We hope this update finds you well and healthy. We miss everyone and cannot wait until the world health situation is under control and allows everyone to come visit your home away from home in Aruba.
Considering our recent Annual General Meeting (AGM), we wanted to provide a financial update which goes into a bit more detail about the future and financial health of the Resort. In order to tell the full story, please allow me to begin before the COVID-19 pandemic affected everyone. Thank you for taking the time to read this message and please feel free to post any questions you may have.
Summary of 2019
During the AGM, the 2019 financial statements were approved. 2019 was a very successful year for La Cabana for several reasons:
· We invested in several renovation projects which will soon be delivered
· We finished the year with a surplus of excess funds over our expenses
· We began to see the savings from the new cooling towers and HVAC units, recently installed
You might have noticed that our balance sheet did not have any investments as of Dec. 31, 2019. This was by design. We collect the majority for our reserve funds at the beginning of the year and schedule investments to mature during the year; we time the maturities to coincide with when we need the funds for renovation projects. Rest assured we still maintain a policy to invest excess funds where appropriate and in a way which is risk-free. The fact that the balance at Dec. 31, 2019 was $0 is merely a timing difference between the allocation of 2020 funds and the current maturity of the investments based on the need to spend the money for renovation projects.
You also might have noticed we were able to reduce our Fund Balance deficit by about 50%. We also had very little maintenance fee delinquency and a reasonable balance of COOP owned units.
COVID-19 and Fiscal 2020
Coming off the heels of a successful 2019, we were greeted in Q1 of 2020 with some of the most challenging events the Resort has faced in its 30 years of existence. As you know, the travel world came to an immediate halt in the beginning of the year and most countries, including Aruba, closed their borders to foreign travel. We were faced with some challenging decisions. As an immediate response to the COVID-19 pandemic and to secure the financial safety of the COOP, we implemented the following steps:
· We immediately halted all non-critical spending
· We applied for the government subsidies which were available to the Resort
· We renegotiated or delayed all vendor agreements and payments
· We immediately stopped all Reserve spending, except for the following:
o If we had already spent the funds and the project materials were already delivered, we continued with installation (for example, the new doors)
o If the spending was critical to the safety and security of the Resort (for example, certain technology expenses needed to ensure the security of operations and data)
o If we were able to secure a significant discount on current labor for projects we expected to perform in 2021 (for example, we repainted the Resort at a 60% discount to normal pricing, which was budgeted in 2021 at 100%)
· We paused our investment program as interest rates had fallen to extremely low rates
· We maintained all our liquid cash to guarantee capital security and not expose our funds to any risk of investment loss
· We reforecasted our cash and financial positions weekly and implemented to high level of oversight on all cash expenditures
· All Board members immediately waived any compensation for 2020.
As such, we have been able to maintain the financial security and health of the Resort. We have begun to see gradual increases in occupancy since August and we experienced a 44% occupancy as of November 10th (date of the AGM). Occupancy increases are important as food & beverage revenues, transient rental and store leases greatly support the financial stability of the Resort.
During the AGM, the 2021 budget was approved with a 0% increase in maintenance fees. This budget assumes additional energy savings, paced increase in occupancy as the world begins to travel, and sets aside funds for us to begin a 3-Phase approach to updating our pool and surrounding amenities. It also includes funding for the start of a much-needed two-year interior renovation project and has little to no increases for operational overhead. Our overall goal for 2021 is “Capital Preservation”. We are closely monitoring all operations at the Resort and retaining a high level of control over the expenditures to ensure we are preserving the health of the Resort and are supporting its recovery.
In conclusion, we miss all of you and look forward to your next visit to La Cabana. Your Board of Directors remains committed to (1) Preserving our owners’ investments in this beautiful Resort (2) Providing memorable experiences, (3) Nurturing our guests, owners, and associates.