I had a brief adventure as a Bali tourism owner in the 1970’s. I was looking for a career change with a touch of paradise but instead had a five-year nightmare.
Leaving the country
In 1975 I was precluded from working in Australia due to the heavy-handed Tax Department, which seemed to think it owned me. I don’t believe in slavery so I left the country. In between my wanderings around Indonesia looking for nickel, I sat next to an accountant on a plane and he mentioned an exciting business opportunity of running a business, the Coconut Grove Hotel, in Bali. Not bad, I thought! A great lifestyle and close to Western Australia, so I could still spend time back home and use my contacts to promote the hotel to Australian travel agents.
They say that wisdom comes from learning from your own mistakes, and I only wish we could make things better by talking about them. It didn’t take me long to slip into the due-diligence process. I arrived at the hotel in Bali with a Sydney solicitor to check out the title and security while I looked at the figures and the suggested strategy for expanding the hotel with more units. I must say that, in 1975, Bali had a lot going for it and this made the financial projections ooze with excitement. The island was still enjoying the long-running publicity from the old Bing Crosby/Bob Hope movie The Road to Bali.
We had a few hiccups moving in to the Coconut Grove Hotel.
- Not long after we launched into the extensive building project for the additional units, it was pointed out that we had not paid the officials enough “pocket money” to continue with our building program. This involved protracted, seemingly never-ending negotiations that bear a striking resemblance to Australian mineral explorers’ experience with our Native Title Act.
- PanAm and KLM were both suddenly banned from landing direct flights into Bali as the central Indonesian government in Jakarta felt that all tourist entry should be via Jakarta, with tourists then transfer ring to regional Garuda (Indonesian Government-owned) airline flights to destinations such as Bali. This is exactly what US and European tourists did not want to do.
- The bank manager then arrived, armed with his own solicitor, and casually mentioned that the bank had a first mortgage over the property and that interest was accruing at the rate of 48 per cent per annum. It appeared my Sydney solicitor had been incompetent in not having asked the right questions and conducting the proper title searches. (After two loss-making seasons, we were rescued, just in time, by Qantas running direct flights from Perth to Bali. This enabled us to participate in the packaged tour market and it became very much an Aussie style destination with one mob flying out on Friday afternoon and another mob moving in, having arrived on the same plane.)
Things got better once there were direct flights to Bali from airlines such as KLM in Europe and PanAm in USA. This guaranteed full houses for most of the Balinese tourist destinations. The existing 12 cottages at the Coconut Grove Hotel were always full and we thought that the restaurant, bar and staff could easily handle an additional 36 units. It’s not often that you have an opportunity to quadruple your cash flow from existing infrastructure. Building was cheap in Bali, using local builders and material, so this also helped the feasibility study.
We managed to keep the hotel operating at a high level of occupancy. It was always difficult to calculate profitability, as I suspected that, on many occasions, we were actually feeding the whole village. Interestingly, we managed to halve the hotel’s food consumption, simply by abandoning bulk purchasing and buying only on a daily basis. The hotel generated its own electricity and we were mystified at our power generation costs, until we found a buried power cable running off in the direction of the neighbouring village. Although we only had 18 staff, we had to have more than 100 uniforms as they had a complex system of job-sharing. We only paid the 18 who were actually on the payroll. They then shared jobs with others who were currently unemployed, sometimes four or five people sharing the one job. This system worked reasonably well. Although we only paid one a salary, we still appeared to be feeding all the other stand-ins and their direct and indirect families
Perhaps my darkest day
I can clearly remember what probably developed into being my worst day on the job. It was a 4am start, on a day I was flying to Jakarta to promote the hotel to travel agents. The early start saw me leaving at dark on the back of a motor cycle (of course the pre-booked taxi didn’t arrive), briefcase held firmly in my left hand and an eight-millimetre movie projector held firmly in my right. Somehow we managed to negotiate all the potholes and stray dogs to arrive at the airport on time. I saw several travel agents in Jakarta and found there to be little interest in Bali, as there were many better and more accessible resorts closer to Jakarta, on the main island of Java.
By the end of the day I’d had enough and one of the travel agents, Bali International Travel, suggested I should stay at their hotel called Bali International Hotel. The proprietor assured me it was “almost completed”. I’m always good for these half-price offers, especially as it was already starting to rain that warm, humid Javanese rain. So as the sun was setting, I headed off for the Bali International Hotel. Now, in Australia I’m sure that building regulations would prevent occupancy of any hotel without handrails on external stairways, but not so in the mid-1970s Jakarta. Halfway up the stairway, down came the heavy rain and as I walked through a few puddles to the door of the hotel room I was fascinated to see that the wooden louvres on the door had been fitted on the wrong angle and were collecting rain instead of deflecting it. This explained the wet floor in the hotel room. The wet floor did not worry me too much for at least I was inside and out of the rain. The room had two narrow beds, each covered with a single white sheet. To my horror, crawling across one bed was the largest cockroach you can imagine. Quick as a flash I removed my boot and flattened the cockroach.
Lifting the boot I found a large technicolor bulls-eye impressed on the sheet. I must have stood on a fresh dog-turd coming up the steps. I decided to sleep on the other bed, but not before taking a shower. Surprisingly, no plumbing had yet been completed to the shower recess, but within reach there was a hand-basin and a plastic bowl. It was obvious that the only way to complete the ablution project was to stand in the shower recess and repeatedly reach out for the refilled plastic bowl. Amazing what you can do when you have to.
Anyway, I then managed to happily climb into the one remaining bed, even though I was perturbed that it only had a single sheet, and I was lying on a raw, exposed mattress. It took only a minute to realise that I wasn’t alone in the bed. There were thousands of creepy-crawlies all over me. My closing thought for the day was “tomorrow has just got to be better than this”.
Learning from mistakes
Remembering something that John F. Kennedy once said — “An error does not become a mistake until you refuse to correct it” — we struggled on for a few years and through continued promotional efforts, a restructured bank debt and direct flights from several Australian capital cities, we achieved profitable performance. This enabled an Australian-based syndicate, of which I was a member, to take over the hotel until, through a different set of circumstances, the enterprise eventually collapsed. Our investment was completely written off.
Many years later, when I revisited in 1999, I found the hotel completely without guests and the pool was empty as if they couldn’t even afford chlorine. I personally felt that despite the lessons learned (about all the things that can go wrong with a perfectly sound project) the five years wasted were simply a disruption to my overall progress. So I was ready when, shortly after that, I was again seated next to an accountant on a flight and he explained how he had “an exciting South Pacific adventure that could not fail”. He was right, but only in that it was an exciting adventure.
Much later, I spent a considerable sum of money seeking legal ad vice on action I might take against the solicitor for not checking the existence of the mortgage over the Coconut Grove Hotel. After spending this money it was explained to me that solicitors don’t like acting against each other any more than doctors like testifying against each other. The question I ask now is: “what sort of fool rushes from one bad investment into another?” I don’t quite know the answer — but you’ve now met him, and if I can prevent you from writing off seven-or-so years of your own lives, your time reading this has been well spent.
It was only later that I did any in-depth analysis, and then managed to learn something from that sobering nightmare.
Learning vs influence
Leadership is not just hitting a ball further than someone else, or running faster than the next guy. It includes an intellectual component that enables us to stand apart from the popularity polls, and work for an ideal, a code of ethics or a new idea, no matter how small the prospect of its early realisation. Looking back at our own lives at some point in the future, we will realise that while we learn from many, perhaps thousands of people, we are only permanently influenced by very few. Perhaps you can count them on the fingers of one hand.
We, ourselves, when working amongst our own people, are constantly mentoring them even if we don’t realise this. We should think more about our influence on others and let it develop our own character to new heights. If we do, we will be even more successful than the goals we have set for ourselves. We have to get this leadership concept right, if we want to get where we visualise ourselves and our future
Later, as our careers advance, we will all look back on who and what made the difference for us. Was it a major challenge, something that became a “stretch assignment” like my Bali Hotel experience? Something you get into easily and have to fight like hell to get out?
Or will it be a mentor, a single person who made a difference in our lives?
We are never deceived, we deceive ourselves. The real trouble with this world of ours is not that it is an unreasonable world, not even that it is a reasonable one. Most of our investment failures come from the fact that it is nearly reasonable, but not quite.
1 Comment
Thanks for a very good read Ron