Association Flainoise

2018-08-22 - Analysis of the golf course aspects of the UTN file

Wednesday 22 August 2018 by François Zahm, Timothy Cooper

Many thanks to Timothy for the translation.
This document is not up to date with the french version, a summary and the contents of the chapter 6
6 - A golf project based on “optimistic” figures for attendance and annual turnover
will be added later.

This document sets out our comments on the golf course aspects of the new tourist unit (UTN), following detailed analysis.
This is a provisional version. It will be updated later.

 1 - The financial basis for the 9 hole golf course is unsound

The market study and the analysis of the potential clientele for the golf course planned as part of the new tourist unit are set out in paragraph 2.2.2.2 of the file, which is headed “adjust supply in line with a fast expanding market”. Most of the text has been copied from two documents published by Atout France, the body responsible for promoting tourism in France:
1. Golf et tourisme, état du marché et potentiel de développement (Golf and tourism, state of the market and development potential, 2012, public price €14.95)
2. Développer un resort de golf (Developing a golf resort, 2014, public price €15.15)

This information is of a general nature: market for golf worldwide, in Europe and in France, typology of golf resort customers, characteristics of golf tourism, etc. On its own it is far from providing a solid financial basis for the plan to build a golf course at Les Carroz in its specific geographic, economic and social environment. That would require an ad hoc market study. Identifying a potential target clientele is one thing; ensuring that there is a high probability of succeeding in reaching that clientele in order to generate the expected financial results is quite another. Moreover, that is an explicit recommendation of Atout France, which the authors of the UTN file have ignored:

Text of the UTN file, paragraph 2.2.2.2.4, page 193:
“ [the project] is also based on fundamentals which must be considered well in advance and not ignored for more or less irrational reasons. One of the arguments put forward …”

Original text of the document “Developing a golf resort”, page 73:

“[the project] is also based on fundamentals which must be considered well in advance and not ignored for more or less irrational reasons. Each part of the project (the golf course, the tourist accommodation, the residential housing) must be the subject of detailed analyses of the potential market and the specific needs…”.

The file fails to mention such detailed analyses or their potential results. That doesn’t stop the authors from providing details of the expected golf-playing clientele (paragraph 2.2.2.4.1, page 194: regular players, occasional players, tourists, golf school and physical preparation course) and presenting a positive projected balance sheet for the golf course on page 331.

In short, without any justifications other than general data on the golf tourism market dating back to 2011 and the qualities of the Les Carroz golf course as claimed by the authors of the UTN file, they conclude that it will attract all categories of golf player and generate a gross profit of 10%. These optimistic conclusions are cause for concern: it is common knowledge that mountain golf courses are structurally loss-making, sometimes significantly. For instance, a report from the Chambre régionale de la Cour des Comptes Auvergne Rhone Alpes dated August17th, 2017 about the mountain resort "les Gets, mentions an average annual loss of 188 620€ for an average annual turnover of 247 399€ over the five accounting periods audited (2009-2010 to 2013-2014).

 2 - Lack of interaction between the project and the Fédération française de golf (French Golf Federation): a project lacking roots in the golf community?

The above observations are all the more surprising when you consider that there is a key partner for any golf course project, namely the Fédération française de golf (FFG). In 2016 the FFG published the guide “Creating a golf course” (available on the FFG website) from which the following sentence is taken (page 54):

“The Ministry of Sport has delegated to the FFG the task of organising, administering, directing, monitoring and developing golf as both an amateur and a professional sport. In 2007 it set up a dedicated service to accompany developers of new golf facilities, whether public or private.”

The two key points of the “Creating a golf course” guide are as follows (the text in italics is taken from the guide) :

1 There is a master plan for the development of golf facilities in the period 2009-2018, approved by the Ministry of Sport, the Centre national pour le développement du sport (National Centre for the Development of Sport - CNDS), the Association nationale des Élus en charge du Sport (National Association of Elected Representatives in charge of Sport - ANDES) and the Comité National Olympique et Sportif Français (French National Olympic and Sports Committee - CNOSF) which “encourages the development of small-scale local facilities, which can be played easily, at little expense and quickly, ideally situated within easy reach of large towns”. It also says that "large-scale facilities also have a place in this plan provided they are appropriate, i.e. they must have a sufficiently large customer catchment area and/or a zone identified as a tourist zone.
2 The FFG offers practical support for any plan to build golf facilities, including, in particular, a golf environment study (étude du milieu golfique - EMG), a “decision-making tool enabling you to assess and evaluate the appropriateness of a project in view of its potential catchment area”. The content of an EMG is as follows:

" - demographic and golf-related statistics at 5 levels: district, local area (radius of 20 to 30 minutes of the site), department, region and nationwide;
- analysis of the typology of local golfers: club membership, level of play, age range, etc.

  • maps of golf facilities in the department and region, projects and works underway, breakdown by commune of registered players resident in the local area;
  • multicriteria analysis providing an assessment of the net potential number of players in the catchment area;
  • personalised summary listing the key factors for the success or failure of the project;
  • final opinion of the President of the League… "

What do we find when we read the UTN file? There is no explicit mention of the FFG development strategy, nor of any interaction between the project sponsors and the FFG, and in particular the dedicated support service for the developers of golf facilities.

Conclusion: Is this project cut off from the golfing world?

 3 - The Les Carroz golf course: what type of course?

The only reference in the UTN file to the FFG development strategy is in paragraph 2.2.2.4, headed “target clientele of the extension of the leisure zone” where it says:

In view of the Ryder Cup, which will be held in France in 2018, the Fédération française de golf (FFGolf) has launched a policy of developing golf and making it more accessible by creating local facilities which form part of the leisure activities made available by the various local authorities. These facilities are open to all, welcoming both beginners and advanced players."

This sentence suggests that the Les Carroz golf course would belong to the category of local facilities recommended by the FFG, where everyone is welcome. In fact, the planned Les Carroz golf course doesn’t meet any of the criteria:

  • The FFG wishes to develop small local facilities, of the mini-golf or pitch&put variety (maximum 15 ha). With a total area of 46 ha, the Les Carroz project is closer to an 18 hole golf course (55 ha) than a 9 hole golf course (25 ha), far removed from a small-scale local facility.
  • To make golf accessible to all, the local facilities which the FFG wants to see developed must be located in urban or suburban areas and be accessible to young people, including those on low incomes and/or without private transport, living within 10 to 20 minutes of the golf course. This criterion is clearly not met, as the nearest town with a significant population (Cluses) is at least 20 minutes away (by car).

.* Quick and easy to play? With a length of 2,945 metres, the Les Carroz golf course is 20% longer than the average 9 hole golf course (2,480 m, according to the FFG). Moreover, the layout of the course (plan on page 178 of the file) involves significant additional walking time between the 4th and 5th holes, between the 8th and 9th holes, and to return to the club house (an estimated total of 400 metres). It will therefore take well over 2 hours to play a round (FFG average), nearly double that recommended by the FFG for small-scale local facilities (1 to 1½ hours). As regards the course itself and its level of difficulty, the authors of the file themselves call it a “championship course” (page 206), which is rarely a sign of an easy course to play. Indeed, nearly every hole of the course is challenging: length of the holes in general, water obstacle from the first shot at the first hole, narrowness of the tree-lined fairways (less than 30 m), 2nd and 6th holes (both par 5) are “dogleg” holes, 7th hole requires a perfect first shot above the abyss to reach the green, “out of bounds” areas alongside the 8th and 9th holes due to the presence of the driving range, etc.

Another import aspect, which is not easy to make out on the plan of the course on page 178, is the cumulative difference in height, indicative of the advanced level of the course. A detailed analysis of the various plans contained in the file, coupled with a site visit using a GPS system, led to the following conclusions:

  • The buildings planned as part of the project (hotel complex and club house) are located at an altitude of 1,095 m at Mont Favy.
  • The playing area, including the driving range, is located below on the commons plain at an average altitude of 1,050 m, with a low point of 1,010 m at the westernmost point of the course (tee for hole 4). This plain is dotted with mounds and slopes, which represent a series of climbs and descents for the golfers (if the project complies with the commitment to keep earthworks to a minimum).
  • The two zones are joined by the 1st hole, following the line of the greatest slope, a difference of 45 m with an average slope of 35%. By way of reference, that corresponds to the difference in height of the 16th hole (between the access road and the green) of the Flaine golf course, so disparaged by the authors of the UTN project. The 16th hole of the Flaine golf course being located just after the golf barrier at the Pierre Carrée pass, anyone can observe its configuration and appreciate the time and the physical effort required to climb back up to the club house of the Les Carroz golf course following the winding path planned in the UTN project. Moreover, a player wishing to train in the driving range before playing a round of golf would have to do this twice (the tee for the 1st hole being located on the slope below the club house), and someone playing 18 holes would have to do it three times. Siting the club house off the golf course, some 20 minutes (round trip) of tiring walk from the training area (driving range and putting green), is nonsensical both in golfing terms (no possibility of training quickly before playing a round, no conviviality around the putting green) and in commercial terms (visitors cannot see golf being played, effort required to take the first step and hit a few balls in the driving range).

Thus the course presented will be neither quick nor easy to play, and will require a good physical condition to deal with the height differences.

.* Finally, a local facility should ideally enhance an area (zone liable to flooding, former rubbish dump, industrial wasteland). On the contrary, the Les Carroz golf course will “artificialise” the last remaining natural area close to the village and privatise a rambling area much appreciated by local residents.

In conclusion, the Les Carroz golf course clearly belongs to the category of “large-scale facilities” as defined by the FFG, and will have a major land-use impact, favouring a traditional clientele of well-off, experienced golfers in good physical condition; it is highly unlikely to attract the very broad clientele referred to in the UTN file. Contrary to the statements made by the authors of the file, golfers will not see it as different from the Flaine golf course in terms of difficulty level because of the difference in height between the club house and the playing area.

 4 – A project 100% financed by public money, so the taxpayer assumes all the risks

The financial aspects of the project are set out in Chapter 5 of the UTN document entitled “conditions for economic and financial balance”.

The authors of the project estimate the overall cost of the 9 hole golf course to be €5 500 000. According to the table on page 336, it is to be funded by:

.* the sale of land: €2 000 000
.* subsidies: €800 000
.* a loan of €2 700 000.

There is to be no private investment, which is hardly surprising in view of the uncertain profitability of mountain golf courses. Private investors will, however, be involved in the building programme and hotel management, the profitability of which is much clearer.

So the taxpayer alone will bear any mishaps in the project (as regards the construction costs, financing or economic repercussions). The risk is all the greater as 50% of the project is financed by a loan which will affect the commune’s finances for years to come.

As regards the cost of the project, there are two highly questionable points:

.* The budget for the 450m² multi-leisure centre is €360 000 excluding tax, i.e. €800 excluding tax or €1,000€ including tax per m². For the construction in a mountain area of a building of high environmental quality which will be open to the public, and in particular the clientele of the adjacent upmarket hotel complex, this appears to be a considerable underestimate.
.* • Although mentioned in page 14 of the « Aménagement du réseau de collecte des eaux pluviales des Carroz d’Arâches » attachment, neither the project costings nor the plans mention any technical building for storing the machinery needed to maintain the golf course and consumables or to house the gardeners. Such a building is required, and must meet strict regulatory standards, according to the FFG’s “Building a golf course” document (page 26):

"This is the work of the greenkeeper and the gardeners, without whom nothing would be possible. The regulatory standards are strict (even if no phytosanitory product is used), and include the following elements:

  • store for the lawn mowers and equipment, and for the supplies needed to maintain the golf course (sand, fertilizer, etc.);
  • separate storage area for plant protection products (regulated area which must be secure);
  • workshop;
  • changing rooms, showers and toilets for the staff;
  • dining room and kitchenette;
  • greenkeeper’s office and meeting room;
  • area for washing machinery and equipment, with separate recovery and treatment of waste water from washing sprays and remains of plant protection products [and] waste water from washing other equipment which might contain traces of hydrocarbons, fertilisers, earth, vegetable waste, etc. The architect may include a system for storing rainwater from the roof of the building."

 5 - A project whose financial balance is uncertain, even according to the authors’ own assumptions

On page 327 of the file it is stated that the operation will be financed by:

.* Own funds: €2 300 000 raised by selling real estate
.* Subsidy: €800 000
.* Loan: €2 400 000 requiring annual repayments of €137 346

On page 335 of the file, it is stated that the sale of property and the development impact tax will generate €2 066 540, which will “feed into the commune’s contribution to implementation of the operation for a total contribution of €2.3m”. Nowhere does the file say where the €233 460 needed to make the own funds up to €2 300 000 will be found.

It appears that no own resources of the project will be able to produce this €233 460, as, on page 336, the project financing table presents a new breakdown of income, different from that given on pages 213 and 335, but in line with the investment capital mentioned on page 335:

.* Own funds: €2 000 000
.* Subsidy: €800 000
.* Loan: €2 700 000

The consequence of this new breakdown is that the statement made at the bottom of page 336 concerning the budget of the commune is now false, as the income is no longer sufficient to cover the amount really needed for the annual repayment of the loan:

“As regards the budget of the commune, the tax income generated by the project (€129 260), together with the €14 000 from the concession, will cover the annual repayment of the loan (€137 346) without generating any surplus.”

With the strictly necessary amount of loan (€2 633 460), and using the assumptions set out on page 327 (22 years, 2.1%), the annual repayment would be €150 706, higher than the sum (€143 260) of the tax income and the rent from the concession. The cumulative difference over the 22 years of the loan period represents €163 812 to be funded by the taxpayer. This amount is based on the authors’ own assumptions, which we consider overly optimistic and unrealistic.

Questions must be asked about the reliability of a file containing such inconsistencies.

 6 – A project based on « optimisitic » attendance and turnover

First of all, we note (page 327) that the golf management is anticipated to be given to the SOREMAC (a public-private company) of which the Arâches municipality is a controlling shareholder.
Just as for the investment, local tax payers will be exposed to the financial result of the golf course operations. There is little doubt about the reason behind this choice, which is the unlikeliness to find a private investor willing to take the financial risk, and not the expected synergies with the other SOREMAC activities, as mentionned page 330.

Secondly, in order to assess the quality of the operating account presented page 331, let’s focus on the following considerations

Expected golf course attendance during the peak season (july/august), key contributor to the annual turnover
Based on expected 9/18 holes green-fees (page 331), average number of holes played by players with annual/weekly subscriptions (page314), and an average number of 15 tee-off per hour, it would take more than 8 hours to accomodate the 125 players showing up at the first tee every day in July and August. This calculation does not take into account any slowing down due to weather conditions, mid day lunch, greenkeepers or golf school activities. It also assumes a perfect planning of 18 holes players.

The operating account is based on a course occupancy rate of 100% in July and August than one can judge at least optimistic, probably unrealistic.

Comparing the expected turnover (320k€) to the FFG and Les Gets golf course data
In its guide « Build a golf course », the FFG mentions an average turnover of 280k€ for a typical 9 holes golf course (excluding Paris and its suburbs). Of course, it is an average, but it concerns mainly golf courses that are open all year round. The expected turnover for the project in Les Carroz is 320k€, of which 305k€ are to materialize during a 5 months period. This means a monthly turnover twice as high as the average for 9 holes golf courses in France, even though it is mentioned page 191 that mountain 9 holes golf courses do not really attract tourists, but « they are an additional offer of the resort, which receives few true golf stays, but rather, tourists that are also golfers, and take the opportunity of their stay to play a round or two»
Another benchmark is the golf course in Les Gets : the CRC report mentions a turnover of 280k€ over a 4 months period (season 2013-2014) with a complete range of service (18 holes, cart rental, restaurant, club house and driving range). The project in Les Carroz is expected to match more or less les Gets turnover, while 9 holes courses are typically generating a turnover which is half the turnover of 18 holes courses (source: FFG)

The projected operating account is based on a 100% course occupancy rate in July an August and a non-standard annual turnover that are unlikely to materialize, leading to a loss-making situation.


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