Fresh eyes helped Northland venture

By SELWYN PARKER

Mike Simm and his two partners knew next to nothing about the tourism industry. None of them had owned a boat. None of them could lay their hands on serious money. And, since many investors were still hurting badly following the 1987 sharemarket crash, they could be expected to be cautious about risky financial ventures.

So what did they do? They borrowed all they could to buy a maritime-based tourism business in receivership. The business was Fullers Northland and the year was 1989.

"Everything we had in the world was on the line," recalls Mr Simm. "Our equity was less than 20 per cent. We were in doggy-deep."

His partners, Roger Dold and Chris Jacobs, had sold their homes to raise their share of the purchase price and Mr Simm had mortgaged his to the hilt.

And today? Fullers Bay of Islands, as the company is now known, has just won tourism's Oscar, the supreme award in the industry's annual prizegiving, one of the very few companies outside the main tourism centres to do so.

But between 1989 and the glamour of the tourism awards, it has been a long and sometimes fraught road for the three partners. Theirs is a story of one of tourism's most successful and little-known exercises in rescue management.

And perversely, argues Mr Simm, the recovery of Fullers Bay of Islands is largely attributable to the owners' combined ignorance.

"Our lack of knowledge of the tourism industry was an advantage," he says. "There's a lot of second and third-generation management in this industry with preconceptions about what should be done."

Mr Simm and Mr Dold were both accountants working for McConnell Dowell. Mr Jacobs, whose background was in sales and marketing, was helping the Fullers receivers. They bought Fullers Northland because the operation was marginally profitable but had fallen victim to Fullers' ill-timed expansion into Auckland under chairman Harry Julian.

The company was still running but not too well under the receivers' scheme of arrangement. The Aucklanders were the only prospective buyers for the business.

Under these circumstances the main creditor, Bank of New Zealand, was happy enough to welcome new owners, even if their stretched resources could reach to just 20 per cent of the company.

The newcomers arrived in Fullers Northland offices in Paihia to find a demoralised staff, a few hundred unhappy former local shareholders in the business and some tired assets. Their first moves were instant, conventional and overdue.

They began the rebuilding process by eliminating not just one or two layers of management but the whole lot. The partners called themselves executive directors and managed the company. Everyone else drove boats or buses, sold tickets, answered phones or was otherwise engaged in operational jobs.

At the same time they installed the bread-and-butter, day-to-day controls that had been missing. For example, the new owners broke out earnings by product lines instead of, as before, simply by "maritime" and "road" (the bus tours).

And they looked at cashflow and patronage on a daily basis. Thus if, say, passenger numbers were down in the Hole in the Rock trips, they could sit down, do some analysis and see what could be done.

Although there was not much spare cash, what little there was went into maintenance, new engines and other equipment, brighter paintwork, new uniforms.

"That gave us credibility with the staff and the market," says Mr Simm. "They could see we weren't taking a lot of money out."

But the resurrection of Fullers Northland needed more than bread-and-butter solutions. The road division, for example, had been an A-grade headache for years.

Although about 25,000 passengers a year paid for the trip up Ninety Mile Beach to Cape Reinga, the service steadfastly lost money. The 23 buses were "unreliable, second-hand dungers" in Mr Simm's words. Half the time the drivers could not even be sure they would make it home.

In these circumstances, Fullers Northland could hardly charge more than a basic price for tickets.

But ignorance can be bliss. Because the new owners knew even less about buses than they did about boats, they went to the coach industry for help.

The result was that Fullers Northland replaced its fleet of dungers, worth perhaps $200,000 in total, with six new, custom-bodied Saab-Scanias worth $1.8 million.

Because the new coaches were top-drawer, designed to cope with sand and salt and much more reliable, the trip north became overnight a premium excursion.

"We effectively replaced a huge repair and maintenance cost with an interest cost, but doubled the ticket price," says Mr Simm, who has a precise memory for figures even 12 years old. Perhaps they are burned on his memory.

The new buses also gave the reviving company a flagship experience to sell, especially to the overseas market it targets.

"Our business aspires to appeal to the international visitor," says Mr Simm, a recent director of the Tourism Board who is passionate about the contribution that the regions can make to tourism.

"We can't survive on the Auckland market or the summer market.

"We have to create an international quality product."

About 72 per cent of Fullers Bay of Islands' passengers are from overseas, primarily from Australia - where the partners market the business aggressively - Britain, the west coast of the United States, Holland and Germany.

They come to be entertained and informed. Mr Simm says the Maori component of the experience is absolutely fundamental.

You can't let up in this business. Last year, Fullers Northland (as it was still then called) gave $30,000 to Auckland consultants NFO CM Research to audit the company. Armed with questionnaires, the consultants interviewed just about everybody with an interest in Fullers Northland - customers, agents, suppliers, staff, focus groups, local residents, you name it.

"What's good and bad about Fullers Northland?" they asked in effect.

It was as a result of the audit findings that the owners changed the name to Fullers Bay of Islands, the "Bay of Islands" saying a lot more to tourists than Northland.

They also retooled the logo to include dolphins, splashed a new, eye-catching livery on the buses (largely because Bay of Islands locals were bored with the original, five-year-old one), knocked up new uniforms and launched a new company called Awesome Adventures to tap the growing youth and backpacker market. And, oh yes, they commissioned a new, $1.5 million, Whangarei-built catamaran.

As for the partners' houses, they were able to buy new ones or, in Mr Simm's case, clear the mortgage within three years.

* Selwyn Parker is available at wordz@xtra.co.nz