At Ryder Cup, follow the money

GLENEAGLES, Scotland -- A return to the home of golf, a place where the game so many centuries ago first evolved, took longer than should rightfully be expected. For only the second time in its storied history, the Ryder Cup this week is being played in Scotland.

Some of the great links courses dot the Scottish landscape: Royal Troon, Muirfield -- which held the country's only other Ryder Cup in 1973 -- and of course the spiritual birthplace, St. Andrews and its Old Course.

All are located within a few hours' drive of Gleneagles, about halfway between Glasgow and Edinburgh, a resort that is home to three golf courses, one called the Centenary that will host the 40th Ryder Cup matches.

But unlike the grand old layouts for which Scotland is known, the Gleneagles venue is an American-style course with lush, perfectly manicured fairways. Instead of pot bunkers and scorched earth, it is a place you might find any given week on the PGA Tour.

Designed by Jack Nicklaus in 1993 and given a makeover by the Golden Bear in anticipation of the Ryder Cup, it serves as an annual stop on the European Tour.

And yet, with all the surrounding traditional and historic Scottish golf courses, they come here?

As Scotland on Sunday columnist John Huggan is proud of saying, the course is the fourth best in the Auchterarder area. (Da-dum. It is a town of four golf courses.)

The reason is as simple as a few symbols on the keypad: $ £ €.

No matter the currency -- dollar, pound, euro -- the Ryder Cup is big business. Enormous might better describe it. And the European Tour makes no secret of the fact that the biennial event -- played in Europe every four years -- is the financial bedrock upon which the circuit rests.

"It would be fair to say that the Ryder Cup is one of the financial locomotives of the tour," said Richard Hills, Ryder Cup director for the European Tour. "It's central to our television negotiations. The players very much know what that they are playing or working for their own company, if you like."

Nobody at the European Tour would get specific about just how much the event fills its coffers, but it is safe to say a small fortune is necessary to secure a Ryder Cup in these times and the European Tour in turn uses the money to help fund its tournaments.

According to Hills, the European Tour controls 60 percent of the event, with the PGA of Great Britain and the PGA of Europe each holding 20 percent.

The European Tour, like the PGA Tour, stages a yearlong slate of events, but unlike its counterpart in the United States, does not attract nearly the sponsorship money.

The PGA Tour has a three-pronged system in which a title sponsor pays a significant part of the purse as well as television production costs. The PGA Tour then makes up the rest of the purse through its television rights deals. In some cases, the tour will subsidize an event that is having sponsorship woes, but it is rare.

The European Tour does not have it as good. The events have purses that are typically less than half those on the PGA Tour. Sponsors don't pay nearly the same amount. And to keep some events afloat, the tour must subsidize the purse to a large extent. And that is where the Ryder Cup money comes into play.

In simple terms, the European Tour loses money in non-Ryder Cup years, makes a tidy profit in years the event is played in the United States (where the PGA of America, not the PGA Tour, owns the event and reaps the majority of the income), and then hits the lottery in years the tournament is staged in Europe.

Earlier this year, Golfweek reported that the European Tour made more than 14 million pounds in pre-tax profit in 2010, the last time the Ryder Cup was staged in Europe. A year later, when there was no Ryder Cup, it lost more than 2.2 million pounds.

Those figures do not take into account some of the other requirements that come with a successful Ryder Cup bid. As part of the K Club's Ryder Cup in 2006, the owner of the resort near Dublin, Ireland -- Sir Michael Smurfit -- committed to a European Tour event at his course for 13 years. Likewise for Celtic Manor in Wales, where the 2010 Ryder Cup was staged. Owner Sir Terry Matthews signed on for the Wales Open for 15 years. In each case, they guaranteed the purse for the event.

"It doesn't take a mathematical genius to work out that the economy in Europe is not very good," said Northern Ireland's Graeme McDowell, who is a member of both the European and PGA Tours and will play in his fourth Ryder Cup this week. "The European Tour schedule is not ripe with $3-, $4- and $5 million events as we have historically enjoyed [on the PGA Tour, where most are more than $6 million]. It's not hard to see how much money the Ryder Cup generates. It's very important for the European Tour.

"They have been known to back purses in the past for events that are expected to be on the schedule and sponsors are backing out at the last minute. There is no doubt that the Ryder Cup is the big financial driver behind what is going on."

Matthews, 71, is a Welshman who made his fortune in the electronics business (his estimated net worth is $1.7 billion according to Forbes) and got into golf due to a chance meeting with the late architect Robert Trent Jones Sr. while the businessman was visiting Florida.

As part of a plan to help give his Celtic Manor resort in Newport, Wales a boost of publicity, Matthews worked to bring the event there despite not yet having a course that could stage it. In 2001, he was awarded the 2009 Ryder Cup, which was later pushed back a year after all the Ryder Cups were delayed because of the Sept. 11, 2001 terrorist attacks. (Gleneagles also was awarded the Ryder Cup at that time as there was a strong battle between the two entities.)

While it is difficult to put an exact number on what a Ryder Cup costs, there is no question it is expensive. Matthews said part of the contract with the European Tour called for spending 25 million pounds for 15 years of purses for the Wales Open (which was played last week). That doesn't include the staging costs.

Then there was another 25 million pounds to build the Twenty Ten course where the 2010 Ryder Cup was played, in addition to the clubhouse, infrastructure, service roads and bus parking as well a new 3 million pound bridge.

Matthews credits his late friend Jones with helping him get on the road to a Ryder Cup, with introducing him to key people and giving him the vision for his three golf courses.

"I happen to be a risk taker; I know you might find that hard to believe," Matthews said during a telephone interview conducted at the same time as the recent NATO Summit was taking place at Celtic Manor. "I look at it like this: If I do it, what is the best case? If I do it what is the worst case? As long as I can afford the worst case, I'll work hard for the best case.

"In terms of the cost, [the Ryder Cup] was the worst case. In terms of upside, it ended up being the best case. It's true this has been a very costly exercise.

"But in my business, I travel all over the world and wherever I go they know about the Ryder Cup. They know about Celtic Manor. They all know that Prince Charles toured the site. President Obama was the first sitting U.S. president to visit Wales. Without the Ryder Cup and the infrastructure necessary, I probably would not have been able to host the NATO Summit. The Ryder Cup makes for a great conversation piece wherever I go."

And it doesn't hurt that his golf business prospered because of it. According to Matthews' communications director, Paul Williams, golf revenues doubled at Celtic Manor between 2008 and 2011 and have maintained that level.

"I have to tell you," Matthews said. "It was probably the best investment I ever made."

Smurfit, who owns the K Club near Dublin, expressed similar views.

Now 78, Smurfit (his net worth is estimated at $478 million according to the Irish Times) figures he spent approximately 20 million euros to secure the Ryder Cup, mostly in the form of sponsoring the European Open that was played at the K Club -- which has two Arnold Palmer-designed courses -- for 13 years.

"Part of the conditions of the Ryder Cup is you make the hotel available for free," Smurfit said in a phone interview. "That was part of your cost. Plus you have to shut the course down a few weeks before so you lose all that revenue. There are so many things involved, it's so huge, it's mind-boggling.

"But people from China, India, the UAE ... people everywhere know of the K Club. It's a well-branded place."

And so, the simple question: Was having the Ryder Cup worth it?

"Absolutely," Smurfit said. "The response afterward in terms of greens fees, hotel guests, general interest in the club was immense. We did very well and continue to do very well. People know we have two golf courses, but of course many of them ask to play the Ryder Cup course."

When the Ryder Cup is played in the United States, the process works in a considerably different way. Although the PGA of America -- not the PGA Tour -- makes a tidy profit off the event as well, there is not the highly publicized bidding process that the European Tour undertakes.

Just a few weeks ago, the European Tour announced that it had whittled down to seven countries the number who could bid on the 2022 Ryder Cup. The 2018 Ryder Cup already has been awarded to a course in France near Paris that hosts a European Tour event -- undoubtedly part of the deal.

The PGA of America has traditionally gone to previous major championship venues or high-profile American clubs. The past five U.S. venues as well as the 2016 site, Hazeltine in Minnesota, have previously seen a major played there.

"It's fair to say it is a different process," said Kerry Haigh, the PGA of America's chief championships officer. "As you can see from our venues, we've more recently played mainly at private clubs. Obviously private clubs are not in a financial position that can afford to bid and pay money to host such an event.

"By doing that, you're most likely going to a resort or a venue that has accommodation on site, where people can stay and play. There are great marketing benefits to host the event. But a private club is doing it for different reasons. One of which is financial."

Although every scenario is different, and no terms are available, the PGA of America might pay a fee to a host club in exchange for getting the use of it for the week of the Ryder Cup. In Europe, not only is the tour paid by the venue, it gets full rights to sell tickets, hospitality, concessions and merchandise.

The PGA of America gets that too, save the fee from the course.

In both instances, however, the event is a boon to the organizers.

It is unclear if there is a flat fee paid to the European Tour, but it is likely. And beyond that, there are enormous opportunities for profit because the host venue agrees to turn over everything to the European Tour. With 50,000 people a day expected at Gleneagles, the numbers add up.

The profits are then divided among the European entities, and the PGA of America also receives a cut -- and pays one when it hosts the event -- but there is plenty left over for the European Tour.

The PGA of America also cashes in such a manner when the event is played in the United States.

Throw in the worldwide broadcast rights fees and it is unlikely that any other event in golf, perhaps not even the Masters, can generate the kind of money made at a Ryder Cup -- especially when you consider there is no purse to pay. The players and their caddies receive a small stipend and have donations made in their name to charity. But they are not paid.

As big and grand as the Ryder Cup is today, it almost defies belief that the tournament several times was on the brink of extinction. The U.S. leads 25-12-2 overall, but after splitting the first four matches starting in 1927, the U.S. won 19 of the next 21 with the famous tie in 1969 in which the Americans retained the Cup.

How little did the Ryder Cup rate?

In 1968, when tour players broke away from the PGA of America to form what would eventually become known as the PGA Tour, the Ryder Cup was part of the negotiation, with little fight. The tour players decided to take the World Series of Golf; the PGA of America got the Ryder Cup.

As late as 1983, when the Americans won a thrilling match against Europe at PGA National in Palm Beach Gardens, Florida, with Nicklaus as captain, the event was not on live TV in the United States.

It wasn't until after 1979 -- when all of Europe was added to what had been a Great Britain and Ireland team -- that the tournament became competitive, stoking the passion and pride of both sides.

Counting Europe's 1985 victory in England, the overall total stands at 9-4-1 in favor of Europe in those 14 Ryder Cups.

"The arrival of continental Europeans into the European team did two vital things," said Ken Schofield, the former executive director of the European Tour who saw the event take off while he was in charge. "It certainly united the players into what then was still a fledgling tour and it brought real competition back into the matches -- which has proved the catalyst for the worldwide success of the event.

"In terms of business, the Ryder Cup quickly became -- and has remained -- the principal level around the tour's TV dealings, regarding revenues and breadth of tournament coverage. It is a strong attraction for corporate partners and vital to the tour's business arrangements."

All of that will be on display this week at Gleneagles, which will be in all of its corporate glory, the Scottish countryside serving as a beautiful backdrop. The Scottish government also has taken on a huge role as a way of promoting tourism in the country. That, too, is part of the process these days, with backing of the host country a huge component.

That is why when the European Tour recently announced those in the running for the 2022 Ryder Cup, it did so by naming seven countries as finalists: Austria, Denmark, Germany, Italy, Portugal, Spain and Turkey.

From one of those locations, a golf course and an owner will emerge as the winner. Deep pockets, more than the golf course itself, will clearly be the most important factor on the résumé.