The Colonial Williamsburg Foundation is outsourcing some of its operations and cutting 71 jobs as the nonprofit that operates the historic site and tourist destination tries to stem years of financial losses — including a $54 million loss in 2016 — that have been draining its endowment.
In a major strategic change, the foundation’s top executive said Thursday that it will outsource to private vendors its golf operations, its 19 retail stores, much of its maintenance and facilities operations, and its commercial real estate management.
“The problem is that we have been drawing too much money from the endowment because we have had to subsidize the losses in the commercial business lines,” President and CEO Mitchell B. Reiss said in an interview. “What we do best is history and education. We need to get back to focusing on that. We need to make sure the endowment supports only that.”
The operations that are being outsourced employ 262 people. Those employees can keep their jobs for at least the next year if they choose, under an agreement negotiated with the four private contractors, the foundation said.
An additional 71 employees in other departments will lose their jobs by the end of the year and will receive severance and job-placement assistance, while 22 other employees have been reassigned because their current positions are being eliminated.
The job cuts do not affect any of Colonial Williamsburg’s “customer-facing, front-line, historic-area interpretive staff,” the foundation said.
“We did our very best to minimize the impact on people who would lose jobs,” Reiss said.
Colonial Williamsburg will employ about 2,100 workers after the restructuring. Employment can vary seasonally and includes about 500 part-timers right now.
In an open letter sent by social media to Williamsburg-area residents and to media outlets, Reiss said outsourcing some of the operations offers a way to run some of the foundation’s commercial businesses more profitably.
“For a variety of reasons — business decisions made in years past, less American history being taught in schools, changing times and tastes that cause us to attract half the visitors we did 30 years ago — the foundation loses significant amounts of money every year,” Reiss wrote.
The foundation’s for-profit hospitality and real estate operation includes six hotels, restaurants, shops, offices, a spa, three golf courses, tennis courts and walking trails.
Four companies will take over the outsourced operations. Kemper Sports will take over the golf courses, Aramark will oversee the retail shops, Brightview will handle landscaping and WFF will oversee facilities management.
The foundation will continue to operate the hotels and restaurants. Reiss said the foundation already has professional service firms to manage the hotels.
Established in 1926, the foundation operates the 301-acre Colonial Williamsburg site, which includes 88 original buildings and 500 buildings reconstructed according to architectural research. Standard Oil heir John D. Rockefeller Jr. put up the money for the purchase and restoration of dozens of Colonial buildings in the 1920s and eventually contributed $56 million to Colonial Williamsburg and related projects.
Three members of the Rockefeller family, who either have served on the foundation board or currently are board members, said in a letter that Colonial Williamsburg “must evolve with the changing times” and the reorganization is a necessary step.
Reiss said attendance has improved since 2015. It is up about 10 percent so far in 2017 to about 230,000 visitors compared with the same period last year. “2015 was important because that stopped a seven-year decline” in attendance, he said.
Yet Colonial Williamsburg still faces operating deficits that have forced it to draw money from the endowment, which is now valued at about $684 million.
The foundation lost $54 million from operations in 2016 — a loss of $148,000 per day — and it has lost $277 million over the past five years. In addition, in 2016 the foundation paid $17 million servicing its $300 million debt.
At the current rate of drawdown, the endowment could be exhausted in eight years.
Annual losses have been compounded by the foundation’s debt load, which Reiss said resulted from borrowing money to improve its hospitality facilities and visitor center in the years leading up to Jamestown’s 400th anniversary in 2007. “For a variety of reasons, the foundation did not realize adequate financial returns on these investments,” he wrote.
The goal of the restructuring is to prevent excessive endowment withdrawals — which have sometimes far exceeded the annual 5 percent drawdown typical for nonprofits. The foundation said it should be able to save “tens of millions of dollars” by 2019 because of the restructuring.
Formerly president of Washington College in Chestertown, Md., Reiss was named president and CEO of the Colonial Williamsburg Foundation in June 2014.
In an attempt to improve the number of visitors, he implemented initiatives such as adding a skating rink on Duke of Gloucester Street and a Halloween event that drew crowds, but which some critics said were out of step with the historic site’s traditional character and educational mission.
Reiss wrote in his open letter Thursday that the new programs have helped but are not enough.
He said the foundation’s primary goal “is to find a way for Colonial Williamsburg to continue to tell America’s enduring story. This means, first and foremost, that we need to focus on our core educational mission — historic area preservation, the museums and educational programs. These are the reasons why people come visit us. It is why they care about us. It is why they support us,” he wrote.
“But to be able to continue to tell our story requires us to be financially stable and, sadly, that stability is threatened unless we take decisive action. Only financial stability will allow us once more to focus on what we do better than anyone else in the world — share America’s history and deliver outstanding guest experiences.”
Asked how Virginians can help, Reiss said, “Come and visit, buy a ticket, stay in our hotels, dine at our taverns, bring your friends and family, hold your conferences here.”