Where did it all go wrong for Flagstaff Hill?

The council this week released a long-awaited report into what could be done to reimagine the site which is costing ratepayers up to $720,000 a year to keep afloat.

But Flagstaff Hill hasn't always run at a loss. There are different views on where things started to go wrong - some say it was the loss of the historic boats which rotted away while others say the arrival sound and light show and all the extra costs that went with it took a toll.

Former director Peter Ronald is so disappointed it has fallen so far short of what it could have been that he no longer visits the site.

"I don't go there because I find it too depressing and distressing. I really feel very keenly the value of what was and its failings," he said.

The shift from being a museum to a tourist attraction was where former director Peter Ronald said he believed things started to go wrong.

"I think that's when things started to fail. The drop in visitation. The confused mission," he said.

Under his watch it was a facility that paid its way, and his goal was to make it a really good maritime museum. "It was developing an international reputation for that," Mr Ronald said.

But a change in direction from council in the 1990s to focus on it as a tourist attraction first and the museum second, its fortunes he believes started to flounder. "That change in tact is really what led to the end for Flagstaff Hill," he said.

"When you then have your focus as a tourist attraction you don't need to look after historic vessels, they're just theatrical backdrops and when they rot and fall to bits you throw them away."

The city council wants to know what the public thinks of its new plans to turnaround the site which include public and private investment in activities such as a geothermal/wellness facility, 40 to 80 room hotel, a function and event space, First Nations experience and dining attractions such as a distillery or brewery.

A hotel on the site is not a new idea. In 2000, a four-year push for a private 32-unit development stalled, and when another developer offered to step in the council voted it down. In 2005, a master plan for the site raised the prospect yet again.

In early 2001, the council secured $3.3 million in state government funding for a $6 million revamp of the site including the sound and light show.

By the time it was finished the council was hoping it would break even but by 2006 headlines declared "Flagstaff Hill hurting" as the losses started to mount.

Former council chief Vern Robson remembers when the council took over Flagstaff Hill from the committee which was successful in getting funding from the tourism minister to start the project.

It turned open paddocks where horses would graze around the heritage-listed lighthouse, cottage and garrison into a village which was designed to bring tourists to Warrnambool all-year-round.

Mr Robson said the Reginald M and Rowitta boats were a major attraction with onsite boat builders also a drawcard.

The 1909 Rowitta - a popular function venue - was scrapped in 2015 after it rotted and it paved the way for a $2.95 million revamp of the facility which was then losing $500,000 a year.

In 2017, a new sound and light show called Harpooned was unveiled and visitor numbers started to jump but then the pandemic hit.

The Reginald M cargo ship built in 1922 which had been in the pond since 1975 was taken away piece by piece after rotting away in 2018 - 10 years after it had been restored.

Mr Robson said if the council worked with Heritage Victoria there were vessels in Melbourne that could be brought in. "It's been done before and could be done again," he said.

"The years that I was there Flagstaff Hill paid its own way," Mr Robson said. "I don't know where things went wrong."

Mr Robson said a lot was achieved in the early years to have it as a first-class maritime museum.

The report released for public feedback by the council this week doesn't include the return of historic vessels to the site but with the possible arrival of a geothermal park, the sound and light show could be a thing of the past.

Mr Robson said while it was exciting to have a sound and light show, it didn't compare to the one at Ballarat's Soverign Hill which was a short drive from Melbourne.

"The sound and light show, unfortunately, was a victim to the costs of local government employees who had to be paid penalty rates to work at night," he said. "If you did your dollars and cents on it, it didn't pay its way."

Mr Ronald said he hoped the future of the site was led by sound practical economic management rather than "beaut ideas and whims".

He said putting a geothermal spa and water park with a historically authentic shipwreck museum was an "absolute illogical mix".

Mr Ronald said the question needed to be asked: what is the purpose and mission of Flagstaff Hill?

He said they had to pick a lane and do it really well. "It's when you start mixing and matching...it gets confusing for everyone including the visitor public," he said.

"It's not going to be sustainable, that kind of fruit salad approach."

Mr Ronald said if it was a museum then there was an argument for it to be subsidised.

The new library, which attracts 197,000 visitors a year, costs ratepayers more than $1.1 million a year, the art gallery which grew from 47,000 visitors to 67,000 between 2016 and 2019 costs about $536,000 a year to keep the doors open.

By comparison, pre-pandemic Flagstaff Hill had 170,000 visitors and costs up to $720,000 to keep afloat but that figure includes the visitor information centre.

"It does actually have a lot of museum material that, one way or another, has to be looked after as well," Mr Ronald said.

However, Mr Ronald feared it was probably too late for it to go back to functioning as a museum but he said he wasn't in a position to make that judgement call.

He said he hoped something positive came out of the latest push to reinvent the site, and it could be reinvented to become self sufficient

"It's probably going to need more than tacking on things that you thinking might help it. Turning it into a kind of fruit salad thing, I don't think that's the future of it," he said.

"One of the options, you would think, would be to just take the fences down and just open it up and have speciality shops and just have it as a little shopping village. That in conjunction with the hotel maybe that would work."

Mr Robson said now Warrnambool had lost a couple of hotels, getting a long-term lease for a private investor to come in and build something on the site could be a good idea.

"There's no doubt it was a prime site," he said.

But he was concerned about the site taking on the already successful geothermal business just down the road.

Council wants feedback through its online survey at yoursaywarrnambool.com.au