Forget the bragging rights. Forget the satisfaction that comes with victory at nine of the last 12 Ryder Cups over the big, bad Americans and their economically superior circuit. Those relatively fleeting baubles belong to the European players. But for the European Tour—on which the vast majority of those men started their professional careers—things are more serious, more life-changing. For the Wentworth, England-based organization, the biennial contest between Old and New Worlds isn’t merely about pride. It’s about money. Lots of money. Survival money.
Wednesday’s postponement of the Ryder Cup at Whistling Straits to 2021, combined with the shift of Europe’s next “home game” to 2023, impacts greatly on that stark fact. A 12-month delay to the seven- and eight-figure windfalls the European Tour receives in the years of the event—and needs to continue in anything like its familiar form—has potentially severe implications. Especially in an economic environment that is so uncertain.
The tour’s focus on finance has long been obvious, ever since the matches became truly competitive almost four decades ago. The lead example: Once played over quality courses like Muirfield, Royal Birkdale, Royal Lytham and Walton Heath, the choice of Ryder Cup venues in Europe since 1985 has been decided solely by hard cash.
The Belfry. Valderrama. The K Club. Celtic Manor. The PGA Centenary Course at Gleneagles. Le Golf National. All have hosted the biggest event in golf outside of the majors over the past 35 years. And all because of money. When it comes to Ryder Cups in Europe, the highest bidder always wins, no matter what happens between tees and greens.
Maybe more so than ever before, that factor led to the Marco Simone Golf and Country Club near Rome becoming the host site for the now 2023 matches. To be the last course standing in the bidding process, Italy’s first Ryder Cup venue was told to reconstruct all 18 holes ahead of the competition, a peculiar request for a course hoping to hold an event of this stature.
Indeed, especially when the matches take place on home ground, the Ryder Cup is easily the biggest source of revenue for the European Tour. The final profit from France in 2018 was about £20 million, according to a source familiar with the tour’s financials. That helps pay for everything the multi-national circuit—more than a dozen countries featured on the original 2019-’20 schedule—does. As it stands, after the PGA of America takes its portion, the European Tour receives 60 percent of all of Europe’s Ryder Cup profits, with the other 40 percent split evenly between the British PGA and the PGA of Europe.
By pushing back the matches a year, the tour’s receipt of those profits is delayed, which becomes problematic considering the tour has already budgeted future seasons based on that income arriving in 2020 and 2022. Combined with lost revenue occurring this year due to the tour being put on hold for the coronavirus, obvious financial uncertainties have been created, the realities of which have begun to be felt.
In an internal memo chief executive Keith Pelley sent to players last week, the tour outlined its intent to let go 65 members of the roughly 265 person workforce. According to a source familiar with the process, the layoffs will be “across the board” and represent “about the same number we have grown by under Pelley” who came on with the tour in 2015. Offices in Hong Kong and France will close, and the headquarters in Dubai will be downsized. And, though no tournament directors were affected, as many as four rules officials will disappear.
Mind you, the postponement of this year’s Ryder Cup could have had a worse impact on the European Tour. According to one source familiar with the situation, the tour is insured for any expenses incurred in the run-up to Whistling Straits, just not for any of the profits accruing from the matches. And again, those profits are smaller this year given the matches were being played in the United States—one source estimates the overall profit split between Europe and the PGA of America is 80-20 in favour of the host side.
Any delay, however, has implications given the business model Pelley and the European Tour follow, which involves running the tour at a loss for three years, then making a large profit in Year 4. Such a tactic mitigates the tour’s tax bill. “A lot of salaries and costs are, quite properly, charged against what the matches generate. Which is good policy,” says one soon-to-be former employee. “So whatever figure gets bandied about, the real number is always bigger. Roughly, the final profit from 2018 was about £20 million.”
Photo by Stuart Franklin When Europe hosts the Ryder Cup the Tour stands to make an eight-figure profit on the match.
That cyclical nature of the tour’s finances is illustrated by the accounts of Ryder Cup Europe LLP—60 percent of which is owned by the European Tour. The 2018 matches in France helped generate an operating profit of £25 million for the partnership. Operating earnings in the previous three years totalled just £7.2 million. And this was merely the continuation of an established trend. In 2010, when the Ryder Cup was played in Wales, the European Tour made more than £14 million in pre-tax profit. A year later, it lost more than £2.2 million. Indeed, the tour ran at a loss in each of the non-Ryder Cup years from 2011-’18.
“There is a formula in place,” says a source familiar with the inner workings of the overall strategy. “In terms of broadcast and media rights, the Americans this year will have had world rights excluding Europe. So the European Tour’s main income for this year would have been the television rights within Europe. All the costs of staging will have been born by the PGA of America, who would have retained all income from tickets and merchandising. The reverse is true in Europe.”
As much as they didn’t want it to happen, a 12-month postponement of this year’s contest is something Pelley and his team had been preparing for.
“The financial implications aren’t anything like as bad as some would like to think,” says a source with close knowledge of the tour. “There is so much guaranteed income from the Ryder Cup. If the tour can’t secure finance against that, they’re not doing a very good job. The Sky [Sports TV] money will be guaranteed. The gate money will be guaranteed. So they’ll borrow against it early. It’s a problem, but not a big problem. It’s a problem for the accounts department as opposed to a problem for Pelley.”
Photo by Getty Images European Tour CEO Keith Pelley and Italian Golf Federation President Franco Chimenti in 2015
The loss of personnel is also part of the re-set many companies are sadly undertaking in these unprecedented times. When the European Tour (jointly with the Challenge Tour) resumes play with this week’s Austrian Open the purse will be a mere €500,000. Even in the much-vaunted U.K. swing later this month, five of the six events will have purses of €1 million, roughly half of the average for Euro Tour events that aren’t majors, WGCs or Rolex Series tournaments.
“The tournament purses have gone down over the next few months,” confirms another source. “So Pelley is saving money there. The Rolex events are going to be worth €5 million, not €7 million. So he’s saving there, too. Plus, assuming things are back to normal next year, player expectations will be lower. They are going to expect €1 million every week, not €2 million. Next year the tour’s outlay won’t be anything like what it has been. But their income won’t be that much different. They will still get their Rolex money. And they won’t have to put £20 million into their own tournaments. By the end of 2021, the tour won’t be in bad shape—as a business at least.”
Pelley has already warned his membership of a new reality going forward. There won’t be lavish player lounges costing around £150,000 per event. There will be fewer courtesy cars. So lots of money will be saved, countering losses like the almost £2 million generated by a qualifying school that will not take place this year.
Be under no illusions, though, Pelley wanted the Ryder Cup to happen this year. Why else would the diminutive Canadian bend over backward with regard to the worldwide schedule once every tour began postponing and cancelling events? He took a back seat to the PGA Tour and the majors and had to re-shape his entire schedule. In effect he said, “Do what you want, as long as the Ryder Cup gets played.”
Now it won’t be. Europe’s first loss since 2016 is already in the books.