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Oregon's Destination Resorts Stabilizing After Years of Uncertainty
by Damon Runberg
Published Dec-23-2013

Oregon is home to numerous destination resorts. Vast open spaces, natural beauty, and recreational opportunities draw both visitors and homebuyers to these resorts situated on our rugged coast, dense forests, mountain gateways, and the sundrenched high desert. There is a long history of destination resorts in Oregon beginning with the development of Salishan Lodge, Sunriver Resort, and Black Butte Ranch in the 1960s and early 1970s. However, many of Oregon's destination resorts are relative newcomers approved and constructed in the past decade. Rapid development of these resorts ensued during the boom years of the housing market from 2004 to 2007; however, the Great Recession ushered in a period of bankruptcies, foreclosures, and ownership changes.

During the height of the recession, Robin Doussard wrote in Oregon Business magazine that the destination resort was "a once-coveted business that's in trouble with regulators, residents, environmentalists, and the development industry. It's a business under fire and in flux, and one with an uncertain future." Almost four years later the future of these resorts looks more optimistic as existing destination resorts have stabilized and are once again expanding.

Oregon's Destination Resorts
The term "destination resort" is widely used, often referring to a resort or hotel that is outside of a large urban area, but here in Oregon destination resorts possess a unique legal definition. In 1973, the Oregon legislature adopted the nation's first statewide land-use planning laws in an effort to protect the state's natural resources and beauty from the encroachment of urban development. The formal term "destination resort" was first used in 1984, when the statewide land planning goals were amended in order to spur economic development in rural Oregon and meet the recreational needs of Oregonians. One of these goals, Goal 8, allowed for the development of destination resorts in certain areas zoned for farm and forest use. The requirements to meet the definition of a destination resort are very specific; however for this analysis destination resorts will be defined by four basic criteria. First, the resort must be in a natural setting, usually land zoned for forestry or farming. Second, the resort must provide overnight accommodations. Third, there needs to be investment in recreational facilities. Finally, resorts must provide real estate opportunities. See Table 1 for a list of the nine resorts in Oregon that qualify as destination resorts based on these critieria.

There are only two destination resorts in Oregon that are outside of the Central Oregon counties of Crook and Deschutes. Salishan Resort is on the Oregon Coast just south of Lincoln City, and Running Y Ranch is in South Central Oregon near Klamath Falls. Tetherow Resort is included in the list even though they do not currently provide overnight accommodations. The resort is building a new lodge for overnight guests expected to be completed in spring 2014.

According to Alan Unger, Deschutes County Commissioner and long-time resident, there are a variety of factors that contribute to the high concentration of destination resorts in Central Oregon. First, the region is only a short drive from the population centers in the Willamette Valley and the Portland metro area. Second, there is an airport in Redmond that provides daily nonstop service between many of the West Coast's major cities. Third, recreational opportunities abound with skiing, golfing, fishing, hiking, biking, and kayaking, just to name a few. Finally, the climate of the region is relatively mild with a significant number of sunny days. In addition to the amenities of Central Oregon, Unger emphasized the importance of the early resorts, such as Sunriver and Black Butte Ranch, that proved that these types of resorts can be successful in the region. From a planning perspective, Deschutes County was one of the first counties in Oregon to complete their zoning for destination resorts, which gave them a head start in approving and developing these resorts.

Table 1
Destination Resorts in Oregon
  Year Opened "Goal 8" Resort?   County
Black Butte Ranch 1971 No   Deschutes
Brasada Ranch 2005 Yes   Crook
Eagle Crest 1989 Yes   Deschutes
Pronghorn 2004 Yes   Deschutes
Running Y Ranch Resort 1996 Yes   Klamath
Salishan Lodge 1965 No   Lincoln
Seventh Mountain Resort 1973 No   Deschutes
Sunriver Resort 1968 No   Deschutes
Tetherow 2008 Yes   Deschutes
Economic Impacts of Destination Resorts
Although destination resorts may be responsible for a variety of negative effects on the local community and environment, it is undeniable that these resorts generate positive economic impacts within the communities where they reside. Destination resorts employ a large number of individuals (more on this later) and these resorts have large payrolls. In addition to the direct resort employment there is also an induced employment effect as other businesses are drawn to these resorts to provide goods and services for the homeowners and overnight guests. Finally, these resorts are significant contributors to their local tax base.

Pay and Hours
The average annual pay for workers in Oregon's destination resorts is $26,436 and total payroll last year was nearly $50 million. The median pay rate for destination resort workers was approximately $12 an hour in 2012. More than 75 percent of destination resort wages were paid in Deschutes County. These resorts accounted for nearly 2 percent of total private wages paid in the county. Oregon's destination resorts pay relatively well compared with similar industries, however pay is far below the statewide average annual pay (Graph 1).

Destination resort jobs are often considered unattractive due to the seasonal nature of the business and a perception that many of the jobs are part-time. Although these businesses are very seasonal, the median weekly hours worked during the peak season in 2012 (3rd quarter) came in considerably higher than the leisure and hospitality sector as a whole. Destination resort workers put in a median of about 32 hours per week, while the median for the leisure and hospitality sector was 20 hours per week (Graph 2).

Graph 1
Destination resort pay is higher than other industries in leisure & hospitality
Graph 2
Destination resorts provide more hours than the leisure & hospitality industry
Resorts as Economic Hubs
Oregon's destination resorts often do not exist by themselves, especially the well-established resorts. These destination resorts often act as little cities and thus have many amenities that other cities or communities in Oregon have to offer. Over time, many supporting businesses, service providers, shopping centers, and even business parks have grown up around these destination resorts. Employment data for Oregon reveals that within a two-mile radius of six of Oregon's destination resorts, and a three-mile radius of Sunriver and Black Butte, there were an additional 308 firms supporting about 1,270 jobs in 2012.

Not all the businesses included in these two- or three-mile buffer zones exist because of the destination resort. For example, many could have existed in their location well before the destination resort was developed, or are in industries that do not directly benefit from a destination resort, like agriculture or manufacturing. In other instances, the resorts are fairly close to other populated areas and the firms within the buffer zones draw customers from these other areas as well. This is probably true of Eagle Crest, which is set just on the outskirts of Redmond, and Salishan, which also has a lot of nearby development in the Gleneden Beach area to its south.

Nonetheless, the majority of the employment in these buffer zones provides goods or services that support these destination resorts. Buffer zone employment is concentrated in accommodation and food services; retail trade; and real estate, rental, and leasing (Table 2). The combined payroll for these buffer zone businesses in 2012 was $30.5 million.

Table 2
Industries Located Near Oregon's Destination Resorts: 2012
Industry  Employment Payroll Average Pay
Accommodation and Food Services 265 $4,445,706 $16,776
Retail Trade 215 $3,863,953 $17,972
Real Estate and Rental and Leasing 167 $3,843,360 $23,014
Administrative and Support and Waste Management and Remediation Services 142 $3,193,429 $22,489
Construction 96 $3,032,135 $31,585
Health Care and Social Assistance 65 $1,664,661 $25,610
Arts, Entertainment, and Recreation 53 $971,708 $18,334
Manufacturing 45 $1,657,438 $36,832
Professional, Scientific, and Technical Services 25 $1,268,474 $50,739
Wholesale Trade 23 $1,121,514 $48,761
Agriculture, Forestry, Fishing and Hunting 21 $605,766 $28,846
Finance and Insurance 14 $448,325 $32,023
Information 9 $411,420 $45,713
Transportation and Warehousing 8 $220,855 $27,607
Other   121 $3,759,975 $31,074
Total 1269 $30,508,719 $24,042
Tax Contributions
Destination resorts are significant contributors to their local tax base. Room taxes are levied on overnight lodging guests throughout much of Oregon. The Deschutes County finance department tracks transient room tax collections for different parts of the county near major destination resorts. For fiscal year 2012-2013 the county collected nearly $3.7 million in transient room taxes. The bulk of those taxes, more than 68 percent or over $2.5 million, were collected in the Sunriver area.

In addition to transient room taxes, these resorts are some of the largest contributors to their home county property tax base. Sticking with Deschutes County, the 2013 net assessed value of the Sunriver service district was over $1 billion, while the Black Butte Ranch service district net assessed value exceeded $500 million. The resorts, private homes, and businesses in these communities account for millions of dollars in property taxes each year.

Although these resorts contribute to the local tax base, they also cost taxpayers money for roads, schools, and other infrastructure. An often debated fact is whether or not the tax contributions by these resorts exceeds the tax burden these resorts place on county budgets.

Employment Down, but Trending Up
The 2008 recession hit during a period of development and expansion for destination resorts. Many of the newer resorts were not yet completed when the recession hit. In fact, several resorts that were planned and approved in Crook County never got off the ground due to the economic climate.

Destination resort employment peaked in 2008 with an annual average employment of 2,082. Much like the rest of the tourism industry, employment in destination resorts plummeted for years after the recession. Employment in these nine resorts bottomed out in 2010. On an annual average basis, destination resorts lost about 15 percent of total employment during these down years (-313). Destination resorts lost a greater proportion of employment than Oregon's accommodation and food services industry, which only declined by about 6 percent between 2008 and 2010. This greater proportional loss of jobs is likely due to the collapse of destination resort real estate sales and values, as well as a decrease in demand for luxury overnight accommodations during difficult economic conditions. In addition to accommodation and food services, destination resorts include employment in real estate offices; recreation (predominately golf courses); entertainment; and public services, such as fire protection.

Much like the rest of the tourism industry, employment in the destination resort business is very seasonal. Although a handful of these resorts provide winter recreation opportunities, they are few compared with the summertime activities. August and July are the peak employment months in these resorts, when employment is typically about 65 percent higher than in the winter months of January and February. These seasonal employment swings can be seen on Graph 3.

While destination resorts began to add back jobs in 2011, these gains have yet to lead to a recovery in the industry. In June, employment was 2,233, which is the highest June employment since 2008; however it is still 10 percent off the peak. Employment in destination resorts will likely recover in the near future based on a number of recent trends. First, Oregon's accommodation and food services industry exceeded prerecession employment totals this year and more individuals will likely spend the extra amount to visit these luxury accommodations as consumer spending rises. Second, the real estate market is recovering rapidly, particularly in Central Oregon. Sales of single family homes in Sunriver increased dramatically in 2012. In fact, Sunriver posted more home sales in the 3rd quarter of 2013 than any period in the past five years. Median sale prices in Sunriver are not rising as quickly as other parts of the region, as homes in destination resorts are priced on the upper end of the market. For instance, the median sale price of Sunriver homes in September was $355,000 compared with $268,000 in nearby Bend.

Graph 3
Employment in Oregon's destination resorts
The Destination Resort of Tomorrow
As employment and property values rebound in Oregon's destination resorts these businesses will likely recover from the Great Recession shortly. In fact, Pronghorn, one of the resorts that struggled during the recession, recently announced that they will be investing $20 million to build a five-star 105-room lodge, a new spa, and expanded resort amenities. As existing resorts stabilize and begin to expand the question is whether or not this business model will begin spreading across the state as it did during the mid-2000s. Or, as some are predicting, will future resorts be smaller eco-resorts that emphasize the visitor experience rather than their exclusive subdivisions?

Eight resorts were approved prior to the recession, but never developed due to the difficult economic conditions. Combined, these eight approved resorts account for over 17,000 acres of developable land; 6,815 residential lots; and 3,435 overnight units. The success of the existing resorts to sell their real estate and build homes on vacant lots will likely be a proxy for future growth of these approved but undeveloped resorts.

Regardless of what Oregon's resorts of tomorrow look like, there will likely always be a demand for the traditional destination resort as many tourists voice a preference for these vacation communities. For those that prefer these destination resorts over a traditional hotel experience it often comes down to the accommodations. One resort visitor commented that "it is more fun to stay in a house or condo with a big group of friends than have separate hotel rooms?it can also be more affordable, especially having a full kitchen." Another comment was that these tend to be "very kid and family friendly with more privacy." Finally, these resorts often provide a "unique experience, great ambiance, and fun activities." These attributes, as well as the recreational opportunities and natural beauty of destination resorts, will continue to draw visitors from around Oregon and beyond.