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Wednesday, 16 November 2011 21:18

Lake Junaluska stares down uncertain future with bold vision

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Lake Junaluska Conference and Retreat Center has reached a critical crossroads on the eve of its 100-year mark. It’s headed toward financial insolvency, and the only thing that can save it now is a bold and aggressive makeover aimed at reclaiming dwindling guest numbers.

The Methodist institution and Haywood County landmark has struggled to stay relevant in a changing world. Lake Junaluska found itself suddenly marooned — caught off guard and with no lifeboat in sight — as the audience for its mainstay church conferences and theological retreats aged.

Meanwhile, its outdated facilities failed to keep up with the tastes and expectations of guests it could have otherwise courted to make up for the lost numbers.

Failure to change course is certain death. But the road to recovery is marked by a modicum of risk — taking on debt in order to bail itself out.

The Smoky Mountain News had a candid and open conversation with the man hired to turn the ship around, Lake Junaluska’s new executive director Jack Ewing.

SMN: So just what is Lake Junaluska’s financial status?

Jack Ewing: “The bottom line is in the last six years we have balanced our budget only once, and I am sorry to say in all probability we will end 2011 with a deficit budget as well.”

Losses have ranged from $200,000 to $400,000 a year recently out of a nearly $9 million budget. Reserves have made up the difference, but those reserves are running out, down to around $2 million.

Meanwhile, guests continue to decline. And subsidies from the Methodist church have been taken away, making the situation even worse.

Why is the conference center losing money?

The Lake has seen a 17 percent decline in overnight stays since 2007. Overnight stays are the conference center’s main source of revenue, and more than 90 percent of its hotel guests are part of a group conference or retreat held on the groups.

“We are heavily dependent on groups for revenue. It is not good for us to be heavily dependent on group business because our group business is declining. Here is another unfortunate truth about group business. A majority of our groups book two to three years in advance. The projection for 2012 is worse than the projection for 2011.”

Is there a clear road back to financial solvency?

“You might look at this and say, ‘It is bleak. You may as well shut the doors.’ It is bleak until you stand on the balcony of the Terrace Hotel and say, ‘This is unbelievable.’ The potential is great. Once we have lodging, food and meeting space that meets or exceeds our guests’ expectations, it will be so easy to sell Lake Junaluska. But, it is going to take some money. We’ve got to find some money to make it happen.”

What solution have you and the board of directors decided on?

“The world is changing. What people want is changing, and what people are willing to pay for is changing, and therefore Lake Junaluska will have to change as well. The first major challenge we have is the condition of our dining, lodging and meeting space are not of the standard that will sustain our traditional guest base nor attract a broader guest base.”

What do you mean by a larger guest base?

“We have to figure out how to optimize our leisure vacation business, because who would not want to come and stay at Lake Junaluska. We are open to people to come off the street and say ‘Can I stay at your hotel?’ They don’t have to be United Methodist, they don’t have to be part of a group. Our lodging facilities are open for people to stay.”

With an annual occupancy rate of only 26 percent, revenue simply isn’t covering the overhead of keeping the facilities open. The Lake has to increase its guest numbers, and that means tapping the vacation market and going after secular conference business.

Why didn’t the administration take action to right the ship sooner?

“It is always easy in retrospect to look at things and say ‘Why didn’t we figure this out earlier?’ I think it is a combination of several factors.” In a sense, the Lake was hit by a perfect storm that is obvious in hindsight but perhaps not so much at the time.

The traditional audience for church conferences and retreats is aging. Meanwhile, the Lake put off make-overs to guest rooms and failed to keep its facilities modern and as a result couldn’t attract new business to make up for what it was losing.

Were you hired as the turnaround guy?

In short, yes, Ewing said.

“I didn’t know the details of the challenge, but I knew the challenge.”

He took over as director of Lake Junaluska in January following the 11-year tenure of former director Jimmy Carr.

Ewing comes from a background in college education, serving as the president of two Methodist colleges during 16 years. He equates his role now with his role at Dakota Wesleyan University, where there hadn’t been a balanced budget in 10 years and a sense of hopelessness had set in before Ewing arrived.

“It is amazing how a sense of hope helps both the employees of and organization and the supporters of an organization. I am trying to give hope. It is not a pie in the sky hope, it is real.”

Lake Junaluska was dealt a major blow four years ago when the Southeastern Jurisdiction of the United Methodist Church began phasing out $1 million in annual subsidies for operations. How is that going?

“Hear me loud and clear: we are exceedingly grateful for the funding the church has provided us. The church has made it possible for us to remain in business.”

The loss of that funding, however, was major.

“That is a huge challenge for us going forward. It is the crisis that helps us to focus our efforts and energy going forward.”

Why are fewer groups booking conferences at Lake Junaluska?

Part of the problem is the traditional demographic that attended Methodist conferences.

“United Methodists are aging and are not being replaced by younger people attending events. They are either dying or they are not physically capable of coming. We are going to have a very focused effort on trying to attract children, youth and their parents.

How do we get those young people to come to Lake Junaluska?

It is going to require us to think differently. The playground built 35 years ago may not be the right playground for children today.” The same for other athletic and recreation facilities.

Where will you pick up extra business if Methodist conference attendance is dropping?

“We are going to have to attract some secular business.”

Lake Junaluska plans to heavily market itself as an ideal retreat and conference venue to the non-profit world.

But the Lake also hopes to pick up business from individual guests who just want to come on vacation to Lake Junaluska. Right now, only 10 percent of guests staying at the lake are simply vacationers unconnected to a conference or group. That has to increase for the operations viable.

What does Lake Junaluska have going for it as a conference and retreat center, or vacation destination for that matter?

“What makes Lake Junaluska so spectacular are the outdoors spaces. The lake is by far our greatest asset. We have got to take care of it, we have got to invest in it. We have to make sure we are protecting our shore and our water quality. All our renovated facilities on the lake need to engage with the lake.”

How much will renovations and new facilities cost?

About $20 to $30 million. But it’s sizably less than a master plan for the lake created three years ago, with a price tag of twice that amount.

What role will fundraising play?

“I think we can raise half of that money. There’s a lot of people who have money who want to give it to Lake Junaluska, they just don’t know it yet.

“Because of the incredible experience people have had at Lake Junaluska over the years, when we tell the story and give specific examples of how a gift can impact the future of Lake Junaluska, they will want to give.

“It is really beautiful when you can sit down and say, ‘Here is what we are trying to accomplish’ and connect with the need all of us have to be a part of something significant beyond ourselves. They are ready to give but they want to know what we are going to do.”

Where will the rest of the money come from?

“We are going to have to borrow some money in order to make this happen.”

Ewing hopes to take out a traditional loan from a financial institution, but as for collateral, that “is an existing question we would have to look at.”

The lake has undeveloped land it could put up for collateral rather than the facility they are taking out a construction loan for. To pay back the loan, the Lake will need to net more each year than it spends on operations — not only erase its deficit but actually create a positive balance sheet — to make the loan payments.

The lake only has $2.5 million in current debt.

What if the extra business you are banking on doesn’t materialize after taking on the debt?

“Who has ever been successful in their lives from an entrepreneurial perspective if they haven’t taken the risk?”

But in this case, Ewing sees the risk as almost nil.

“We have confidence this will happen.”

Stuart Auditorium is old as Lake Junaluska itself, originally little more than a canvas roof over a tent frame, holding the very first Methodist sermons when the institution was founded in the early 1900s. What will become of this large lakeshore venue?

“When Stuart was built in 1913 it was not intended to last for two centuries.”

It isn’t big enough — it seats 2,000 but really the Lake needs a venue for closer to 3,000. It has exorbitant heating and cooling costs. It doesn’t meet modern audio-visual standards. In short, it might be torn down, although complete overhaul isn’t out of the question.

“Stuart is a place people love. While I strongly desire us to have a facility that meets our need going forward, if it can be done by preserving the current facility, great. But what is most important is to have a forward-looking building.”

Whatever is built back in Stuart’s place will have the same signature look of a giant revival tent.

“If we replace it, people will know it is Stuart Auditorium. It would be a newer version, a 21st century building that meets our space needs going forward. Stuart will be the signature building going forward for the next 100 years.”

What else could face the wrecking ball?

The Harrell Center falls dismally short as the primary meeting space on the grounds and fails to accommodate the needs of groups coming to the Lake. A new Harrell Center will be outfitted with flexible meeting space and will tie in with the new Stuart Auditorium next door — as well as integrate with the underutilized lake shore.

A new Harrell Center would be able to host a 400-person banquet. The largest banquet space on the grounds now is 150.

Jones Cafeteria is also on the short list, but like Stuart, could be fixed with a major, major renovation instead of complete tear down.

What about the Terrace?

Ewing called the Terrace an unfortunate example of the “architecture du jour” syndrome. It looked great in the 1970s — but the fleeting look didn’t last.

The Terrace needs façade work to make it more attractive from the outside, new furnishings in all the guest rooms, and complete gutting of the guest room bathrooms.

It is terribly dated. Most hotels update their rooms every five to seven years. It’s never been done at the Terrace since it opened in 1977, and people aren’t getting the value of what they are paying now, Ewing said. A major interior renovation is in the cards.

Any plans for the Lambuth?

Ewing wants to transform the stately inn into a “grand hotel experience.”

“I like to think about it being Greenbrier like. People will want to come to Lake Junaluska to stay at Lambuth Inn.”

Renovations will make it into a luxury hotel, although not with the luxury price tag.

What’s the time line?

Everything must be finished in five years. The Terrace will likely come first, then the Harrell Center, then Stuart, then the Lambuth.

How did you decide what needed fixing most?

“How do we strategically invest in things that will be revenue producing? We cannot be spending money on things that will not have a return on investment.”

A strategic planning committee in concert with the board of directors for the lake developed the master plan for what had to be done. Also, a facility audit of every building at Lake Junaluska was prepared by an outside firm with the help of a local architect.

What will you do about the deficits until the Lake’s new image and facilities start to bring in increased revenue?

The Lake will balance its budget starting in 2012. It has to come up with at least half a million to do so — enough to cover the $200,000 to $300,000 operational deficit it has been running and to cover the last $250,000 in subsidies from the church that will be phased out next year.

“Everybody on the staff has been challenged to think of ways to optimize revenue and control expenses.”

If demand doesn’t justify keeping all the buildings open, why not shut some down?

“We have the same number of facilities open today as we had 10 years ago. We may have to in the short-term ‘right size’ the organization before we can grow bigger and grow stronger. We may have to shut down some buildings.”

In fact, the Lake has been shutting down the Lambuth Inn – and occasionally even the Terrace – during slow weeks in the winter for a few years already.

“It is not new. We are just trying to be a little bit more strategic in the way that we do that. But it isn’t what we want to do long term.”

Has Lake Junaluska considered offering alcohol to appeal to a broader market and younger demographic? Or at least allowing it under special use permits?

“There is nothing in this plan about serving alcohol to attract groups from the outside. There are plenty of groups that would love to come that do not expect or need to have alcohol. We are planning this future with a clear understanding and commitment of Lake Junaluska as a place that does not include alcohol.”

Besides, the property deeds that govern facilities at Lake Junaluska ban alcohol.

“So at this point it is a moot issue. There may be a need for that issue to be evaluated at some point in the future, but it is not part of our planning process.”

Is charging for a grounds pass on the table, rather than allowing free public access to the walking trail, rose walk and gardens, playground and other recreation sites?

“The way I am approaching that is not from the perspective of charging people to come but giving people the opportunity to spend money when they arrive. There is a tremendous opportunity for a place where we are not charging somebody for the experience but giving people an opportunity to get something they want and that will be beneficial for us.”

This means ice cream, coffee, sandwiches and retail — perhaps by vendors but perhaps food ventures run by the lake itself. Ewing envisions a plaza lakeside around the new Stuart Auditorium.

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