763,028 1,835,340 1,905,482 Contra Costa 1,108,963 1,166,670 1,224,372 1,281,561 1,341,741 Marin 258, , , , ,840 Santa Clara 1,890,424 1,970,828 2,059,786 2,151,165 2,243,474 San Francisco 848, , , , ,332 San Mateo 752, , , , ,641 Total 6,459,394 6,748,221 7,040,921 7,320,975 7,600,510 Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Figure III-6 Population Projections, San Francisco Bay Area, ,000,000 9,500,000 9,000,000 8,500,000 8,000,000 7,500,000 7,000, Source: California Department of Finance, Demographic Unit (2014); Chuck Nozicka Consulting (2016) Chuck Nozicka Consulting, Tourism and Recreation Planning 15

24 Visitor Origin Domestic Since those arriving for a stay-and-play experience at Darkhorse may be traveling from outside the area, overall travel patterns within California can indicate the potential source of visitors. Accordingly, visitor origin data further supports probable future market demand due to population growth in California. Source market data provided in reports for travel by Visit California indicate that the bulk of the domestic market is comprised of Californians as well as a sampling of visitors from several other western states. See Figure III-7. In addition, several noteworthy demographic market areas (DMA) also provide a good portion of travelers with California including key regional market areas for Darkhorse such as The San Francisco Bay Area and Sacramento. See Figure III-8. Since Darkhorse is within a day trip from the Sacramento area and readily accessible from San Francisco we may assume that future marketing programming for Darkhorse could also attract a proportion of those traveling to these areas. We recognize that the bulk of these travelers are presently focused on a general recreation destination, however, at the least these data indicate the extent to which visitation from other states and regions within California, may be targeted for future visitation to Darkhorse. Figure III-7 Domestic Visitor Origin to California by State California Arizona Nevada Texas New York Washington Oregon Illinois Florida Colorado 3.3% 2.9% 2.5% 1.9% 1.7% 1.5% 1.4% 1.3% 1.2% 70.8% 0% 20% 40% 60% 80% Source: Visit California (2016); Chuck Nozicka Consulting (2016); * Under 1% is not shown Chuck Nozicka Consulting, Tourism and Recreation Planning 16

25 Los Angeles San Francisco-Oakland-San Jose Sacramento-Stockton-Modesto San Diego Fresno-Visalia Phoenix (Prescott) Bakersfield New York Las Vegas Chico-Redding Santa Barbara-Santa Maria-San Luis Obispo Seattle-Tacoma Monterey-Salinas Chicago Denver Portland, OR Figure III-8 Domestic Visitor Origin to California By Demographic Market Area (DMA) 5.7% 3.8% 2.9% 2.0% 2.0% 2.0% 1.9% 1.6% 1.4% 1.2% 1.2% 1.1% 1.0% 9.6% 14.1% Source: Visit California (2016); Chuck Nozicka Consulting (2016); * Under 1% is not shown 30.3% 0% 5% 10% 15% 20% 25% 30% 35% International A portion of the Darkhorse market will reportedly be generated by international arrivals with particular attention to those from China; with the facility s education component providing professional training as well as attracting golfers from China s emerging golf industry. As indicate in Table III-3 and Figure III-9, the Chinese market presents a significant proportion of visitors to California, with the state capturing nearly half of all visits to the United States. Table III-3 Visitation from Asia to California, By Country of Origin Estimated Visitors to California Change CA Share of Visitors to U.S.A. Hong Kong 65, % 48.4% India 291, % 25.9% Indonesia 48, % 49.9% Japan 537, % 14.3% Korea, South 438, % 24.8% People's Republic of China 1,162, % 44.8% Philippines 114, % 47.6% Republic of China (Taiwan) 239, % 54.1% Singapore 66, % 41.3% Thailand 42, % 43.6% ASIA TOTAL 3,009, % 27.8% Source: Visit California (2016); Chuck Nozicka Consulting (2016) Chuck Nozicka Consulting, Tourism and Recreation Planning 17

26 In addition, the trend for travel to California from China shows very significant growth. This indicates that the Darkhorse marketing objective to attract this market has significant potential for success. Finally, overall international visitation to California from both greater Asia as well as Europe is also increasing. We anticipate that as Darkhorse becomes established as a desirable destination for international golfers the number of visitors and the associated number of rounds played can be increased accordingly. See Figure III-10. 1,200,000 1,000, , , , ,000 - Figure III-9 Visitation from China to California, Source: Visit California (2016); Chuck Nozicka Consulting (2016) 3,500,000 Figure III-10 Visitation from Asia and Europe to California, ,000,000 2,500,000 2,000,000 Europe Asia 1,500,000 1,000,000 Source: Visit California (2016); Chuck Nozicka Consulting (2016) Chuck Nozicka Consulting, Tourism and Recreation Planning 18

27 In addition to golf, Darkhorse is also located in an area with a full array of visitor experiences that may attract guests to Darkhorse for longer lengths of stay. These activities can also provide non-golfers traveling in a party with destination golfers ample alternative activities during a stay. The alpine ski resort industry, a good comparable for golf, has invested millions of dollars in activities and recreation amenities for non-skiers in an effort to attract families and visitor parties to a full service experience. Fortunately, Darkhorse does not have to make these types of investments since the Gold Country region and the nearby communities of Auburn and Nevada City feature a full range of actives and attractions. As shown in Table III-4, those visiting from overseas also seek a wider range of travel experiences. We have included golf among these even though this specific destination activity will naturally attract a smaller market compared to general tourism attractors. Interestingly, only Japan and South Korea show a higher rate of golf participation among overseas visitors to California. In short, Darkhorse is well positioned to attract a wider audience than a golf resort located in a golf-centered region. Table III-4 Activity Participation While Visiting California, Percent of Visitors For Activities that may be Available at or Near Darkhorse By Country of Origin Total Overseas U.K. Germany France China India Japan Shopping Sightseeing Small Towns/Countryside Experience Fine Dining Historical Locations Guided Tours Art Gallery/Museum Concert/Play/Musical Cultural/Ethnic Heritage Sites Environ./Eco. Excursions Golfing/Tennis Source: Visit California (2016); Chuck Nozicka Consulting (2016) A number of other findings that apply to market demand for Darkhorse include the following: In-bound International travel to California has been robust with activity increasing in excess of 5% per year; the largest growth has come from in-bound visitors from Asia with visitation from China growing at a rapid clip; California hosts 45% of all in bound visitor travel to the USA from China million visitors from China specifically visited California in 2015; visitation from China is projected to grow 17.8% to 1.36 million in 2016 this is an increase from 671,000 just 5 years South Korea Chuck Nozicka Consulting, Tourism and Recreation Planning 19

28 Trips ($Millions) Trees Resort at Darkhorse Golf Club Market Demand Report ago; primary general activities include shopping, small town rural atmosphere, and culture and history. Visitors from China are young, with an average age of 37 years; many of these visitors use preplanned tours to travel beyond gateway destinations; there are approximately 110 daily nonstop flights from China to three principal gateway cities Los Angeles, San Francisco, and San Jose; air traffic at Sacramento International has increased 5.6% for domestic and 21.4% for international activity. Dark Horse ownership s knowledge of overseas markets indicates a distinct competitive advantage for attracting this growing international destination golf and tourism market. Gold Country Visitation Trends and forecasts for travel to the overall Gold Country region show strong long term growth. See Figure III-11. To the extent that Darkhorse can attract destination golfers and overnight visitors among these travelers the facility may increase its market accordingly. In addition, for golfers who also seek a full recreation experience as part of their stay, Darkhorse can position itself as an overnight destination that offers access to this increasingly popular destination region within California. Figure III-11 Gold Country California Annual Trip Trends and Forecast, Source: Visit California (2016); Chuck Nozicka Consulting (2016) Chuck Nozicka Consulting, Tourism and Recreation Planning 20

29 Seasonality Per the data reviewed in the facility profile, Darkhorse enjoys a Sierra Nevada foothills climate that provides at least the opportunity for year round play and most certainly allows for a multiple season operation. The potential for hosting golf and other event activity into the shoulder season is indicated by current overnight lodging activity in Nevada County. As shown in Figure III-12, lodging activity within unincorporated Nevada County is well distributed during a primary nine-month season, with the mid-winter quarter showing the lowest level of activity. In fact, the shoulder seasons as represented by the spring and fall quarters experience a combined majority of lodging activity. This indicates the opportunity for an active 9 month season at Darkhorse. Figure III-12 Nevada County Room Tax Collections by Quarter Apr-June 33% Jul-Sept 24% Oct-Dec 30% Jan-Mar 13% Source: Nevada County California (2016); Chuck Nozicka Consulting (2016) Golf and Recreation Trends Regarding trends in recreational golf, there has been significant discussion in the media, as well as conversation in public meetings about Darkhorse, regarding a decline in golf participation. In fact golf did have a robust period of growth followed by, until recently, a decline in activity. Some publications attribute the rise in golf s popularity in the early 2000 s to the visibility generated by golf star Tiger Woods a phenomena similar to golf s early age of popularity in the 1950s and 1960s with the stardom of Arnold Palmer and Jack Nicklaus. Most recently the Great Recession of 2008 also attributed to a decline in participation due to falling discretionary spending. However, the most recent data indicates that golf has at least stabilized in terms of numbers of Americans who play the game, with data showing a stable national participation rate from 2013 thru See Figure III-13. Note that for purposes of comparison we also show trends for another destination activity, alpine skiing, which has experienced a similar pattern of decline followed by stable participation. Chuck Nozicka Consulting, Tourism and Recreation Planning 21

30 Participants (000s) Trees Resort at Darkhorse Golf Club Market Demand Report Figure III-13 National Participation among Those Age 6 and Over Golf and Alpine Skiing, ,000 30,000 25,000 29,528 28,571 27,103 26,122 25,682 22,442 24,720 24,700 24,120 20,000 15,000 10,000 10,362 10,346 10,919 11,504 10,201 8,243 8,044 8,649 9,378 Skiing Golf 5, Source: The Outdoor Foundation Participation Report 2016; Chuck Nozicka Consulting (2016) The recorded number of golf rounds played is beginning to reflect a similar pattern with available data showing increases during the past year in at least half of the reported months. See Table III-5. Of course, weather conditions can affect a wide region and limit rounds played, but balancing this out are months with exceptional increases. Overall the outlook is far less gloomy than articles written even a few years ago indicated. Common knowledge in the industry indicates that while it still facing challenges, as long term economic conditions improve golf may well hold its own and then grow. In fact, our review of literature on sites such as the World Golf Foundation and the National Golf Foundation indicate that the industry is aggressively implementing strategies to grow the game. Table III-5 Rounds Played: National and California Percent Increase over Previous Year by Month, 2015/2016 National California Nov % -3.3% Dec % 8.2% Jan % -20.2% Feb % 4.1% Mar % -8.7% Apr % 5.2% May % 0.0% June % -0.6% July % -1.9% Aug % 0.2% Sept % 6.0% Oct % -6.5% Source: World Golf Foundation, Rounds Played Reports 2015 and 2016; Chuck Nozicka Consulting (2016) Chuck Nozicka Consulting, Tourism and Recreation Planning 22

31 Number of Palyers Trees Resort at Darkhorse Golf Club Market Demand Report Among these golf development strategies is a focus on education and early age experiences along with efforts to expose girls and those from diverse ethnic backgrounds to the sport. As shown in Table III-5, the participation of girls at the high school competitive level has been growing in California (and around the nation). Participation by boys has been sluggish but relatively stable. Darkhorse with its education focus is well position to participate in this development strategy and according to APG, will seek to become a destination for golfers in local communities. We anticipate that this will include a younger and more diverse golfing population. 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Figure III-14 High School Golf Team Participation California, 2002/ /2015 Boys Participation Girls Participation Source: The National Federation of State High School Associations (2015); Chuck Nozicka Consulting (2016). Other findings during our review of industry sources indicate several other factors that should be encouraging for golf operations at Darkhorse as well as the overall California industry. The largest group of beginners is in the age groups; accordingly the huge generation known as Millennials, represents an opportunity for an increased golf market. According to the National Golf Foundation, The twenty-somethings like Jordan Spieth, Jason Day, Rickie Fowler, Lexi Thompson and teenager Lydia Ko appear to be resonating with the Millennial generation. Millennials report they expect to travel more and spend more on recreation experiences. Interestingly, in the spring of 2016 the Chinese government officially approved of golf. Despite growing participation and course development in China, the PRC government historically frowned upon the sport as source of corruption; an attitude recalling the Chuck Nozicka Consulting, Tourism and Recreation Planning 23

32 Participation (000s) Trees Resort at Darkhorse Golf Club Market Demand Report days of Mao Zedong. Growing interest and participation in golf within China may provide Darkhorse with an opportunity to educate and attract his emerging market. Since our firm works across a full spectrum of outdoor recreation industries we can provide some perspective on the outlook for golf and perhaps dispel the gloom that is reported seen in some quarters of the industry. It turns out that golfs experience with decline and then stabilization has also affected other similar sports with respect to barriers to entry and participation primarily cost and skill development. An example is shown in Figure III-15 which compares golf to other sports that require time, skill development, and participation and equipment investments. One reason for this decline and then increase is of course economic hangover effects of the Great Recession. Another is simple demographics a smaller adult population (Generation X) sandwiched between the huge aging baby boom generation and a similarly large but emergent Millennial generation. Throughout the outdoor recreation industry, all types of activities are dealing with similar trends to golf and in response are ramping up efforts to engage younger and more diverse populations to grow their sports. Golf is no exception and has a positive long term future at Darkhorse and throughout California. 30,000 Figure III-15 National Participation among Those Age 6 and Over Golf and Select Comparable Activities, ,000 20,000 15,000 10,000 5,000 Alpine Ski Golf Tennis Water Ski Inline Skate Ice Skate Jet Ski Source: The Outdoor Foundation Participation Report 2016; Chuck Nozicka Consulting (2016) Implications for Darkhorse The reviewed population growth projections combined with demand for domestic and international travel to California and the Gold Country Region as well as selected activities those that may be available at or near Darkhorse indicates positive long term demand for the project. Several points reviewed in this chapter will have a specific and direct impact on the market for Darkhorse offerings. Chuck Nozicka Consulting, Tourism and Recreation Planning 24

33 Projections for regional population growth cannot be emphasized enough. Darkhorse is in the position to provide improved golf amenities that may in fact be coming on-line just as regional population puts increased pressure on existing facilities. Urban areas of Northern California Sacramento and the San Francisco Bay Area will be a key source of guests at Darkhorse. By virtue of its raw population size and projected dramatic population increases, San Francisco Bay Area visitors are expected to generate increasing demand for Darkhorse. Even if Darkhorse simply maintains its current market share in these population areas, data indicate an increasing level of activity. Planned improvements and an expanded marketing strategy will very likely expand the facility s market capture. Though Darkhorse location provides fairly good day-trip use access from many local communities and the regional market, the setting for non-local visitors especially those from out of state and overseas will require some level of overnight accommodations in the immediate area. Accommodations options proposed for Darkhorse provide an opportunity to capture these visitors at the site and to extend lengths of stay in the project s Gold Country setting. The immediate Gold Country region and the communities of Auburn and Nevada City offer a full range of visitor activities and services. To the extent that Darkhorse can market itself as a full service destination and entice groups that include non-golfers, the facility can enjoy a market advantage compared to golf-centered destinations. This may also apply to groups interested in hosting events at Darkhorse, such as but not limited to weddings and meetings. Golf participation trends show a stabilizing of the market after a period of well-reported decline. New participants including those from the emerging Millennial generation as well as overseas visitors indicate a positive long term outlook for golf at Darkhorse. International visitation to California, especially from China, shows significant growth. Golf is now a government approved sport in China. Accordingly, Taylor Made and Adidas Golf sponsor the American Junior Golf Association (AJGA), which brings more young Asian players to the game. The APG, has encouraged youth to join the organization, and has brought initial groups of students to Darkhorse. Most importantly, APG plans to open a golf school in China, with students expected to travel to Darkhorse for golf education programs in the future. Darkhorse managers from parent company APG have detailed knowledge of these international markets providing a distinct advantage over other destination golf facilities in the region. Darkhorse is well positioned to take advantage of growing overseas travel to California. Chuck Nozicka Consulting, Tourism and Recreation Planning 25

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35 IV. Market Supply This section of the report reviews the current supply for golf facilities in the Gold Country Region with specific attention to the immediate Auburn area. This includes golf resorts along the Highway 49 corridor in the foothills region at elevations similar to Darkhorse in other words facilities within the market reach of Sacramento and the San Francisco Bay Area and per Darkhorse, also above the fog and below the snow. Regional Supply For this review we included golf facilities along the northern Highway 49 corridor in the Auburn to Nevada City area; for purposes of comparison we augment this list by including several resorts in the Gold Country foothills along the southern stretches of Highway 49. Note that we did not review facilities that may be considered part of the Highway 49 Gold Country region but which were located in high elevation alpine rather than foothill settings. Several of the alpine-located destination golf and full service resorts feature real estate development as well as substantial amounts of on-site lodging. These resorts tend to be upscale and in some case, very extensive developments, with project such as Nakoma Resort near Graeagle and Grays Crossing in Truckee. In addition to their alpine location, these resorts primarily represent large scale real estate and resort development projects and as such are not comparable to the more modest Darkhorse proposal. The sampled comparable golf facilities include: North Gold Country Auburn Valley Country Club, The Ridge Golf Club, Black Oak Golf Club, Winchester Country Club, Alta Sierra Golf Club, and Nevada County Gold Club; South Gold Country Greenhorn Creek Resort, Mountain Springs Resort, Saddle Creek Resort, Sequoia Woods Country Club, and La Contenta Golf Club. See Table IV-1. Our review yielded the following pertinent findings related to market supply and the Darkhorse competitive position in the marketplace. Location. The immediate Auburn area hosts four golf destinations that might be considered competition for Darkhorse, with two identified golf facilities in the Nevada City area. The South Gold Country golf facilities, while distant from Darkhorse, do represent competition for the larger San Francisco Bay Area market, especially the southern Bay Area. North Gold Country golf destinations enjoy more direct access from primary markets via Interstate 80. Type. With the exception of one facility, all destinations are semi-private. The public may access these resorts but typically during restricted times and by prescheduled tee times. Only two reviewed courses are of a 9-hole design. Green Fees. Green fees range from lowest for twilight golf to peak fees during day time weekend periods. The least expensive golf facility is the Nevada County Country Club ($15- Chuck Nozicka Consulting, Tourism and Recreation Planning 27