There are two ways to read Colonial Williamsburg's 2015 Annual Report released with the current issue of "Trend & Tradition."
It could be read as the record of improvement: Revenues were up, expenses were flat and the Colonial Williamsburg Foundation operated the Historic Area — which has historically produced at an operating loss — with a smaller loss than in 2014.
On the other hand, despite reporting the "strongest summer visitation since 2008," Colonial Williamsburg sold a lower-than-expected 574,300 tickets — which includes student and youth groups — and the foundation's net worth fell for the second year in a row.
Colonial Williamsburg is the city's biggest tourist attraction and one of the region's largest employers, so the financial health of the foundation is important news for everyone in the Historic Triangle.
Colonial Williamsburg's Annual Report give a snapshot of its operations, both non-profit and for-profit. The foundation also prepares an IRS Form 990 each year for the non-profit side and a corporate income tax return for its for-profit operations.
The operating results reported on the Consolidated Income Statement and Statement of Changes in Net Assets table shown in the report refer to: ticket sales; all revenues generated by hospitality and products; unrestricted operating gifts and restricted gifts for operations spent for their intended purpose during the year; the budgeted amount of endowment support provided by the endowment spending policy; and all operating expenses of the foundation and its subsidiaries.
To put ticket sales into context, Colonial Williamsburg sold more than a million tickets per year in the late 1970s and early 1980s. Admissions have hovered at over 600,000 for most of the past decade.
However, Colonial Williamsburg officials said the lower numbers results from a different way of calculating admissions.
Changing how tickets are counted
"Soon after Mitchell Reiss' arrival, CW's ticketing metrics changed to more accurately reflect the number of guests who actually visit Colonial Williamsburg's Historic Area. Previously, leisure (individual consumers) ticket sales numbers were obtained by combining ticket sales among guests at Colonial Williamsburg with promotional tickets that were provided to third party groups and were counted whether or not they were used," said spokesman Kevin Crossett. " Using the new model, Colonial Williamsburg's ticket sales rose 1 percent. The increase in ticket sales represents a 7 percent increase in (ticket) revenue over the same period. The data clearly shows Colonial Williamsburg visitation is trending up."
Only leisure ticket sales are now used to compare year-over-year attendance.
"The 574,300 is the total of ticket sales for leisure guests plus student and youth groups. Student and youth group sales figures can vary from year to year, so we pull them out for our year-over-year comparison," Crossett said. "Using only leisure ticket sales ... we are more easily able to compare our long-term finances. In other words, the 574,300 is total feet-on-the-street ticket sales. When comparing year-over-year sales, we rely on leisure ticket sales figures to inform us on tourist demand."
Backing that up, foundation revenues rose for the last nine months of 2015 — and for the first four months of 2016, according to Reiss' note last week to employees informing them they wouldn't be getting the $50 per month bonus for increasing revenues for May, after 13 straight months of revenue increases.
The report, distributed with the current edition of Trend & Tradition, shows:
•Total operating revenues increased $4 million, to $185 million in 2015.
•Expenses stayed flat at $223 million.
•The 2014 operating deficit declined from $42 million to $38 million.
The foundation withdrew $1 million more from its endowment than it did last year to supplement operations in 2015, a total of $45 million. Infusions of money from the endowment to the operating budget occurs each year, according to a formula.
Bottom line: the foundation's net assets decreased from $858 million at the beginning of the year to $800 million on Dec. 31, 2015.
Overall, the foundation's endowment made a 2.9 percent return on its investments, more than the 1.4 percent return of the S&P 500.
However, Colonial Williamsburg had $29 million in losses in "Endowment Investment Income, realized and unrealized gains/(losses), used for non-operating purposes or retained in endowment."
Changes to retirement benefits cost the foundation another $4 million and it experienced another $2 in unspecified losses.
These losses were partially offset by $15 million in gifts for the endowment or for capital projects.
Going through necessary changes
While the numbers might not tell an altogether happy story, Colonial Williamsburg President Mitchell Reiss, was upbeat in his accompanying message.
Reiss said Colonial Williamsburg is going through changes, but changes that are necessary to be viable for the future.
"For Colonial Williamsburg to succeed —ironically, to remain the same in the most critical ways — it would have to change in others," Reiss said.
The foundation launched a number of new initiatives in 2015:- a musket shooting range, an ice skating rink, an archaeology site for children, operating an ale house and holding the first official Halloween celebration in the Historic Area. The constant at Colonial Williamsburg in 2015 was change.
That, Reiss said, was on purpose.
"This was serious change undertaken at an aggressive pace, reflecting a genuine sense of urgency," he wrote in his introduction to the report.. "Seismic shifts in America's cultural and economic landscapes over the years had done serious harm to Colonial Williamsburg's bottom line. Like so many other historical sites and museums, we had simply lost the attention of too many people."
The changes are likely to continue.
"All aspects of revenue generation and expense reduction are reviewed and discussed regularly. Since last year, the foundation evaluated signage and way-finding and prioritized phases for signage improvement; installed up lighting in several iconic Historic Area buildings as well as improvements to lighting along walkways and parking areas; completed construction of the Market House with generous support from trustee Forrest Mars; completed reconstruction of the Windmill of Colonial Williamsburg with donor funding; offered ice skating adjacent to Merchants Square; constructed a shooting range for black powder and 18th century musket shooting; announced the Lodge joining Marriott's Autograph Collection Hotels; changed food service options at the Lodge to better match guest trends; and invested in information technology infrastructure," Crossett said Tuesday.
"These efforts and many other smaller initiatives paid off in the improved financial results for 2015. Projects continue into 2016 and beyond to re-establish Colonial Williamsburg hotels as the premier hotel options in the area and also to offer Historic Area experiences relevant to today's guests," he said.
And some of the continuing changes seem to be paying off.
Attendance at the Art Museum of Colonial Williamsburg increased for the third straight year, rising 3 percent in 2015. The foundation also reached 50 percent funding for the $40 million proposed expansion of the museums.
"Colonial Williamsburg hosted 222,636 guests at its museums in 2015," said Crossett. "Approximately 10,000 guests enjoyed the foundation's free Halloween event, Haunting on DoG Street: Blackbeard's Revenge. Nearly 20,000 guests experienced Liberty's Ice Pavilion."
Vaughan can be reached by phone at 757-345-2343.
By the numbers
Revenue: $185 million, up $4 million from 2014.
Expenses: $223 million, no change from 2014.
Operating deficit: $38 million, down $4 million from 2014
Leisure tickets sold: 480,007, up 5,708 from 2014
Foundation net assets: $800 million, down $58 million from 2014