Interesting news coming from THE FLADGATE PARTNERSHIP

[Christian Gollnick]

Some interesting news about The Fladgate Partnership. published yesterday by “Economico”.

It’s in Portuguese, but here are the most important points:
- TFP is looking to open a high-end-hotel in the Douro. They have looked already at several properties, but no contract has yet been finalized. The new hotel shall be a kind of YEATMAN for the Douro-Valley
- the YEATMAN in Gaia had a very good year in 2013, with revenue growing by 19%. But it still hasn't made a profit – but seems to be on the right way. The hotel sees the possibility to increase the pricing in 2014.
- the consolidated revenue for TFP in last year was EUR 98.5 million, 10% more than in 2012. This is mainly due to the sales of the 2011 Vintage and other “special category” port, but also due to expansion into new markets (the are adding markets in Eastern Europe and Southern America).
- TFP sells Port wine into 72 countries. The most important markets are England (33%), USA, (13%) and Canada (10%). Portugal: 7%.
- the profit before tax is EUR 6.7 million.
- In the beginning of 2016 TFP will abandon their current buildings in the “Centro Historico” in Gaia and move to Quinta dos Barões, also located in Gaia. The group has already invested EUR 30 million into this property.
- The current property in the historic center of Gaia is for sale and the group values the buildings at EUR 10 million.

My thoughts: I must confess that I like it very much that the group publishes these figures - many of the Port wine companies are like Black Boxes - and it's nice to get a little bit insight into such an important operation like TFP. There are a few surprises (the devastating news is that the want to give up their location in Gaia – a place I dearly love). TFP is very good at making money with high-end products (be it the YEATMAN or the old tawnies from Wiese & Krohn). I think it’s a good way to make money, establishing a very special reputation with very special products. Port wine is very expensive to produce and the current prices are too cheap, I believe. So going high-end is a great marketing-strategy. Reduce the volume output but increase the price and quality. But as a tawny-fanatic I’m kind of sad to see that the prices have risen dramatically over the last years for the good old stuff…
So, when I’m in Gaia in 2 months, I will of course visit the lodge of Taylor’s again – but with mixed feelings. It’s sad to know that this place will be abandoned in less than 2 years…

Here is the link to the article:
http://economico.sapo.pt/noticias/taylo ... 94435.html

[Daniel Jewesbury]

There's a property by a bend in the river between Pinhão and Tua that's been getting some very obvious and very major redevelopments. I wonder.

[Derek T.]

Interesting.

6.8% pre-tax profit from a company selling luxury consumables doesn't sound good. Tough times and the encouraging thing is that it is a positive number!

I hope they don't make the same mistake that Romaniera did and create another white elephant in the Douro. Good hotels are needed, but very remote 5* palaces don't seem to work up that neck of the woods.

Thanks for posting.

[Bradley Bogdan]

Surprised they're planning on upping the price of the Yeatman, didnt think that place was cheap to begin with.


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[Frederick Blais]

From my understanding the place they are selling in Gaia is the building with the Fonseca sign on it. It is were all there operations/shipping was done. This was created alter the flood of 2002. This building was created from the beginning with the potential of being sold. The design was so that you could move panels inside to configure it the way you want. So I don't think the Taylor's lodge is in danger.

Now they have their operation/office/bottling line/shipping further back in Gaia, behind the shopping mall Corte Ingles. This place use to belong to Real Companha Velha and its location is more conveniant to TFP group than the previous place.

I have to agree with Derek I know some Port companies making better margins. But Taylor's is also aiming volumes. I'd be curious to see Symington's number :)

[Frederick Blais]

Surprised they're planning on upping the price of the Yeatman, didnt think that place was cheap to begin with.


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If you compare with anything that quality in other big city of Europe it is probably 3 times cheaper! It is an amazing hotel!!!

[Roy Hersh]

I hope they don't make the same mistake that Romaniera did and create another white elephant in the Douro. Good hotels are needed, but very remote 5* palaces don't seem to work up that neck of the woods.

Not long ago, there was not a single hotel in the Douro. Adrian Bridge's inlaws built the first high end hotel catering to oeno-tourism (if not hotel of any sort) in the Douro, with the Vintage House, IIRC it was built in 1998-1999 and renovated by the new owner "CS" in 2009.

Personal observations:

I know that when I first ventured to the Douro in 1994, there were no hotels to speak of, well possibly one that was renting rooms. Anyway, I think there is plenty more room for hotels in the Douro today, but not big resort properties, more likely small-mid-sized boutique properties and a few that would be family and budget friendly as well. However, there must be a solid relationship between reality and quality vs. price. We have seen both Quinta da Romaneira's hotel and Aquapura (opened 2007) ... both high end luxury properties, fail.

Aquapura is still open, but the hotel industry standard of success, (measured by the annual % rate of occupancy) can not be supported by properties that in reality are doing 90% of their business between April and November in a place like the Douro region. That is really tough to sustain and at exorbitant prices, even more difficult. Maintaining staff levels on a par with that type of seasonality is really tough. Aquapura is a good example. The staff level that they had when it opened (I stayed several nights during their 1st season) was really impressive and it seemed like there was a greater number of employees than guests and a visit there during harvest 2013, proved that even with a fairly busy dining room, the staff throughout the hotel was sparse if not a skeleton crew. I hope they can turn things around, offering more reasonable pricing, but for a long time they were reluctant to go in that direction. Understandable, because once you begin to discount your rates, it becomes much tougher to go back in the other direction.

While The Yeatman took several years to truly gain momentum and have significant % occupancy rates, it appears the hotel has grown to be much more healthy. Last year at a dinner with Adrian, he mentioned that they were going to seriously consider raising the room rates. Now you don't do that, unless you have consistent and improving annualized occupancy rates. Building and maintaing a new hotel must have been quite a drain on TFP's cash flow in the early goings, but I am glad to see that it has survived and is now thriving. The location just can't be beat. Love the Pestana and The Intercontinental has a tremendously centralized address as well, but neither are in the heart of the Port lodges with a view of Porto looking across the river, (not that the Pestana's views are lacking).

There is currently discussion of several new hotel projects in Porto, including the formerly abandoned hotel construction site/property that had been started across from the Wiese & Krohn lodge. Since my last visit in October until returning less than two weeks ago; I was blown away by some of the brand new construction projects and especially new eateries and updated storefronts on the Porto side of the river. While austerity measures and VAT at 23% have strangled the PT economy, the dramatic uptick in tourism in Porto/Gaia has brought a nice infusion of much needed cash, yet jobs remain scarce and low paying overall, at this time.

The Douro is different and certainly has far less capacity for tourism today, although forward looking companies that are with deep pockets can look to the next decade with measured optimism. While Vallado and others have opened upscale properties in the last few years, there have only been a couple. I do know of a few quintas which have either renovated older facilities and modernized their offerings or are in the midst of building brand new facilities. With tourism in Porto/Gaia burgeoning the past few years, it is only a matter of time before there will be an actual need up in the Douro. So I think it would be wise to find a great location before that happens and get in while RE is still fairly affordable. Time will tell, but it was interesting to read Christian's post and I was pleasantly surprised by the transparency of TFP. Many other privately held Port companies would never even consider being so forthcoming with their financials.