The true cost of conducting PGA Tour events without fans
Seats were vacant at the Players Championship, where play was canceled after one round.
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What will fan-less PGA Tour events mean to tournaments’ bottom lines? — Raul Naismith, Toledo, Ohio
“We’re not selling 99,000 beers this year,” said Michael Tothe, the tournament director of the Charles Schwab Challenge at the Colonial, which tees off a string of four fan-less PGA Tour events this week.
The Colonial, in Fort Worth, Texas.; the RBC Heritage in Hilton Head, S.C., the Travelers in Cromwell, Conn., and the Rocket Mortgage Classic in Detroit, will all be played without fans but, really, they’re being staged with not much else than players, caddies, a reduced fleet of tournament officials and volunteers, and healthcare workers to test and re-test everyone for Covid-19.
What it means to a tournament’s bottom line is expectedly severe.
Expenses are going down, but so, too, is revenue. And because every PGA Tour event is a structured as a 501(c)3 nonprofit organization, the biggest impact will be felt by the charities that receive what is leftover.
There’s little need for tents at Colonial. Tothe said there will be about six tents, compared to nearly 100 last year. There’s less demand for parking lot shuttles, though there will still need to be many to fill them in a socially distant way. There’s no need for an army of volunteers to direct traffic and manage the crowds, or employees to sell merchandise, food and drink.
Having no fans is certainly going to look strange on television but from a revenue perspective it’s a different story. “The big misnomer is people thinking the gate ticket price is big revenue driver,” said Jason Langwell, the executive director of the Rocket Mortgage Classic, who expects revenue to be down 70 percent.
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“It’s critical but there’s not a lot of cost to having individuals walk through the gates and around the golf course to watch,” he said. “You just need to properly credential them and find them a place to park.”
The biggest driver for revenue at most PGA Tour events is the corporate hospitality tents. And these first four events won’t have any.
Nathan Grube, tournament director of the Travelers Championship, the third of the fan-less events, broke down the economic equation succinctly: “If we build a hospitality structure and the client pays X, the net proceeds go out to charity.”
That X varies by what each market will pay — at the Waste Management Open in Phoenix, those boxes around the raucous par-3 16th hole fetch more than $50,000. But without any of that revenue this year, these four tournaments had to get creative to replace lost revenue.
The Colonial plans to raffle off prizes online including hats signed by Bryson DeChambeau and a Ryder Cup bag signed by Steve Stricker and Padraig Harrington, with Charles Schwab covering the costs to ship the prizes so all the money goes to charity.
Raffle tickets will be sold throughout the telecast in $10 increments. “We want people in this challenging time to still give,” Tothe said. “But we also want people to be able to give.”
The Rocket Mortgage Classic went with a four-prong approach that will consider how its sponsors, pro-am participants and ticket buyers’ finances might have changed while trying to hold on to the money already paid to cover existing costs. Langwell said the tournament gave people the option to donate their fees, defer them to next year, ask for a refund or “reimagine” how to reapply the fees.
The biggest driver for revenue at most PGA Tour events is the corporate hospitality tents. And these first four events won’t have any.
In reimagining, for example, the tournament is planning a fall pro-am, with local celebrities and some PGA Tour players attending. While the pro-am during tournament week cost $10,000 a player, the fall version will be a relative bargain at $3,000.
“It’s a premium price for a traditional corporate or charity outing, but the value proposition is different,” Langwell said. “There aren’t many charity events where you show up and see tour professionals and local celebrities.”
Another complication with conducting a tournament without fans is the considerable financial commitment of the event’s sponsor. Langwell said the Rocket Mortgage had already spent 35-40 percent of the cost of building out the tournament before it was postponed; had the event been nixed, he said it would have lost millions of dollars.
Most tournaments have insurance that covers some aspect of the event, like the Wednesday pro-am getting rained out or a concert being canceled. But policies for the entire tournament are rare and expensive.
“We do have insurance for various aspects of event week – like the Wednesday pro-am and some special events,” said Grube of The Travelers. “But we don’t have an overarching event cancellation policy. Over last 50, 60 years on the PGA Tour, one, maybe two events were canceled.”
One exception was The Open Championship, which reportedly had cancelation insurance.
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What no one wanted to address was the somewhat sensitive subject that not all sponsors are as generous. Some sponsorship deals are enough to cover all the costs of the tournament and then some. Other tournaments have reserves to weather a year like this. But some of the less prestigious stops are going to struggle to pay staff without the PGA Tour or other patrons stepping in to help them.
These fan-less tournaments still hope to deliver to the charities that depend on them, albeit not at the same level. Tothe said the Colonial should still be able to donate about $12 million, just $2 million lower than last year. The Rocket Mortgage Classic, in just its second year, thinks it will match the $1.2 million it raised for charity last year, with a focus on bridging the digital divide for Detroit’s poorer kids.
Grube said in the darkest days he thought the Travelers would not be making any donations this year, but with the way its partners and community has stepped up, he believes the donation will be lower than last year’s $2.1 million, but still substantial.
“This isn’t an economic situation that was hitting one industry — everyone was dealing with this,” he said. “It was unbelievable how companies said, ‘We’re going to donate all of our sponsorship dollars this year, or half of it or 20 percent. If partners didn’t do that, there would be no net proceeds.”
These four events are luckier than the tournaments that were canceled, like the John Deere Classic, which is one of the more philanthropic tour stops. Clair Peterson, the tournament director, said he expects the tournament, which was originally set to be played July 9-12, to donate at least $6 million to charity.
Fans are making fixed donations — instead of pledges based on the number of birdies made — and the tournament will dip into its reserve fund to cover the 5 percent bonus it affixes to those pledges.
“(It’s) certainly below our record setting 2019 amount of $13.8 million,” Peterson said. “But still a huge impact in an important year.”
Paul Sullivan writes the Money Game column for GOLF Magazine. Have a question for him? Drop him a line at moneymailbag@golf.com.
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