25 July 2008

Humber Valley Resorts - new business plan

Flip to Crazy about Newfoundland and you'll find some interesting information on Humber Valley Resorts, the high-end real estate development started by former Indy publisher Brian Dobbin.

A major reorganization and refinancing effort has been underway since late last year. This is the first hint of the new initiatives aimed at stemming losses reported in the last two fiscal years and becoming profitable.

The post comes - apparently - from an e-mail sent to owners of existing chalets by the new Newfound NV chief executive officer Jayne McGivern following her first visit to the property.
Key initial points
* Newfound wants to retain the operation of the resort within the company
* The primary focus will be to build high-end chalets
* Tennis courts will be added [Update: Dan from Crazy advises by e-mail he made an error on the swimming pool mentioned in the original. He's adjusted his own post accordingly]
* Focus on completion of the road system, cycle paths and verge landscaping
* Reduce the property sales activity - to create a more controlled build plan
There are some other interesting developments, though, including this:
As a postscript - Jayne McGiven [sic] also met Tom Marshall the provisional [sic] finance minister and local MHA representative [sic], and apparently made it clear that the company would not continue to fund the only tourism flights from Europe, and reinforced that if tourism is to succeed the provisional government [sic] needs to take a much more active role. I also hear that her suggested solution is the resumption of the London to St Johns route. (Not that great for Western Newfoundland in my opinion). [Emphasis added]
There were hints of this publicly already. The Telegram reported in early June on Newfound NV's annual report for 2007.

Since late 2007, the company has reorganized, reduced losses and introduced a new management team to further develop properties in Newfoundland and the Caribbean, estimated in the company annual report to have a value of US$227 million.

The annual report describes the efforts made at turning around the company's fortunes:
As mentioned in my statement last year, we have been addressing the construction issues and although some still remain we did achieve our aim of accelerating the construction program during 2007 and we are making healthy margins on new build.

During the year, we carried out significant construction work on over 60 chalets resulting in an increase in revenue in local currency from construction and furnishings of 66% to US$ 21.3 million. We have nearly completed the construction backlog inherited at the time of the Newfound acquisition in 2006 and, subject to suitable funding being in place, it is hoped that all of the remaining outstanding contracts will be started during 2008.

In 2007, the first full year of operation of the 18 hole golf course, we won four prestigious awards including Golf Magazine (golf.com) Best New International Course 2007 and ScoreGolf Magazine's Best Canadian New Golf Course 2007. The credit for this must go to our Golf manager and his team.

We have recently signed an agreement with Monarch Airlines to run a weekly Boeing 757 from Gatwick to Deer Lake to cover both the summer and winter seasons, thus supporting the expected increase in vacation traffic. Although the charter at present makes a financial loss until such time as vacation numbers increase, it is an important part of both the operations at Humber Valley Resort and its future development.
Notice that there is no reference in the annual report to finding financial subsidies for the charter flights. In fact, the last statement suggests the current losses will be rectified once vacation numbers increase.

The idea of government paying for or subsidizing flights was first hinted at publicly by Brian Dobbin in his farewell column in the last issue of the Indy.
Humber Valley Resort showed a lot of people how good our tourism product can be to international markets, but it is now controlled by a mostly non-Newfoundland group of shareholders who see it only as an asset amongst others. While a private company we invested over $15 million just in marketing our tourism product internationally and providing air service from Europe. I know of no other international developer in the world who paid for weekly overseas flights for four years. Although I remain a shareholder in the company, I don’t expect our board will accept that kind of capital expenditure in the future on something they rightfully see as the province’s job. [Emphasis added]
Commercial air service, including international service, is available to Newfoundland and Labrador from London via several carriers. Air Canada discontinued year-round service between St. John's (YYT) and Gatwick in 2006 due to reportedly low traffic volume. It announced at the time it planned to introduce summer-only service in 2007.

Following the Air Canada announcement, Newfound's charter carrier at the time - Astraeus - began competing with Air Canada on the summer service run in 2007.

Both carriers subsequently withdrew from the St. John's to Gatwick run, although the provincial government only attacked Air Canada. The provincial transportation minister John Hickey offered a convoluted - and often incorrect - version of events.

The idea of the province having some financial involvement in the flights is a new twist though. In comments made to CBC in December, Newfound Group president Jeremy White referred to a request for the provincial government to lobby Air Canada to restore the direct Gatwick-St. John's flight. He also said government had offered to help defray some of the marketing costs for Humber Valley.

No representative from Newfound NV is listed in the provincial lobbyist register, as of 25 July 2008.

Humber Valley general manager Paul Shelley is a former provincial tourism minister. [Update: Dan from Crazy reports by e-mail that Paul Shelley is "long gone" from Humber Valley. He's now in St. John's but still with Newfound NV.]

Brian Dobbin, still the major shareholder in Newfound NV according to the 2007 annual report, sits on the provincially-appointed Ireland business partnership board.

Between 2006 and 2008, the provincial government was the "anchor advertiser" at the Independent, Dobbin's weekly newspaper, according to comments by editor Ryan Cleary.

In summer 2007, the Indy featured a front page story on Astraeus and its weekly service. The piece attracted considerable criticism:
This week, Cleary himself has shown the folly behind this thinking; has demonstrated that independent ownership does not guarantee editorial independence. The main story on page one of this week’s Independent (July 20) is what journalists indelicately call a “suck piece”. It takes up more than a third of page one, then turns to a massive two page spread inside. And nowhere in the article does Cleary disclose to whom he is sucking up.
In other words, there is a blatant hidden agenda.
Cleary and photographer Paul Daly took a round trip to London, thanks to free tickets from Astraeus Airlines. In return, Cleary lectures us that the flight was less than one-third full, and that the airline does not have a “bottomless pit of money.” The headlines exhorts us to “Use it or lose it.”
Actually, Cleary didn’t need to accept the free tickets to write this piece. He could have secured the essential information from a face-to-face or phone interview. But no matter – I don’t begrudge a reporter a freebie here and there, as long as there is full disclosure.
Nowhere in the body of the article does Cleary bring himself to say the tickets were free. You have to read the photo caption to discover that “the airline provided the paper with two round trip tickets.”

Update: 'ullo, 'ullo. What's all this then? An eagle-eyed reader has noted that the provincial government's tourism statistics report for 2007 claims there's been an increase in commercial airline travel by the infamous "non-resident" visitor to the province and that air capacity has gone up likewise.
The number of non-resident air visitors reached an estimated 81,100 to
the end of April 2008, an increase of 5.0% over the same period last


Air capacity has increased significantly to Newfoundland and Labrador
for the summer of 2008 compared to the summer of 2007 with the
exception of international/overseas outbound direct. Not including the
Newfoundland to London, UK flights, there has been an overall increase
in air access of 6.9% flights (23 additional flights per week) and
14.3% or 3,353 seats per week

That "non-resident" visitor thing is such a joke. It's like you sleeping in another part of the house when the in-laws come to visit and then claiming that in addition to the endless string of visiors from out-of-province, your living room had a few "non-resident visitors.

Tourists are tourists. Visitors are visitors. The provincial government need to find another term for what they describe, and what is a legitimately business activity. But, they need to separate it from the real tourism statistics more clearly than they do. That way, the public can see - transparently - what kind of impact the tourism advertising budget is having on the market.


Hat tip to Gary Kelly for the link to the Crazy post. Humber Valley has potential. It will be interesting to see how it grows, hopefully without public subsidies.