Preliminary Market Analysis for a Proposed Golf Learning Center/Driving Range at Waid Recreation Area Franklin County, Virginia

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1 Preliminary Market Analysis for a Proposed Golf Learning Center/Driving Range at Waid Recreation Area Franklin County, Virginia Prepared For: Franklin County Commerce and Leisure Services Mr. Scott D. Martin, Director 40 East Court Street Rocky Mount, Virginia (540) Prepared By: 1150 South U.S. Highway One, Suite 401 Jupiter, Florida December 2007

2 Preliminary Market Analysis for a Proposed Golf Learning Center/Driving Range at Waid Recreation Area Franklin County, VA

3 Table of Contents INTRODUCTION...1 EXECUTIVE SUMMARY...1 Local Market Factors Affecting Driving Range Operations...2 Estimated Use Activity...3 Financial Overview...3 Summary Conclusion...3 PROJECT DESCRIPTION...4 Site Location Waid Recreation Area...4 Site Location Local Context...5 Site Location Regional Context...5 Site Features...6 Target Markets...6 LOCAL FACTORS AFFECTING THE MARKETABILITY OF DRIVING RANGES...7 Overall Site Attractiveness...7 Market Area Overview...7 Demographic Overview...7 Economic Overview...9 Summary of Local Market Factors...13 GOLF MARKET OVERVIEW...15 National Trends in Golf Demand and Supply...15 Predicted Golf Demand in Franklin County/Smith Mountain Lake Market...16 Estimated Roanoke/Lynchburg Area Golf Demand NGF Golf Demand Indices...17 Potential Demand for Driving Range Visits...17 Visitor Demand...19 Supply Indicators...19 Household/Supply Ratios...19 Opportunity Chart...20 Local Supply Issues...21 Area Golf Facility Map...22 General Findings Local Supply...23 Competitive Assessment Review...23 New Golf Courses...25 Local Golf Market Summary...25

4 MARKET OPPORTUNITY ANALYSIS...26 Market Potential...26 Market Opportunity...26 Demand and Supply Conclusions...27 Play Potential at the Proposed Facility...27 Market Share Conclusions...28 PRELIMINARY FINANCIAL CONSIDERATIONS...30 Revenue Expectations...30 Activity Levels and Fees...30 Merchandise Revenue...30 Food and Beverage Revenue...31 Lesson Revenue...31 Revenue Summary...32 Expense Estimates...32 Cash Flow Statement...33 Results Of Cash Flow Model...33 SUMMARY CONCLUSION...34 APPENDIX DEMOGRAPHIC DATA...35 Summary Demographic...35 Demographic Trend...37

5 Introduction National Golf Foundation Consulting, Inc., (NGF Consulting) a subsidiary of the National Golf Foundation, was retained by Franklin County, Virginia to assist in determining the market potential of adding a new driving range / golf learning center at the existing County-operated Waid Recreation Area. The proposed facility is being considered as an added amenity to the County facilities and is intended to be used by both area residents and visitors. The County is considering a 40-acre portion of property immediately adjacent to the Waid Recreation Area, near the town of Rocky Mount, Virginia and in central Franklin County. This initial market analysis is intended to provide you with a general overview of the supply and demand for this type of facility in the Franklin County / Smith Mountain Lake market, and the initial opinions of NGF Consulting as to the viability of the total project. This initial investigation has been prepared by NGF Consulting to aid in the process of determining the feasibility of a driving range and golf learning center to which we will refer in this letter as the Waid Park Golf Center. This initial market report has been divided into four main sections: Potential demand sources; existing golf supply; the estimated current and future status of the regional golf facility marketplace; and some preliminary financial considerations for the project. To examine the market, NGF Consulting Director Richard Singer spent the period of November 5 through November 7 in the Franklin County / Smith Mountain Lake, Virginia area. The consultant s activities included an extensive tour of the selected Waid Recreation Park site, visits to competitive facilities in the market area, an examination of some of the area s driving range facilities, meetings with county employees and a meeting with interested area residents / potential users of the facility. Additionally, valuable information was gathered from the: Smith Mountain Lake Chamber of Commerce; the State of Virginia; Robert Charles Lesser & Co., LLC; and the Virginia Research and Analysis Bureau. NGF Consulting gratefully acknowledges the many contributors to this study effort, including officials of Franklin County and all others who assisted in this study. National Golf Foundation Consulting, Inc. Franklin County, Virginia 1

6 Executive Summary The following is a summary list of significant findings made by National Golf Foundation Consulting, Inc. The supporting text and tables are found in the body of the attached report. Appendices will be included in the final report. NGF Consulting has studied the golf market in the immediate local Franklin County, Virginia area, with special focus on the market potential of a proposed new golf driving range / learning center being considered as an addition to the popular Waid Recreation area. In summary, NGF Consulting believes that there is demonstrated and growing demand for a new municipal golf practice facility in the growing Franklin County area, although this opportunity may not be sufficient to sustain such a facility in light of all operational and development costs that would be required. As a result, NGF Consulting believes that the only possibility for the proposed facility to be successful would be if: (1) The Waid Park Golf Center was of high quality with good management and customer service; (2) The operation must be efficient, with a vigilant eye kept on cost control; (3) The practice center must offer heated bays and be open year-round; (4) There must be a commitment to marketing, especially in the pre-opening phase and in the initial years of operation; and, (5) A very strong teaching program must be built to help stimulate latent demand for golf in the community, as well as cultivate future repeat customers. The key NGF Consulting findings on the Franklin County / Smith Mountain Lake area golf market are listed below: Golf is rapidly becoming an integral part of the overall defining character of the greater Smith Mountain Lake area, and several new golf facilities were added to the market area in the 1990 s. Basic ratio analysis prepared by NGF Consulting for this report suggests that while Franklin County has a favorable ratio of households to golf courses, the broader surrounding region is much less favorable. This indicates that the area needs to be stimulated to demand more golf, a stimulation that could be enhanced with a driving range / learning center such as proposed by Franklin County. Nationally, the trends in golf show a slowing of new golf facility development after a decade long growth spurt of golf courses. The key issue facing the overall golf industry in the coming decades will be creating new golfers to fill up all those new golf courses built over the last decade and a half. Facilities like the proposed Waid Park Golf Center have been identified by NGF as key for helping to develop new players and grow the game of golf. The overall Roanoke area is not a top-line golf market, with lower-than-average participation rates and frequency of use. Still, NGF Consulting has estimated that there are 3,000+ golfing households in Franklin County with the potential to demand as many as 100,000 rounds of golf annually. NGF Consulting estimates for driving range participation suggests that the demand for range use in Franklin County is roughly 20,000+ visits or about 27,000+ buckets per year. National Golf Foundation Consulting, Inc. Franklin County, Virginia 1

7 The NGF Consulting permanent resident estimates do not consider the seasonal resident or transient/visitor golf demand in the Smith Mountain Lake area. Visitor golf demand is a key element in the area s golf market and visitor patterns to the Smith Mountain Lake area have a strong influence on the characteristics of the area golf market. Visitors to the area can add an additional 3,000 to 4,000+ range visits to this total. The Roanoke Golf market is generally well supplied with golf facilities of all types, although a larger-than-average proportion of the golf facility inventory in the area is in the private club segment. This would indicate that what golf facilities there are in the region are generally not available for public use, and this is true of driving range facilities in Franklin County. With so few ranges in the Franklin County market, golfers are required to travel great distances for golf range service. The golf season in the immediate Smith Mountain Lake market is shorter than it is in the Roanoke area. The peak Smith Mountain Lake golf season appears to be from May through October each year, with only a handful of golf rounds being played in April and November. LOCAL MARKET FACTORS AFFECTING DRIVING RANGE OPERATIONS The local market factors affecting the operation of a new golf range / learning center in proximity to the Waid Recreation Area tend to be mixed in that there is a small population but with signs of growth and growing affluence. The key NGF Consulting findings of the area economy and demographics are listed below: The demographic data for Franklin County indicates a generally small and rural population with significant growth expected, particularly in the vacation/second home market near Smith Mountain Lake. While the population is very small around the Waid Recreation site, the populace is becoming increasingly affluent, meaning a growing number of higher income residents will be residing in the area in the future, representing a solid core market from which to draw golf customers. The economic base of Franklin County has been in tourism and tourism related businesses in and around Smith Mountain Lake. Tourism, driven by the activities and lodging along the Lake, is the major revenue generator for the area, and it has been increasing rapidly in recent years. The increase in visitation to the area will have a positive impact on the demand for golf in the area, and this is likely to be true for driving range-type facilities as well. The continued health of the immediate Smith Mountain Lake tourism industry is seen as a crucial factor for the successful marketing of golf range use at the Waid Recreation area site. The demand for residential real estate appears to be very strong and growing in this region as supported by data collected by NGF Consulting. New home construction is growing more rapidly than a decade ago and the sales of existing homes had been increasing up to and into The immediate Smith Mountain Lake area has become a prime second home location in the last several years. This strong demand for housing, particularly in the upscale second home market, is seen as a positive indicator for the marketing of a new commercial driving range in the area. National Golf Foundation Consulting, Inc. Franklin County, Virginia 2

8 ESTIMATED USE ACTIVITY NGF Consulting has observed a market opportunity for a high-quality stand-alone commercial practice facility/ driving range, with modern design features and support amenities, to serve the growing Franklin County area market. The Waid Park Golf Center s competition in the market would have to be the on-course range at Westlake and/or the three commercial driving ranges over 45 minutes away in the Roanoke/Salem area. Additionally, the proposed site has many positive attributes, especially related to location and surrounding recreational uses. The NGF Consulting estimate for sales volume at the proposed Waid Park Golf Center is as follows: Projected Number of Buckets Sold for the Proposed Waid Park Golf Center Year 1 Year 2 Year 3 Year 4 Year 5 19,872 22,356 23,184 24,840 24,840 Source: NGF Consulting FINANCIAL OVERVIEW NGF Consulting has created a preliminary cash flow model for the new Waid Park Golf Center under some basic assumptions as outlined in the body of this report. We also assume that the golf range would have professional management and a strong commitment to golf educational programs, including group lessons, golf schools, golf camps, and include the presence of a qualified golf teaching professional. The results of NGF Consulting s preliminary cash flow projection shows that Franklin County should not expect to generate much in the way of net operating income for the first several years of operation, with operational break-even not occurring until the fourth year after opening. This would suggest that the facility is a break-even proposition for the County (at best) and that any cost to develop the proposed facility must come from another source, as the operations of the propose Waid Park Golf Center will not be enough to retire any capital costs necessary to construct the facility. SUMMARY CONCLUSION NGF Consulting market research has revealed a market opportunity for a new municipal golf practice facility in the growing Franklin County area, although this opportunity is not that strong. Additionally, the proposed site has many positive attributes, especially related to location and surrounding land uses (Waid Recreation Area). In summary, NGF Consulting expects that if the proposed Waid Park Golf Center is developed, it would probably be well utilized although the overall utilization may not be sufficient to generate revenues that can cover all operational expenses AND retire the capital investment necessary to construct the facility. National Golf Foundation Consulting, Inc. Franklin County, Virginia 3

9 Project Description Franklin County, Virginia is currently considering the development of a new driving range facility to serve as the centerpiece amenity for the existing Waid Recreation area in central Franklin County. The facility would be built on a yet unspecified portion of property just to the northwest of the Waid Recreation Area, immediately adjacent to Six Mile Post Road. This roadway also provides service access to the full Waid Recreation site. From the standpoint of Franklin County the proposed golf facility must be capable of supporting itself operationally, and possibly even earning enough revenue to retire any direct development costs. As of the fall of 2007, no formal plans for this development have been created nor any formal designs prepared. It has been assumed that the selected site would accommodate a driving range development and the consultant field visit supports this assumption. The chosen site is of sufficient size to incorporate a full driving range facility under a number of different configuration scenarios. For the purpose of this analysis, it is assumed that the completed Waid Park Golf Center would include the following elements: Lighted golf driving range of at least 40 hitting stations and at least 300 yards of hitting length Separate range area for golf instruction Support building with pro shop, snack bar and golf teaching classrooms Maintenance area Parking for at least 50 autos Practice putting green Practice chipping area with sand bunker Appropriate staff including golf professionals for instruction Other possible elements that could be included but not necessarily considered for this analysis include miniature golf, putting course, and/or full service clubhouse. SITE LOCATION WAID RECREATION AREA The subject property is located in central Franklin County on Six Mile Post Road, approximately 3.5 miles west of central Rocky Mount, VA, and roughly 45 miles southwest of Roanoke, Va. (Southwest Virginia s largest metropolitan hub) and in immediate proximity to the Smith Mountain Lake area of western Virginia. Access to the site would be via Six Mile Post Road, which connects to Highway 40 (known locally as Franklin Street) less than two miles from the site. Highway 40 provides access from Ferrum in the southwest and Rocky Mount (40W), and the southern portion of Smith Mountain Lake (40E). In Rocky Mount, Highway 40 connects to several area roadways including Highway 220, which provides access to Roanoke, and Highway 122, which provides access to the northern Smith Mountain Lake area. Overall, the consultant s finding on the access for the facility is very good in this regional context as the site will be relatively convenient for golfers coming from all directions. Franklin County reported to NGF Consulting that 2,500 autos pass by the Waid Recreation entrance along Six Mile Post Road each day. The maps below show the site in a local and regional context: National Golf Foundation Consulting, Inc. Franklin County, Virginia 4

10 Site Location Local Context Site Location Regional Context National Golf Foundation Consulting, Inc. Franklin County, Virginia 5

11 SITE FEATURES The site selected for the proposed Waid Park Golf Center is a 40-acre parcel at the entrance to the Waid Recreation area, bounded by Six Mile Post Road, Waid Park Road, and Waid Park itself. The property is roughly rectangular in shape with its longest side (appx yards) along Six Mile Post Road and roughly 300+ yards wide (NGF notes a formal survey has not been completed and sizes are NGF estimates). This width suggests that it would be difficult to configure a driving range any way other than along its lengthwise axis. This would mean that the range would have to be oriented with the hitting area at the southwest portion of the site with golfers hitting toward the northeast, or vice-versa. The basic preference for driving range orientation is for golfers to hit in the most northerly direction possible, so as to avoid hitting directly into the sun. Thus, the northwest hitting direction seems to make the most sense for the property. NGF notes that this configuration will likely require netting along Six Mile Post Road to keep range golf balls from interfering with auto traffic on that roadway. The site also has some gentle topographic characteristics that would not preclude a driving range development, but would have to be considered before any construction was to commence. TARGET MARKETS Any plan to market the proposed new Waid Park Golf Center should center on the attraction of four distinct market opportunities that can be identified in this area. 1. Franklin County Residents Residents of Franklin County are expected to be the primary market for the Waid Park Golf Center. The County s 50,000+ residents would have to participate at the new facility on a regular basis to make this a viable operation. 2. Smith Mountain Lake Visitor / Seasonal Resident Golf Market Residents of Smith Mountain Lake, Virginia and its bordering towns and counties will form a secondary market for Waid Park Golf Center. The general resident and second home population of golfers is considered a strong potential market for the proposed new Waid Park Golf Center. 3. Expanded Geographic Market With the proximity of Roanoke, Lynchburg and other western Virginia cities, Waid Park Golf Center has a population of over 2,700,000 persons within 80 miles. While those people residing in the expanded geographic market cannot be considered the core market, it is reasonable to assume that Waid Park Golf Center will pull some market share from outlying areas such as these. 4. Local/Regional Scholastic / Youth Market The Franklin County market is home to a relatively small, but still important school-age population. Local middle and high schools report growing interest in golf and golf-related activities including competitive golf teams. National Golf Foundation Consulting, Inc. Franklin County, Virginia 6

12 Local Factors Affecting the Marketability of Driving Ranges The objective of this section is to identify and assess those local factors that may affect the attractiveness and marketability of golf driving range and learning center service at the proposed Waid Park Golf Center. OVERALL SITE ATTRACTIVENESS As discussed in the previous section, the Waid Park Golf Center site would suit a public driving range both in terms of site configuration and topography, as well as location and access. The facility would be well-located and create a positive synergy with the recreation elements already present at the Waid Recreation area. If developed, the proposed Waid Park Golf Center would be the only commercial stand-alone driving range in Franklin County and the Smith Mountain Lake region, with only two other commercial driving ranges in the market located as part of other area golf courses. MARKET AREA OVERVIEW For purposes of analyzing market-wide data for this report, a primary market area for the proposed facility has been defined as Franklin County, Virginia. NGF Consulting also reviewed data from five-mile and 80-mile market rings for comparison purposes and to consider a broader secondary market. NGF Consulting will provide a summary of these data and how they relate to new golf range / learning center development. Demographic Overview Utilizing research materials provided by the National Golf Foundation, Tactician Corporation, and Applied Geographic Solutions, Inc. (a supplier of demographic research based on U.S. Census results), NGF Consulting has examined relevant characteristics of the local population. In the following table, NGF Consulting indicates the population growth trends for Franklin County, 5-mile and 80-mile rings, as well as for the State of Virginia and the total United States. More detailed Demographics appear in the Appendix to this report. National Golf Foundation Consulting, Inc. Franklin County, Virginia 7

13 Population Trends Roanoke / Franklin County 5 miles 80 miles Virginia Lynchburg DMA U.S. Population ,549 9,913 2,317,946 6,187,355 1,015, ,709,429 Population ,286 10,785 2,590,131 7,078,442 1,083, ,421,211 CAGR % 0.85% 1.12% 1.35% 0.65% 1.24% Population 2007 Estimate 50,781 11,221 2,701,936 7,752,744 1,097, ,086,923 CAGR % 0.57% 0.61% 1.31% 0.61% 0.87% Population 2012 Projected 53,269 11,555 2,795,455 8,216,130 1,107, ,516,904 CAGR % 0.59% 0.68% 1.17% 0.18% 0.95% Median HH Inc $46,298 $39,220 $45,238 $57,626 $38,135 $48,443 Median Age *CAGR Compound Annual Growth Rate Source: U.S. Census Bureau, AGS, Inc. and NGF Consulting. From the data presented above, NGF Consulting has made the following observations regarding the local demographics. The population within five miles of the Waid Park Golf Center site is about 11,200 total persons in roughly 4,700 households. While these figures are very modest, there are more than 50,000 people in Franklin County, and the broader Roanoke/Lynchburg market area, which includes Smith Mountain Lake, has over 1.0 million residents. Modest population figures in the local market imply that Waid Park Golf Center will likely have to draw from secondary markets to achieve satisfactory usage at the proposed facility. Although the population is small, the immediate Franklin County area does show signs of growth with both projected future data supported by new residential communities under development all around the Smith Mountain Lake area. The obvious implication for future golf facility development in the area is that steady growth means a larger supply of potential golf customers will be residing in the market area. The median age in the immediate Franklin County area is considerably older than the State of Virginia and the total U.S., indicating a higher proportion of older aged residents in this market area. Generally speaking, a comparatively older population in a market area tends to increase golf frequency, as older golfers tend to play more often than younger age segments. As a result, higher-than-average rounds played and/or driving range use are generally expected in older markets. Median household income in the Franklin County area is lower than the State of Virginia and the total U.S. However, the immediate Smith Mountain Lake area shows much higher incomes. In general, higher income residents are more likely to participate in golf with a high level of frequency. The implication Waid Park Golf Center is that penetration into secondary markets will be necessary to achieve satisfactory range usage and lesson activity. National Golf Foundation Consulting, Inc. Franklin County, Virginia 8

14 Economic Overview In addition to identifying demographic trends and characteristics of the area, we have examined economic indicators in the regional economy. This regional and local analysis of the economy and its likely impact on the success of a new public range and will assist in identifying key trends in the market area and how these trends will relate to a new golf center development. Smith Mountain Lake Area Smith Mountain Lake, where the waters meet the Blue Ridge Mountains, is located in the southern part of central Virginia. Approximately 60% of the lake s shoreline is within Franklin County, with the remaining in Bedford and Pittsylvania counties. The manmade lake was created when Appalachian Power Company, now American Electric Power, selected the site in the gap of Smith Mountain on the Roanoke River for a hydroelectric and storage pump project. The Smith Mountain Dam, which is 227 feet high and 816 feet in length, was completed in Smith Mountain Lake, using the Roanoke and Blackwater rivers and other tributaries, reach full pond for the first time on March 5, This created the residential and recreational lake with 20,000 plus acres of water that offers 500 miles of shoreline. Smith Mountain Lake is the second largest lake in Virginia and is recognized to be a premier vacation destination. Among the many water activities at Smith Mountain Lake are power boating, canoeing, sailing, parasailing, swimming, fishing, water skiing, wakeboarding, and jet skiing. The Smith Mountain lakefront includes seven public boat-launching sites and many public and private marinas. Smith Mountain Lake State Park is the only state park located in the Smith Mountain Lake area. In addition to traditional water sports like swimming, fishing (for striped bass, especially), boating, and boat launching, Smith Mountain Lake State Park guests enjoy hiking, camping, picnicking and more. At the park, there is a visitor s center with many interesting exhibits, including one detailing the history and folklore of Smith Mountain Lake. There are also hiking trails, fishing (a Virginia State License is required), swimming at a 500-foot-long beach, picnic areas, 50 campsites, and assorted programs such as night hikes, canoe trips, and wilderness skills training. The park totals 1,506 acres with 16 miles of lakefront. The State of Virginia estimates 200,000 visitors per year enter the park. History buffs will want to check out the Booker T. Washington National Monument and the National D-Day Memorial. Another popular attraction at Smith Mountain Lake is the Smith Mountain Dam Visitors Center. More than one million people have visited since its opening in May of The population figures below are for Full Time Residents and don't include summer residents and the many visitors that frequent the area from all over the country. Smith Mountain Lake. 14,000 Bedford County 50,000 Franklin County 43,500 Pittsylvania County 43,500 National Golf Foundation Consulting, Inc. Franklin County, Virginia 9

15 Climate The Franklin County area is characterized by a modified continental climate. The average annual temperature is approximately 55 degrees Fahrenheit. Seasonal normal high and low temperatures and precipitation averages are given in the table below. Prevailing winds are generally out of the southwest, except during the winter months when winds often originate from the northwest. The normal number of calendar heating degree-day units for the Franklin County area is 11.4 units per day per annum. Temperature and Precipitation Averages Franklin County Temperature (F) January July Average High Average Annual Rainfall 44 Average Annual Snowfall 14 Source: Virginia Climatology Office, 1993; C&C Appraisals Economic Development Franklin County has a number of industrial and commerce parks available for new and expanding businesses: Franklin County Commerce Park, located five miles south of Rocky Mount, offers approximately 260 acres with direct access to U.S. Route 220. The park lies adjacent to a public golf course. West Franklin Business Park, located in the western part of the county off Route 40 in Ferrum, with 56 level acres adjacent to Ferrum College. Franklin County/Rocky Mount Industrial Park, a joint effort with the Town of Rocky Mount, with 19 acres available, has excellent access to U.S. Route 220 and services in the Town. Rocky Mount Technology Park, a new park in the Town of Rocky Mount focused on recruiting businesses that value access to fiber and state-of-the-art telecommunications. The park is home to the Franklin County YMCA and provides direct access to over five miles of trails in a state wildlife preserve. National Golf Foundation Consulting, Inc. Franklin County, Virginia 10

16 Major Employers in Franklin County Name Product Employment Range M.W. Manufacturers Window/door construction 1,000+ Franklin County School Board Educational/government Wal Mart Retail business Franklin Memorial Hospital Medical services County of Franklin Government agency Ferrum College Educational Ronile Yarn dyeing Mills Stop & Go, Inc. Administrative services Mod-U-Kraf Homes, Incorporated Modular housing Willard Construction of Roanoke Valley Construction Trinity Mission Healthcare & Rehab. Healthcare services The Uttermost Company Interior decoration framing Ameristaff Temporary employment services Kroger Grocery store Fleetwood Homes of VA Manufactured housing Dairy Queen Restaurant North American Housing Modular housing Courtland Healthcare Center Healthcare services Virginia Utility Prot. Srv. Incorporated Administrative & support services Source: 2005 Top 50 Employer Listing 3 rd Quarter, Virginia Employment Commission Waid Recreation Area The County developed Waid Recreation Area, a 510-acre park located at the end of State Route 800, off Route 640 (Six Mile Post Road) in the Pleasant Hill community. This park offers a variety of recreational pursuits for citizens of all ages and preserves a portion of the historic Old Carolina Road. The facility includes two baseball/softball fields, picnic facilities, an 82-year old bridge surplused by VDOT, about a mile of frontage on the Pigg River and a three-acre wetland area. The Pigg River Blueway also begins at this site. The County also collaborates with the Virginia Department of Game and Inland Fisheries in a trout stocking program along the Pigg River through the park. This is the longest stretch of publicly accessible riverfront in the County and as such receives significant use as a winter fishery. Waid Recreation Area contains the largest stretch of the colonial-era Carolina Turnpike. This historical resource is unique in the mid- Atlantic and contains the old Waid Stage Stop. A vernal pool is found at Waid. The County is completing development of an additional five-field sports complex at this site. The fields will be used for soccer, football, and lacrosse programs through the County s Department of Commerce and Leisure Services. Additional developments at the site will include picnic shelters, expanded trail access, and improved historical/environmental interpretive programs. National Golf Foundation Consulting, Inc. Franklin County, Virginia 11

17 According to Franklin County officials, the park has a peak season attendance of approximately 5,000 per weekend day and up to 1,000 per day weekdays. Lighting was installed at the Waid Park baseball fields in 1997 at a cost of $134,450. Electrical cost for Waid Park for the year ending November 10, 2007 was less than $1,000. Tourism/Seasonal Residents According to the Virginia Tourism Corporation, growth in visitation to the Smith Mountain Lake area has been considerable with a doubling of total tourism spending between 1993 and Data for the period since 2001 was not available but it is clear that the growth has continued. These visitors had a total economic impact of just under $63 million on the area economy in 2001, and supports upwards of 640 jobs. Tourism is the predominant industry and biggest revenue generator in the immediate Smith Mountain Lake area. However, there are several indications that permanent resident housing is on the rise in the area, along with individually owned second and vacation homes. NGF Consulting was not able to find any detailed count of the number of visitors to the area, but the State of Virginia estimates that approximately 200,000 to 250,000 persons visit the Smith Mountain Lake State Park in each of the last four years. Also, the Franklin County data indicates a relatively small number of lodging units available on the south end of Smith Mountain Lake and in proximity to the subject Waid Park Golf Center. Some of the highlights of the Virginia Tourism Corporation Report follow: Franklin County Travel Economic Impact Profile Travel Impacts Prelim 2001 Traveler Spending $31,800,000 $33,050,000 $33,370,000 $45,830,000 $47,890,000 $49,502,000 $52,641,000 $58,140,311 $62,854,095 Change from Previous Year 10.5% 3.9% 1.0% 37.3% 4.5% 3.4% 6.3% 10.4% 8.1% Travel Payroll $3,960,000 $4,840,000 $4,940,000 $6,430,000 $7,320,000 $7,954,000 $8,210,000 $9,182,566 $10,320,728 Travel Employment State Travel Taxes $1,500,000 $1,590,000 $1,600,000 $2,180,000 $2,350,000 $2,390,000 $2,690,000 $2,979,139 $3,307,527 Local Travel Taxes $3,610,000 $3,750,000 $3,820,000 $4,060,000 $5,020,000 $5,297,000 $5,626,000 $6,241,017 $6,692,429 Source: Virginia Tourism Corporation 2003 National Golf Foundation Consulting, Inc. Franklin County, Virginia 12

18 Travel Impacts Franklin County 2000, 2003, 2004 Impacts Percent Change Percent Change Percent of State Total Expenditures $58,140,311 $64,433, $73,301, Payroll $9,182,566 $17,418, $18,963, Employment 577 1, , State Tax Receipts $2,979,139 $2,724, $3,095, Local Tax Receipts $6,241,017 $2,033, $2,311, Retail Sales Lodging Taxable Sales $3,893,601 $4,459, $4,353, Food Service Taxable Sales $22,455,782 $29,203, $33,455, Excise Tax Collections Lodging Excise Tax $117,646 $113, $121, N/A Food Service Excise Tax $592,589 $640, $700, N/A Source: Travel Economic Impact Profiles, 200, 2003, 2004, Virginia Tourism Corp. SUMMARY OF LOCAL MARKET FACTORS The local market factors affecting the operation of a new golf range / learning center in proximity to the Waid Recreation Area tend to be mixed in that there is a small population but with signs of growth and growing affluence. The most important positive aspects of the local Roanoke/Smith Mountain Lake market area is the rapid growth in demand for residential housing from both primary and secondary homebuyers, and the continued popularity of the Smith Mountain Lake area as a prime recreational/vacation destination. Continued growth in these two factors is viewed by NGF Consulting to be supportive of the development of a new golf facility at the Waid Recreation site. The key NGF Consulting findings of the area economy and demographics are listed below: The demographic data we have presented for Franklin County indicates a generally small and rural population with significant growth expected, particularly in the vacation/second home market near Smith Mountain Lake. While the population is very small around the Waid Recreation site, the populace is becoming increasingly affluent, meaning a growing number of higher income residents will be residing in the area in the future, representing a solid core market from which to draw golf customers. The economic base of Franklin County has been in tourism and tourism related businesses in and around Smith Mountain Lake. Tourism, driven by the activities and lodging along the Lake, is the major revenue generator for the area. Although the most recent data available does not truly reflect it, the tourism industry in Smith Mountain Lake has been increasing at a very rapid pace, doubling in economic impact during the 1990 s, and likely experiencing even stronger growth since The increase in visitation to the area will have a positive impact on the demand for golf in the area, and this is likely to be true for driving range-type facilities as well. National Golf Foundation Consulting, Inc. Franklin County, Virginia 13

19 Overall, the Smith Mountain Lake area remains a very attractive vacation destination, particularly for people in the eastern, Mid-Atlantic U.S. region who can access this area very easily by automobile. Still, this market remains heavily dependent on tourism and the growing service industry that supports it, as well as the growing resident population. The continued health of the immediate Smith Mountain Lake tourism industry is seen as a crucial factor for the successful marketing of golf range use at the Waid Recreation area site. The demand for residential real estate appears to be very strong and growing in this region as supported by data collected by NGF Consulting. New home construction is growing more rapidly than a decade ago and the sales of existing homes had been increasing up to and into The immediate Smith Mountain Lake area has become a prime second home location in the last several years. This strong demand for housing, particularly in the upscale second home market, is seen as a positive indicator for the marketing of a new commercial driving range in the area. National Golf Foundation Consulting, Inc. Franklin County, Virginia 14

20 Golf Market Overview In this section of our report NGF Consulting has attempted to estimate the size and scope of the Franklin County/greater Roanoke area golf market. Having identified key demographic and economic factors that may affect the performance of area golf facilities, we now turn our attention to the current golf demand climate in this market and the actual performance of the area s golf facilities. NGF Consulting uses predictive models as benchmarks for estimating potential market strength. These benchmarks are then compared to the actual performance of golf courses in and around the Franklin County/Smith Mountain Lake area in an effort to establish reasonable parameters, within which the proposed new Waid Park Golf Center will be expected to operate. NATIONAL TRENDS IN GOLF DEMAND AND SUPPLY Golf participation in the U.S. has grown from 3.5% of the population in the early 1960s to about 12.6% of the population today. NGF estimates that 36 million golfers reside in the U.S., with growth slowed to about 1.0% per year. Other surveys completed outside the golf industry show the number of people who identify themselves as golfers is as high as 45 million, indicating a large potential latent demand from very inactive golfers. As rapidly as the demand for golf has grown, the supply has grown even faster, with an average increase of about 2.1% per year. With the increase in supply, we are seeing a marked increase in competition, and the supply is greater than the demand in some markets. In addition to increased competition, four other factors have contributed to a decline in the number of rounds per course during the 2002 to 2005 period. These include: 1) an uneven economy; 2) the aftereffects of 9-11, which greatly reduced the traveling golfer market; 3) the increasing time pressure on individuals and families; and 4) abnormally poor weather conditions over the past few years in much of the U.S. The combination of these factors has caused many golf facilities to become distressed, particularly those that have a high debt load because of higher construction costs and the perceived need to build high-end courses. The level of golf course closings has quadrupled from an annual average of 24 courses per year in to 48 courses in , 63 courses in 2004 and more than 100 courses in In 2006, there was negative net growth in golf facilities for the first time in six decades, with hole equivalents closing and opening. In terms of the total number of rounds produced, NGF estimates that rounds fell about 1.5% in 2003, after a 3% drop in NGF research indicated a rebound of about 0.7 percent in 2004, a very slight decline of 0.1% in 2005, and an increase of 0.8% in The Mid-Atlantic Region, which includes Virginia, saw rounds decrease by about 0.3 percent in 2006, after a 1.2 percent increase from 2004 to On the positive side, the growth in golf course development has slowed considerably nationally and in the majority of local markets, a trend that should help ease some of the competitive pressure. Another positive trend is the aging of America. Baby boomers are rapidly approaching retirement age when golf activity flourishes. The baby boomers represent not only the largest single demographic in the US, but they also approach retirement age with more disposable income than any previous generation. National Golf Foundation Consulting, Inc. Franklin County, Virginia 15

21 PREDICTED GOLF DEMAND IN FRANKLIN COUNTY/SMITH MOUNTAIN LAKE MARKET The objective of this section is to provide an overview of golf demand potential in Franklin County and the surrounding Smith Mountain Lake area, as well as a broader Roanoke/Lynchburg market area. The predictive demand models are based on historical golfer participation characteristics, and incorporate existing and emerging demographic trends in the subject market area. In January of each year, Market Facts mails golf participation surveys to 50,000 households nationwide to determine the previous years' golf participation characteristics. In order to be representative of the U.S. population, the observations are weighted to match total U.S. demographics. The NGF Golf Demand Model includes the critical combination of age and income, regional seasonality, and available golf course supply, as well as existing and emerging demographic trends in a particular market area. The model can be used as a benchmark for estimating potential market strength in a particular area. Because the sample is so large, NGF is extremely confident of its accuracy. In statistical terms, the national participation rate is estimated to be 12.6 percent plus or minus 0.2 percent at the 90 percent confidence level. Estimated Roanoke/Lynchburg Area Golf Demand The table below illustrates how the Roanoke, VA DMA ranks in relation to the other 209 DMAs nationwide on some key golf demand and supply measures. Rank (of 210 Characteristic DMAs) Predicted Household Participation Rate 167 Predicted Golfing Households 85 Predicted Golf Rounds Demanded 89 Total Number of Facilities T81 Public Facilities T93 Private Facilities 46 Resort Facilities Premium Facilities Standard Facilities Value Facilities T indicates tied with at least one other DMA for this rank T62 T81 T85 T81 DMA Golf Demand Rankings Predicted Household Participation Rate 14% Rank (of 210 DMAs) 167 Predicted Number of Golfing Households 62,493 Rank (of 210 DMAs) 85 Predicted Number of Rounds Demanded ,602,420 Rank (of 210 DMAs) 89 National Golf Foundation Consulting, Inc. Franklin County, Virginia 16

22 NGF Golf Demand Indices The Golfing Household Index is based on Predicted Number of Golfing Households, and compares golfing household participation in a particular geography to the national base index of 100. The Rounds Index is based on Predicted Number of Rounds, and compares the propensity of rounds played per household in a particular geography to the national average rounds index of 100. The predictive indices for golfing households and rounds demanded were developed in order to determine the relative strength of a particular golf market area in comparison to other golf markets and the nation as a whole. These predictive demand indices help identify where golfing households and rounds activity are concentrated by comparing various geographies with one another and the national average, which is 100. For example, if a market has a Golfing Household Index of 120, that area is estimated to have 20 percent higher golf participation rate as compared to the U.S. average. And, if a market has a Rounds Index of 120, that area is estimated to have 20 percent higher average rounds per household as compared to the U.S. average. Predicted Golf Demand Franklin County 5 Miles Roanoke- Lynchburg DMA Virginia U.S. SITE 80 Miles Golf Demand Indicators # of Golfing Households 3, ,205 62, ,489 21,249,204 Number of Rounds Played 98,427 16,952 4,592,913 1,602,420 14,643, ,088,704 Golfing Household Index Rounds Played Index Source: National Golf Foundation Predictive Demand Model Key Findings The Roanoke DMA ranks in the middle to lower range of all golf market measures when compared to the other 210 DMA s in the United States. The highest ranking in this market is 46 th out of 210 in the total number of private golf courses available in the DMA. NGF Consulting has estimated there are over 3,000 permanent resident golfing households in Franklin County, plus another 60,000+ golfing households in the greater Roanoke DMA. Franklin County golfers are capable of producing close to 100,000 rounds of golf per year, while the Roanoke DMA is expected to demand as many as 1.6 million rounds of golf annually. Locally, we estimate just 560 golfing households demanding about 17,000 rounds annually within 5 miles of the Waid Recreation site. This estimate does not include the golfers and rounds potential of the area s large tourist and seasonal (second home) population. Potential Demand for Driving Range Visits We will now turn our attention to estimating the potential demand for driving range visits from residents of this market area. By applying the relevant results of NGF s publication Golf Practice Facilities in the U.S. A Summary of Supply and Demand to the market population base, we are able to determine reasonable estimates of potential golf range demand in the facility s trade area. National Golf Foundation Consulting, Inc. Franklin County, Virginia 17

23 The results of the range survey indicated an overall (all types) national driving range participation rate of 12.5 percent. This means that 12.5 percent of the population used some type of commercial golf range in the preceding year. The national participation rate for standalone ranges was 8.0 percent, with an average of 5.4 commercial range visits per golfer per year. Driving Range Demand Estimate Applying the national utilization numbers for commercial ranges to the resident population of the primary market area, we have formulated an estimate for potential driving range visits and potential baskets demanded. The following table demonstrates the number of potential commercial golf range visits demanded in the market area: Estimated Range Visit Demand For Waid Park Golf Center Franklin County 5-Mile Ring 80-Mile Ring Population * 50,781 11,221 2,701,936 x Commercial Stand- Alone Golf Range Participation Rate** 8.0% 8.0% 8.0% Potential Market Area Range Users , ,155 Average Annual Frequency of Use** Potential Driving Range Visits From Mkt ,937 4,847 1,167,236 Potential Range Baskets Demanded (at 1.25 per range visit) ,421 6,059 1,459,045 *Population estimates are from Applied Geographic Solutions, Inc. of Thousand Oaks, CA **Participation rates and frequency are from NGF publication, Golf Practice Facilities in the U.S. A Summary of Supply and Demand Estimated Range Visit Demand For Waid Park Golf Center Franklin County 5-Mile Ring 80-Mile Ring Population * 53,269 11,555 2,795,455 x Commercial Stand- Alone Golf Range Participation Rate** 8.0% 8.0% 8.0% Potential Market Area Range Users , ,636 Average Annual Frequency of Use** Potential Driving Range Visits From Mkt ,012 4,776 1,207,637 Potential Range Baskets Demanded (at 1.25 per range visit) ,765 5,969 1,509,546 * Population estimates are from Applied Geographic Solutions, Inc. of Thousand Oaks, CA **Participation rates and frequency are from NGF publication, Golf Practice Facilities in the U.S. A Summary of Supply and Demand Based on the Commercial Golf Range Participation Model, NGF Consulting estimates that there are more than 4,000 potential commercial stand-alone driving range users in Franklin County, with upwards of 216,000+ within 80 miles of the selected site. It is estimated that these range users demanded more than 22,000 range visits (1.167 million in the 80-mile market) in Applying a basket conversion number of 1.25 per visit, we arrive at a potential demand of more National Golf Foundation Consulting, Inc. Franklin County, Virginia 18

24 than 27,000 baskets in Franklin County in These numbers are expected to increase to almost 4,300 potential golf range users, 23,000 visits, and 28,700 baskets in Franklin County by the year The figures presented in the Commercial Golf Range Participation Model represent potential demand based on the permanent resident population within the given market area. The model does not include any factoring for range visits generated by visitors to the area, workers living outside the area, or by those residents of outlying areas. It should also be realized that the estimates from both models assume constant demand throughout the year and represent market possibilities, not necessarily market realities. The estimates provided for participation in 2012 were prepared under the assumption that golf participation data (participation rate and average visits per year) remains constant at 2005 levels, and provide reasonable estimates of commercial golf range participation in The 2012 model projects commercial golf range participation for that year based only on projected changes in the size of the population. Visitor Demand As we saw in the Market Area Overview section of this report, the Franklin County /Smith Mountain Lake area is a growing visitor destination. Although potential visitor demand for golf range / learning center is difficult to quantify, it is clear that the operators of the Waid Park Golf Center should target this market by emphasizing ease of access and quality of facilities. A preliminary estimate of the volume of potential range demand from this segment is as follows: Roanoke-Smith Mountain Lake Area Visitor Golf Demand Estimated Adult Visitor Population* 200, ,000 x Commercial Golf Range Participation Rate 8.0% 8.0% = Estimated Visitors Who Golf While in Roanoke 16,000 23,200 x Estimated Visitor Range Frequency Rate.2 Visits.2 Visits = Estimated Potential Visitor Range Demand 3,200 4,640 According to the Smith Mountain Lake Chamber, 31% of Roanoke-Smith Mountain Lake area visitors had median household incomes of more than $100,000. This is similar to the breakdown of area permanent residents, and so we will assume that the golf activity generated by these visitors fall proportionately into the same income breaks as did the demand from permanent residents. SUPPLY INDICATORS Household/Supply Ratios The Household/Supply Ratio is derived by dividing the total number of households by the number of 18-hole equivalent golf courses. Household/Supply indices are derived from these ratios, and then compared with the base national figure of 100. As the tables below indicate, National Golf Foundation Consulting, Inc. Franklin County, Virginia 19

25 Franklin County appears to be about 15 percent under-supplied with golf relative to the total United States, however this measure is more a representation of the limited number of golf courses in the County (3) than a large supply of households. While this statistic on its own might indicate positive support for a new golf facility, it must be evaluated in context with other variables, such as tourist visitor participation and household/supply ratios in the broader Roanoke/Lynchburg DMA that show more of an over-supply. Franklin County 5 Miles 80 Miles Roanoke- Lynchburg DMA Virginia U.S. SITE Golf Supply Summary Total Golf Facilities ,995 Public Golf Facilities ,616 Private Golf Facilities ,379 Total Golf Holes ,042 1,197 5, ,235 Public Golf Holes , , ,431 Private Golf Holes ,241 78,804 Household/Golf Supply Indicators Households per 18 Holes: Total 8,581 8,404 6,458 6,679 8,976 7,476 Households per 18 Holes: Public 21, ,982 10,451 14,415 10,570 Households per 18 Holes: Private 14,302 8,404 22,976 18,507 23,793 25,542 Households Supply Index: Total Households Supply Index: Public Households Supply Index: Private Source: National Golf Foundation Opportunity Chart Using the most basic measures of golf demand and supply, NGF Consulting has created an opportunity chart to show the interaction between these two measures. As shown below, we can see that the golf sub-markets in this location all tend to fall in either inactive or saturated quadrants. This is a result of generally low rounds activity from the permanent households in this market, but some locations have more golf courses than others. National Golf Foundation Consulting, Inc. Franklin County, Virginia 20

26 Opportunity Chart Franklin County 5 miles 80 miles Households Supply Index 160 Virginia U.S. Saturated 140 Active Inactive Rounds Demanded Index Opportunity LOCAL SUPPLY ISSUES Previous sections of this analysis have focused on the market s current economic condition and potential golf demand from area residents and tourists. This section of the market study examines existing golf facilities in the defined Franklin County /Smith Mountain Lake market area. As this market contains a very limited number of golf facilities truly comparable to the proposed Waid Park Golf Center, NGF Consulting has evaluated some comparable facilities located outside the immediate Smith Mountain Lake area. NGF Consulting visited or contacted 10 golf facilities in the region that were either: (1) within the immediate Franklin County / Smith Mountain Lake area; or (2) Roanoke area stand-alone driving ranges. In addition, we have identified three potential new courses that are in various stages of planning or construction and may be added to the area over the next few years. The following is a list of area golf courses, as defined above. A map follows, displaying the location of each course. National Golf Foundation Consulting, Inc. Franklin County, Virginia 21

27 Franklin County Golf Facilities Private Willow Creek CC (no range) Waterfront CC (20-station range) Public Westlake G & CC (20-station range) *Profiled in next section Area Golf Facility Map Other Regional Golf Facilities Stand-Alone Ranges Big Lick Golf Range (69-stations) Glen Acres Driving Range (40-stations) Lakeside Golf Center (20-stations) Public Golf Courses London Downs GC (30-station range) Ole Monterey GC (20-station range) Mariner s Landing G&CC (12-station range) Sycamore Ridge GC (10-station range) Under Construction (Renovation) or In Planning* Water s Edge CC (private) Penhook Village (private) Ballyhack CC (private) National Golf Foundation Consulting, Inc. Franklin County, Virginia 22