Drive Shack (DS) vs. TopGolf (ELY) Part 1
So this whole interest in the ‘stocks’ of TopGolf happened on a date, when fortune of being 3 hour delayed into a TopGolf Bay, I got a chance to chat with a manager about the TopGolf location I was at with my date in the DC metro area (by the way TopGolf did me well, after the 3 hour delay comping the round). During my small-talk with the manager while awaiting a golf bay at TopGolf, I opined to the manager, “Man, I wish one could invest in TopGolf.” He replied, “You can, Callaway (ELY) we just merged with a few weeks ago.”
I immediately googled this, not believing how I could have missed this chatter on the interwebs, but I knew once I heard this, I had to buy some ELY stock and some call option/s…so far has been a profitable investment. And I think it will continue to be now that the mask mandate is being lifted and life is returning to normalcy in America and parts of the globe once again.
I am not sure if you have ever been to a TopGolf location nationwide, but I’ve been fortunate to have been to the first one that was in Kingstowne, VA (a little southwest of Old Town Alexandria — Top Golf’s first US location in 2010), to watching them grow throughout the US. It literally has a cash flow, it feels like a casino, but without the negativity of casinos’ cash flow. They catered to families, individuals, corporate events, minorities/women who may not be at ‘one’ would consider the typical ‘golf course’, and with their varied games, and upgraded facilities as they opened up around the country and world wide, TopGolf, now part of ELY is flourishing.
Fast forward to this weekend, I drove with a friend last night to check out this ‘TopGolf-like’ publicly traded, Drive Shack (DS). In fact, the CEO of DriveShack worked previously for TopGolf ironically enough, as I googled while awaiting food at the DS venue. And of recent news, Rory McIlroy is backing DS and their ‘Puttery’ technology, which was not on display last night. Sort of strange, because I think the mini-golf/drinking experience would probably bode well for either ELY or DS with the GenZ/Millenial crowd with a few bucks in their pocket, and even to GenX/Baby Boomers having a good family time at something low-impact physically, but getting outdoors.
Driving to the Richmond VA outskirts wasn’t exactly a fun drive, and its location to me seemed odd, but from the exterior, DS looked nice at their Richmond location. It literally felt like a TopGolf except without the wait, because well…it was in NW Richmond, not necessarily the epicenter of population and cosmopolitan life one would see in a major metro. But being interested, I proceeded in with my friend. First, I was thinking they’d establish themselves perhaps differently with their food, so we had dinner. The menu wasn’t bad, and we tried a few items, and the bartender Danielle was absolutely great (ELY you should hire her), it was pretty empty and dead for a Friday night. The food was passable, but nothing to call home about.
We proceeded to get a bay and I was curious to try it out, and looking upon the ‘range’ that lie before me, it ‘looked’ like TopGolf, but it was not. They had varied games of ‘ShackJack’ this kinda strange game where you try to get a hand of 21 based on ‘virtual’ locations of cards on the course. I was able to make a 21 twice, but was already bored with the game. Next I tried their TopGolf-like ‘TopTracer’ like technology, and it ‘seemed’ somewhat accurate, but definitely seemed janky, as I noticed it looked like some MATLAB GUI running on Windows OS, that you could clearly see.
I tried next to pick the St. Andrews game where I could ‘virtually’ play the Old Course…well it didn’t work. Kind of disappointing having watched Tiger Woods win the Open in 2000 as a High School kid, that really let me down, not to mention DS employees with their lack of customers did not even take time to show me how to set up the games, etc. It did not feel like a first class operation you’d find at any TopGolf location. Overall, the bays felt like a 2nd hand TopGolf, the fake turf bought from what you’d find in a Dick’s sporting Goods, the tables and chairs not as the same quality any TopGolf location. So after playing for about 30mins and them closing down for the night, my friend and I headed back north to the DC area.
In our ride back we discussed, what is DS trying to do? And I slept on it too, thinking I must have missed something, perhaps they have some ‘widget’ that is better, but honestly, I couldn’t think of anything that distinguishes them above TopGolf except perhaps they’d serve second and third tier locations in the US, or if they get the mini-golf thing going, that’d be a good market. Looking through their potential upcoming locations, that theory seems to be correct. And maybe their advanced ‘Puttery’ locations that have fancy indoors mini-golf will work out (whenever they build one), but they’re fighting a 600-pound gorilla and uphill battle against ELY’s now surge towards dominance in making Golf open to the masses.
Without a doubt TopGolf has better technologies, better looking facilities, better and helpful staff (at least in my opinion) and being first to market with such a business model, has, and will likely continue to put pressure on DS to figure out something to distinguish themselves. Last night, encouraged me to at least ‘hold’ the $275 worth of DS shares I bought on late Friday, and see if someone in the VC world pumps some money into their expansion. I do wonder why Rory is backing DS, because he has to know there’s a big difference in quality in ELY vs. DS ‘TopGolf’ like experiences.
In part 2, I’ll cover geospatially, where I think either DS or ELY can thrive in expansion and/or product offerings. Taking a look at their spheres influence from a geospatial and market expansion that ‘could’ be possible.