Golf Benchmark Survey in North Africa 2008

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GOLF ADVISORY PRACTICE IN EMA Golf Benchmark The source of industry knowledge Golf Benchmark Survey in North Africa 2008 ADVISORY Sponsors and supporters of the Golf Benchmark:

2 Golf Benchmark The source of industry knowledge Frontcover: Golf Citrus Hammamet, Tunisia All Golf Benchmark reports are available for download on www.golfbenchmark.com, the source of industry knowledge. KPMG would like to express our most sincere gratitude to the sponsors and supporters of the 2008 edition of the Golf Benchmark Survey.

Golf Benchmark Survey in North Africa 2008 3 Dear Reader, I am delighted to present the third edition of the Golf Benchmark Survey, which by now has established itself as one of the major sources of industry knowledge. The constantly increasing number of participants in our survey demonstrates the growing interest in this type of market intelligence study. I am happy to note that golf course owners and operators are realizing the importance and the value of benchmarking within both the local and the international arenas. Andrea Sartori Partner, KPMG Advisory Ltd. Head of Golf Advisory Practice in Europe, Middle East and Africa info@golfbenchmark.com Within the framework of the 2008 edition of the Golf Benchmark Survey we have analyzed three new regions, namely South America, North Africa and China. This regional report on North Africa, based on responses from 20 golf course managers, presents several interesting findings about this emerging golf market. North African golf courses strongly rely on tourism and, as such, golf revenues are mainly generated by green fees. It is interesting to note that in this market golf courses achieved a 25 30% gross operating profit margin in 2007. Please take a few minutes to read our report you will find a wealth of information in the pages which follow. Please note that our analysis of the North African golf market was conducted prior to the full scale unfolding of the financial crisis and economic downturn of 2008. While it is too early to assess the impact of the crisis, we trust that the positive expectations of golf course owners and their management concerning the medium- to long term outlook of the market will remain. I would like to take this opportunity to thank all the club managers and golf course owners who have participated in our research for their valuable input. Furthermore, I would like to express my sincere gratitude to the sponsors and supporters of the Golf Benchmark initiatives for their continuous support. Please note that all of our market intelligence studies are available for download free of charge at www.golfbenchmark.com. If you would like to receive any clarification or discuss the survey results, please feel free to contact the KPMG Golf Benchmark Team or myself. Yours sincerely,

4 Golf Benchmark The source of industry knowledge Overview of the North African golf market North Africa has a long and rich historic relationship with golf dating back to the late 19 th century when the British introduced the game in Egypt, by building the first private golf club in North Africa, the Gezira Sporting Club. It was however not until the last decade that the sport has really started to develop with several golf courses appearing across the region, in an attempt to capitalize on golf as a potential source of valuable tourism income. Together with the growth in supply, the number of golfers in North Africa has also started to increase. Distribution of supply in North Africa, 2008 Tunisia 23% Egypt 33% Algeria 2% Morocco 42% According to our research on golf supply in the region, the estimated number of golf courses currently operating in North Africa is 43. Although far behind South Africa (home to more than 450 regular courses), Morocco with 18 courses has a relatively large golf course supply compared to most countries on the African continent. The three courses of Royal Dar Es Salaam Golf Club in Rabat are among the most popular, hosting the annual King Hassan II Golf Trophy. Meanwhile, Egypt currently offers 14 golf courses compared to only three courses just over a decade ago. The country s golf courses can be found in Cairo and Alexandria, but also in the tourist resorts of Hurghada, Sharm el Sheikh, Taba, Ein Sokhna and Luxor. With 10 golf courses open for play, Tunisia represents the third largest golf market in the region. We are also aware of one golf course in Algeria, which is located in Deli Ibrahim. Source: National golf federations and golf courses with KPMG elaboration North African golf courses are usually situated in the main tourist areas along the coastline. Many of the newly built golf courses are part of master planned golf resorts and communities, offering their guests a high quality golf experience. These courses are often designed by internationally renowned golf course designers. Building on the growing tourism demand in the region, the proximity to Europe and the excellent climate, the supply of golf courses is expected to further increase in the near future with several international developers entering the market. According to our research, currently there are about 40 45 golf projects in different phases of planning or construction, many of which are parts of large master planned resort communities. In countries such as Algeria, Libya and Sudan, where golf is still played primarily on sand courses, there are also a few grass golf course projects in the pipeline.

Golf Benchmark Survey in North Africa 2008 5 Golf participation rates among the local population are still very low compared to European levels, while the primary source of demand remains golf tourism. The estimated number of registered golfers in the region is around 9,000, indicating a golf participation rate of approximately one player in every 10,000 inhabitants. As the most developed golf market in the region, Morocco accounts for more than half of these golfers, followed by Egypt with approximately 3,000 players, and Tunisia with less than 1,000 golfers. The following table provides a brief overview of the golf course supply and estimated golf demand in North Africa. Supply and demand figures of North African countries (2008) Country Courses Players Golfers per course Morocco 18 5,000+ 278 Egypt 14 3,000 214 Tunisia 10 900 98 Algeria 1 n/a n/a Total 43 8,900+ 212 Source: National golf federations and golf courses with KPMG elaboration With approximately 210 registered golf players per course, golf supply is currently heavily dependent on golf tourism, rather than on local golfers. Given the very low golf participation rate, there is likely demand growth potential in North Africa.

Golf Benchmark Survey in North Africa 2008 7 Profile of our sample Distribution of the participating golf courses by country Tunisia 35% Egypt 15% Morocco 50% The Golf Benchmark Survey in North Africa is based on responses from 20 golf courses. About half of the survey participants are located in Morocco, while 35% are in Tunisia and the remainder in Egypt. The fact that in North Africa golf courses are clustered in tourist complexes with larger golf courses is also well reflected in our survey. While 50% of the survey respondents were 18-hole golf courses, a relatively high percentage (45%) were 27-hole or larger facilities. We only had one 9-hole golf course in our sample. Two-thirds of the participating golf courses are located in tourist resorts, while 35% are located either in a park (20%) or are part of a country club (15%). Most courses operate as semi-private clubs. by size 27-hole+ 45% by location Part of a tourist resort 65% by quality Mid-quality 25% 9-hole 5% Country club 15% High-quality 20% 18-hole 50% Park 20% We asked golf course operators to assess the quality level of their courses according to grades ranging from top quality to low quality. Courses located in tourist resorts all rated themselves as good or high quality facilities, while some courses in non-tourist areas have rated themselves as mid-quality. The chart below reflects the high service level of golf courses in North Africa. Without exception, all golf courses in our sample have pro-shop and restaurant facilities and the vast majority also have a dedicated club house and practice facilities. About one-third of the golf courses also provide additional sports and recreational amenities. Additional facilities in our North African sample of golf courses Pro-shop 100% Restaurant 100% Club house 95% Driving range 95% Golf academy 90% Accomodation 45% Meeting facilities 45% Swimming pool 30% Residential estates 30% Tennis courts 30% Pitch & Putt 30% Retail & offices space 25% Health club 20% Casino 5% 0% 20% 40% 60% 80% 100% Good quality 55%

8 Golf Benchmark The source of industry knowledge Methodological note and survey limitations The analysis presented in this report has been performed based on the responses of participating golf courses in the Golf Benchmark Survey 2008. Requested information mainly relates to the 2007 operating year. Financial data was submitted in the home currency of the respective countries and was converted into EUR at yearly average exchange rates for 2007. Respondents were requested to present all pricing-related information and financial data net of any applicable taxes. We wish to highlight the following limiting factors of the survey: In the case of financial information some cross tabulations may be considered indicative but not representative of the market due to a lower number of responses. The lack of commonly accepted terminology related to golf course operation, the inconsistency of national statistics, and the lack of a uniform system of accounts for golf courses are constraints we could not overcome and which make comparisons even more difficult. The rounding of decimal figures may lead to some discrepancies when computing input data.

10 Golf Benchmark The source of industry knowledge Demand characteristics Membership composition of golf courses Membership and round information are the key demand indicators of the Golf Benchmark Survey. Female members 30% Junior members 11% Male members 59% Membership According to our sample, the share of female and junior golfers is surprisingly high in North Africa, with 30% of all golfers being women and 11% being juniors, which is higher than in most European regions. Our research confirms that a large proportion of members consists of male expatriates. This partially explains the high percentage of female members joining their partners at the club. The average membership size of North African courses is relatively low with 236 members per course on average. This is not unexpected considering the region s strong focus on tourism. We also note that the membership base of courses in Morocco was about three to four times higher than in Tunisia. Membership size of golf courses in selected regions 18-hole courses Middle East 694 Western Europe 608 China 403 Eastern Europe 350 North Africa* 236 South-East Med. 203 Average membership in selected countries of North Africa 450 400 350 300 250 200 150 100 50 111 425 236 0 Tunisia Morocco Average North Africa 0 200 400 600 800 * all courses Source: Golf Benchmark Survey 2007 and 2008 Note: Western Europe includes Spain, Portugal, France and Italy, while the South-East Mediterranean region includes Cyprus, Turkey and Greece, in this context.

Golf Benchmark Survey in North Africa 2008 11 Rounds played in selected regions 18-hole courses Middle East 41.900 South Africa 33.400 GB & Ireland 30.500 Western Europe 27.000 North Africa 20.400 South-East Mediterranean 18.800 0 10 20 30 40 50 Thousands Source: Golf Benchmark Survey 2007 and 2008 Round information All courses in North Africa have reported year-round playability. Based on our sample, the average number of rounds played on a North African golf course is 26,500, considering courses of all sizes, which equates to 73 rounds per playable day. Eighteen-hole golf courses in North Africa host approximately 20,000 rounds. The average number of rounds played on North African golf courses is slightly higher than the registered number at golf courses in the South-East Mediterranean (Greece, Cyprus and Turkey). Average number of rounds played in North Africa 30,000 25,000 20,000 15,000 26,500 20,400 10,000 5,000 0 All courses 18-hole courses Share of member rounds and green fee rounds all courses Member rounds 11% Unsurprisingly, the vast majority (89%) of the total rounds consist of green fee rounds, and only approximately one-tenth are played by members. However, the share of member rounds versus green fee rounds is significantly higher in Morocco than in other countries. Green fee rounds 89% Average number of played rounds top performers vs. lower performers (all courses) 44,400 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 13,400 21,900 0 Bottom tercial Mid tercial Top tercial To allow courses to benchmark themselves against the average of their performance group, we have calculated the average number of rounds for the top and the bottom performers. While some courses with 27 or more holes recorded over 40,000 rounds, the lowest performers recorded only 10-15,000 rounds. However, if we take into consideration the size of these golf courses, and focus on 18-hole courses only, it is apparent that the best performers recorded approximately 25,000 rounds.

Golf Benchmark Survey in North Africa 2008 13 Revenues and costs Does the membership scheme require the payment of an initiation fee? This chapter provides information on the key operating indicators expressed in terms of pricing, revenues, operating costs as well as operating profitability. No 38% Yes, for every membership 19% Pricing The membership and pricing 1 schemes are variable and therefore difficult to compare. Despite this, we noted some common characteristics. Yes, for certain membership types 43% Nearly two-thirds of the golf courses require the payment of an initiation fee, however, usually only for certain membership types. Initiation fees are very low with the most expensive courses in Morocco charging up to EUR 800 for club membership. The average initiation fee is below EUR 250. Annual subscriptions start from EUR 300, with a few courses charging more than EUR 1,000. The average annual subscription fee is around EUR 640. Courses in North Africa charge relatively low membership fees, but they charge relatively high green fees. Average membership fees (EUR) 700 637 600 500 400 300 200 225 Average green fees in North Africa (EUR) 100 0 Annual subscription Initiation fee 60 57 59 50 40 33 35 30 20 10 0 9 holes 18 holes Weekdays Weekends Membership fees are relatively low in North Africa compared to other surveyed regions. However, many courses are charging their members for playing, although the application of green fee charges which are in most cases highly discounted depends on the type of membership. Average green fees of EUR 57-59 for a round of 18 holes is also a lower figure than in most golf tourism destinations, for example Dubai, where a weekend round costs EUR 121 on average, or South-Mediterranean Europe, where it costs between EUR 66 and EUR 78 on average. A 9-hole green fee costs approximately 60% of the amount paid for an 18-hole round. 1 All pricing information was requested excluding any applicable tax.

14 Golf Benchmark The source of industry knowledge Average weekend green fees for 18 holes in selected locations (EUR) Dubai 121 Portugal 78 Turkey 76 Average green fees in North African countries (EUR) 70 66 59 60 50 46 40 40 30 Cyprus 76 Spain 66 North Africa 59 20 10 0 Morocco Tunisia Egypt Average North Africa South Africa 30, complemented with secondary research 0 50 100 150 Source: Golf Benchmark Survey 2007 and 2008 From the North African golf destinations, Egypt is the most expensive: it costs about 1.5 times more to play a weekend round there than in Morocco and Tunisia. Average revenues in selected locations (EUR) 18-hole courses Portugal 1,802 Spain 1,514 South Africa 1,052 North Africa 945 0 500 1,000 1,500 2,000 Thousands Source: Golf Benchmark Survey 2007 and 2008 Average GOP margins in selected regions (EUR) 18-hole courses Revenues, costs and profitability Golf course revenues comprise the following main components: membership fees, green fees, revenue from food and beverage, pro-shop, and others (e.g. sponsorship, lease income, etc.). In 2007, the average revenues of the respondent courses in North Africa range from EUR 600,000 to EUR 2.5 million depending on the size of the facility. The average revenues for 18-hole golf courses are EUR 945,000, which is below the average revenues of golf courses in European golf destinations like Spain and Portugal, as well as that of South African courses. More than half of the revenues in North African courses are generated by green fees. Operating costs range between EUR 550,000 and EUR 1.5 million, again depending on the size of the golf course. The average operating cost for 18-hole golf courses is between EUR 680,000 and 750,000, resulting in a gross operating profit (GOP) margin of approximately 25%, with best performers achieving above 30%. Middle East 32% North Africa 25% The average revenue per utilized round (RevPUR), which represents the value of total services sold in relationship to one round played, was around EUR 45-50. Benelux 21% South Africa 17% Central Europe 14% Western Europe 12% Northern Europe 3% 0% 10% 20% 30% 40% Source: Golf Benchmark Survey 2007 and 2008

16 Golf Benchmark The source of industry knowledge Other operating characteristics In this section we provide an insight into the staff size, the size of cart fleets and outsourcing at golf courses in North Africa. Staff size The average staff size of 18-hole golf courses is around 60, with three-quarters of the employees (45 persons) working full-time. Large facilities can employ up to 80 100 people. The golf maintenance department employs a very high number of staff, with 32 full-time and nine part-time employees on average. Average staff size of golf courses in North Africa (18-hole courses) Golf maintenance 32 9 Total staff 45 14 0 10 20 30 40 50 60 70 Full-time Part-time Number of carts North African golf courses operate relatively large cart fleets with 40-50 golf carts on average, and charge around EUR 25 for an 18-hole cart rental.

Golf Benchmark Survey in North Africa 2008 17 Outsourcing Similarly to other regions, several golf courses outsource some of their activities to external suppliers. Pro-shop and food and beverage facilities, which are available at all of the respondent golf courses, are outsourced in 40-45% of the time. Operation of a golf academy is outsourced at one-third of those courses that have such a facility, as indicated below. Outsourcing of facilities at golf courses in North Africa where they exist 80% 70% 60% 50% 40% 45% 40% 35% 30% 20% 10% 0% Pro-shop Food and beverage Golf academy SamanaH Country Club, Morocco Photographer: Troy Vincent

18 Golf Benchmark The source of industry knowledge Future market outlook We have questioned golf course owners and operators about planned capital investments, improvements and their future business performance expectations. Capital investments Nearly three-quarters of the golf course managers in our sample were planning capital investments or refurbishments in 2008. Almost all of them were planning to upgrade their club houses, and most of them intended to upgrade (80%) or even expand (50%) their golf courses. Are you planning any capital investments, improvements or refurbishments in 2008? Upgrading the club house 95% No 25% Yes 75% Golf course expansion 50% Upgrading the golf course 80% 0% 20% 40% 60% 80% 100% Rating of expected business results Medium 15% Excellent 25% Expected future business results We have also queried our survey participants about their future business expectations. Twenty-seven percent of the respondents foresaw excellent results and 60% expected good results. Only a few golf course managers expected average performance. However, it should be noted that this research was conducted prior to the full scale unfolding of the financial crisis and economic downturn of 2008. Participants may now have different expectations about future performance. Good 60%

19 2008 Golf KPMG Benchmark Advisory Ltd., a Hungarian Survey limited 2007 liability Europe, company Europe, Middle and a Middle member East firm East of & the Africa & KPMG Africa network Summary of independent Report Report member Golf firms affiliated Benchmark with KPMG Survey International, 2007 19 a Swiss cooperative. All rights reserved. Real estate Golf Leisure Tourism KPMG's Golf Advisory Practice possesses in-depth know-how and experience of the business side of the golf industry. We provide professional services to developers of new golf courses across Europe, Middle East and Africa, particularly for those courses included in integrated real estate developments and tourist resorts. We have also assisted tourism institutions with their golf development strategies and helped numerous owners and operators of existing golf courses in becoming operationally more efficient in an increasingly competitive market place. In addition, we are the organizers of the annual Golf Business Forum (golfbusinessforum.com), and have initiated numerous studies which provide valuable benchmark information to the industry. Our services include: Market and financial feasibility studies Business plans Project conceptualization and investment planning Golf development strategies Business performance improvement Valuation services Transaction services Management contract negotiation Contact: Andrea Sartori Partner Tel.: +36 1 887-7215 E-mail: andrea.sartori@kpmg.hu Durban Country Club Photo: Grant Leversha 2008 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of

golfbenchmark.com For further information please contact the Golf Benchmark Team: KPMG Golf Advisory Practice in EMA H-1139 Budapest, Váci út 99 Hungary Tel: +36 1 887 7100 E-mail: info@golfbenchmark.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. KPMG does not accept any responsibility for errors, omissions or any consequence arising from the use of this report. KPMG reserves the right to alter at any time any element of this report. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 2008 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.