Vanuatu, Republic of: Interview with Mr. Darren Pettiona

Mr. Darren Pettiona

Owner (Iririki Island Resort & Spa)

Mr. Darren Pettiona

Vanuatu, like all countries in the region, is striving to attract foreign investment. What would you say are the country’s most significant competitive advantages compared to other islands here, in the region?

Finally there is political stability in Vanuatu, which is a very important thing. Unlike many of the countries in the region, too, there is no religious tension. I know that sounds a bit strange, but for that reason it is a very good place for holiday for families, since people feel safe here. It has been voted the happiest place in the world, I think, four times and is still ranked number four or five. There is no level of violence of any description. People do feel very safe in this area. It is very safe from an investment point of view, as well.

It is also only three hours from Australia, an hour from Fiji and three hours from New Zealand, so as a regional centre it is very close. If I live in Sydney, it is quicker for me to get to Vanuatu than it is to Perth. If I can come to a place which is very relaxing and virtually is in Australia, it is a very good destination. It has been pretty well undiscovered, because the Vanuatu Government historically does not have a lot of money, so they do not spend a lot, like Fiji or Bali, on branding. Unless you have been here, you do not know about the place.

Probably the best thing to happen to Vanuatu is the tour ships – the cruise ships coming in. If I look at our resort here, I would say 80% of people who stay here have stayed here before and loved the place. They have been referred by a friend who said, “You’ve got to go there. It is so awesome,” or they have come on a cruise ship and had a day-pass and walked around the island, going, “Well, that’s great. I want to come back there and stay.” The cruise ships have been very important in helping Vanuatu establish the brand of who they are and what the country is.

The growth of the tourism sector is a priority of the Government in keeping with the economic growth strategy. What initiatives should be taken by the government in order for Vanuatu to develop other competitive advantages that present?

The biggest problem for Vanuatu is that there are not enough of airplanes coming into the area. Basically, the airplanes fly in now from Fiji, New Caledonia, Australia, and New Zealand. It is a very limited audience. Probably about 75% of our tourists are from Australia, New Zealand or New Caledonia. The main issue for the government has been the airport and they have been talking about upgrading the airport for a decade, but they are finally doing it. That will then allow long-haul flights to come in, and this will help to open-up Asia to Vanuatu, and that will increase tourism dramatically. I am expecting that by July, August next year a few charter flights will come from Asia.

Interestingly, in December this year Caissa, who is one of the biggest travel agents in China, was going to have a cruise ship go to Tahiti. They have now directed it to Vanuatu, so they are testing the water of Vanuatu. Caissa has a high-end Chinese tourist client, so they are bringing the high-end clients, to see how they react to Vanuatu, to see if Vanuatu is the future destination for them. The airport and the passenger terminal are the two critical things for the government to do. Unfortunately, the government is limited in what they can spend on branding in subsidy dollars. They own their own airline, but it is expensive to go on the flights. Because of a limited budget or the budget constraints, they really cannot do what Fiji does in heavily subsidised airflights, and do advertising in Australia, New Zealand and places like that. They are really, I believe, reliant now on expanding their relationships with the Asian community to bring it in. It does not take a lot to have this place very busy, because of the size and the level of accommodation. You only have to have two or three more flights coming in a week and the place is booming.

Another thing where it is really nice, too, is that this is catch-22. It is not commercialised. The things that make it so lovely is the fact that there are no street vendors pushing things on you, that it is not over developed, so it still has a very natural feel. You can go out to the islands. You can see people in natural habitat. You can cook naturally. You can pick your own vegetables. You can swim in the water. That part of it is one of the biggest beauties, which eventually will dissipate a bit as growth comes in, but now it makes it one of the biggest attractions.  

You have mentioned you have been in the hospitality industry here, in Vanuatu, for several years. Taking into account your wealth of experience, how would you summarise the hospitality industry here, in Vanuatu?

We have been here for seventeen years now and we have had this and the Grand Hotel. We are actually based in Sydney, so we do not do much day-to-day, but we have a very good management team here. We have seen the highs and lows of Vanuatu and, I must admit, this is probably the most bullish I have been about best Vanuatu in ten years. It is the first time, as I said before, that there are infrastructure projects carried out, but there are three or four at the same time, which is unheard of. It is a bit of unprecedented in Vanuatu. This current government has done a really good job in leveraging systems from the World Bank and from AID to actually build an infrastructure that can sustain and support increased tourism. I think they have had a lot of good support from the Chinese government, as well. That relationship is interesting, because historically they have been tied to Australia, France and New Zealand, but now the government has recognised that there is an opportunity to explore those areas and they appear to be doing a very good job.

Vanuatu is an interesting place. There are some good news and [some] bad [ones]. The thing that Vanuatu does need is to improve the quality of accommodation, genuinely. Of the big resorts, there are probably us, Holiday Inn and Le Lagoon, but what I would like to see is any new, future accommodation built to the standard that our resort is, so this becomes a baseline of 4.5-, 5-star. For us, the better the accommodation, the better the place is, because more people are attracted to it. We do not fear the competition. We actually encourage it, because that will mean more people come, because there are more things to do here and there are better places to stay.

In 2015, the country suffered Cyclone Pam’s devastation. Iririki Island Resort & Spa was re-opened in May this year. Apart from natural disasters, what are other challenges that you have to face here, in Vanuatu, as a businessman in the hospitality industry?

The biggest challenge is that we do not have enough planes coming in, so everyone is competing for a limited number of tourists. An issue can occur when people try to undercut each other, which is no good for longevity of resorts. We are trying to maintain our price in structure and things, otherwise we cannot. We pay our staff very well. We pay our staff over 20% over award rates, so we are trying to attract good quality staffs. The biggest challenge we really have is, I suppose, getting enough people to the destination. The other issue you always have, too, is consistency of product. Staff training becomes very critical. A lot of our staffs have been here over 15 years, which is great, but, I suppose, a lot of the staff live scattered around 83 islands, potentially, and the Ni-Vanuatu people have been used to living a life pretty much of subsistence. It is very easy for them to just leave and go back and farm-the-carrots-on-the-main-island-type-thing. Training and education is probably the critical thing, I think, for Vanuatu long-term, so getting a better-educated population. We see that through primary school. There have been great primary schools, but a secondary it all falls away. Unfortunately, the government needs to put some programs in place to try and keep people at school, because that will help the future generation, to help them build sustainable economy. They are probably the biggest challenges, I think, we really face.

According to our research, was in 2014 when the Island – Resort was sold to you and your business partners. Could you tell a little bit more about the history of your company and why did you choose to establish yourself in this country?

Everything comes by accident, I would say. Interestingly, we had the first instant gaming licence here in Vanuatu and we had an arrangement with Club Victoria and Club New South Wales to roll out interactive terminals throughout all the clubs and things through them. That was going to be publicly listed in June ’98 – May ’98 the dot-com meltdown went. Of course, the underwriters went 100 miles an hour, because they could. Then, John Howard, who was the Prime Minister of the country at the time, the interactive play protectorate, which was we had not had the legislation yet but it was effective from today and, if you breach it, you as a director might face $1.5m in fines. That killed the whole business, but the guy who was running it for us over here, said, “Darren, we have lost some money here, but there is an island that has come up for sale,” and I said, “I would say it would be pretty cool to own an island when you are 30,” so that is where it started. It was by accident - it was not by design, which normally happens in these places. But, look, we really love the place. The people are fantastic and it is a hard place not to like. As I said, we are very close to all the staff. It is an easy place to do business, because, as I said, tomorrow we are having some investors come over, wanting to do some development, and we have got the Prime Minister, Deputy Prime Minister, Minister for Finance joining us to help, so they are very supporting of this process, where no other country in the world would you be able to get the three Heads of government, basically, having lunch with you to try to promote investment. I think that part of it makes it really, really cool.

What, do you think, are the key reasons behind the company’s success over the years?

I think we are just consistent. I think you just have to work hard at it. We are probably lucky, as well, because this is a prime piece of real estate in Vanuatu, so if anywhere is going to be easier to make money, it would be an island 200m off the capital. If we were right at the back dock somewhere, it might be a greater challenge, but the island itself is quite iconic. We do a lot of branding in Australia. We come from technology background, so if you – and you are quite welcome to – search Google for, say ‘Vanuatu’ – a picture of Vanuatu, you will probably see Iririki island comes up first. A lot of people see Iririki and think that is Vanuatu, or they see the island and think that is Vanuatu. They do not realise what Vanuatu is. If you go and search, you will see Iririki comes up. Because of that, it is probably easier for, compared to some of the other struggles that people face.

Historically, we probably have the best occupancy, because if people come to a place like this, they will want to stay on. Especially when they just get the ferry straight across to the main land, they can have the best of both worlds. They can see the rest of the place and they can just come back to the island and feel protected and sheltered. I think a lot of that has a lot to. We have been lucky in that respect, which is why we cannot say it is all by design, again. Also, we have good staff. The staff, if you go to TripAdvisor, you will see a lot of comments about staff. The staff are your biggest asset. Even though we have buildings, if the staff are not friendly, if they do not service people correctly, it is all worthless. Having them do all that and smile all the time is really important.

What is the role that the company is playing in the development of economy of Vanuatu? - We see you many local people working here.

We are the biggest employer in Port Vila. I think we have 286 staff. In a country that has 80% unemployment, we are quite critical to that. When the cyclone came through, we were shut for 15 months, but we kept most of our staff on. Masseurs would become painters, other workers become gardeners, cleaning rubbish and things, so we kept them employed, because we knew how devastating it would be to put 200 people in unemployment in a time when people could not afford mortgages and things. It hurt us a little bit financially, but we looked it as a long-term investment: we do this now and we get a lot more loyalty from staff, because they were families and some of them had mortgages. I mean, we could have just shut and said ‘that is it and everyone is out’, but we have been here so long, we looked at the future of Vanuatu and what we were trying to achieve here, so we kept them on. To all their credit, people were really good. They took up different roles. We had chefs repair and being gardeners, building and moving dirt, so it was good. The thing about that, what made it better, too, is that now they have even more pride in their product, because they have actually been hands-on and they have so invested in it. They are actually probably more loyal to the product than we are. If people criticise, they get very defensive about it. Well, that is their opinion. We can try to improve it, but you will find a lot of staff are very protective of the product, because they have invested so much effort and sweat into it.   

HBR is well renowned for publishing break through ideas about innovation and technology. Can you provide some examples of how do you incorporate innovation into your work in Irikiri Island Resort & Spa Vanuatu?

We have the biggest installation of solar panels in the Pacific Islands. The biggest problem in places like Vanuatu is the cost of utilities. One of the biggest issues on profitability we spoke about earlier is the cost of infrastructure and utilities. What happens is generally, because it is such a small population, for the government to attract someone they have to give them exclusive agreement to provide power for them to invest in building infrastructure. What that ends up meaning is that you are going to pay a lot for these utilities. When we were here fifteen years ago, the cost of power was about $0.70/kW. It is about $0.58/kW, 15 years and 16 years later.

To be able to have a sustainable business, you have got to be able to generate power yourself and become self-sufficient. Right now, we have put, I think, 3,500 solar panels so we will be completely off the grid. We are growing our own fruit and vegetables up top and guests can go up with the chefs and pick their own vegetables, which is great. People love that they can grab this fresh and when they eat it, too, they taste the difference. Food here, in Vanuatu, is quite good, because it is very fresh. Seafood is a problem, which you would not think it would be, and that is because of all the fishing rods that have been given out. They are right in the Pacific, but beef and things are really, really great here.

We will eventually put in a desalination plant, as well, to generate our own water. We have our own water treatment facility and sewerage facility, as well. The whole idea is to make it a very self-sustainable island, which is good for the Pacific, because they are facing global warming issues. The power company here generates power generally by diesel generators, which is terrible for the environment. Vanuatu is a country that needs to protect their areas and things about global warming and are very supportive of it and they should be, because this is going to make the whole difference of their future. We are encouraging other resort centres to look at us as a test case and a benchmark. My power will now go down from, basically, $0.56/kW to $0.30/kW and it will be locked in at that level for the next 20 years. Our power will go from AU$1.2m a year to $700,000 a year, and because there is no tax here, that is pretty cashable. It is half a million, 10,000 a week free cash load, which can be invested in other things.

The country is home to many luxury hotels and resorts, such as Warwick Le Lagoon or The Havannah. What do you think that makes your resort different compared to the other ones?

I am biased, but I think we have the best resort now, anyway – even better than Le Havannah, but I think we are a different proposition – we are an island. You are not on the main land. We have a lot of activities. We have a lot of things you can do here, from all the water sports, to casino – some people like it or do not like, we have restaurants, aspa on top, so we have got a lot of options here. Its vicinity is good. You just get on a ferry and you just go across and you are in the heart of the city.
I think our location is probably our best competitive advantage and the fact that we are an island. If you look at TripAdvisor, I think right now we are ranked four at TripAdvisor, which is very good for big resorts. They will struggle, because you have so many more people there. If you have a little boutique like Havannah, I can hand-hold everyone and they love the place. When you have 300 people staying, you are going to have issues all the time. If you look at our competition and relations that, I think, the closest to us is Le Lagoon, as it is ranked 13th, then Holiday Inn is 15th-16th, and the Grand is 19th. We are miles ahead of what our peer group is.

What kind of clients are you looking to attract?

Well, any clients, really. Vanuatu historically was a honeymooners’ area, also an area of expat businessmen, so everything was really designed around single people coming in. In fact, when we first had our resort, this area here was adults-only. In fact, the resort, before we took it over, was adults-only resort, so it was all honeymooners and things like that. What has happened since is that Vanuatu has become a family destination, so families are coming in. They think it is safe, it is secure, it is beautiful, it is warm – things like that. We have had to re-engineer the whole place. We are trying to offer different styles of accommodation so we have built these big family fares, because people like the forest. People like to come and sit on a hub over the water, so we built two-bedroom family fares. We have still got all the honeymooners’ area. We have the ability to cater now for all different types and it is more of a tourist destination now compared to what it was.  It really was expat businessmen and honeymooners. Now it has become more of a family destination, so we have had to re-engineer our menus, our accommodation style and how we promote ourselves to really accommodate that. I think it is only going to get bigger than it was.

Are you looking to reach out new international clients and markets, for example the United States or Europe?

The biggest issue with all that is getting here. Generally, you will find people want direct flights or they have to tie it into a bigger trip, so they will go to Fiji for a few days and over to Vanuatu and then go back. This is where the airport is critical, to be able to take long-haul flights, and so at least eight-, ten-hour flights, so they can start coming from Hawaii, Fiji, Guangzhou - places like that; Seoul and all those type of areas, to make it more attractive. Everyone wants to come here, they just cannot get here or it is a hassle to get here. If you look at it, say, when the Chinese want to come here, they can come via Australia, but then they have to get a VISA to get to Australia, to get to here, so it becomes a very big challenge, whereas if they could fly direct here, there would be no VISA issues and things like that.

We do get a few from the US and that is normally based on, I suppose, the history of Americans here. You are probably aware that the naval base is here and things like, so there is quite a lot of affinity from America to Vanuatu. In fact, the US paid for the main road that is going all around Efate. Even at Iririki, too – you might not know this, before we had become a resort, this was a high commissioner – British High Commissioner and the very first hospital was on here, so any expat that is around my age who was born in Vanuatu, was born on this island. It was Queen Elizabeth who had morning tea here, when the Britannia came through, so there is quite a bit of history we want to maintain, too, on this structure. We are going to build a whole history archive in there, as well, just to show where Iririki had come from. We have got a lot of things that are quite interesting.

On a more personal level Mr. Pettiona, and bearing in mind your wide experience as a businessman, what would you say that is the most important lesson you have learnt over the years that you incorporate today into your role in Iririki Island Resort & Spa Vanuatu?

Patience. It would be patience – persistence and patience.  Nothing happens at the speed you think it will and you have to re-engineer and change, because it will not work out how you wanted it to be. You have to be very flexible. You have got to be quick to change your direction, to adapt to what has to be and you have to be patient here, because things do not work as fast as you would like them to work. That can be challenging and very frustrating, but it is easier as you get older. When you are a bit younger, it can be a lot more frustrating. When you get older, you learn to be a bit more patient and if you just persist, you will get there. The good thing with this place is that persistence is the key. If you persist, you will get to the end result you wanted to get to, but you have got to be patient and be persistent with applications and things. Systems and processes, I have learnt, are more important than I have ever thought they would be. Things you take for granted in the western world, where everyone has been educated and go through a very strict process, do not occur here. Training and processes are really important to get consistency, because if I said to someone here, “Go from A, to B, to C, to D,” they will do very well. If I say, “There is A, get yourself to D,” they will all go different directions to get there and they will cause real issues within the business itself. That part is good management, training and structures are really important here, too.

To conclude the interview, as you are well aware, the readers of HBR include many of the world’s most influential business and political leaders. What final message would you like to send them about Vanuatu and about Iririki Island Resort & Spa Vanuatu?

I think that Vanuatu is a really good destination and has a lot of potential. I think its location is great compared to the developed countries like Australia and New Zealand and its cost of labour is very cheap, but I do not think it has been exploited to the level it should be.

I think the opportunities for corporations to do business here is quite good. One thing I am very surprised about is that the cost of labour is probably $2/hour, but considering we are two hours off Brisbane, three hours off Sydney and three hours off New Zealand, no one has set up any manufacturing or anything here. When you think about it, the shipping costs are so low, because you are going to only travel for two hours, and the cost of labour is $2/hour, so I think there is an opportunity for people to build and develop, I suppose, manufacturing and area outside the robotic stuff. Any labour-intensive business things would really strive here, and the government are very supportive, and it is close for shipping to Australia and New Zealand. I have been very surprised over the years that nothing has happened like that. When you look at the cost of labour in Australia, $25-$30/hour, you can employ 10 people to one in two-hours distance. You travel two hours and you employ 10 to one – surely there is going to be things that people can exploit.

I think there are some really good opportunities and I think Vanuatu is still going to be very heavily relying on the tourism sector, and I think that is still going to grow, too, because of the stability of the country politically, but also because it is religiously and racially stable. There are no groups here with tensions with each other and it does not matter what religion I have, whether it is Buddhism, Islam, Christian, Catholic. It does not really matter. There is none of that built-up tension, which makes it a very safe place and a very happy place. Like I said before, everyone who comes, comes back. Everyone who comes across – and most of them quite shocked. We have had a lot come and say, “Oh, I heard about Vanuatu, but I was not expecting to find something like this in Vanuatu. I was expecting tin shanties and things like that. Wow, this is better than most resorts around the world and it is two hours away.” That part of it, I think, the undiscovered part of Vanuatu will eventually blossom. It is like a flower ready to blossom and I think it is in the next probably five to ten years that you will see the best of Vanuatu come out.