(Bloomberg) -- Padel, the racket sport craze currently sweeping across much of the planet, has turned into a cautionary tale for investors in one of the countries that first fully embraced it: Sweden.
Padel centers in the biggest Nordic country are being converted to warehouses and budget grocery stores after the racket sport’s pandemic boom turned into a bust. Almost 90 padel-related companies have filed for bankruptcy this year, according to data from credit reference agency Creditsafe.
Thousands of courts are also being closed down after operators were hit by a triple whammy of ballooning competition, surging inflation and waning interest from a middle class whose appetite for the sport previously seemed insatiable.
Read More: Padel Club Opens in Midtown Manhattan to Stoke Booming US Growth
“So many things went wrong,” Andreas Ehrnvall, a veteran of the sport in Sweden, said. “This country rapidly went from having 300 padel courts to 3,500. It was just untenable.”
Padel, usually played in doubles at an enclosed 20 by 10 meter court, seemed an ideal pastime for Sweden, a country with a proud tennis tradition. Investors jumped on the opportunity, including private equity group Triton Partners and the country’s biggest soccer star Zlatan Ibrahimovic.
The number of courts in Sweden ballooned between 2018 and 2021, but it soon became clear that the expansion was overdone. Ehrnvall, a former tennis pro who helped bring the sport to Sweden, saw early signs that something was out of order. Having run a padel club in the town of Uppsala since 2012, he was horrified at the development as too many people trying to make a quick buck piled in.
“In one, year Uppsala went from having a total of 14 to 100 courts,” he said of the boom. “I’d say that in a city of Uppsala’s size, with some 200,000 inhabitants, there is room for no more than 20 courts.”
Operators are now shuttering their facilities at a rapid pace. We Are Padel, a key part of private equity firm Triton’s investment in the sport, has closed around 50 clubs in Sweden, leaving only 13. Its owners recorded a 716 million Swedish kronor ($65 million) loss in 2022, driven by a major writedown. Another firm, PDL United, which was backed Coeli Private Equity, has gone bankrupt and its assets are now controlled by creditors.
Eno Polo, Chief Executive of Triton’s European padel group LeDap, in which We Are Padel is a major part of its footprint in Sweden, described the country’s boom as a “gold rush,” and drew parallels to recent real estate bubbles.
“Hindsight is always easy,” he said when asked why so many pooled their money into the new sport, also quoting a low barrier of entry, which allowed many firms to quickly set up shop. While the Swedish boom initially fueled attractive returns, it also resulted in a large oversupply.
Representatives for Triton were not available to comment on its padel investments at the time of publication.
In Vasteras, about a hundred kilometers west of the capital Stockholm, a former padel center is currently being converted to a grocery store under Axfood AB’s budget brand Willys. Other halls have been converted to storage for solar panels and tires.
Even as the Swedish padel industry contracts, analysts are still projecting a bright future for the sport. A research report from Deloitte puts the current value of the padel ecosystem at about 2 billion euros and estimates that it will surpass 4 billion euros ($4.3 billion) by 2026, as the number of courts worldwide is projected to double to 85,000.
The global opportunity has provided hope to some Swedish entrepreneurs. Spotify Technology SA founder Martin Lorentzon is backing a padel center that opened in London’s Canary Wharf in late August, with the UK pinpointed as one of the countries where the sport could grow rapidly in the coming years.
Triton’s LeDap is also making smaller forays into the US market. That country is also in the grip of another hybrid racket sport called pickleball, which Polo says isn’t a serious rival to padel, describing it as “more like a public-park activity” such as shooting hoops at a basketball courRead More: Pickleball Injuries May Cost Americans Nearly $400 Million This Year, According to UBS
Others are hoping that the US pickleball craze will reignite interest back in Sweden. Malmö Padelcenter, which opened in 2013, no longer has use for ten padel courts, and has converted four of them into five pickleball courts.
For Ehrnvall, who runs his padel center in Uppsala with his wife Malin Andersson, what has been dubbed “the death of padel” offers a chance to start something anew, building the sport from the ground up.
“Making money for a while was fine, but if you split that over the ten years we have put into padel, our hourly wages would be like 50 cents,” Andersson said. “That’s the reality if you want to work in sports. It takes passion and dedication, and I don’t think that was part of the calculation for some of these investors.”
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