Namhwa Industry, High Profit Margins Despite Low Green Fees... Golf Course Management Know-How

Lowering Per-Hole Maintenance Costs by Operating the Largest Golf Course in Gwangju-Jeonnam Area
Improved Accessibility Expected to Increase Visitors

More than 20 years ago, the five-day workweek was introduced, increasing leisure time. The leisure and travel industries have grown rapidly. Last year, the number of companies adopting remote work increased due to the impact of COVID-19. Even with the introduction of flexible work arrangements including remote work, productivity did not decline, and voices demanding the adoption of a ‘four-day workweek’ are growing louder. The MZ generation (Millennials + Generation Z), who value ‘work-life balance’ (WLB), actively support the introduction of the four-day workweek. This is a concern for companies seeking to attract talented personnel.

Demand for enjoying leisure activities is increasing. Until just a few years ago, golf was classified as a premium sport but has now entered the path of popularization. In 2019, the number of golf course users reached 38.96 million, a 7.8% increase from the previous year. Considering last year’s golf fever, it is highly likely that this upward trend continued. Asia Economy aims to gauge growth potential by analyzing the business and financial structure of Golfzon, the leading company in screen golf market share, and Namhwa Industry, which operates Muan Country Club (CC).

[Asia Economy Reporter Hyungsoo Park] Namhwa Industry, which operates the public golf course Muan Country Club (CC), continues to maintain stable growth. Pursuing debt-free management, it has a solid financial structure and sets lower usage fees compared to nearby competing golf courses, steadily increasing its users. Another advantage is that, thanks to relatively warm temperatures even in winter, the course does not have to close during the coldest months. With the steady increase in the golfing population, Namhwa Industry is expected to sustain stable growth for the foreseeable future.

According to the Financial Supervisory Service’s electronic disclosure system on the 5th, Namhwa Industry recorded operating revenue of 17.7 billion KRW, operating profit of 7.5 billion KRW, and net profit of 6.6 billion KRW last year. Operating revenue increased by 18% compared to the previous year, while operating profit and net profit rose by 34% and 115%, respectively.

◆ Operating the Largest Golf Course in the Gwangju and Jeonnam Region = Located in Cheonggye-myeon, Muan-gun, Jeollanam-do, Muan CC has three courses with 54 holes. It is the third largest in Korea. Among 35 public golf courses and 8 membership courses operating in the Gwangju and Jeonnam region, Muan CC has the most holes. Leveraging economies of scale, it reduces the cost per hole for maintenance and upkeep. This is the secret to maintaining affordable green fees. Except during the harsh winter, Muan CC’s green fees range from 80,000 to 135,000 KRW per person, which is only 30-40% of the fees at golf courses in the Seoul metropolitan area.

Looking at Namhwa Industry’s operating revenue composition, golf course entrance fees account for 78%, food and beverage 8%, and cart rental fees 13%. Last year, Muan CC’s utilization rate was 77%, up 9 percentage points from 68% in 2019. The utilization rate was calculated based on a capacity of 246,600 people, with 189,700 users last year.

Namhwa Industry expects the number of users to increase as accessibility to Muan CC improves along with the growing golfing population. Muan CC is located just a 10-minute drive from Muan International Airport and about 20 minutes from Muan Station. With the planned construction of the second phase of the Honam High-Speed Railway, a new line between Naju Gomagwon, Muan International Airport, and Mokpo is underway. A high-speed rail station will be established at Muan International Airport. Construction is scheduled to begin in the first half of this year, aiming for completion in 2023. Once opened, travel time from the Seoul metropolitan area to Muan International Airport will be reduced to 1 hour and 50 minutes. Muan CC also operates a golf hotel to attract users who want to enjoy a one- or two-night golf stay.

◆ Increasing Users and New Business Ventures = As COVID-19 vaccination rates rise, the resumption of overseas travel is approaching. One reason why the golf course boom seen last year may not continue into next year is this. Demand that previously enjoyed golf overseas concentrated on domestic golf courses, making reservations difficult at most domestic courses. However, if overseas travel becomes possible from the end of this year, the increase in domestic golf course users may slow down next year.

Namhwa Industry plans to build a residence hotel, villa-type townhouses, and condominiums next to the East Course of Muan CC as new growth engines. They anticipate that the number of tourists using Muan International Airport and the high-speed rail station will increase, creating demand for accommodation facilities. Shuttle buses will operate between the airport and Muan CC, and travel agencies will organize travel package products to attract tourists.

With a solid financial structure, Namhwa Industry has significant investment capacity. As of the end of last year, its debt ratio was only 9%. The total amount of cash, cash equivalents, and short-term financial products is 27.3 billion KRW, and it operates debt-free. Since its initial public offering (IPO) in November 2018, it has not raised additional funds.

Choi Jae-hoon, CEO of Namhwa Industry, serves as a director of the Korea Golf Association and vice president of the National Middle and High School Golf Federation, fostering the golf industry and supporting the development of professional and amateur golf players. Having been involved in the establishment and management of Muan CC, CEO Choi has a deep understanding of the golf industry. Namhwa Construction holds the largest stake in Namhwa Industry with 24.77%. Including shares held by related parties, the largest shareholder group’s ownership reaches 83.01%.

This content was produced with the assistance of AI translation services.