PGA events are not cash cows for golf courses. Can Saudi-backed Golf LIV tip the scales?

The PGA Tour won the opening round of what is shaping up to be several legal clashes with golfers who have joined a controversial new rival league backed by the Saudi government.

But as the world of golf awaits the resolution of a larger challenge of 10 golfers on their PGA Tour suspensions and a antitrust investigation per the Department of Justice, LIV Golf is attracting more players with huge sums of money – and a few select host courses in the United States might have a similar chance of cashing in.

Talor Gooch, one of three LIV golfers confirmed to be excluded from the FedEx Cup PGA Tour playoffs, hits a shot during a practice round at Trump National Golf Club Bedminster.

Golf course owners have more than money to consider when considering hosting a LIV event. Support for the tour from the Saudi sovereign wealth fund fueled protests against his events and sportswashing charges.

Critics have lambasted golfers on the tour, accusing them of helping to sanitize a country’s image accused of supporting terrorists who carried out the 9/11 attacks, and Saudi Crown Prince Mohammed bin Salman, who oversees the Public Investment Fund that backs LIV and which the CIA concluded ordered the 2018 assassination by journalist Jamal Khashoggi.

But just like golfers did impaired backfire for their participation, the courts can look beyond Saudi Arabia human rights record if the money is good, said Victor Matheson, professor of economics at the College of the Holy Cross bisnow.

“We already know that every club is a prostitute,” Matheson said. “The only question is just to negotiate the price.”

At least six golf club owners have signed up to host LIV Golf events. Although the locations were not announced, LIV announced a expanded calendar of 14 tournaments in 2023 which “is expected to expand LIV Golf’s global footprint into North and Latin America, Asia, Australia, the Middle East and Europe”. More tournaments likely means more owners joining the upstart PGA rival with profit expectations, which game folks say isn’t the reality — or even the goal — of hosting PGA Tour events.

As the PGA Tour benefits controversial tax-exempt statusLIV Golf is a for-profit company, and given that it is backed 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 announced in May that the new tour had secure $2 billion for its 2023, 2024 and 2025 schedule. The tour reportedly paid Phil Mickelson a $200 million signing bonusand Norman said Tiger Woods rejected an offer from “somewhere in this neighborhood” of $700M to $800M join its ranks. The tour purses, of which even the last-place golfer gets a cut, eclipse those of the PGA.

LIV can attract more big name golfers, increasing its profit potential, when these signing bonuses are made public. But the upstart tour, like the PGA, has not been open about paying its host club.

“I know the LIV pays these golf courses more than the PGA Tour, but I don’t know how much more,” said Jeff Woolson, general manager of CBRE Golf and Resort Group. bisnow.

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Saudi Crown Prince Mohammed bin Salman oversees the sovereign wealth fund that finances LIV Golf.

How either tour compensates its host clubs is not public knowledge.

“PGA Tour site fees have always been very confidential, and the profit from a tour event at your course has always been almost non-existent,” said Keith Cubba, National Director of Golf Course Advisory Services at Collars. “The courts do it for other reasons. There’s a lot of charity going on, but you’re really not doing it, for the most part, for profit.

Outside the TPC network — a group of 30 lessons owned, operated or licensed by the PGA Tour – host clubs receive rental fees which vary depending on the reputation of the course, time of year and the time it must close before the tournament, PGA Tour Vice -Senior President of Tournament Business Affairs John Norris Told bisnow.

The organizers started setting up tournaments as 501(c)(3) charities after PGA Tour commissioner Deane Beman in the 1970s converted the tour into a nonprofit 501(c)(6) commercial league. But that doesn’t mean host clubs can’t make money.

“They have the ability in most cases to run catering operations during tournament week, they have merchandise in their golf store,” Norris said.

The PGA declined to comment on any questions regarding LIV.

Direct revenue sharing isn’t usually part of the deal for PGA golf courses, Norris said, adding that there are about 40 deals between clubs and the PGA Tour and they’re all a bit different. But the tour provides year-round agronomic support to get courses into tournament condition, and Norris said hosting a PGA Tour event validates how good a golf course is.

This creates an indirect benefit for the club, which benefits from long-term publicity which can affect dues and playing rights, Matheson said. It includes something that the streaming only LIV Golf cannot offer its host clubs: impressions of network broadcasts.

“The great thing about the PGA Tour is guys watch it on TV, women watch it on TV, they say, ‘I want to go play this golf course, I want to play Torrey Pines, I want to go play any of those other bucket list golf courses,” Woolson said.

These picturesque scenes shown in the lounges on Sunday afternoons do more than enhance the course.

“There are clubs that are in areas of property development where it gets a lot of coverage during the broadcast,” Norris said.

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The 18th hole of the Blue Monster course at Trump National Doral Golf Club, one of two Trump properties where LIV Golf will stop in 2022.

Clubs caliber to host LIV Golf events have other indirect effects to consider, particularly if animosity against the new circuit extends to its host courses and, by extension, their results.

Several members and employees left Oregon’s Pumpkin Ridge Golf Club, host of LIV Golf’s first event on American soil. One member said 16 members had opted out of membership, but 30 joined between when it was announced as the host course and the end of June, Golf Digest reported.

Escalante Golf, which owns Pumpkin Ridge and The International in Bolton, Massachusetts, which hosts LIV in early September, declined bisnow, as will LIV Golf and Rich Harvest Farms in Sugar Grove, Illinois, where LIV will play later this month. The Royal Greens Golf and Country Club in King Abdullah Economic City, Saudi Arabia, where LIV will host 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 in late July and will host the final event of the 2022 season at Trump National Doral Golf Club in Miami, did not respond to interview requests, nor did representatives of the Centurion Club, the site of LIV’s inaugural event in Hemel Hempstead, UK. Stonehill Estate Co., owner of LIV Golf’s early October stop in Thailand, did not respond to a request for comment.

The rise of a golf league to rival the PGA Tour creates the possibility of competition not only for golfer services, but also for course hospitality.

Norris said PGA Tour deals with hosts typically amount to title sponsorship and average more than six years, and LIV’s arrival on the scene has yet to be a bargaining chip.

“We haven’t had one of our host facilities say, ‘Hey, we hear the rival golf league is doing X, so we need Y,'” he said.

But Woolson said he considers it inevitable that the PGA Tour will change the way it makes deals with host courses.

“How can it not? ” he said. “The PGA Tour is not a static organization. They will react one way or another.

If the competition provides more direct compensation to host golf courses, the rising tide would not lift all boats, only a few elite clubs in the United States, Cubba said.

“There are 13,400 McDonald’s in the United States and there are 15,500 golf courses,” he said. “So let’s assume that 10 McDonald’s across the country received large sums for events held at their property, that will not change the overall profitability dynamics of McDonald’s across the country.

“It’s the same with golf. Even if LIV paid a fortune for site fees and it impacted 10 golf courses, it would not affect 15,500 golf courses nationwide.

Michael C. Ford