PGA Events Aren't Cash Cows For Golf Courses. Can Saudi-Backed LIV Golf Tip The Scales?
The PGA Tour won the opening round of what is shaping up to be several legal confrontations with golfers who have joined a new, controversial rival league backed by the government of Saudi Arabia.
But while the golf world awaits the resolution of a broader challenge from 10 golfers over their PGA Tour suspensions and an antitrust investigation by the Department of Justice, LIV Golf is attracting more players with huge sums of cash — and a select few host courses in the U.S. could have a similar chance to cash in.
Golf course owners have more than just money to consider when mulling over hosting a LIV event. The tour's backing from the Saudi Arabian sovereign wealth fund has fueled demonstrations against its events and accusations of sportswashing.
Critics have lambasted the tour's golfers, accusing them of helping to sanitize the image of a country that is accused of supporting the terrorists who carried out the 9/11 attacks, and of Saudi Crown Prince Mohammed bin Salman, who oversees the Public Investment Fund that backs LIV and who the CIA concluded ordered the 2018 assassination of journalist Jamal Khashoggi.
But just as golfers have weathered blowback for their participation, courses can look past Saudi Arabia’s human rights record if the money is right, College of the Holy Cross economics professor Victor Matheson told Bisnow.
“We already know that every club is a prostitute,” Matheson said. “The only question is just negotiating the price.”
At least six golf club owners have signed up to host LIV Golf events. Although sites haven’t been announced, LIV announced an expanded 14-tournament schedule in 2023 that “is expected to expand LIV Golf’s global footprint across North and Latin Americas, Asia, Australia, the Middle East and Europe.” More tournaments likely mean more owners partnering with the PGA’s upstart rival with expectations of profits, which people around the game say isn’t the reality — or even the goal — of hosting PGA Tour events.
While the PGA Tour enjoys controversial tax-exempt status, LIV Golf is a for-profit business, and seeing as it's bankrolled by one of the largest sovereign wealth funds in the world, it hasn’t been shy about spending money to make money.
LIV Golf CEO Greg Norman in May announced that the new tour had secured $2B for its 2023, 2024 and 2025 schedule. The tour reportedly paid Phil Mickelson a $200M signing bonus, and Norman said Tiger Woods rejected an offer of “somewhere in that neighborhood” of $700M to $800M to join its ranks. The tour's purses, from which even the last-place golfer gets a cut, dwarf the PGA's.
LIV can attract more big-name golfers, increasing its profit potential, when those signing bonuses are publicly reported. But the upstart tour, just like the PGA, hasn’t been forthcoming about its host club compensation.
“I know that the LIV is paying these golf courses more than the PGA Tour is, but I don't know how much more,” CBRE Golf and Resort Group Managing Director Jeff Woolson told Bisnow.
How either tour compensates its host clubs isn’t public knowledge.
“Site fees for the PGA Tour have always been very confidential, and profit from having a tour event at your course has always been almost nonexistent,” said Keith Cubba, Colliers’ national director of golf course advisory services. “Courses do it for other reasons. There’s a lot of charity that goes on, but you really aren’t doing it, for the most part, for profit.”
Outside of the TPC Network — a group of 30 courses owned, operated or licensed by the PGA Tour — host clubs receive a rental fee that varies based on the course’s notoriety, the time of year and how long it has to close before the tournament, PGA Tour Senior Vice President of Tournament Business Affairs John Norris told Bisnow.
Organizers began setting up tournaments as 501(c)(3) charitable organizations after then-PGA Tour Commissioner Deane Beman in the 1970s converted the tour into a 501(c)(6) nonprofit business league. But that doesn’t mean host clubs can’t make money.
“They have the opportunity in most circumstances to run the food and beverage operations at tournament week, they have merchandise in their golf shop,” Norris said.
The PGA declined to comment on all matters concerning LIV.
Direct revenue sharing generally isn’t part of the deal for PGA golf courses, Norris said, adding that there are some 40 agreements between clubs and the PGA Tour and they are all a little different. But the tour offers year-round agronomic support to get courses into tournament condition, and Norris said hosting a PGA Tour event validates the quality of a golf course.
That creates an indirect benefit to the club, which gets long-term advertising that can affect membership dues and green fees, Matheson said. That includes something the streaming-only LIV Golf can’t offer its host clubs: impressions from network broadcasts.
“What's great about the PGA Tour is that guys watch it on TV, women watch on TV, they say, ‘I want to go play that golf course, I want to play Torrey Pines, I want to go play any of these other golf courses on the bucket list,’” Woolson said.
Those picturesque scenes beamed into living rooms on Sunday afternoons don’t just highlight the course, either.
“There are clubs that are in real estate development areas where that gets a lot of coverage during the broadcast,” Norris said.
Clubs of a caliber to host LIV Golf events have other indirect effects to consider, including whether the animus against the new tour extends to its host courses and, by extension, their bottom lines.
Several members and employees left Oregon’s Pumpkin Ridge Golf Club, the host of LIV Golf’s first event on U.S. soil. One member said 16 members relinquished membership but that 30 joined between when it was announced as a host course and late June, Golf Digest reported.
Escalante Golf, which owns Pumpkin Ridge and The International in Bolton, Massachusetts, which hosts LIV at the beginning of September, declined Bisnow’s requests for comment, as did LIV Golf and Rich Harvest Farms in Sugar Grove, Illinois, where LIV will tee off later in the month. Royal Greens Golf and Country Club in King Abdullah Economic City, Saudi Arabia, where LIV will have its penultimate tournament of the season, also declined to comment.
The Trump Organization, which hosted LIV at Trump National Golf Club Bedminster in New Jersey at the end of July and will hold the final event of the 2022 season at Trump National Doral Golf Club in Miami, didn’t respond to interview requests, nor did representatives of Centurion Club, the site of LIV’s inaugural event in Hemel Hempstead, UK. Stonehill Estate Co., which owns LIV Golf’s early October stop in Thailand, didn't respond to a request for comment.
The rise of a golf league to rival the PGA Tour creates the possibility of competition for not only the services of golfers, but also the hospitality of courses.
Norris said the PGA Tour’s agreements with its hosts usually correspond with the title sponsorship and average more than six years, and LIV’s arrival on the scene hasn’t been a bargaining chip yet.
“We have yet to have any of our host facilities say, ‘Hey, we hear that rival golf league is doing X, so we need Y,’” he said.
But Woolson said he sees as an inevitability the PGA Tour changing how it reaches agreements with host courses.
“How can it not?” he said. “The PGA Tour’s not a static organization. They’re going to respond in some manner.”
If the competition does bring more direct compensation to host golf courses, the rising tide wouldn’t lift all boats, just a few elite clubs in the U.S., Cubba said.
“There’s 13,400 McDonald’s in the U.S., and there’s 15,500 golf courses,” he said. “So assume that 10 McDonald’s in the country took in significant money for events being held at their property, it’s not going to change the overall dynamics of McDonald’s profitability across the country.
“It’s the same thing with golf. Even if LIV was paying a fortune for site fees and it impacts 10 golf courses, it doesn't put a dent in 15,500 golf courses nationally.”
