Closing at the Opens

Companies are pining for the chance to bolster business at Pinehurst No. 2.

By Lee Pace

While the best golfers in the world battle each other and a revamped course at Pinehurst Resort & Country Club in June, a different game will be played on site — albeit in air conditioning. Fluor Corp., an Irving, Texas-based construction and engineering company, will fly in a ringer. Charlotte Pipe and Foundry Co., a 113-year-old manufacturer of cast-iron and plastic pipe and fittings, will employ a little misdirection. And San Francisco-based Wells Fargo & Co. will replace Wachovia Corp. in the lineup. They’re all hoping to gain an advantage from the field of play.

For the first time, the United States Golf Association will hold the men’s and women’s U.S. Open Championships in consecutive weeks — June 9-22 — on the same course, Pinehurst No. 2. Golf’s governing body believes linking the tournaments will bolster the women’s event. That’s not the only difference from 2005, the last time Pinehurst hosted the Open. The course has undergone an extensive renovation, most noticeably sandier landscaping replacing Bermuda-grass rough. Even management of the event will be different — sort of. One thing, however, will stay the same: Companies are jumping at the chance to use the U.S. Open to boost business and are willing to pay a premium for the opportunity.

Pinehurst’s first Open in 1999 flourished in a robust economy, generating an estimated economic impact of $160 million, according to the local convention and visitors bureau. When it returned six years later, it contributed $128 million (though that estimate came from a different model than the 1999 one). But the recent financial morass necessitated an altered strategy for 2014. “The corporate landscape in North Carolina has changed materially since 2005,” says Jim Hyler, former chief operating officer of Raleigh-based First Citizens BancShares Inc. and USGA president in 2010-11. “The banks have changed. The power companies have changed. We’ve had to broaden our outreach to different categories of businesses.” Finance companies, for example, made up 22% of corporate sales in 2005. This year, they dropped to 15%.

Mac Everett is a former Charlotte-based executive with Wachovia and Wells Fargo who has helped recruit corporate-hospitality customers to the Pinehurst Opens. “Some of the new names, frankly, I don’t recognize. These have been transformative years, and we’ve been through a mighty economic downturn. But we’re beyond the budget we’ve set for ourselves. I think it shows you how strong the appeal of an Open at Pinehurst is and how committed this state is to making sure each time an Open comes to Pinehurst it’s a success on every level.”

Pinehurst was awarded its first U.S. Open Championship in 1993, giving it six years to prepare for the biggest golf tournament on American soil. “We were wringing our hands at first,” recalls Pat Corso, Pinehurst president and CEO from 1987 to 2004. “We had worked long and hard for six years trying to convince the powers that be in golf that we could do this and do it properly. Then all of a sudden it was like, ‘OK, show us what you can do.’” The key decision was making it a North Carolina, not just a Sandhills, event. The resort recruited business leaders — Charlotte heavyweights Hugh McColl of Bank of America Corp., John Belk of Belk Inc. and Bill Lee of Duke Power Co. among them — to serve on its President’s Council. Its primary goal was to impress upon businesses the importance of buying hospitality tents. “Our goal was to sell 20 tents. We would make budget and do well at 20,” says Hyler, council chairman back then. “But the economy was doing well in ’99, and we had the wind at our back. We sold out 20 tents — then 30, then 40, then 50. We could have probably sold 75.” All told, Pinehurst sold 50 at $125,000 a pop — $6.3 million.

The 1999 Open was so successful from competitive (with the popular Payne Stewart beating the popular Phil Mickelson on the last shot), operational and financial standpoints that the USGA awarded the course another. By the time 2005 arrived, however, a third of the corporate sponsors in ’99 were no longer around. They had been either bought or had gone bust. “We had to adjust to changing times and a different marketplace,” says Reg Jones, championship director in 2005 and 2014. “For ’05, we adjusted to offer a smaller size at a smaller price point. We also created a new product called The Trophy Club — a sports-bar theme with individual tables for each company.” Pinehurst sold 65 smaller tents at reduced prices ranging from $40,000 to $175,000. The result: a corporate sales record  — the USGA won’t disclose how much — that still stands.

“There is an incredible amount of camaraderie, loyalty and state pride in North Carolina,” says Mimi Griffin, whose Allentown, Pa.-based MSG Promotions Inc. has managed corporate-hospitality sales for the USGA since 1995. “I don’t know if I’ve seen any other area or club or state that has embraced the championship the way that North Carolina and the Pinehurst community and the surrounding area have.”

Nevertheless, organizers had to change their strategy again for this year’s Opens. Raleigh-based Progress Energy Inc. and Charlotte-based Wachovia, big sponsors in 1999 and 2005, have been acquired by other companies. Management of the event also has changed hands, though a familiar face is still running things. The USGA normally handles ticket and corporate sales, tournament administration and course setup. In return, it pays the host club a rental fee, which it won’t disclose. It made an exception for Pinehurst in 1999 and 2005 because the resort had Pinehurst Championship Management LLC, an in-house tournament administration and marketing company. It had managed PGA Tour events and the 1994 U.S. Senior Open at Pinehurst No. 2 and the 1996 U.S. Women’s Opens at Pine Needles Lodge and Golf Club in nearby Southern Pines. Jones was on its staff in 1999 and was promoted to championship director before the 2005 Open. He impressed the USGA, which hired him to run all its men’s Opens. Pinehurst Championship Management was, in practice, dissolved when he left, so the USGA — and Jones — will run the show this year. It doesn’t appear to have harmed sales.

It’s hard to compare the cost of hospitality at this year’s championships with previous ones because the men’s and women’s events are conjoined. A company can’t choose between the sexes; corporate packages include both tournaments. Last year’s men’s Open at Merion Golf Club in Ardmore, Pa., reserved 185 acres for hospitality. Pinehurst will cordon off 400 acres to entertain as many as 6,100 guests per day. For the first time, Pinehurst’s Members Clubhouse, newly renovated, will be divided into 10 sections, each available for $385,000. That price includes 75 daily tickets to the men’s Open and 30 to the women’s. The resort’s driving range will become the corporate village with tents, averaging 1,600 square feet, available for $215,000. Ten-seat tables inside a corporate pavilion cost $11,285 a day. The USGA won’t disclose past sales but says corporate-hospitality revenue at the 2008 through 2012 men’s Opens ranged from $11.6 million to $13.6 million. It expects this year’s to draw on the higher end of that.

If you’re interested in a package, this information won’t provide much assistance. The tents and clubhouse sold out in late January. “We’ve not been able to say we’re out of tents five months out in a long, long time,” Griffin says. “This is not a boondoggle, it’s not frivolous spending. This is the way business is conducted.” She says that corporate costs — including tickets, food and beverage — average less than $500 per person per day. “We sold the Super Bowl in Jacksonville in 2005, and the cost per person was $7,000 to $9,000. So the U.S. Open is so much more cost effective, and you have the same level of excellence and magnitude of event.”

Jack Clayton entertained clients at the 1999 and 2005 Opens as a Wachovia executive. Now an executive vice president overseeing operations in 51 eastern North Carolina counties, he’ll be at Pinehurst on behalf of Wells Fargo, which has picked up a number of Wachovia’s sports-marketing commitments, including title sponsorship of the annual PGA Tour event at Quail Hollow Club in Charlotte. The bank has bought space in the clubhouse beside the 18th green and will invite guests from around the country. “Sometimes it’s hard to quantify these things, but I can tell you I got an email recently from someone we’d taken to another event who we thought would place $5 billion with us, and instead it was $15 billion. It doesn’t always work that way, but sometimes it makes an impression. Another thing I like to remind our folks, you want to make sure someone else isn’t taking your best customers to the U.S. Open. There’s a little bit of ‘protect your own turf’ that goes into it.”

When Pinehurst was pursuing major-championship golf, it hosted back-to-back PGA Tour Championships in the early 1990s. Hyler believed that sponsoring those events and entertaining guests at them would be fruitful for First Citizens. The bank also sponsored the three U.S. Women’s Opens at Pine Needles and the 1994 Senior Open at Pinehurst. “At First Citizens in ’99 and ’05, we put hundreds and hundreds of hours into planning — organizing tickets, extending invitations, planning dinners and lodging. It’s a huge logistical effort, but it’s well worth it. After ’05, we kept track of the business we did with people we invited to the Open. Certainly not all of it was attributable to the Open, but it helped. We felt like the cost paid for itself several times over.” Hyler is now managing director of Raleigh-based Investors Management Corp., which owns companies such as Golden Corral Corp. It will have a presence in the Pinehurst corporate village come June, though a smaller one than First Citizens had in 1999 and 2005.

Fluor, which has offices in Charlotte and Greenville, S.C., is renting seven houses and flying in a private chef. Its package includes 44 tickets a day that will be distributed to customers and their spouses. “We house our guests in private homes and work very hard to give them a safe, comfortable environment,” says Dave Dunning, executive vice president of business development and strategy. “It’s a significant investment, but it’s well worth it, as we can create new relationships or strengthen existing ones. Including the spouse is an appropriate way to create a broader relationship.”

Charlotte Pipe and Foundry had a corporate tent at the 2008 Open at Torrey Pines Golf Course in San Diego. “We had just opened a new plant in the West, and we used that Open to launch our new facility,” says Brad Muller, vice president of marketing. “It made a lot of sense that year. Otherwise, if the Open’s in our backyard, we want to be involved. There really is no other event where you can spend so much time with your customers in a relaxed and fun setting. We combine that by flying them into Charlotte, taking them on tours of our plants in Charlotte and Monroe and then taking them to Pinehurst. We can get a bigger bang for our buck.”

Guests in the corporate village will at least have plenty to eat. Bethesda, Md.-based Ridgewells Inc. has catered the corporate tents, clubhouse and media center at the majority of U.S. Opens since 1993. (A different vendor handles on-course concessions). Ridgewells will build a 10,000-square-foot kitchen for food preparation at Pinehurst and staff it with a management team and executive chef. Otherwise, its food and labor will be local. It will procure sweets from Nye’s Cream Sandwiches of Wilmington and Locopops of Durham, baked goods from Neomonde Baking Co. of Morrisville, the Bread Shop in Pittsboro, the Bakehouse in Aberdeen and Sweet Boutique Bakery in Fayetteville and cheese from Chapel Hill Creamery in Hillsborough.

Ridgewells CEO Susan Lacz and her staff spent considerable time studying barbecue, developing palates for the sweeter western and tangier eastern styles. “Each time we work the U.S. Open, we spend about a year getting to know what kind of food and cuisine are popular in that area,” she says. “We want our menus to represent the flavors of North Carolina. The west-versus-east issue with the barbecue has been interesting. We have traveled all over the state; we’ve driven out of our way miles to try another one. The challenge is always to find the best product and a partner who can handle the capacity we require. We might tell a mom-and-pop bakery we need 22,000 cookies, and their eyes bulge out.”

The numbers surrounding any Open tend to have that effect, and Hyler believes this year will be no different. During a keynote address at a Pinehurst, Southern Pines and Aberdeen Convention and Visitors Bureau conference last year, he predicted the statewide economic impact of the championships would be between $140 million and $170 million. “The exposure for Pine
hurst and North Carolina is hard to calculate and put a dollar value on,” he said, according to The Pilot newspaper. “It’s a huge, huge event.”