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Visitors at Honey Creek Resort in this early 2010 photo. (Cliff Jette/The Gazette)
The Iowa Department of Natural Resources stands by two companies hired to manage Honey Creek Resort, despite continued financial problems at the $58 million state-owned facility on Rathbun Lake.
Honey Creek’s revenue for the year that ended June 30 was nearly $220,000 below budget, causing the state-financed resort to lose nearly $1.5 million after bond payments and management fees.
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The DNR said it’s not fair to finger the management firms for the resort’s poor performance when the weak economy has hurt tourism across the Midwest.
Honey Creek, which opened in September 2008, boasts a 105-room lodge, 28 cottages, fine-dining restaurant, water park and 18-hole golf course. Unable to convince a private investor to build the resort, the state financed most of the project with $33.5 million in bonds.
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Chuck Corell
The DNR has asked Gov. Terry Branstad to consider including in his fiscal 2013 budget money to pay off the bonds, said Chuck Corell, administrator of the DNR’s Conservation and Recreation Division. Paying off the bonds would allow the DNR to stop dipping into funds intended for conservation efforts in all 99 counties. So far, more than $3 million in Resource Enhancement and Protection (REAP) has gone to Honey Creek.
The DNR also could switch from flat-fee to performance-based payments for Central Group Companies. Central Group was paid a flat fee of $220,000 in fiscal 2011 and has a contract with Iowa through 2013.
The DNR hired Capital Hotel Management in 2010 to act as the state’s asset manager and oversee Central Group. Capital Home Management was paid $99,900 for Aug. 26, 2010, through June 30, 2011. Its new contract provides a $75,600 base fee with an additional $64,300 in incentives if Honey Creek reaches specific profit targets.
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Janelle Rettig
Both management companies have failed to maximize profit at Honey Creek, Rettig said. “It’s not financially meeting the targets on any budget that has been established for it,” she said.
The resort was in the red $900,000 for the first 10 months of operation. A state audit showed the resort had an operating loss of $46,000 in fiscal 2010.
For the last fiscal year, ending June 30, Honey Creek made nearly $432,000 before bond payments and management fees. But that was nearly $220,000 less than budgeted and not enough to meet the resort’s $1.9 million in bond payments, management fees and insurance costs.
Sen. Mark Chelgren, R-Ottumwa, proposed selling Honey Creek earlier this year, but the idea did not go before the full Senate.
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Honey Creek Resort State Park near Moravia has conference facilities. (Cliff Jette/The Gazette)
A Honey Creek employee recently was caught skimming more than $2,000 from payments owed to lodge guests. Although the employee’s credit card company, not Central Group, uncovered the thefts, Corell said the group has acted swiftly to put procedures in place to prevent future incidents.
Rettig says the DNR shouldn’t ask for more state money while Central Group runs the resort.
“If we want Honey Creek to stabilize and head in the right direction, we really need to wipe the slate and start all over,” she said.
Still struggling
Corell said Central Group Companies shouldn’t be blamed for Honey Creek’s financial struggles. Not only is the economy sluggish, but a wet spring and early summer cut down on the number of golfers and other outdoor enthusiasts using the facilities.
“It’s a little premature to blame it all on Central Group at this point because you’ve got to remember that the whole industry is depressed,” Corell said.
Central Group CEO Bob Pace said his company didn’t build Honey Creek or finance it, but has managed it well through rough economic times.
“We don’t have anything to be apologetic for, as far as we’re concerned,” he said. “The property has done incredibly well for a destination resort opening at the beginning of a recession.”
Corell said Honey Creek is faring better than other Midwest resorts. Its 46.3 percent occupancy rate for January through September was slightly higher than other resorts’ rates and the revenue per available room for the same period was $66.93, compared to $57.59 for the comparable facilities, data compiled by Honey Creek’s asset manager show.
The resort also had a good fall, hosting several big events, including the Bluegrass Music Association of Iowa’s annual festival, Corell said. Honey Creek has booked 21 weddings for 2012 and Central Group is reaching out to organizations in Des Moines, Ames and Omaha for meetings.
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Dean Kaster
Dean Kaster, an Appanoose County supervisor, said the resort provides jobs and brings Iowans to southern Iowa.