Friday the 13th...The Final Chapter / Part III

The previous owner of The Riverside ran a cash-only business, (I think, duh, maybe for screwing the IRA tax reasons) and therefore, kept no reliable records as to the earning potential of the hotel and restaurant; no occupancy rates, no average # of diners/month, no monthly or annual revenue figures – nothing. So not only did we quit good jobs and leave friends and family to buy a 106-year old haunted building in need of major repairs with fetid living quarters in an out-of-the-way town that smells like rotten eggs in a climate that would freeze the ass off of Nanook of the North for nine months out of the year, we also invested our life savings into the textbook definition of a financial "pig-in-the-poke".

The business plan that I developed for the bank was based upon some wild-ass guesses using formulas that involved days of operation, number of rooms, number of dining room seats, room rates per night and price of the average meal ticket, and put that against estimated monthly expenses – most of which came from Abe; no, unfortunately not Honest Abe Lincoln, but Abe Rodriguez. I conservatively figured, or so I thought at the time, that our break even point was at a 20% occupancy rate. I actually took a lot of time putting occupancy numbers together, with bell curves trending during busy seasons along with expenses, and felt that I had a pretty good grasp of things. After all, (although most who’ve read prior entries to this blog and have marveled at my lack of business acumen, nay in many instances, my lack of a single, properly functioning brain cell, will call absolute screaming BS on this) I ran a successful business for the better part of 20 years, a large part of which involved the financial management of budgets and expenses and generation of revenues. So while I was a neophyte in the hotel and restaurant business, I certainly wasn’t a neophyte in running a successful business. While The Riverside was nothing but an endless string of bad decisions, I previously had a history of making mostly good decisions; the bank relied upon that fact in buying into my 20% occupancy rate business plan, which included 5-year cash flow and pro-formas.

The first summer seemed to go pretty well, in spite of the fact that we’d done zero marketing or advertising. We ended up being at full occupancy every Saturday night from the middle of June until mid September, with numerous near sell outs throughout the weeknights. Our lunch traffic was steady to good throughout the summer, with bustling dinner business on the weekends. I was able to comfortably pay the bills, and even had the cash to make an extra mortgage payment in September. But in October and November, our business dropped like a Boulder boulder; but the expenses held steady. I started eating through our cash like a victorious football team at a post-game buffet. A decent Christmas season helped momentarily to right the ship; then came the off-season (January, February and March), followed by the dead season, or more commonly referred to as ‘mud season’, which is comprised of April, May and the first two weeks of June. I terrifically miscalculated the amount of business that was available to us during Ski season; from a lodging perspective, it was virtually non-existent, as skiers want to be on the slopes, and we were 25 miles away from Winter Park. If not for Valentines Day weekend and a couple of group events, our first full winter would have been disastrous. It was in March that I went to the bank for that promised line-of-credit that was ultimately denied; if not for me raiding my 401k, we wouldn’t have made it to our second summer season.

We shut the hotel down in mid-April after an Easter Sunday brunch and headed to KC for a few weeks. We still had our unsold, unoccupied home in KC that we were making payments on – a situation that never even in my ‘worst case scenario’ plan occurred to me when we packed up in June of 2008 and headed west; not only was I not budgeting in a house payment, I had budgeted in the income from the quick sale of that house at pre-depression real estate values.

There was another nasty little ‘what if?’ that I missed when I was running the business plan numbers on this venture that was now strangling us to a slow, very intense fiscal death – the depression. While I now have profound doubts about our ability to have been successful at The Riverside in a robust economy, I for damn sure know the current state of the economy didn’t do anything but hurt our situation. As bad as things are nationally, they’re far worse in Grand County, CO, with the hub of the pain and suffering being centered in Hot Sulphur Springs – the county seat. The whole raison d’être behind Grand County, CO is tourism, and tourism is fueled by discretionary spending and discretionary spending is the first thing to dry up in a depressed economy.

The difference between our first summer (economy still robust) and our second summer (economy in the toilet) was profound and immediately discernable. Our bustling lunch business of 2008 disappeared in the summer of 2009; on many days not a single soul walked through the door, but a cook was paid and the prepped food went to waste. It was a slow, agonizing financial death; by August I’d sent home all of the peripheral help, and it was down to Julie, our cook and me to handle all of the chores. I had way too much 10:00 AM – 2:00 PM empty lunch time, listening to the dining room playlists and reading books, whilst sitting, hoping and praying that a customer would walk through the door; not one second of it was relaxing or enjoyable.

Our 2009 pre-season hotel room bookings were non-existent and the Saturday afternoon walk-in crowd of 2008 that filled the hotel every single weekend was hunkered down someplace else. Business was in the toilet but the fixed expenses were still in the penthouse.

We were bleeding, we were dying, and the coffers were bare….