Bill Cecil frets that Biltmore Estate’s growth strategy will compound his tax problems. It could end up solving them.
Entrepreneur William Amherst Vanderbilt Cecil looks south over the rooftops of Asheville, toward the outsized estate built by his grandfather 100 years ago. “Biltmore was always about being new,” muses Cecil, the estate’s current owner, explaining the logic behind the thoroughly modern business he has created there.
Biltmore Estate celebrates its centennial this year with special exhibits and its most elaborate Christmas festivities ever. Having turned his family mansion into a major tourist attraction – and a catalyst for regional economic growth to boot – Bill Cecil, 66, has moved into a new market. His strategy is to capitalize on the goodwill and glamour of the Biltmore name by selling everything from wine to furniture. Using catalogs, computer databases and other tools to leverage the power of the Biltmore brand, Cecil predicts the estate’s revenues will jump from $35 million a year to $100 million.
“This is a unique property, something not even Disney could build,” says Hugh Darley, corporate consultant at Viacom’s Paramount Parks in Charlotte. “They are in a league by themselves.” Darley, a Disney veteran himself and a former consultant to Biltmore, sees a lot of potential for Biltmore product lines. “The Vanderbilt name is a true part of Americana, known across all segments of population. It has an air of quality about it, and as long as they maintain it, they should do well.”
A strong brand name gives companies a kind of shortcut to their customers’ wallets. That’s one reason Wall Street loved brand-name products so much in the ’80s, when Forbes magazine put a $10 billion price tag on Philip Morris’ Marlboro brand. Biltmore is not in the league of the Marlboro Man, but Cecil does have a ready audience for his products. Some 750,000 visit his property each year, and most presumably are satisfied by the well-orchestrated experience. With that kind of goodwill built up, marketing costs are sharply limited, allowing the profits on each additional product to flow straight to the bottom line.
Already, Biltmore has pretax margins of about 12%, more than $4 million a year. But Bill Cecil is not motivated by profit alone. He loves Biltmore on a purer level, feeling a sort of, well, noblesse oblige about its continued existence. “We don’t preserve to make money, we make money to preserve,” he says of his efforts to open new sections of the mansion and grounds while maintaining a scrupulous level of quality and historical accuracy. “I’ve been enormously impressed,” says Richard Moe, president of the National Trust for Historic Preservation in Washington. “There aren’t many places like Biltmore, not that many Bill Cecils. He has done a great job in terms of quality.” That quality, of course, can be viewed as an additional investment in brand building.
Cecil’s success has led to a problem, albeit a problem many companies wouldn’t mind facing. He fears that the tax man will take so much upon his death – inheritance taxes run as high as 55%, and the house has been valued at $30 million – that the Cecil family will no longer be able to operate Biltmore as a private company. That, Cecil believes, would destroy the special spirit that informs the place, wreck the delicate balance of commerce and culture he has created. “The more I do, the more I reinvest,” Cecil says. “And the more I reinvest, the more my problem grows.” Yet even as he lobbies the government for special treatment of historic properties, the increasing cash flow from Biltmore’s brands could solve his tax problem. “We’re land poor,” he says earnestly, but he may not be able to say so for long.
Bill Cecil is a big man, youthful-looking despite his gray hair, slightly owlish in his eyeglasses. He speaks in a plummy English accent, going into great detail on the finer points of wine making, family lore and the politics of historic preservation, lapsing occasionally into such Americanisms as “No way, Jose.” Born in the great house his mother, Cornelia, inherited from her father, George Washington Vanderbilt, Cecil is the product of two storied bloodlines. The Vanderbilts, of course, built one of the great American fortunes; the Cecils, the fanciest of British aristocrats, descended from William Cecil, Lord Burghley, who was lord high treasurer to Queen Elizabeth I.
But the genes that have done Bill Cecil the most good seem to have come straight from his maternal grandfather’s grandfather, “Commodore” Cornelius Vanderbilt. Old Cornelius was no rich kid – he came up the hard way on Staten Island, working ferry boats in New York harbor. The Commodore’s genius was in recognizing and exploiting a new way of making money in the economy of his day: steam-powered transportation. His empire, based on steamships and railroads, became the stuff of legend. Bill Cecil while never poor, insists he had to work for a living. Grandpa George Vanderbilt spent much of his share of the fortune building and furnishing his great estate. Bill’s brilliance has been to capitalize on a lucrative corner of the modern economy: the willingness of people with leisure time and a little extra money to spend them on travel and tourism.
Cecil was educated in Europe and served in the British navy just after World War II. He came back to the United States in 1949 to attend Harvard, then went to work at Chase National Bank, a forerunner of Chase Manhattan. “I worked in New York, then took on more responsibility with a move to Washington,” Cecil says. He is emphatic that his job was not just a way to pass the time. “I needed to work to support myself.” But in time, the lure of Biltmore Estate proved too strong to ignore.
When George Vanderbilt began buying up land near Asheville in the late 1800s, eventually amassing 125,000 acres, he envisioned creating not only a magnificent house in the Blue Ridge Mountains but also a self-supporting estate. Architect Richard Morris Hunt designed the 250-room mansion, and New York’s Central Park designer Frederick Law Olmsted laid out its gardens. Vanderbilt opened Biltmore House with a gala Christmas celebration in 1895.
With its farm, lumber mill and plant nursery, the estate was productive through the early part of this century. But maintaining it was a massive job. After Vanderbilt’s death in 1914, his wife, Edith, began selling off land and operations. Son-in-law John Cecil, Bill Cecil’s father, opened the house to visitors in the ’30s, but not much came of it. Its most important use was as a storage place for paintings from the National Gallery during World War II. By 1960, around the time Bill Cecil returned to Asheville, the house was losing $250,000 a year. “It was seen as a white elephant,” he says. Though the house was made a national landmark in 1963, most of the revenues came from dairy farming. In 1979, Bill Cecil and his brother, George, split their inheritance, with George taking the farm and some land, and Bill holding onto the house and its grounds.
It was a slow process of renovation and expansion. “We could have gone cheaper on furnishings, but that’s not preservation,” Cecil says. Adds Senior Vice President Stephen Miller, “Each time we opened a new area of the house or estate, we could support a rise in the ticket prices.” Not that Cecil claims some great master plan for the business. “Nothing really prepares you for this,” he says. “It’s quite unlike other ways of making a living.”
Still, his strategy has paid off. By 1976, the great main-floor music room was finished. The downstairs, which holds the servants’ quarters and an indoor swimming pool, opened in 1980, the winery in 1985, the upstairs bedrooms and parlors in 1989. Audiotape tours and behind-the-scenes guides were added, and the price of admission climbed steadily to the current $24.95.
To add some value and keep the customers coming year-round, Cecil has developed special events at Biltmore. The Christmas festival and spring flower extravaganza are the most popular. Overall, gate revenue is about $17 million, compared with total revenues of $3.5 million in 1979. Other sources of income, including the estate’s restaurants, souvenir shops and winery, bring total revenues to almost $35 million, against expenses of some $30 million.
It’s a nice business, but one that’s just started to tap the wealth of the Biltmore name. “Our catalog brought in sales of a little over $1 million in its first year,” Miller says. “$10 million’s a realistic goal for our catalog sales, $15 million a real home run.”
The Biltmore catalog hawks reproduction artwork and bric-a-brac from the mansion. Visitors entranced by George Vanderbilt’s collection can buy a $48 filigree tea-bag caddy, $138 brass picture frames (“the look of a true antique,” the catalog says) or a $95 tobacco jar. A line of reproduction furniture will be available in future editions.
One new venture, which Miller heads, is a management company. “We’ll begin as a consultant this year,” he says. “A lot of historic properties, even museums, are afraid of funding cuts. We are deluged with requests for information on how we do what we do, so we’re going to market it.”
Miller, who grew up in Asheville and worked on the estate during summers, says the company is trying many ways to beef up its numbers. “We’re thinking about opening on summertime evenings, maybe involving one of the restaurants on the estate,” he says. “We’d like to have an attraction based on agriculture, which was such an important part of Mr. Vanderbilt’s original plan.” The estate has already built a herd of 500 cattle, raised as breeding stock. An agricultural exhibit would help lure a market segment underserved by Biltmore – families with children.
“We are trying to expand our appeal to people traveling with kids,” says William Cecil Jr., 36, president of the wine company, which sold 42,000 cases last year. Miller also hopes to increase international interest in the estate. Biltmore marketers are working with other regional attractions, such as Chimney Rock Park, and state government to create a tourism package.
“We don’t expect people to fly in just for us,” Miller says. “But we could be part of a travel plan. It’s not going to happen overnight, but 10 years from now we should be on the map. Even the Olympics in Atlanta could help on that score.”
But as always with the Cecil family, the matter is more complex than numbers alone. Diana “Dini” Pickering, 37, Bill Cecil’s daughter and senior vice president for reproductions and retail, sounds a note of caution when talk turns to numbers like a million visitors a year and $100 million in revenues. “I’m not sure about that $100 million,” she says. “I don’t like the way a lot of big companies operate. They’re too impersonal. I would hate to lose that family spirit we have here.”
Beyond the rewards to its owners, Biltmore Estate has proved a gold mine for Buncombe County and western North Carolina. “There’s no question that it’s an exceptional draw, one of the main attractions of this region,” says James S. France, vice president and general manager of another Asheville landmark, Grove Park Inn. “People used to close up the hotels for January, but there’s enough business now to keep them open year-round. We haven’t closed for several years.”
Biltmore’s $2.5 million advertising budget gives the whole region more visibility. Estate horticulturalists, for example, travel the South and Midwest holding talks and giving interviews. That helps draw in traffic that spills over to surrounding attractions.
Dick Trammell, who ran Asheville’s convention bureau from 1975 to ’83, says that’s part of Biltmore’s strategy. “When we would go after motor-coach tours, we had to give tour operators more options and attractions,” he says. “Biltmore was promoting things like Old Salem and the museums in Raleigh. For a long time, their advertising budget exceeded that of the state travel bureau.”
According to a study commissioned by Biltmore Co. and conducted by Clemson University’s College of Architecture, visitors to Biltmore Estate pumped almost $100 million directly and indirectly into local businesses in 1991. “[Biltmore is] as important as any industrial business in that region,” says Trammell, former director of N.C. Division of Travel and Tourism. “Biltmore draws people from up and down the East Coast, and when they come in on I-95 or I-85, their route across North Carolina on I-40 covers a lot of the state.”
Biltmore paid almost $600,000 in local taxes, licenses and fees last year. With numbers like that, Bill Cecil’s fight to keep Biltmore a going concern takes on more than a passing importance to his neighbors.
How strong is Bill Cecil’s case for putting off the tax man? How much sympathy can be mustered over the difficulties of transferring great wealth from one generation to the next? It’s true that an enormous tax bill, one that forces the Cecils to curtail their business, could be tantamount to the government killing the goose that lays golden eggs. But the same argument could be applied to all family-owned businesses forced to liquidate by inheritance or capital-gains taxes, from mom-and-pop restaurants on up.
Bill Cecil is lobbying for a change in the law concerning the inheritance of historic properties, which would allow heirs to carry on without paying the estate tax, at least until they or their descendants decide to cash out. He has spent time in Washington, arguing his case with politicians and preservationists.
But the Cecils reject the various solutions put forward for saving the estate as impractical or counterproductive. Why not fold all or part of the property into a tax-exempt entity? “That might work for a generation,” Bill Cecil says. “But it would kill the attitude of involvement so necessary to our growth.” Selling Biltmore off to developers or a big entertainment company is similarly unpalatable to the family. Cecil rejects the idea out of hand. “If I wanted to bastardize it, I’d do it myself and make a fortune,” he says. “I could go to Mr. Sotheby or Mr. Christie and say, ‘How much for this chair? I have a dozen of them.’ And we can build as many high-rise apartments on the property as we wanted.”
Cecil’s notion that outsiders might not provide the stewardship the family does carries some weight. “There’s a sensitivity to certain things because the family owns it,” Paramount’s Darley says. “It maintains the authenticity. Big companies don’t have the expertise to run something like this.” Adds Moe of the National Trust for Historic Preservation, “There’s a certain culture and discipline that make Biltmore a success.”
What about loans or insurance policies to cover the tax bill? Bill Shobe, an assistant professor of economics at UNC Greensboro, takes the revenue-raising idea even further. “If a property is so valuable to the surrounding economy,” he asks, “why not sell some kind of development bond to keep the place going?” The Cecils pooh-pooh any big borrowing plan. “We don’t have that kind of cash flow,” Dini Pickering says. “We’re land poor,” Bill Cecil repeats. “The tax value of the house and the goodwill associated with the property aren’t income producers at the necessary level.”
Even the goodwill accrued to brand names is valued for taxation by the IRS. The more Biltmore grows its brand name, the more that intangible jewel is worth. “The tax policy is a disincentive to our growth plan,” Bill Cecil Jr. complains.
But they might have to cut out the poor-mouthing if their brand strategy succeeds. Already, the estate would seem to produce enough in profits to support a debt load sufficient to pay a hefty tax bill. A few years of growth from the catalog business would help pay even more.
It’s not like the estate is drowning in debt. “The house is paid for,” Bill Cecil Jr. says. The company has about $10 million in long-term debt, used to finance recent projects such as a visitors’ center, new restaurants and a parking lot. It also has about $3 million in revolving, short-term debt. “I’d think that any loan could be collateralized by the real estate.” That’s the not-so-surprising view of a commercial lender at a big North Carolina bank. “And if they get the cash flow up, they could easily service a $25 million loan.”
Bill Cecil Jr. and Dini Pickering both want to continue their father’s work at the estate their great-grandfather built so improbably in the shadows of the North Carolina mountains. Says Pickering, “We really are committed to this business. I have no intention of taking it in other directions. We hope to keep it in the family.” If the brand strategy pans out as well as looks possible, the Cecils should hold onto their house, with or without a break from Uncle Sam.