Provincially owned golf courses continue to bleed red ink on P.E.I.

By Ian Munro (guest opinion)

Letters to the Editor (The Guardian) comment@theguardian.pe.ca
Published on February 10, 2015

P.E.I. golf courses

©Submitted Photo

In the 1990s, as golf boomed across North America, the government of P.E.I. decided to promote golf as a centrepiece of its tourism and economic development strategies. The province purchased several golf courses and spent significant sums on marketing for golf-related tourism. This week, the Atlantic Institute for Market Studies (AIMS) published a review of Prince Edward Island’s experience with the promotion of golf-tourism over the past two decades, and finds that these investments have not produced strong returns for the Island’s taxpayers.

In the early 1990s, there were valid reasons that the golf-centred tourism strategy seemed compelling to some. The game’s popularity was taking off across the continent, and P.E.I. seemed a good location for golf development. If you build it, the theory held, they will come…and stay, and eat, and spend.

Unfortunately, things did not go according to plan. After the turn of the millennium, the golf boom crashed, tourism traffic dropped and the provincially owned courses began to bleed red ink. In 2007, the province decided to sell its courses, but after seven years of on-again-off-again efforts they remain unsold, and the Crown corporation that manages provincially owned courses continues to lose money.

A number of tactical missteps contributed to this outcome. The governments of the day seem to have been swept up in the general excitement of the golf boom. Decisions and investments were made on the basis of insufficiently sophisticated projections of how well things might turn out in the future, rather than sober assessments of possible risks and the implications of alternate scenarios.

Analyses used by decision-makers were sometimes crude, if not methodologically unsound and were likely poorly understood by politicians who repeated talking points from these analyses, contributing to unrealistic expectations among the Island’s citizens while doing damage to informed public debate.

Compounding these strategic mistakes was simple bad luck. Nobody saw the 9/11 terrorist attacks in 2001 or the 2008 financial crisis coming. These developments had significant negative impacts on tourist traffic over the course of a decade, and contributed to the disappointing results of P.E.I.’s golf tourism strategy.

The government did err, however, by moving beyond its appropriate role in economic development, which is to provide a sound business environment in which entrepreneurs are able to do what they do best. Government is a key player in the economic development process, but its appropriate role should be limited and well-defined.

Governments must invest adequately in the production of a well-educated and skilled labour force, build and maintain high-quality basic infrastructure, ensure a fair and efficient regulatory regime, and provide reasonable and competitive tax structures. These are all tasks that governments, and only governments, can perform and they are fundamentally different from inserting government into the role of owner-operator of entities such as golf courses that could and should be competitive, private sector enterprises.

Instead of focusing on its critical and indispensable roles, the provincial government opted to take on the roles and risks of direct golf course ownership. The government should have recognized that if golf were indeed the sure-fire winner it believed it to be, then there would be no need for governments to own and operate golf courses.

Instead, under those circumstances a booming golf sector would be ripe with investors eager to meet the demands, reap the profits — and also bear the risks.  Instead of enabling this type of entrepreneurship, P.E.I.’s golf strategy likely actually inhibited private sector investment in new golf infrastructure by presenting entrepreneurs with additional competition from the government, an entity with much deeper pockets than their own.

Instead, the government took the risks upon itself, and taxpayers have paid the price. Some 25 years after “teeing off” on golf, the province has spent millions of dollars, remains deeply in debt, and still owns four money-losing courses that it has been trying to sell for seven years. Tourism figures are down roughly one-fifth compared to the late 1990s.

Perhaps a fitting postscript to this story is the fact that, in 2010, two decades into the government’s concerted efforts to have golf drive tourism development in the province, P.E.I. was named by the International Association of Golf

Travel Operators as the winner of the Undiscovered Golf Destination of the Year Award.

Ian Munro an independent economic and public policy consultant. He is a native of P.E.I. and now resides in Halifax. He is the author of the new AIMS research paper “Short of the Green: Golf as an Economic Development Tool on Prince Edward Island.”