Millions Are Being Poured Into Golf Entertainment
Topgolf, Drive Shack, and BigShots Golf are in growth mode.
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Hey Golfers -
A couple of weeks ago, ClubCorp announced they would invest $100 million in the BigShots Golf expansion plan. The $100 million investment is a partnership arrangement with VICI Properties. VICI Properties is investing $80 million, while ClubCorp is investing the remaining $20 million.
The Golf entertainment space has seen an explosion of capital. There are three key players in Golf entertainment.
Topgolf ($ELY)
Drive Shack ($DS)
BigShots Golf (ClubCorp Subsidiary)
For those who aren’t familiar, Topgolf, Drive Shack, and BigShots Golf are entertainment companies that operate golf-related venues. The in-person experiences are designed to bring people together through gamified socialization. The multiple-level driving ranges have sophisticated technology built into their platforms to create a fun, competitive atmosphere.
Let’s break them down.
Topgolf
Topgolf is the most established golf entertainment venue of the three. Initially founded in 1997 in the U.K. by twin brothers - Topgolf boasts 72 locations around the Globe.
United States (66 locations)
United Kingdom (3 locations)
Australia (1 location)
Mexico (1 location)
United Arab Emirates (1 location)
What you may not know? Callaway acquired Topgolf in an all-stock acquisition for $2.66 billion; the deal closed in March of 2021. Pre-pandemic, Topgolf reported full-year revenue of just over $1 billion and 23 million customers in 2019.
Callaway reported Quarter 2 earnings in August, and it was the first full quarter for Topgolf in their portfolio.
$325 million in revenue during Q2
Outperformed Q2 same venue sales versus 2019
Projected full-year same venues sales to be 90% of 2019 levels
Toptracer - a Topgolf brand - installed a record 2,014 bays
For reference, Callaway’s consolidated revenue in Q2 of 2021 was $914 million, Topgolf represented 35.5% of top-line revenue to the Callaway brand. It’s easier to understand the value Callaway saw in Topgolf in the acquisition.
The interesting thing? Topgolf isn’t done building. Topgolf has seven planned openings in the coming months.
California (2 locations)
Florida (2 locations)
Maryland (1 location)
Washington (1 location)
Germany (1 location)
Considering that the average cost of building a location is between $10 million and $40 million, Topgolf is spending significant capital on growing its business. Callaway released an investor slide deck in October of 2020 of the planned acquisition - below are highlights.
Average venue revenue - $17 million
Average venue EBITDA - $5 million
The identified opportunity of 200 venues domestically
The identified opportunity of 250 venues internationally
Topgolf is a ~$1 billion business in revenue, and they are just scratching the surface.
Drive Shack
Drive Shack has three business units.
Drive Shack
Puttery
American Golf Corp
We will focus on Drive Shack and Puttery. American Golf Corp operates 56 golf properties in the United States.
Drive Shack opened their first golf entertainment venue in 2018 in Orlando, Florida. Drive Shack has four locations.
Orlando, FL
Raleigh, NC
Richmond, VA
West Palm, FL
Drive Shack has two committed venues to open before 2024.
New Orleans, LA (On - Hold)
Manhattan, NY
Drive Shack’s revenue through the first six months of 2021 was $19.8 million or about $5 million per venue - significantly lower than Topgolf's. However, Drive Shack venues only accounted for 17% of total Drive Shack revenue for the first six months of 2021.
Drive Shack’s development cost is in line with Topgolf’s expectations. They estimate between $25 million and $40 million per location with expected revenue of $15 million - $25 million per venue and an expected venue EBITDA of $4 million - $6 million.
But with only two venues in the development pipeline, where will the growth come for Drive Shack? Simple answer - Puttery.
Puttery is a different spin on the golf entertainment business. Utilizing the success and disruption that Topgolf and Drive Shack have had on the driving range business - Puttery aims to do that to the traditional mini-golf business.
In the Puttery’s words:
We are re-defining the game within an immersive experience and innovative technology focused on competitive solcializing.
Drive Shack plans to build 50 venues by the end of 2024 - which will require an enormous amount of capital.
Development Cost - $7 million - $11 million per venue
Total Revenue - $7 million - $11 million per venue
Drive Shack sees this as a prominent strategy highlighted by the above graphic. Smaller venue size, quicker development time, less development cost will produce a much higher development yield for Drive Shack.
The exciting part about Puttery? Rory McIlroy committed $10 million through his Venture Capital firm, Symphony Ventures.
BigShots Golf
ClubCorp purchased a controlling interest in BigShots Golf in 2018. ClubCorp is a leader in private and public play golf clubs in North America, with over 200 in their portfolio and 20,000 employees.
Unit economics and financials are more difficult to understand since Apollo Global took ClubCorp private for $1.1 billion in 2017, but let’s give it a shot.
BigShots Golf has three locations.
Fort Worth, TX
Springfield, MO
Vero Beach, FL
BigShots Golf has two locations in the developmental pipeline.
Bryan, TX
St. George, UT
BigShots Golf is taking a different approach than Topgolf in their market approach, targeting smaller markets that can fully support a golf entertainment venue.
With the recent announcement of a $100 million cash infusion into BigShots Golf, it is reasonable to say they will plan to open another 4 - 10 venues in the coming years.
Topgolf, Drive Shack, and BigShots Golf have committed $100s of millions in future capital expenditures to grow the golf entertainment business - a net positive for the game of golf.
Interesting Fact: Topgolf, Drive Shack, and BigShots Golf all have corporate headquarters in Dallas, TX.
Have yourself a Monday, talk to you next week!
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