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GM Report January 2010
Just as we were finishing the renovation our buildings 7 & 9 we were hit with a rainstorm that caused major flooding in certain parts of the island but, fortunately we only experienced water intrusion in one bedroom on the ground floor of building 7. However, there were several roof leaks that became evident as the volume of rain reached 4 inches per hour. All of these items have been repaired and we found in the case of the roofs that almost all of the causes of the leaks were faulty or sloppy construction.
The renovation of buildings 7 & 9 finished on time and on budget. We feel that these units were the best that we have produced so far and our guest and owner comments confirm it. The new Koa wood floors set the whole unit off as it is the first thing that catches your attention when you walk in the unit.
The budget process for 2010 was completed on time and allowed us to send out maintenance fees billings earlier than we have in previous years. Because of the opt-in letter contained in the mailing we could not send this project out to a vendor to complete. Each mailing packet needed to be reviewed by someone who knew what to look for in order for the information to be accurate for that particular owner.
The unauthorized use of the pool is still an issue especially with kids out of school on furlough Friday’s. On several occasions we have caught people in the pool and spa who jumped over the fence to get in. In the last incident, it took the police an hour to respond and by that time those involved had left. We may be forced to increase the height of the fence around the back spa in addition to adding commercial security cameras to the area.
ON GOING PROJECTS
The ambitious pace of multiple projects will slow considerably in 2010 as our sole big project for the year is the renovation of building 5 & 6. These two buildings contain 28 units and we are scheduled to begin Building 5 on April 23rd and finish on July 2nd . Building 6 is scheduled to begin July 9th and finish on October 1st . We feel very comfortable with the process now, after having completed most of the units on site. John Mahoney will serve as the project manager similar to what Jean Camp did for us for those buildings already completed. He will be assisted by Bill Adams who was our onsite supervisor and did an excellent job in making sure the project ran smoothly.
We are still evaluating the heat pump issue. Initially, the noise factor was not acceptable with the units that came with the original order. The supplier reengineered another unit and just recently sent that to us for installation. The installation has been completed and the unit is much quieter. We are now conducting tests to measure the effectiveness of the pumps as it relates to energy consumption. Gus and John have been working together to oversee and monitor this project.
FRONT OFFICE
John reports that occupancies during the 4th Quarter of 2009 declined. Occupancy averaged 73.1% for the period, well under the original budget but, close to our reforecast of 75%. Late in the year we faced the effects of fixed week/fixed unit bookings and the seasonal issue of reduced travel during the holidays. And finally, this year we experienced the overall impact of the concerns about the economy. In an average year we expect occupancies around 75% for the last six weeks of the year, however the downturn was more significant. December posted a rate of 67.2%. As a result our overall occupancy for 2009 finished at 79.2%. I think we were fortunate to finish close to 80% as many properties were in the 50 to 60 percent range.
Owner usage was generally on budget until the month of December. Usage was only 65% of the budget that month and related to the increased impact of fixed week/unit reservations. Those weeks have been utilized less and less over the years and are difficult to assign to alternative use (rentals) because the unit numbers are guaranteed. Some of that problem has been resolved with follow up calls to owners requesting information on their anticipated use but, many owners do not respond to our inquiries.
Exchangers were a reverse image of owner usage. Exchange bookings were well below budget in the first two months of the quarter (66% and 79% of expectations) but, rebounded in December of 88% of budget. Overall exchangers were 78% of budget while owners were at 79%.
In general owner usage for the year was unchanged. 2008 posted 36.9% and 2009 came in at 36.8%. Likewise exchange totals were virtually unchanged between years.
Our current occupancy projection for 2010 is 77% for the year. The projection for the first 2 months of 2010 are in the low to mid 70’s as it fluctuates daily based on owner cancellations and non pickups from exchange companies.
We are finishing up the installation of electronic safes that arrived in December of last year. They are large enough to accommodate lap top computers and eliminates the use of keys which was a real problem for the front desk. Access codes are user driven and we do have back up capabilities. Both CCIOA and CRVOA units will now be equipped with the new safes.
OWNER SERVICES
Based on our ongoing collection efforts for CCIOA we will begin the year of 2010 with 181 weeks as of 12/31/2009 and still have 32 week processed for QC (Quit Claim Deeding). That will give us a total of 213 weeks that we have in our inventory as a result of those efforts.
The collection efforts for CRVOA have resulted in 74 weeks that we have in inventory and 10 additional weeks in QC process. That will give us a total of 84 weeks. These non performing weeks have a greater impact on the operation as the total billable weeks are much less than CCIOA. We anticipate that these numbers will rise in 2010 especially weeks in the QC process.
FACILITIES, LANDSCAPING & GROUNDS
As a follow up from the last meeting we completed the addition of a 30 foot section of sidewalk fronting Building 7. This new section now connects the new sidewalk to the parking lot on both ends of the building. It eliminates to need to turn around for our room deliveries and provides better unit access for our owners and guests.
We will be working on a slot drain in the playground section to provide better drainage in an area where water accumulates. We have also had problems with algae growth in that area especially during our winter months when we typically have excessive rain.
As I mentioned earlier in this report, we contracted out the roof repairs to a roofing company and worked with them to complete all of the leaks that were a result of the November storm. James Sarme and his crew did a good job in getting them access to all of the affected units and monitoring to make sure their crews were using safety harnesses while they were on the roofs.
We are completing the new landscaping of Hale Mana Ho’oko. The design was done by Morton Yamasaki at the same time we were working on the pool. It will integrate many of the same planting themes from the pool area.
We recently did a major cut back of the eucalyptus trees on property as many of them were getting too large and were dangerously close the several residential buildings. Although they may look stark now, they will grow out very quickly and once again blend into the overall landscaping.
We took advantage of the tax breaks offered by the Federal Stimulus Bill and purchased an all electric vehicle for the maintenance crew. Our existing carts were in very poor condition and needed to be replaced. This vehicle is fully licensed and registered with the County. It has been very useful since we put it in service in December. We also got a $5,052 tax credit as and additional benefit.
HOUSEKEEPING
The new washers were installed the first week of December. This project also included a separate filtration system mounted behind the washers to filter the waste water prior to it entering the waste line. This was a requirement of both the County of Kauai and Princeville Utilities that was never done in the original installation. Our staff really likes the new equipment as it is easy to use much quieter and it is not as hot in the laundry work area. We look forward to potentially performing laundry services for surrounding properties. We have already purchased a cargo van to replace our old and often broken truck. This van will be used by both housekeeping and facilities for runs to pick up parts and equipment and hopefully for laundry deliveries. We have begun a new cycle of general cleaning as we do at each operating year.
ACCOUNTING
During the 4th quarter Julie and her staff continued to produce financials for all 3 companies, as well as reconciliations for all general ledger accounts.
Julie reports that audit bids for the 2009 operating year were requested from 3 firms all located in Hawaii. The 2008 audit did not go smoothly, dragging on for 11 months. The quality of the audit itself was unacceptable. We were one of the smaller clients of Myers & Brettholz and were often placed on the back burner. After a teleconference with several Board members the firm of James & Associates was selected. They have experience in both Association and Timeshare accounting and taxes. They are located on Maui and don’t intend on expanding beyond the markets they currently serve.
One specific issue that concerned us was the tax decision our prior audit firm made for CCIOA regarding the solar issue and federal tax credits for installation. The auditors stated that there was no way we could claim the federal credit. Several members of the solar committee had researched this extensively and disagreed. Our new auditor James & Associates were asked to research the matter and to restate the tax return if they found justification. They determined that there was no stipulation with the IRS saying that we could not take the credit. They will be restating the 2008 Federal tax return. James & Associates also found other errors in the 2008 returns that they will correct and refile.
The staff worked very hard keeping up with the accounting aspects of renovations, collections, activities and end of the year payroll processing. They are still trying to work with TSW our property software provider to enhance their reporting capabilities to give us the kind of reports we need to operate more efficiently.
ADMINISTRATION
We had our annual Employee Recognition party a few weeks ago. It was a luncheon held in the Rec. room and everyone enjoyed the good food and prizes that we gave away. It is especially important in these difficult economic times that we recognize the effort that our employees put forth on our behalf day in and day out. They are the ones who can make a vacation trip into and “experience” either good or bad and we should not lose sight of treating them fairly in good times and in bad. We recognized the following employees:
One Year Service Award: Ernest Cabutaje Housekeeping
Rose Ann Canosa “
Gregorio Guimba “
Romaldo Guimba Facilities
Five Year Service Award: Lenore Domingo Housekeeping
Kapua Hermosura Reservations
Myrna Rodriquez Housekeeping
Jimmy Uduando Facilities
Fifteen Year Service Award: Agusto Sajonia Facilities
Employee of the Year: Bill Adams Facilities
Our new staff in Activities has been a breath of fresh air. Lead by our manager Sabrina Callahan they are truly concentrating on making someone’s vacation a unique “experience” even if it means they don’t get anything in return. We have more participation in our onsite activities and we will continue to look for new activities for our owners and guests to do.
Our IT projects have been a challenge as we try to move forward with our billing and balloting project. It was anticipated that by January 1st of this year we would be up and running and that both Cliffs Club and Cliffs Resort members would have the opportunity to pay on line via electronic check and to view and print their invoices. We have had several teleconferences to try and resolve the core problem which is TSW is Microsoft based and Data Space Industries who we have hired to complete the project for us is Linux based. DSI was hired to design and present owner information (i.e. invoices) through the website. Based on these differing platforms, both vendors were having difficulty finding a solution that would successfully pass information from one side to the other. The best analogy is that one side was speaking English and the other was speaking Chinese. After our last teleconference in December, DST now has the ability to successfully query information in TSW. Based on a recent inquiry as to the timeline to complete the initial part of this project, we are looking at mid February.
In November, a new log in procedure was created to simplify the login request process for owners. The responses have been great from our owners. It is during this process that we are offering multi account owners the option to combine their accounts into a “master account”.
Based on our preliminary forecasts 2010 will be a challenging year. We have seen a softening of our occupancy in what is traditionally a strong period. As a result of this and our concern with collections we have made staff reductions by both eliminating positions and cutting hours. Through the first 11 days we have reduced our payroll by $28,000 and will continue to monitor our expenses and make adjustments accordingly. We need to proceed cautiously this year and be conservative in our capital and operating expenditures.
03/02/2010
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