Reicof Co. Ltd.’s vision of turning its Rota Resort & Country Club into a PGA outpost is on hold while it sorts out how to get more golfers and guests to the isolated island.
Reicof which acquired the resort on Jan. 1 blamed the situation on the airlines.
The financial woes of the resort which took a turn for the worse when Pacific Island Aviation ceased operations on Feb. 9 amounted to losses of about $180 000 a month in March and April and caused the sudden dissolution of a management agreement with the Buena Vista Hospitality Group. The resort’s 110 employees were notified of the dire straits in a memo on April 20 and Clifford L. Meads Buena Vista’s manager left for good on April 26.
Facing 16% occupancy in April and without more direct flights from Saipan in sight Reicoff decided it could not afford the management services of the Tampa Fla.-based Buena Vista let alone a $6.4 million renovation project. Buena Vista which is involved in management and marketing at more than 50 hotels resorts golf communities and clubs throughout the world was considered a marketing coup by Reicof which wanted to deliver the PGA of America name to idyllic tiny Rota. Buena Vista is the sole licensee that can deliver the Professional Golfers Association name.
Meanwhile Rota Resort the island’s largest business and employer has some short-term plans as temporary fixes to stop the bleeding:
• A marketing meeting scheduled for April 28 will look at a strategy for bringing employee-incentive tours from companies that are affiliated with Reicof.
• While the massive renovation project is on hold Reicof will pump in money in May for cash flow for operations and some immediate needs such as restaurant renovation.
• Reicof which canceled the resort’s annual Mayor’s Cup Golf Tournament in February because it did not have enough operating golf carts has ordered 40 new Club Car electric carts from PacSports Ltd. at a landed cost of about $5 500 apiece. PacSports said the deal had not been signed as of April 27 and it is concerned about the creditworthiness of Reicof and who the owners are before it decides on any terms.
• Rota Resort which has three large generators that can power the entire island of 3 000 population is considering selling power to the Commonwealth Utilities Commission. They were scheduled to meet April 26 to discuss this possibility.
“I’m not sure what’s happening next. All I know is there is no dispute. We have an understanding that what we came here to do cannot be done in this climate. This is not adversarial at all ” said Meads four days before his departure. He said Buena Vista was involved in the Rota Resort project to “reposition the property bring in the PGA name and elevate the property.” Meads said he will return home to Savannah Ga. for a couple of weeks then will move with Buena Vista to another location.
Reicof quickly dispatched two owner’s representatives Mitch Matsumura and Seiji Kuwabara who arrived on April 15 to assess the condition of the resort and handle the emergency management situation. “We’re making a report of the situation of the resort to Japan. We understand that the economy of Rota depends on our project. We hope we can work out good flight schedules ” said Matsumura. “We committed this investment. We do have a lot of concern but we think it can be resolved ” he said. They were scheduled to go to Tokyo in early May to report to Reicof and return to Rota on May 10.
Meanwhile they are searching for a general manager and a comptroller both of whom more than likely will be Japanese said Jesse Rojas sale and marketing manager for the resort.
Matsumura said Reicof did not understand the severe impact of PIA’s cessation of service until March or April. He said the company knows it will miss the benefits of Golden Week a traditionally heavy vacation time for Japanese. He said Rota Resort has few bookings despite that fact that Guam has 36 charters and Saipan three for Golden Week April 29 to May 8.
A large part of the problem for Rota Resort is that Japanese tour wholesalers for years have been selling package tours to Rota via Saipan. Fully 70% of Japanese visitors to Rota came via Saipan. Although Cape Air which is marketed by Continental Air Micronesia increased service in the wake of PIA most connections are routed through Guam Continental’s hub adding additional time for security screening and immigration checks which must be duplicated on arrival in Rota. Flights to Rota via Saipan were easier to sell because both are in the Commonwealth of the Northern Mariana Islands; therefore screening is only required once. “Wholesalers in Japan are confused about how they can sell our packages because we don’t have good connections ” Matsumura said. Almost nobody connects to Rota from Saipan flights on Japan Airlines and Northwest Airlines he said.
Russell C. Price administrator and captain for Cape Air said the commuter airline has done a great deal to arrange a schedule that assists Rota and the resort within the framework of Continental’s Guam hub and May 1 added a second 46-seat ATR 42 aircraft to its Marianas routes. “We understand the resort is the biggest player on the island and we are coming to the plate for Rota as a whole. We’re adding more flights at more times of the day with the largest and best-equipped airplane they have seen in years ” Price said. Beginning May 1 Cape Air increased the number of commuter flights from 10 to 18 a day.
“It would be a little unfair to say the market is not well serviced. You can start at any one of eight cities in Japan and connect to Rota on Continental ” Price said.
Freedom Air which serves the Marianas with two Guam-Rota-Saipan trips a day is in discussions with Northwest Airlines to adjust its schedule to connect with Northwest’s Japan-Saipan flights. Richard C. Brown director of operations for Freedom Air said no formal talks have taken place with the resort about the schedule though Freedom Air is considering a midday flight if the demand is there.
Reicof is an investment group based in Tokyo that is involved in land acquisition and development. Reicof and Buena Vista had signed a 10-year management agreement.
Rota Resort opened June 1 1995 on a site of about 600 acres overlooking the ocean. The golf course opened its first nine holes on June 15 1995 and the second nine on April 1 1996. Much of the land is subject to a 40-year government lease the maximum period under commonwealth law. The resort’s initial 25-year lease was signed in 1990. The 11th CNMI Legislature extended it for another 15 years. At that time Rota Resort promised to keep the local green fees at $30 per round until June 1 2005.
The resort reported revenues of $2.36 million for 2003 and $2.7 million for 2002 for the Deloitte & Touche/Guam Business list of the “Top 50 Companies in Micronesia.”
The amount Reicof paid for the 18-hole golf course and 52-suite Mediterranean-style hotel is a tightly kept secret. However a source close to the sale said “I hear they got it for a song.” SNM Corp. a 210-year-old company based in Osaka Japan spent about $120 million while never completing the grand plan of the resort.MBJ