|By Jason Garcia, The Orlando Sentinel,
Fla.McClatchy-Tribune Regional News
Aug. 24, 2011--After four decades, Walt Disney World is getting out of the golf business.
The giant resort said Wednesday it has struck a 20-year-deal to turn over its five golf courses to a group headlined by legendary golfer Arnold Palmer. The move pairs Disney World's courses with one of golf's best-recognized brand names while also allowing the resort step back from a business that has become less attractive amid competition from a glut of new courses built during the housing bubble.
Under the deal, Arnold Palmer Golf Management will take over day-to-day operations of each of Disney World's golf courses: Palm, Magnolia, Lake Buena Vista, Osprey Ridge and Oak Trail. Financial terms weren't disclosed, though the Palmer group will make annual lease payments to Disney and split revenue earned from the courses with the resort.
Roughly 330 Disney employees will be impacted by the move. Disney said each will be offered other jobs, at comparable pay, elsewhere at the resort.
For Disney, a key attraction is the involvement of Palmer, considered one of the greatest players in the history of professional golf. The resort is banking on the association with Palmer to help set its courses apart in a crowded marketplace and lure more golfers who may have ignored Disney World in the past.
"This deal would not have gotten done if it had not been for Mr. Palmer's engagement and his desire to associate his brand with the Disney brand," said Ken Potrock, senior vice president of Disney Sports Enterprises.
As part of the deal, Palmer will personally oversee a redesign of Disney's Palm course. The renovation isn't likely to be complete until at least 2013.
Representatives for Palmer said he was unavailable for comment Wednesday. But in a prepared statement issued by Disney, the retired golfer said, "After 40 years as a golf course architect, I'm looking forward to this opportunity to contribute to Disney's rich and storied golf legacy. I've enjoyed a lifetime of memories playing golf and it will be a great reward to pass that on to those who share a passion both for Disney and the game of golf."
But the deal is also designed to get Disney itself out of the golf business, which has become much more challenging in recent years, particularly in Orlando and the rest of Florida. A glut of new courses -- many built as part of a residential subdivision that sprouted during the housing boom -- has forced operators to slash green fees to lure golfers, eroding profitability.
"There's too many courses and not enough players," said Tom Stine, co-founder of Golf Datatech, a golf-industry research company based in Kissimmee. "It's made the Orlando market very, very competitive from an operator standpoint."
Golf courses are also expensive to run. Stine said operating and maintenance costs can exceed $1 million per year -- and Disney, which has a critically important brand to protect, likely spends more than most. "You don't ever see a blade of grass uncut anywhere on the Disney World property," Stine said.
Disney began scaling back its golf operations several years ago when it opted to close a sixth course, Eagle Pines, and use the land for a new subdivision of multimillion-dollar homes. That project, dubbed "Golden Oak," is currently under construction.
Disney also has a deal to sell its Osprey Ridge course to Toronto-based Four Seasons Hotels and Resorts, which plans to build one of its luxury hotels at Disney World. That project has been delayed until at least 2014 and Arnold Palmer Golf Management will operate the course until the Four Seasons is built.
Still, Disney said the deal with Arnold Palmer's management group is as much about drawing traffic as it is about cutting costs.
In addition to being able to market Palmer's involvement, Disney also hopes to tap into a membership organization run by the company dubbed "Palmer Advantage." Members pay $120 a year for access and benefits to an assortment of courses and clubs around the country.
Century Golf Partners, the Addison, Texas, firm that owns Arnold Palmer Golf Management, said Palmer Advantage currently has between 5,000 and 6,000 members. But that number swells to nearly 130,000 when including members of the individual golf clubs within the network.
It's a pool of golf enthusiasts that Disney has had difficulty dipping into on its own.
"This allows us to reach people that we haven't been able to reach previously that haven't considered Disney golf as a destination for them," Potrock said. "These are guys that are going to spend not just golf time here, but, because they are going to bring their families, they're going to spend resort time, too."
Even 30,000 people is a pittance compared to Disney World's overall traffic -- the resort's four theme parks drew an estimated 47.1 million visitors last year. But such untapped pockets of travelers are becoming more important to Disney as it attempts to squeeze more growth of its massive Orlando property.
The strategy is driving other projects at the resort, as well, such as the conversion of 23 suites in Disney World's high-end Contemporary Resort into "health-and-wellness" suites with features such as bamboo floors, massage tables and access to a private yoga studio.
The deal with Disney World is among the biggest yet for Arnold Palmer Golf Management, which operates more than 70 courses around the United States. The company has previously struck five-course deals in Myrtle Beach, S.C., and in Palm Beach Gardens, where it runs the PGA National Resort and Spa.
"To add a destination that includes options for a full-service family vacation was very attractive," said Doug Howe, a partner with parent company Century Golf, a privately held firm that says it did $250 million in revenue last year. "What we're seeing here now, with baby boomers retiring, is a lot of golf enthusiast -- men and women, grandma and grandpa -- are taking their grandkids out courses. They have the time and the willingness to travel."
Disney World has an extensive history of golf management. The Palm and Magnolia courses were part of the original resort that opened in 1971. The resort has also hosted an annual PGA tour event -- now called the Children's Miracle Network Hospitals Classic -- for 41 years.
Potrock said Disney is confident its customer experience will not suffer in Arnold Palmer's hands.
"I would tell you that, if it was a anybody else but the Palmer organization, with their track record, I think there would have been a much a greater level of trepidation [within Disney]," Potrock said.
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