Loss-making European Tour Group bailed out by PGA Tour loan

The European Tour Group made an operating loss of almost £19.8 million in 2023.

The PGA Tour paid almost £20 million to help the European Tour Group break even in 2023.

In case you haven’t realized by now, there’s a lot more to the DP World Tour’s strategic alliance with the PGA Tour than co-sanctioned events and giving away 10 cards to the best performers in the Race to Dubai every season.

A look at the European Tour Group’s latest company accounts underlines the scale of their partnership – and how they would be in a potentially worrying position without it.

Since 2021, the Wentworth-based circuit has benefitted from non-repayable loans totaling £53.2 million from the PGA Tour. They fell six figures short of breaking even last year, but it could have been far worse had they not received £19,630,000 in “underpin funding” from their American cousins.

The Tour’s annual report claims that this “financial support” was used to deliver another record prize fund on the DP World Tour, though it could also be seen as a way to help clear a deficit of £19,760,000.

Speaking exclusively in the next issue of Today’s Golfer magazine (on sale: November 28, 2024), Kinnings put this operating loss down to increased administrative and staging costs, driven by a combination of post-Covid supply chain issues and the war in Ukraine.

“The arrangement that we have with the PGA Tour is that they provide that underpin, in return for certain assets and investments in European Tour Productions,” said Kinnings. “That’s a very good commercial relationship which provides the security that we want. That’s a quid pro quo that they are comfortable with, and we are comfortable with.”

The protection of this “guaranteed underpin” from the PGA Tour does provide a non-repayable safety net, at least until 2027, though it is easy to see why Kinnings is so in favor of uniting the game when they continue to operate beyond their means.

Historically, the European Tour Group has always made a profit in Ryder Cup years, but a 35% spike in operating costs in Rome meant profits were down almost 40%, versus Paris 2018. Shortfalls elsewhere, plus a £5.35 million outlay which was attributed to the fire at Marco Simone Golf & Country Club, meant they had to dip into their cash reserves by a little over 33% in 2023.

In court documents that went public by mistake last July, the PGA Tour regarded the European Tour Group as an ‘underinvested and borderline distressed’ asset. Kinnings argues that “the PGA Tour wouldn’t have done a deal with us if that was the case”, and remains bullish in his assessment that the DP World Tour is “strong and ready to grow”.

Their accounts may suggest otherwise.