Founder: Brian Dobbin, 44
Business plan: A luxurious, four-season resort on the west coast of Newfoundland that would offer holidayers custom-designed homes and an authentically Canadian experience
Target market: Affluent and adventurous foreigners, mostly from Europe and the United States
In the mid-1990s, Newfoundland entrepreneur Brian Dobbin came up with an ambitious plan to build an upscale getaway on the island's remote and scenic west coast. Unable to secure domestic financing, Dobbin looked to sources in Hong Kong and Taiwan, and, over the next five years, managed to raise $35-million. With $18-million of this capital earmarked for the Newfoundland resort, the provincial government agreed to sell Dobbin's development firm, Newfound Group, a big chunk of Crown land.
Dobbin decided to presell the Humber Valley Resort chalets, but he didn't bother chasing Canadian buyers. Since it was the closest such North American resort to Europe, he reasoned that winning business there would get New York and Toronto buzzing. As it happened, Dobbin scored an international marketing coup: He started his sales pitch in 2002 - just in time for the real estate bubble - and received orders for 375 homes from customers in 16 countries.
But back in western Newfoundland, where the building boom had doubled the costs of labour and materials, Humber Valley was in trouble. The tab for constructing a 3,000-square-foot chalet had risen from $350,000 to more than $400,000. So, too, the costs of big-ticket items such as a Doug Carrick-designed golf course and charter flights from London for prospective property owners. "We made the classic developer's mistake," Dobbin admits. "We made it too nice."
When the Humber Valley project began to hemorrhage red ink, Newfound was forced to do business with property speculators, who, by 2005, had driven resale prices up by 300 per cent. By then, in an effort to escape bankruptcy, Dobbin had stepped away from the project, but his management team in Newfoundland continued to overspend and overhire. Two weeks after Humber Valley officially opened in December, 2004, it laid off 40 of its 150 staff. "The single biggest problem we had was that no one who was there in the early days of resort operations - most importantly, myself - was actually on the ground at Humber when we started," Dobbin says.
In late 2006, Newfound got a $40-million lifeline by selling itself to a shell company that traded on the London Stock Exchange. After Dobbin resigned as CEO a year later, however, the struggling London-based enterprise cut its losses. With debts of more than $100-million and dozens of properties still unfinished, Humber Valley filed for creditor protection. As the global economic slump worsened, chalets that had fetched $750,000 during the boom were selling for almost 50 per cent less.
Convinced that Humber Valley is still viable, Dobbin recently launched a bid to regain control of the resort. In hindsight, he says, "the biggest lesson I learned from the whole thing is how naive I was about how successful we were going to be."
Jon Zwickel Partner and executive vice-president, Bellstar Hotels & Resorts, Calgary Bellstar has some advice for Humber Valley on how to build developments in good times and bad. First, Zwickel says, his company stays focused on each project for the long haul. Second, Bellstar plans its developments in phases so that prices for each release can reflect current costs. Third, it remains market-driven by gathering intelligence on what people are buying, what they're paying and where they're from. "We extrapolate all of that information and create what the market is already saying it wants to purchase, as opposed to creating what we think consumers might want to buy," Zwickel says.
During the boom, he adds, many resort developers and marketers took a ready-fire-aim approach. "In difficult times, our adage would be, 'Ready, ready ready, aim, aim, aim and then fire.'"
Ian Thomas Chairman, Thomas Consultants, development strategists, Vancouver Thomas says Humber Valley suffered from the same sort of blind optimism that afflicted Dubai, which is paying the price for becoming reliant on European buyers. "When the band stops playing in their own domestic market, the first thing owners are going to get rid of is their discretionary assets, and resort property tends to be the first thing they sell."
As for evaluating an opportunity such as Humber Valley, Thomas says there are many North American resorts to use as benchmarks. A good starting point: Nail down costs for the average unit and determine if you can turn a profit. Then figure out what's special about your offering - and how many people will choose it over the competition. "I think Dobbin circumvented those key aspects," Thomas says. "He wasn't too specific in his premarketing and, by his own admission, he sold way too cheap."