STOCKHOLM – 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 centres in the Nordic country are being converted into warehouses and budget grocery stores after the sport’s pandemic boom turned into a bust.

Almost 90 padel-related companies have filed for bankruptcy in 2023, according to data from credit reference agency Creditsafe.

Thousands of courts are also being closed 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.

“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 20m-by-10m 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 football 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 of trouble.

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 (S$87.2 million) loss in 2022. Another firm, PDL United, which was backed by Coeli Private Equity, has gone bankrupt. 

Eno Polo, chief executive officer 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 fuelled 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 100km west of the capital Stockholm, a former padel centre is being converted into a grocery store under Axfood AB’s budget brand Willys. Other halls have been converted to storage for solar panels and tyres. 

But 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 (S$2.9 billion) and estimates that it will surpass €4 billion by 2026, as the number of courts worldwide is projected to double to 85,000. 

The global opportunity has provided hope for some Swedish entrepreneurs. Spotify Technology SA founder Martin Lorentzon is backing a padel centre that opened in London’s Canary Wharf in late August, with England pinpointed as one of the countries where the sport could grow rapidly in the coming years.

Triton’s LeDap is making smaller forays into the United States market. The US is also in the grip of another hybrid racket sport called pickleball, which Polo says is not a serious rival to padel, describing it as “more like a public park activity”, such as shooting hoops at a basketball court.

Others are hoping that the US pickleball craze will reignite interest back in Sweden.

Malmo Padelcentre, which opened in 2013, no longer has use for 10 padel courts, and has converted four of them into five pickleball courts. BLOOMBERG