On the Upswing: TopGolf Takes a Shot at Growth

By Dave Winzelberg |  Aug 28, 2012

With declining consumer spending and competition from the internet, large-scale entertainment establishments are looking to provide their customers with a new experience. TopGolf thinks it has found the answer with its unique "Experiential Retail" destination.

Though golf is largely considered a "gentleman's game," many who've been to the driving range admittedly try to hit the guy piloting the ball retriever with a well-placed 6-iron. Even Randy Starr has confessed to trying, although he admits he's not a very good shot. Starr is the chief development officer at TopGolf, a growing entertainment-sports bar business based on an original golf-meets-target practice concept from England. Started in 1999, the company now has seven locations worldwide, including its newest, in Allen, Texas.

The concept represents an emerging trend of experiential retail businesses and, through its creativity, TopGolf is poised to show impressive growth in an economy that has left many other large-scale entertainment establishments in the rough. Starr believes TopGolf can accomplish this by offering what arcades and online video games can't. "TopGolf provides the opportunity to get that exhilarating feel of striking a golf ball and watching it fly in the air, then adds a real live gaming component to it with some friendly competition," he says.
 
The fun, easy-to-learn concept of TopGolf--players hit golf balls at targets for points--seems to be the key to its mass appeal. It eliminates the need to invest the many hours and dollars necessary for people to play the real game. In fact, more than 40 percent of TopGolf 's customers even categorize themselves as "non-golfers."

The typical customer--male, 18 to 44 years old--is younger than the usual crowd at a regular golf driving range. The environment is casual, lending itself to being more of a social gathering place. "They are the instigators who bring their friends, coworkers, dates, and families with them," Starr said of TopGolf's core demographic.

A TopGolf center could soon be coming to a neighborhood near you. The company's plans to expand include several more locations within its existing markets as well as in the country's Sun Belt areas, where the game is played year round. The goal, Starr says, is to eventually have over 150 corporate-owned locations across the U.S., including in cities such as Denver, Washington, D.C., and New York City.

The places that they've already established have been a boon to the community. Wherever TopGolf puts down stakes, spending and jobs--each facility employs at least 100 people (200 in peak season)--both increase. Over a 10-year period, the economic impact of TopGolf's locations exceeds $50 million, according to company auditors. Shopping-center landlords often contact the company, hoping that TopGolf can become an anchor tenant and draw more people to their other retailers.

Within the growing sector of experiential retail, TopGolf is a prime example: It's not selling a product, but rather offers a unique customer experience. Starr knows that the entertainment factor has to be worth it to succeed, calling it "the ultimate discretionary purchase."

"Customers do not need to come to TopGolf or any other entertainment destination," Starr says. "That is why we are heavily focused on delivering a best-in-class service and entertainment experience." It seems to be working, too. More than 1 million people have played TopGolf since its inception.

A typical facility sees about a thousand customers pass through its doors each day. In its early years, however, TopGolf teed off in the face of several hazards. The lack of a cohesive idea about what to implement resulted in obstacles to the design and development of the early locations. Also, each facility requires a relatively large footprint of land for complete construction, which includes a 200-foot-long field and about 1,000 parking spaces. TopGolf executives say they've now improved their methods of scouting and securing new locations.

No matter what happens in the course of the company's development, TopGolf is confident that by continuing to provide a fun, social sports environment for an enthusiastic customer base, it can transition into a period of accelerated growth for the next five years.

"It's an escape," Starr says. "I feel that it is this core component of the concept that explains why people keep coming back."

DAVE WINZELBERG - David Winzelberg is an award-winning reporter who spent 20 years writing for the New York Times. He currently writes for Long Island Business News.

This article originally appeared on The Atlantic Online as part of the Investing In A Better Tomorrow program.

Content may be produced by outside parties not affiliated with Bank of America. Opinions or ideas expressed are not necessarily those of Bank of America, Merrill Lynch Wealth Management, U.S. Trust or Bank of America Merrill Lynch, nor do they reflect their views or endorsement. These materials are for informational purposes only. Bank of America, Merrill Lynch Wealth Management, U.S. Trust and Bank of America Merrill Lynch do not assume liability for any loss or damage resulting from anyone's reliance on the information provided.


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