Mt Cook Plans To Grow With Tourist Trade

Press, Volume CVIII, Issue 31767, 26 August 1968, Page 16

Mt Cook Plans To Grow With Tourist Trade

In spite of a disappointing year caused by lack of snow last winter and higher depreciation, the Mount Cook and Southern Lakes Tourist Company, Ltd, faces an immense challenge in the next few years as the “Jumbo” jets begin carrying passengers throughout the Pacific.

The McDonnel-Douglas Corporation, after a close study, estimates that some 900,000 United States passengers will travel in the Pacific area sin 1970. This figure could rise to 1.5 m if fare levels drop.

If only a small percentage of these visit New Zealand then the country’s tourist facilities will be over-taxed quickly, even discounting the increased interest in New Zealand by Australians and others since devaluation.

Because Mount Cook transports tourists both on land and in the air and provides resort facilities, especially at Queenstown, the company will feel the Impact of-this large growth in tourism. The future market for the company thus seems assured. The matter which both investors and shareholders must resolve is whether Mount Cook can serve this market and at the same time earn satisfactoy profits. An answer to this requires a review of current facilities and future planning and also whether the company is sufficiently well organised to meet this growth, both at a financial and managerial level. Expansion Rate So far Mount Cook has expanded at a great rate. Its ordinary capital has risen from $170,000 to around $500,000 within four years and this has been matched by expansion of services and facilities. Apart from the coach and airlines divisions, the major activity is at Coronet Peak, Queenstown, where in the last five years chairlifts to skifields and a restaurant have been built and the road to the area improved.

Since the acquisition of New Zealand Tourist Air Travel; Ltd, after the close of the financial year in March, Mount Cook has an amphibian air service in the Auckland area and around the Southern Lakes in the South Island, and has improved its tourist facilities in the North Island with better premises in Auckland. Expansion will probably be directed to making better use of the potential in the North Island, building another resort in Queentown to complement Coronet Peak, and opening up the Southern Lakes area. Project’s Attraction Since the Manapouri power project was begun, opening up previously inaccessible areas, Interest in these lakes has increased rapidly in the last year or so. Transport will have to be improved to service these areas and provide additional carrying capacity as tourist numbers increase. This will be mainly solved when the Hawker Siddeley 748 begins operating in October, just before the main season begins. This turbo-prop aircraft will supplement the present two DC-3s which, because of the good ski-ing and snow conditions, have been fully used this winter. Projections for November show that the airlines division will be used more than planned with the 748 on several days already scheduled to make two return flights daily. Aircraft Finance A feasibility Study shows that the 748 can be paid for from depreciation and cash earnings. This aircraft has been financed over ‘ eight years, presumably with the help of United Kingdom export sales arrangements.

If the demand for air services continues to rise next year, the 748 and the DC3s will have difficulty coping with the loads offered and some other aircraft will have to be considered. In the shortrun, this may not necessarily mean another 748 although the company has plans for another about 1970. The next logical step is accommodation. A guaranteed hotel booking of known inter-

national standard is rapidly becoming as essential as an airline ticket for today’s regular world traveller. Hotel Entry Sooner or later, Mount Cook must enter the accommodation industry so that it can ensure its travellers of bookings. Meanwhile, the quickness of air travel means that an overseas visitor can visit most of the scenic attractions In the South Island within a few days, depending on what his interest is. This speedier turn round makes better use of the high capital tied up in hotels. To meet these demands requires changes within the organisational structure. Recently the board was strengthened by adding three directors, Messrs C. O. Marshall, R. W. Steel and R. S. Odell, to widen the scope for decision making at the top. Also, management changes have been made so that development can be planned but at the same time allow executives to give attention to the day-to-day running of the company. Firm Transformed These two changes have virtually transformed the company from a small, localised firm based in Timaru to an organisation which is gearing itself to run on a national and international level. With this expansion, it is certain that shareholders will be asked in the future for more capital. This will have a dual purpose, to provide more funds and to widen the equity base so that the company has access to fixed term borrowing opportunities.

Since 1965, the company, under the guidance of a large public accounting firm in Christchurch, has been operating a profit plan. This provides closer control over each division of the group and has also enabled the board and executives to plan with more certainty for the future. Year Anti-climax The latest year was an anticlimax in the steady growth achieved by Mount Cook in the last four years. No snow until late in the winter meant that revenue fell $47,205 while the coach and air services were also severely affected. Depreciation provision also rose $39,679 to $57,972. To meet the expected increase in demand, the company in the latest year expanded its coach fleet and installed a small Pomagalski chairlift, which increased depreciation rates.

This year the winter season has been exceptional and last year’s drop in revenue is unlikely to be repeated and perhaps recovered. Cash Flow Depreciation provisions will continue to rise, especially once the 748 comes into use. However, this has two benefits. The first is that it reduces the taxable income and second, any provision is retained within the business and with retained earnings (after paying dividends) provides the internal cash resources for the group. Last year’s performance should be an isolated one. In the current year, prospects of a profit at least equal to the $56,030 earned in 1966 are likely. The future promises much greater returns and the development within the company in the last three years has placed Mount Cook in as good a position as could be expected in which to take advantage of the boom in tourism.