ADDITIONAL INFORMATION FOR MEMBERS IN RELATION TO TUSCANY APARTMENTS.

This information should be read in conjunction with the 2015 Strategy Forum outcomes detailed below this advice.

The Board of Directors of the RAAF Welfare Recreational Company (Trustee of the RAAF Central Welfare Trust Fund) in 2015 made difficult but necessary decisions in relation to the future direction of support the business entity provides serving members of the RAAF, broader ADO and ex-members. That said, and as stipulated in the Trust Deed, the primary focus of support is for serving members.

One of the outcomes of the Forum was the staged withdrawal from holiday facilities at Merimbula. This has been managed to date with minimum impact on members. However, as a result of two unexpectedly quick sales over the summer period there will be no three-bedroom apartments available for holiday letting post January 2017. All extant bookings will be honoured at no additional costs to members (transferred to privately owned apartments within the complex). Additionally, the Board will consider reducing booking timeframes for the remaining 2x two bedroom apartments to six months for serving RAAF members and three months for all other eligible members.

The Board appreciates the impacts of the phased implementation of its strategy and once again encourages members, as quite a number have, to read the outcomes statement detailed below to gain a deeper appreciation of the challenges and issues considered.

Further information in relation to the operational performance of the business entity may be found in the Annual Report (see the Performance Statement on pages 9-12) and the 2016/2017 Corporate Plan – both documents located under the ‘About RWRC’ tab.

Enquiries may be directed via the web site ‘Contact Us’ tab to the Company Secretary.

EXECUTIVE SUMMARY – OUTCOMES OF RAAF WELFARE RECREATIONAL COMPANY STRATEGY FORUM.

The purpose of this document is to explain the background of the RAAF Welfare Recreational Company (as Trustee of the RAAF Central Welfare Trust Fund), the Company’s current operational position and the decisions taken by the Board at its recent Strategy Forum.

BACKGROUND

The RAAF Welfare Recreational Company (RWRC) was established in 1972 to manage the activities of the RAAF Central Welfare Trust Fund. The objective for which the Company was established was primarily to:

Provide benefits to members of the Royal Australian Air Force and partners and families of such members, ex-members and their dependants, members of the Royal Australian Navy and Australian Army (serving or retired) and their partners and families and civilian staff employed by the Department.

These benefits have been provided primarily by the provision of discounted holiday accommodation, loans and grants to bases / sporting clubs for worthwhile purposes and, in some cases, support to RAAF Recreational Theatres.

The Company is audited annually by the Australian National Audit Office and is required, under legislation, to table an Annual Report in the Parliament.

CURRENT POSITION

Currently, the RWRC owns and leases:

  • 11 apartments at the Ambassador complex on the Gold Coast (and leases the one apartment it does not own);
  • Four apartments at the Tuscany complex in Merimbula (two apartments having been recently sold); and
  • One leased apartment in the Marrakai complex in Darwin.

The financial performance of the entity over recent years has prevented a pro-active approach to providing loans and grants for worthwhile projects.

Operational Performance

Consider the following statistics for discounted holiday accommodation:

If all apartments were occupied 100% of the year, less than 3% of the Force would benefit. At Ambassador difference in outcomes from 1999/2000 when compared to 2013/2014 are:

  • Occupancy has declined from 90.50% in 99/00 to 61.31% in 13/14
  • Expenses have increased 62.98%
  • Income has increased 10.34%
  • In 2000 a cash surplus of $31 352.00 was recorded. In 2014, a cash loss of -$57 950.00 was recorded
  • There were 71 Air Force stays at Ambassador in 2000, whilst in 2014 there were 206 stays. - For 2014, based on a PAF strength of 13 980, a benefit was provided to only 1.47% of Air Force at Ambassador.

At Tuscany, the difference in outcomes from 1999/2000 when compared to 2013/2014 are:

  • Occupancy has declined from 88.79% in 99/00 to 50.29% in 13/14
  • Expenses have increased 32.41%
  • Income has decreased 1.61%
  • In 2000 a cash surplus of $13 702.00 was recorded. In 2014, a cash loss of -$20 361 was recorded
  • There were 104 Air Force stays at Tuscany in 2000, whilst in 2014 there were 72 stays. - For 2014, based on a PAF strength of 13 980, a benefit was provided to only 0.52% of Air Force at Tuscany.

Note that Reserve strength has not been included. If added to make a total force of 18 535 (excluding overseas based personnel) the percentages would be (for 2013/14):

  • Ambassador: 1.11% of the Force obtained a benefit
  • Tuscany – 0.39% of the Force obtained a benefit.

Conclusion. The ‘worth’ of the entity is $7.8m (2013/2014 Annual Report). For this investment, the RWRC was able to provide a benefit in the form of 278 stays for Air Force personnel. This represents a benefit to 1.50% of the Force.

QUESTION: Is this the most efficient use of $7.8m?

It is important to stress that Directors over the years have made a considerable effort to upgrade and promote holiday facilities. However, in an ever competitive market, the figures speak for themselves and reflect the challenge faced by the Board at the Strategy Forum. Consider also the operational outcomes for all aspects of the business entity over the past five years.

2009/2010 2010/2011 2011/2012 2012/2013 2013/214
Loss $68 785 Loss $12 636 Loss $121 917 Loss $81 423 Loss $128 452

The Board have and has a duty to act in the best interest of members and the business entity. Acknowledging the challenges and efforts over recent times, operational outcomes dictated that the Board had no option but to act now to address what is a failing business model.

DECISIONS TAKEN

With historical and recent operational performances in mind, the Board after considerable consideration and discussion agreed the following key strategic outcomes and decisions:

Overarching consideration. The RAAF Welfare Recreational Company is providing a benefit, at considerable subsidy, to very few members of Air Force (on 2013/2014 figures, less than 2%). It was agreed that this is unacceptable. The inefficient uses of resources occasioned by the current investment construct (being heavily overweighted in property) cannot continue. As such, the following outcomes were developed and agreed:

Outcomes statement

The Board will pursue a rationalisation of current assets of the Company in such a manner that will allow the Board to provide a sustainable and equitable benefit to members of the Air Force and other eligible persons.

How is the Outcome statement to be delivered?

Shorter term:

  1. Better management of ‘cash’ to achieve greater returns.
  2. A revised tariff model coupled with marketing to improve operational outcomes to be developed (if there is no improvement in occupancy this provides the Board a view about member’s attitudes for RWRC owned accommodation).
  3. Pursue the sale of all apartments at Merimbula in a staged manner.
  4. Drip feed proceeds of apartment sale/s to an income yielding portfolio providing greater returns than currently achieved.
  5. Improved cash returns to be used to offset operating losses.
  6. Define a ‘new’ model for the provision of services to members that impacts greater numbers.

Short to medium term:

  1. Continued withdrawal from Merimbula with proceeds feeding into improved returns on cash.
  2. Improved cash returns used to provide other services for members if there is an operating surplus.
  3. Critically review operational outcomes for the Ambassador apartments and decide on potential sale opportunities (to be informed by progress of Merimbula sales and operational outcomes).

Medium to longer term

  1. Continue to measure outcomes.
  2. Review and take action one way or another on the Ambassador sale option.
  3. Continually review performance and relevance.

OVERALL END STATE

The end state will be that the RAAF Welfare Recreational Company provides support / benefit that impact a far greater percentage of the Force than is currently the case. That end sate may include discounted holiday accommodation however, that accommodation will be a vastly different model to that which currently exists.

As the Board progresses and refines how it aims to support members of the Air Force, further updates will be provided.