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Stafford and Marilyn Burrowes: Taking Dolphin Cove to new heights

Business Nominee #3


Tuesday, November 04, 2014

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Stafford and Marilyn Burrowes took their soft adventure company Dolphin Cove Ltd to the Junior Stock Exchange in December 2010.

Within those four years the couple has had the opportunity to put to the test, and perhaps to rest, their most dreaded fear about public listing.

Marilyn, even more than her husband, had serious trepidation about disclosing what she considered to be her firm's private information.

A seat at the exchange would mean that all client contracts, executive compensation, strategic plans, financial performance and the granular details of the organisation's banking relationships would now be in the open.

The husband and wife team had successfully carved out a unique niche within the soft adventure tourism market, and Marilyn wanted to protect the first-mover advantage that their company continued to enjoy.

"I did not want to list," she confesses. "I did not want everybody to know our business."

Her husband and executive chairman was more receptive to the idea, and it's not because he didn't share some of her reservations. He was equally mindful of the downside risks, but used a different scale to weigh the trade-off.

"We went public to take advantage of the tax benefit," Stafford acknowledges unabashedly. "It allowed us to finance our expansion and it makes it easier for us to raise capital when we need it."

By joining the Junior Stock Exchange, Dolphin Cove Ltd would save millions of dollars on its tax liabilities over its first 10 years as a public company. The impact on its balance sheet would be immediate; it would be transformed by the capital infusion from investors who would line up to share in the risks and rewards of the promising venture.

The tax incentive scheme was calibrated to be the dealmaker that would nudge business owners like the Burrowes towards the stock market. If they chose to list at least 20 per cent of their company's shares, there would be no tax on its profits for the first five years, and the firm would be subject to taxation on only half of its gross profit during the succeeding five years.

The Government programme has been a real game-changer. Twenty-four companies have so far joined the Junior Stock Exchange in the four years that the incentive has been in effect -- by far the quickest pace of growth in listing since the 'senior' market (the Jamaica Stock Exchange) was founded nearly 50 years ago.

Stafford and Marilyn were certainly not unique in their concern that public revelation of important company secrets could empower competitors and, in some instances, invite new ones into their market.

For years many business owners have acted on this fear to stay away from the stock exchange, and some of them like the Burrowes were eventually persuaded by the generous tax scheme.

Happily, going public has not produced the adverse consequences that Marilyn once dreaded. Today, her company is no closer to having to fight off an assault on its market dominance than it was four years ago.

"These days it is almost impossible to get dolphins from the wild because of the actions of animal rights groups," says Stafford. "It is not an easy business to now get into."

There is a sense of ambivalence towards this development because, while it has erected an entry barrier against direct competitors, in the absence of an effective breeding programme Dolphin Cove could, over the long run, find itself exposed.

In any event, to get into this business in Jamaica the investor would have to jump through the multiplicity of hoops that the Burrowes themselves had to clear a decade-and-a-half ago, and even the most dogged entrepreneur could find this task daunting.

The exhaustive to-do list that awaits the prospective entrant to this market is nothing short of incomprehensible. There are state agencies and agencies within those agencies from which licences must be obtained. Then there are central government regulations, local government restrictions, and environmental laws that must be met.

On top of that, some of the rules now in place are so strict they appear to be designed not just to protect but to affirmatively advance animal rights. Then condsider the marine restrictions, and the requirement to comply with international conventions. All this is long before the first dollar is spent on actual block and steel.

The name Dolphin Cove is a bit of a misnomer. It belies the wide range of activities -- many of which have nothing to do with dolphins -- which this company offers at the four separate attractions it operates along the island's tourism belt.

Still, there is no doubt that at the three marine parks, the dolphins are the most evocative residents. This fact was on stark display during an early afternoon tour of the Ocho Rios lagoon with Stafford and Marilyn.

The dolphins' acrobatics and physical power as they were led through their routines by their handlers demonstrated why the two entrepreneurs found a winning formula in this business.

"Aaahhh, ooohh," the spellbound spectators of mainly American cruise passengers sighed almost in unison -- as if they, too, were part of the choreography -- at the sight of dolphins, on command from their handler, leaping several feet into the air, twisting and turning before plunging back into the pool.

Some visitors to the park wanted to experience the sensory treat provided by a close encounter with the adorable creatures.

It was hard to ignore the spectacle of one American tourist who clearly wanted a conversation piece with which to regale the folks back home. She wrapped her arms around the dolphin, then pressed her slender torso against its middle section -- cameras clicking away to immortalise the moment. Then she gently rested her ear against its side as if trying to hear its heartbeat. "Oh my gaad, oh my gaad!" she gasped. "He is so powerful, he is so powerful!"

The Ocho Rios water park is home to most of the 27 marine mammals that the company has in Jamaica -- the majority of which it owns outright, and a few leased. This is the spot that first ignited the imagination of Marilyn and Stafford as they drove around the island in the late 1990s looking for somewhere to build their dream attraction.

It sits on 1,700 feet of seafront real estate near Dunn's River Falls. The land is very narrow and every square inch is either built out, or is already earmarked for development.

There is a restaurant, one hamburger grill, a photo shop, a souvenir store, an ice cream parlour and cabanas. A section decked with beach chairs is reserved for sunbathing.

A tiny stream descends from the hill by the southern border of the property and trickles across the walkway on its journey to the sea. It forms puddles that harbour a variety of fresh-water species, adding to the ambience of the attraction. Massive man-made seawater pools are home to stingrays, nurse sharks, dolphins and a variety of small marine life.

Visitors who are out for an adrenaline rush pay premium to play and swim with the human-size animals, including the sharks and rays. Others snorkel their way around the pools.

Tourists can also enjoy glass-bottom kayaking, while a jungle trail leads them to a section of the park where they come in very close contact with exotic birds, iguanas, spiders and snakes. This is a nature lover's paradise.

This is the location that immediately comes to mind when the name Dolphin Cove is mentioned.

Yet visitors who are on the island for a bit of outback experience can head a few miles east of Ocho Rios towards a 1,000-acre property called Prospect Plantation that Dolphin Cove Ltd leases.

Here, a different world awaits them. Fully exploring the one-and-a-half-square mile undulating wooded terrain can take up an entire day. The adventurers can take a tour in a tractor-drawn open carriage. The more youthful may opt to skim across the terrain -- on a two-wheel motorised unit called Segway. They stand upright on the machine, regulate its speed and steer it with a handle that functions like that of a motorbike.

Visitors can choose from a variety of rides: buggy, all-terrain vehicle, and horseback, or for those in search of a more exotic experience -- camelback rides.

The other two attractions -- the Dolphin Cove lagoon that is located at Point -- near Lucea in Hanover (from the point of view of Hanoverians cheekily marketed as being in Negril) and the one at Half Moon Hotel in Montego Bay are essentially scaled-down versions of the Ocho Rios water park.

Managing three marine locations is not as simple as it sounds. The owners have to take scrupulous care to protect the welfare of the animals -- after all, they are their primary assets.

It's a responsibility that Stafford and Marilyn take very seriously.

This is why their company has on staff, or hire as consultants, several highly qualified individuals in the field of animal care and environmental protection: specialist marine mammal veterinarians and consultant compliance advisors on environmental matters.

Overall, the establishment provides employment to over 300 individuals.

Four years ago, Dolphin Cove Ltd began a breeding programme for its Atlantic Bottlenose dolphins, aimed ultimately at making the company self-sufficient in the supply of its key talents at its attractions. Five of them have given birth and two are now pregnant.

Breeding dolphin is a tedious, time-consuming exercise. Stafford explains that they typically take 10-13 years before they are ready to produce young ones and have a 12-month gestation. On average, each female produces one baby every three to four years.

"We are no longer limited in our expansion to obtaining dolphins from abroad," he declares with an obvious sigh of relief.

Seen through the prism of the tens of thousands who flock to the attractions each year, Dolphin Cove and Prospect Plantation are simply fun places to be.

From the perspective of the investors, this is big business.

Marilyn, who is vice-president of marketing, says that collectively the four Dolphin Cove parks are ranked in the top three most popular tourist hot spots within the island. Typically, visitors are steered towards them by cruise ships, hotels and tour operators. Other tourists, as is the case with Jamaicans, walk up to the ticket counter, buy their pass and enter.

Different level packages are available, depending on the experience the visitor wants.

Tickets to the parks generate the bulk of its revenue, though income from ancillary services is surprisingly substantial. The sale of souvenirs, photographs that capture guest experience, food and beverage are among the critical ancillary revenue sources.

For the financial year to December 31, 2013, the company recorded revenues of $1.5 billion. Nearly a third, or $533 million, was generated by the ancillary services -- underscoring management's success at merchandising.

The net profit in 2013 -- $322 million -- was a three-fold increase over 2009, the year before Burrowes launched the share offer.

The owners went to the market from late November to early December 2010, offering 20.4 per cent of the shares in their company (including 5.1 per cent that was reserved as special block). They sought $240 million, only to find investors knocking down their doors to pump $620 million into their enterprise -- creating one of the most oversubscribed IPOs in recent times.

The financial performance for the first six months of this year reflects a business that continues to over-perform even the growth in tourist arrivals.

So far this year cruise ship arrivals are up eight per cent over last year, but Dolphin Cove's profit jumped 30 per cent during the first six months of this year, compared to the same period in 2013 -- from $221 million to $287.2 million.

Revenues soared too, by $110 million, to $897.5 million.

To be sure, part of the profit and revenue growth reflects the devaluation of the local currency, given that most of the firm's earnings are in hard currency, but Stafford says that the attraction has been welcoming more visitors, many supplied by cruise ships.

"Disney is a good producer of business for us because it has a family cruise," he explains. "The Caribbean is its prime cruise destination during the winter."

Dolphin Cove Ltd is gearing up to entice more local patronage to its Ocho Rios location.

The highway that will link the north shore tourist resort and Kingston is slated for opening in January 2016, and is expected to not only cut the driving time in half, but make the journey safer and less tedious.

Stafford is betting that the easier access will drive more Jamaicans to his park and is now adding facilities to cater to them -- water slides, an upgraded beach and animals like sea lions.

"We are always reinvesting in the parks," he says. "We are now expanding in anticipation of the highway and to make the park especially appealing to locals."

In 2008, the Burrowes partnered with a Caymanian to open an attraction in the tiny island but that company was not included in the public offer.

"We are the majority shareholders but we did not include it," the chairman explains. "One day we may take it in."

Plans to export the brand to Providenciales, in Grand Turk; and St Lucia are now at various stages of execution.

Moses Jackson is the founder of the Business Leader Award programme and chairman of the Award Selection Committee. He may be reached at moseshbsjackson@yahoo.com


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