(HOUSTON BUSINESS JOURNAL) -- Days before its golf tournament in 2010, organizers of San Diego’s annual PGA stop received the call they’d been waiting for.
The tournament had been searching for a sponsor after Buick pulled out following the bankruptcy of parent company General Motors in June 2009. But Farmers Insurance notified the organizers it wanted to ink a one-year deal that January. The company remains the tournament’s sponsor today.
While the Houston Open can still technically sign a sponsor, it’s uncertain if a roughly year-and-a-half search will be resolved in time for the tournament starting March 26. That means the PGA and the Houston Golf Association will pay the bill, and opportunity costs will be lost for branding around the tournament to the tune of millions of dollars.
“If our circumstances were to change, we have the flexibility on the production side of the event to shine a light on significant partners through media, television advertising and on-site branding,” Steve Timms, president and CEO of the Houston Golf Association, said in a Feb. 22 statement.
The PGA also remains committed to the tournament despite not having a sponsor.
“We have been and will continue to be in discussions with a number of potential title sponsors regarding the Houston Open in 2018 and beyond,” a spokesman for the tour said in a statement.
A sponsorless Houston Open shouldn’t come as a surprise, experts say, as these multiyear, multimillion-dollar deals are difficult to reach for any sporting event — even given the amount of time tournament has looked for one. But experts say there’s optimism the tournament will attract a sponsor, or sponsors, soon due to the Houston Open’s prestige and as the PGA continues to find success attracting long-term partners.
Over the past year, there’s been intense competition in Houston’s sports sponsorship scene between major events and organizations. Add in flat or low growth rates at many of Houston’s oil and gas companies, and it makes for a difficult environment to strike a deal in the “energy capital of the world.”
After Shell Oil Co. announced it would drop its Houston Open sponsorship in June 2016, the Houston Dynamo and the Texas Bowl also started hunting for sponsors in the Houston area. So far, only one has completed a deal. On Nov. 15, Katy-based Academy Sports + Outdoors became the new sponsor for the Texas Bowl in a multimillion-dollar agreement that stretches into 2019. The deal was in part credited to the longstanding relationship between Academy and the Texans, which host the annual collegiate bowl football game.
Meanwhile, the Dynamo continue to look for a jersey sponsor after its contract with Australia-based multinational mining company BHP Billiton expired in 2017.
“Those are big,” Chris Canetti, president of the Dynamo, said in January of the Dynamo, Houston Open and Texas Bowl’s sponsorships. “They provide levels of local, national and international exposure in different ways.”
iming is critical to these golf tournament sponsorship deals, which can range between $8 million to $12 million a year, said Scott Seymour, managing director of golf at Connecticut-based sponsorship consulting practice Octagon. Not every company is poised to make a deal of that size at any given time.
Also, each deal is unique based on where the tournament is located and what kind of audience a sponsor is looking to target. The time it has taken for the Houston Open to find a sponsor shouldn’t be surprising given the deal size and other factors, Seymour said. In addition, golf tournaments and other sporting events regularly go through cycles of long-term sponsors.
Some experts say that the HGA and the PGA not making a deal could be interpreted positively as it likely means the organizations haven’t caved to smaller offers.
“It’s a fit to be found,” Seymour said.
Only a select group of companies, often in industries with little differentiation in products, will be interested in a sponsorship the size of the Houston Open’s, said Betsy Gelb, professor of marketing and entrepreneurship at the University of Houston. For example, BBVA Compass’s sponsorship of the Houston Dynamo soccer stadium was used to try to set itself apart from other banks in the area. That’s because banks, like gasoline, are not likely something consumers think have wide differences.
Companies are often asking if they should be promoting themselves as a firm or showcasing a differential advantage in their product. A sponsorship lends itself to the former, while other advertising is useful for the latter.
“It’s about what context makes the most sense (for companies),” Gelb said.
Pitching the deal
The HGA and PGA have attempted to reach out to potential sponsoring companies in several ways.
Five months before the tournament this year, organizers opened the sponsorship to multiple companies contributing smaller amounts, which would add up to a full title sponsor. The deal could involve up to three companies, called founding partners, with significant presences in Houston. If such a deal is reached, the event would likely be called the Houston Open sponsored by the founding partners.
The structure, although unusual, was seen as a way to help other companies enter as a partner in an event that they normally couldn’t afford. The move to have multiple sponsors is rare in the PGA Tour as only one other event, the Players Championship, uses a similar model.
With the Houston Open name intact, the new model could also help focus the event’s attention on Houston and highlight the city’s recovery following Hurricane Harvey, one of the costliest natural disasters in U.S. history. Timms told the Houston Business Journal in November that talks about this multipronged sponsorship model began after Harvey.
The Houston Open is the largest annual golf tournament in the Bayou City and has attracted top golfers for decades. In 1946, the first tournament saw superstar golfers Byron Nelson besting Ben Hogan by two strokes. Now, the tournament touts that TV and online audience globally is more than 1 billion households.
The tournament has also raised about $69 million for youth and charity. Last year, the around $2.2 million raised was used to fund programs such as The First Tee of Greater Houston, an international youth development organization. The HGA has also contributed to the enhancement of public golf courses in the area.
The economic impact of the tournament is about $25 million to $30 million annually, according to the PGA. Although large, it’s helpful to consider that, similar to other sports events and franchises in Houston, the economic impact is minuscule compared to Houston’s GDP of $478 billion in 2016, according to the Greater Houston Partnership.
Still, the impact of the Houston Open goes beyond hard dollar figures, proponents argue.
“The Houston Open shines a national and international spotlight on the city year after year,” David Mincberg, board chairman of Houston First, said in an emailed statement. “Any major event of this magnitude only strengthens Houston’s image as a top-tier destination, driving more visitors and room nights to the city.”
Outside of a sponsor, a 2019 date for the Houston Open hasn’t been decided.
The PGA has recently been shuffling tournament dates with San Antonio’s Valero Texas Open grabbing the week before The Master’s tournament in 2019, which is where the Houston Open has been slotted in recent years. Often, sponsors have some leverage when deciding event dates, Seymour said, so it’s unknown how a sponsor will impact the Houston Open’s future date.
A new location for the tournament is uncertain as well. Houston Mayor Sylvester Turner said in April 2017 he wanted to bring the tournament back into the city limits of Houston. City of Houston spokesman Alan Bernstein said in a Feb. 21 email that Turner’s position is unchanged. Currently, the tournament is hosted at the Golf Club of Houston in Humble.
But a new sponsor shouldn’t be difficult to locate in the future — the PGA has signed more long-term sponsorship deals in recent years than they’ve ever done, Seymour said. For example, the Valero Texas Open landed a 10-year agreement in October with San Antonio-based Valero Energy Corp. (NYSE: VLO).
“The Houston community is an incredible community,” Seymour said. “There’s no reason why they won’t have a sponsor in the near future.”
Houston Open by the numbers
1 billion - Potential number of households reached by the Houston Open.
$69 million- Amount roughly raised since the Houston Open started in 1946.
$25 million to $30 million- Economic impact of the Houston Open for the Houston area.
$8 million to $12 million- Cost to sponsor a typical PGA Tour tournament stop per year.
$7 million- Size of the Houston Open purse in 2017. About $1.2 million was awarded to the winner.
350,000- Number of Houston youth the First Tee of Greater Houston provides with learning facilities and educational programs. The First Tee organization is a large beneficiary of the Houston Open’s fundraising.
18- Roughly the number of miles the Golf Club of Houston in Humble is located outside of downtown Houston. Mayor Sylvester Turner wants to bring the tournament back into city limits in future years.
SOURCE: PGA, HGA, Octagon, Thegolfnewsnet.com