Sportsrisq's January Newsletter

Tour Update: January

Abu Dhabi HSBC Golf Championship – 26th to 29th Jan

For the first time this year all of the world’s top 4 players will lock horns. They will also be joined by Tiger Woods and a full European Tour field to make for an exciting championship. With the greens amongst some of the fastest on the European Tour (12 to 12.5 on the Stimpmeter) and generally pretty hard as well there is a premium on driving distance around this course more so than others on the 2012 schedule. In a similar vein to the Masters it is typically the bigger hitters that perform best at the HSBC Abu Dhabi Championships. The bigger hitters are able to approach the greens with more lofted clubs which allows them to hold the ball on the testing greens more easily. This can be demonstrated by the correlation of finishing positions and average driving distances in the championship over the last 6 years. The average driving distance of players finishing in the top 10 finishing position in comparison to the players finishing between 40^th and 50^th is significant.

Year	1st - 10th Average Driving Distance (Yards)	40th - 50th Average Driving Distance (Yards)	Difference (Yards)	Total Difference for Week (Yards)
2011	283.85	277.34	6.51	364.56
2010	284.81	284.94	-0.13	-7.28
2009	293.2	284.42	8.78	491.68
2008	282.01	278.42	3.59	201.04
2007	286.97	275.48	11.49	643.44
2006	288.76	279.13	9.63	539.28
Average	286.60	279.96	6.65	372.12

In all but one year the top 10 drove the ball further than those finishing down the field between 40^th and 50^th position (some of the worst performing players to make the cut.) In 2007 players finishing between 40^th and 50^th had an average of 643 yards further left in on their approach shots for the week than the top 10 players.

Contract Structuring with the Abu Dhabi Championship

During the off-season many sponsors have structured and restructured contracts in order to keep their best brand ambassadors and attract new ones. From our experience we have seen that performance driven bonuses are as popular as ever. This is firstly due to the fact that they are very appealing for the players if they feel confident about the upcoming season. Secondly, for the sponsors, bonus structures are an excellent way to incentivise great play and even shape a golfer’s schedule for a relatively small fee.

There are a number of ways to incentivise the world’s best players to start the season quickly and bonuses are one of the most effective tools for sponsors to use. For example;

$1,000,000 bonus for winning both the Abu Dhabi HSBC Golf Championship and the Masters could be covered as below;

Golfer	Rate	Cost of Cover
Tiger Woods	1.7%	$17,000
Rory McIlroy	1.3%	$13,000
Luke Donald	0.4%	$4,000
Lee Westwood	0.4%	$4,000

Multiple wins are common for the world’s top players during a single season. A $1,000,000 bonus would be an excellent payday for the player but will also have phenomenal advantages for sponsors. By offering larger bonuses for certain tournaments, sponsors can begin to dictate the tournaments that they would like to see their players participate in. This lets sponsors manage their brand exposure more specifically. Creativity with contract structuring allows sponsors to reach key demographics and specific geographical areas much more successfully.

When structuring bonuses it is important to make them realistic. For example, 3 of the 4 Major winners last season were multiple winners on tour. A $1,000,000 bonus for multiple wins including a Major Championship would be attractive for players as it is an attainable bonus trigger. Considering that the specific bonuses above could be added to Luke Donald and Lee Westwood’s contracts for only $4,000, it shows what great value this type of creative bonus structuring provides. It is no surprise that a number of our clients are particularly keen on these bonus structures.

Player Focus: Luke Donald

Many have argued that the next couple of seasons are Luke Donald’s best opportunity to clinch a Major. There is a 54% chance that he will win at least one Major over the next 2 seasons but he is only the 3^rd most likely golfer to complete this feat. Woods and McIlroy both have probabilities of over 70% each of winning a Major in either 2012, 2013 or both.

Despite having a high chance (in golfing terms) of completing this goal, recent statistics aren’t entirely in Luke Donald’s favour. Not since 2007 has someone who finished the year as world number one gone on to win a Major Championship the following year (Tiger Woods, U.S. Open.) 2007 was also the last time that the player that lead the scoring average on the PGA or European Tour went on to win a Major the following year (also Tiger Woods.)

However, his ball striking and putting statistics are phenomenal as he led the money lists in both the United States and in Europe in 2011. His hard work and support from Dave Alred has furthered his steady improvement. Each year Donald’s probability of winning a Major has improved greatly as shown below. In 5 of the last 7 years Donald’s chance of winning a Major in the following season has increased. As we look forward to 2012 he is probably best suited to the 3 Major Championhips being played outside of Georgia. The demanding setups of the Ocean Course at Kiawah Island (U.S. PGA Championship) and the Lake Course at The Olympic Club (U.S. Open) are each over 2.5% more likely than Augusta to provide Donald with a Major victory in 2012.

Luke Donald’s major sponsors would have found that the rate of cover for his Major Bonuses has increased fivefold over 7 years. Furthermore, as he has risen up the world rankings the size of his bonuses would have increased considerably as well. Luke Donald is clearly now a much more expensive player to sponsor. Locking in a 3 year rate during the 2009 season would have saved over $425,00 for a $1,000,000 Major Win Bonus. It is just another example of where working pro actively to manage future bonuses is highly advantageous. It is exactly this type of foresight that Sportsrisq can provide and combined with our sharp rates is exactly how we can save sponsors a lot of money when it comes to covering bonus contracts.