By Keith Chu / The Bulletin
Published: February 25. 2007 4:00AM PSTTourists looking to enjoy top-notch golf and restaurants at a Sunriver-area resort, but who aren't picky about where they sleep, will soon have a unique way to cut down on the price of lodging. Rather than renting an entire two-bedroom visitor cabin at Caldera Springs resort, they can pay for just the cabin's kitchen and living room, where the only place to sleep will be a pullout couch or a Murphy bed.
Land use watchdogs say few resort visitors will want to sleep on a couch after traveling to recreate in Central Oregon. They argue Caldera Springs' plan is proof that high-priced resorts are trying to skirt county and state laws requiring overnight lodging units.
Some developers deny that claim, but they also admit that county and state regulations are the only reason they plan to build so many time shares and rental cabins over the next few years.
The rules were intended to ensure that destination resorts would only be built if they could draw enough tourism to make them profitable. But analysts and developers argue the regulations haven't stopped any resorts - they have simply required them to lose money and build rental rooms that nobody really wants.
Nearly 3,000 new overnight accommodation units are slated to be built in the next few years at the five resorts planned for Central Oregon, according to planning documents from Crook and Deschutes counties.
Some analysts predict that avalanche of new rooms is poised to overwhelm a market that already has too many places for people to stay.
"If you require these developers to build these overnight accommodations, the reality is they're only going to be rented out 12 weeks of the year and then just sit empty," said resort lobbyist and former Deschutes County Commissioner Linda Swearingen. "You'd be better off taxing them $500,000 because then the public would see some benefit at least."
The law and the market
On Monday, Deschutes County commissioners are scheduled to debate whether to allow more permanent homes at resorts, in response to a request by developers. The proposed rule would allow 2.5 homes for every overnight lodging unit - a 25 percent increase and the most homes allowed under state law.
The state's destination resort laws, first adopted in 1984, put a bevy of restrictions on resort development in exchange for knocking down a pillar of the state's land use system: allowing development outside of city boundaries. The idea, according to state planning goals, was to stimulate rural economies by allowing "self-contained development providing visitor-oriented accommodations and developed recreational facilities in a setting with high natural amenities."
Developers have long complained about the law, with much of their ire directed at the "overnight lodging requirement" - that resorts must build one rental unit, like a hotel room or time share, for every two single-family homes. Watchdogs say that requirement was supposed to ensure that resorts didn't become rural subdivisions in disguise.
But the rule hasn't slowed the runaway train of resort development. Three new resorts are planned or under construction in the Powell Butte area of Crook County, while work on Tetherow, just outside of Bend, and Caldera Springs, near Sunriver, is also under way. And the Thornburgh resort north of Tumalo is awaiting a decision from the state Land Use Board of Appeals, while south of Redmond, Pronghorn is completing a clubhouse and spa targeted at the ultra-luxury market. Jefferson County currently is not home to any resorts, but commissioners recently changed land use laws to allow them for the first time.
Instead, escalating land values in Central Oregon have made it worth developers' while to build money-losing overnight lodging units and still make a profit on sales of lots for permanent homes.
"They have to factor in the fact they're going to have X amount of overnight accommodations that aren't going to make money," Swearingen said.
Analysts agreed that Central Oregon has far more overnight units than it needs, most likely because of the state lodging ratio law.
"Most of the projects we work on would not include lodging units were it not for that ordinance," said Jon Peterson, president of resort consulting firm Peterson Economics based in Anacortes, Wash. "There is still lots of demand for new second home properties, but the lodging market all throughout the Northwest is already oversupplied."
Resort consultant Richard Mc-Elyea, of Economic Research Associates in California's Bay Area, said most resorts outside of Oregon build five or eight permanent homes for every overnight unit.
"The problem is, it is very hard to finance high-end resorts and it is very risky," McElyea said. "A person has a lot less risk if they're building residential units, particularly if they're pre-sold."
Peterson, who studied the Central Oregon market for Thornburgh, Pronghorn and Crook County's Brasada Ranch, said he knows of no other area that requires resorts to build a set number of overnight units.
In 2005, he found average resort occupancy rates were low across Central Oregon: 30 percent at Black Butte Ranch, 40 percent at Sunriver and 66 percent at Eagle Crest.
And a study earlier this year by Smith Travel Research showed Central Oregon's average occupancy rates were the lowest in the state, at about 55 percent, compared to 65 percent statewide.
Residents vs. tourists
But Central Oregon LandWatch Attorney Paul Dewey said low demand for resort rooms doesn't mean the county should relax its regulations. It just proves the developments never should have been approved in the first place.
Dewey and other land use watchdogs argue that resorts are allowed specifically to attract overnight visitors.
"The reality is there is no market for destination resorts," Dewey said. "They keep faking it so they can build subdivisions when subdivisions are not allowed by Oregon law."
The difference between tourists and residents has huge implications for the economy and government services, land use advocate Carol Macbeth of 1000 Friends of Oregon said. Tourists, Macbeth argued, create short-term impacts on infrastructure, but more than make up for it by spending lots of money in local communities. Residents in remote developments, on the other hand, spend less and put more stress on the infrastructure.
Resort representative Swearingen disputed accusations that resorts draw more permanent residents than visitors. Although resorts are battling low occupancy rates at their hotels or rental homes designated as "overnight units," they're doing good business selling second homes or condos that are aimed squarely at tourists.
She pointed to Eagle Crest, which has hundreds of units that are unsuitable for full-time homes, but don't count as overnight units under Deschutes County's code.
"They have more of them that don't meet the letter of the law for overnight, but they are vacation homes," Swearingen said. "They don't have a garage, they're designed in such a way that people wouldn't want to live in those year-round."
Even if that's the case, resort neighbors, like Tumalo resident Rich Van Horn, said they want resorts held to the current rules. Van Horn said he worries about infrastructure impacts. But his biggest fear is that gated golf course communities, like Thornburgh, will wipe out the culture of his agriculture-based area.
"We can argue traffic because it will make a definite impact, we can argue water," Van Horn said. "Right now, we're basically getting golf course communities shoved down our throat, and that's the real rub."
The letter of the law
Deschutes County commissioners had mixed answers for dealing with the coming overnight room glut.
Commissioner Dennis Luke said he thinks the current rules are working as intended, although he wants better oversight of whether resorts are meeting the overnight lodging requirements.
Commissioner Tammy Baney agreed that some resorts might not have turned out as originally envisioned, but said current land use rules make it hard to prevent new resorts if they're being developed inside the resort zone. Baney said she doesn't want to stop resort development, but she doesn't want to let resorts out of their agreements either. An oversupply of overnight rooms would be a factor if developers ask to expand the area where resorts are allowed, she said.
Commissioner Mike Daly said the low overnight lodging occupancy rates could be a sign the county's rules are too strict.
"It is market driven. If they have some rental units vacant, then shame on them, they built too many, but I think they also realize that maybe the 2-1 ratio is a little bit harsh," Daly said.
The fact that Deschutes County has already approved Caldera Springs' pullout couch proposal seems to prove that the current law is not having its intended effect, Dewey said. Counting a room that doesn't even have a bed as an overnight lodging means resorts are just trying to meet the letter of the law as cheaply as possible, he said.
"It really calls into question whether again these are destination resorts and also whether or not counties are letting them slide on the overnight accommodations," Dewey said.
Tom Luersen, managing director of Sunriver and Caldera Springs resorts, could not be reached for comment.
Deschutes County planner Will Groves, who oversees Caldera Springs's applications, said state and county resort rules don't provide any firm guidelines about what counts as an overnight accommodations, which made it hard to deny Caldera Springs's proposal.
"We basically have no criteria to say whether that does or does not qualify as a bedroom," Groves said. "We had a lot of internal debate about this."
The state rule says overnight lodgings include "hotel or motel rooms, cabins and time share units," as well as some privately owned homes that are available to rent. "Tent sites, recreational vehicle parks, mobile homes, dormitory rooms and similar accommodations do not qualify as overnight lodging."
Planning Director Catherine Morrow said the standard essentially comes down to whether a room can be rented separately and is actually available to rent.
"If they've got the thing set up so it is a separate room and they've got it available to rent as a separate room, then it meets our definition," Morrow said. "We're working within that definition on a case-by-case basis."
All of the Crook County resorts plan to use visitor cabins to meet the overnight housing requirements, but none has proposed counting the living areas as separate units, according to a county planner.
Maybe the best gauge of the resorts' priorities comes from their own Web sites. Neither Caldera Springs's nor Pronghorn's sites mention available rental properties.Pronghorn's Web site recommends visitors stay at a partner hotel, such as Phoenix Inn.
Eagle Crest Vice President Ken Cates didn't comment on the Caldera Springs proposal, but he said he wouldn't be surprised if resorts try to avoid the state's and county's overnight lodging rules.
"If the general consensus is that the rules don't make a lot of sense the way they're written, then surely (developers) will try to get around it," Cates said.
Keith Chu can be reached at 617-7829 or at kchu@bend bulletin.com.
Published Daily in Bend Oregon by Western Communications, Inc. © 2010