[Chatham House Discussion] A Golf Course Charging 60,000 Won for a Few Slices of Watermelon, Will People Keep Going?

by Lee Hyunwoo

Published 30 Jul.2024 06:30(KST)

Updated 01 Aug.2024 15:17(KST)

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Some Side Effects of Luxury Entertainment Golf Acknowledged
One Cup of Coffee 15,000 Won, One Bottle of Makgeolli 20,000~30,000 Won
Cart Fees Also Raised 2~3 Times as Part of Premium Strategy

"Need for Self-Regulation Efforts Rather Than Entertainment Expense Restrictions"
"Increasing Public Golf Courses in the Capital Area Is Also a Solution"

Editor's Note'Entertainment golf,' which grew through corporate card entertainment expenses, has expanded to account for one-third of Korean golf course sales after COVID-19, leading to criticism that golf course usage fees have been excessively raised. Amid economic uncertainty, recent corporate crackdowns on entertainment expenses have worsened the management situation of golf courses. There are concerns that excessive increases in golf course fees will reduce the golf population itself, thereby weakening the foundation of the golf industry. To explore solutions to this issue and promote a healthier golf culture, Asia Economy held a 'Chatham House Roundtable' at its headquarters in Jung-gu, Seoul, sharing the problem with experts and discussing measures. Participants included Professor Kim Woo-cheol of the Taxation Department at University of Seoul, Kim Hoon-hwan, Executive Vice President of the Korea Golf Course Management Association, Seo Cheon-beom, Director of the Korea Golf Consumer Agency, and an external affairs executive from Company A. Experts unanimously agreed that voluntary reduction of entertainment golf culture should be prioritized over tightening regulations related to corporate card use. They also emphasized the need for the golf course industry to reduce dependence on entertainment golf and make self-regulatory efforts to rationalize prices. The roundtable followed the Chatham House rule, disclosing the list of attendees but keeping individual remarks anonymous.

At the 'Chatham House Roundtable' held on the 22nd at Asia Economy in Jung-gu, Seoul, participants are discussing the issues of excessive use of corporate golf course cards, the sharp rise in usage fees, and security measures. From the left, moving counterclockwise, are Kim Woo-cheol, Professor of Taxation at the University of Seoul; Baek Kang-nyeong, Digital Content Managing Editor at Asia Economy; Kim Hoon-hwan, Executive Vice President of the Korea Golf Course Management Association; and Seo Cheon-beom, Director of the Korea Golf Consumer Agency. Photo by Yoon Dong-ju doso7@

▶Moderator = Baek Gang-nyung, Digital Content Managing Editor

Q: What is your opinion on the criticism that entertainment golf using corporate cards has excessively raised golf costs?

A: The fact that corporate card sales account for 27.9%, nearly 30%, of each golf course's revenue as of 2022 has abnormally increased golf costs. In fact, everything becomes expensive at Korean golf courses, not just the green fees. Coffee that normally costs about 5,000 won per cup is sold for 15,000 won, and a bottle of Makgeolli is sold for 20,000 to 30,000 won. Who would buy these if they had to pay out of pocket instead of using a corporate card? They have even introduced limousine carts, charging two to three times more than regular cart fees. Not only membership golf courses but also public golf courses are adopting limousine carts. The premium trend caused by increased corporate card sales is causing pain for all 5.44 million golfers.

B: I partly agree with that claim, but saying that entertainment golf using corporate cards alone raised golf costs is problematic. The perception of entertainment expenses has changed significantly compared to the 70s and 80s. The term 'business promotion expenses' is now used instead of 'entertainment expenses,' reflecting that the previously covert and excessive entertainment culture, often involving entertainment establishments, has disappeared. Tax authorities have encouraged the use of credit cards for entertainment expenses, making these expenses more transparent and legitimate. Since the implementation of the Kim Young-ran Act (Anti-Graft Law) in 2016, reckless consumption has decreased, and awareness has shifted considerably. The actual increase in golf course costs can be seen as a temporary phenomenon caused by the growth of the Korean golf population and a short-term surge in demand due to the COVID-19 special situation. Viewing the rise in golf costs solely as a result of increased entertainment golf is an overly biased perspective.

C: Both sides have valid points. It is undeniable that since 2020, when the government raised the deductible limit for entertainment expenses, the proportion of corporate card sales in golf course revenue has increased. However, it is also true that several factors, such as rapid inflation before and after COVID-19, acted simultaneously. Labor costs and all other expenses rose, and demand surged sharply due to the COVID-19 special situation, making price increases inevitable. Even young MZ generation (Millennials + Gen Z) who never played golf before started playing. But this was a temporary trend. Recently, many MZ generation golfers have dropped out. Companies are also reducing corporate card use at golf courses due to economic downturns. Prices may not fall immediately, but eventually, golf course costs will decrease again according to supply and demand principles. There are many factors influencing the current rise in golf costs beyond just the increase or decrease in entertainment golf.

Q: Would reducing the deductible limit for corporate cards eradicate the entertainment golf culture?

A: Even considering the COVID-19 special situation, corporate card sales have driven the enormous operating profit margins of 40-50% at golf courses. Corporate card customers, needing to entertain others, do not mind high prices to give a good impression. As a result, even public golf courses have set all service prices based on corporate card customers. While corporate card sales have been a foundation for growing the golf industry, they have become a cancerous burden on general customers. Lowering the deductible limit for entertainment expenses would force companies to reduce entertainment golf frequency, normalizing green fees and all golf-related service costs.

B: The adjustment of the deductible limit for entertainment expenses was mainly aimed at economic revitalization, and the COVID-19 special situation temporarily increased golf demand sharply. Inflation was also significant during this period and must be considered. The claims about high green fees mostly concern golf courses in the metropolitan area where customers flock. Many local golf courses are already suffering operating losses, and many have been hit hard as companies reduce corporate card spending. According to A's argument, if corporate card spending decreases, green fees should fall, but this is not the case. The expensive green fees felt by general golfers reflect price increases at metropolitan area golf courses, caused by excessive demand concentration in this region.

C: I also find it difficult to agree with the argument that tax authorities should induce golf course cost reductions by lowering the deductible limit for corporate cards again. In fact, the deductible limit was increased to about 50 million to 100 million won per year per company, which is not a significant change for large corporations and mainly affects some small and medium enterprises. If the government intervenes to regulate this, it could set a bad precedent by excessively restricting private companies' activities. Encouraging companies to voluntarily limit corporate card use at golf courses, as is happening now, is worth considering.

Q: What do you think is the reason Korean golf costs are particularly high compared to other countries?

B: Metropolitan golf courses have more customers than they can handle and have no incentive to lower prices. If customers decrease, they will naturally lower prices to attract them. Some golf courses raised prices further but lowered them again within two months after a sharp drop in customers. Although green fees are said to be expensive, actual profits are not large. An 18-hole public golf course averages 13 to 15 billion won in sales, but after deducting labor and material costs, the net profit is about 3 to 5 billion won. Considering many courses were operating at a loss before COVID-19, it is hard to say they are making huge profits due to high prices.

A: Even so, operating costs at golf courses have not changed much before and after COVID-19. It is true that golf costs have risen sharply in a short period, and the prices of food and beverages sold at golf courses have been raised excessively compared to market rates. These aspects require self-reflection.

C: The excessive concentration of demand at metropolitan golf courses is certainly a problem. Whether corporate card customers or individual customers, demand is so fierce that booking competition is intense, preventing price reductions. However, charging excessively for food and beverages is problematic. Charging 60,000 won for a few slices of watermelon is excessive. This is why MZ generation golfers, who recently joined the golf population, have dropped out due to high cost burdens. Such overcharging is structurally harmful to the golf industry. Persisting with high-price policies to make short-term high profits will be detrimental in the mid to long term.

D: Although it is difficult to generalize to all golf courses, the current business practices of metropolitan golf courses significantly impact golf cost increases. Their operating profit margins exceed 50%, yet management is poor. Tree and turf maintenance is inadequate, and they charge high prices for mediocre food, but corporate customers still come and spend, generating excess profits. Samsung Electronics' highest operating profit margin was below 30%. A 50% margin is excessive. Public golf courses charging 200,000 to 300,000 won also require expensive meals, so corporate customers easily spend around 2 million won for four people per visit. Even if it is entertainment expenses, such frequent high spending can be embarrassing when submitting tax invoices to companies.

Q: What do you think are practical measures to rationalize domestic golf costs?

C: Summarizing the discussion, to reduce golf costs felt by consumers, more public golf courses should be established in the metropolitan area, and golf courses themselves should implement clearly differentiated pricing policies between public and membership courses. Just like airplanes have economy, business, and first-class seats, Korean golf courses currently require everyone to pay first-class prices. More affordable public golf courses, like those in the U.S. and other countries, should be created.

B: I definitely agree with this point. Some local golf courses outside the metropolitan area offer green fees around 50,000 won during off-seasons. While metropolitan golf courses become more expensive due to concentrated demand, some golf courses in Gangwon Province even close for 4 to 5 months due to poor off-season demand. I hope for regulatory relaxation when building new golf courses in the metropolitan area and measures to improve accessibility to local golf courses.

A: The domestic golf industry needs to self-reflect. With the COVID-19 special situation over, continuing only with premium strategies will shrink the market. The overseas golf market has grown to 3 to 5 trillion won annually, while the entire domestic golf market is around 7 trillion won. Many golfers are going abroad. Japan, where golf course fees are low and the weak yen phenomenon is occurring, is attracting many customers. The average green fee in Japan is about 5,600 yen, roughly 50,000 to 60,000 won. This causes severe capital outflow and harms the domestic economy. Golf must transform from expensive entertainment to a popular sport.