Prepared for: The District Municipality of Muskoka

Transcription

1 MUSKOKA RESORT AND TOURISM OFFICIAL PLAN POLICY REVIEW Interim Options Report Prepared for: The District Municipality of Muskoka February 20, 2013

2 February 20, 2013 Ms. Samantha Hastings Planning & Economic Development Department District Municipality of Muskoka 70 Pine Street Bracebridge, ON P1L 1N3 Via RE: MUSKOKA RESORT AND TOURISM OFFICIAL PLAN POLICY REVIEW Interim Options Report Dear Ms. Hastings: In accordance with the terms of our engagement, (PKF) is pleased to submit the attached Interim Options Report relating to the. This report includes all stakeholder input, research and findings relevant to PKF s evaluation of Muskoka s positioning within the resort and tourism sector, an initial review of Muskoka Official Plan policies, and presents a framework to guide District decision making on a go-forward basis, with respect to updating existing Resort and Tourist Commercial policies. We look forward to discussing our results to date with you upon your review of this document, and continuing to work with you on the next steps of implementing this project. Yours truly, PKF CONSULTING INC.

3 TABLE OF CONTENTS EXECUTIVE SUMMARY PART 1: ANALYSIS OF MUSKOKA S RESORT AND TOURISM SECTOR POSITIONING, TRENDS ANALYSIS AND STAKEHOLDER CONSULTATION 1.0 INTRODUCTION Study Background Study Scope RESORT AND TOURISM SECTOR OVERVIEW Introduction Tourist Demand Trends History of the Resort Sector Definition of Resorts Resort Product Development Trends Trends in Other Overnight Tourism Product Types Summary Implications for Muskoka THE CANADIAN HOTEL INDUSTRY LENDING ENVIRONMENT Introduction Investment Cycles in the Canadian Accommodation Sector Profitability of the Ontario Accommodation Industry Financing in the Canadian Hotel Sector Accommodation Supply Implications Overall Conclusions/Implications MUSKOKA S RESORT AND TOURISM POSITIONING Introduction District of Muskoka Tourism Overview Muskoka Accommodation Sector Other Overnight Tourism Product The Importance of All Overnight Tourism Products in Muskoka Interim Options Report February 2013

4 5.0 RESORT OWNER SURVEY RESULTS Introduction General Operating Characteristics Ownership Structure Built Product and Amenities Operating Structure Rental Structure Unit Availability for Transient Rental Other Issues Summary & Implications TRAILER PARK & CAMPGROUND SURVEY RESULTS Introduction General Operating Characteristics Built Product and Amenities Utilization Other Issues Summary & Implications CAMP SURVEY RESULTS Introduction General Operating Characteristics Built Product and Amenities Camper Utilization Other Issues Summary & Implications STAKEHOLDER INPUT Introduction Municipal Stakeholder Input Stakeholder Workshop PART 2: REVIEW OF MUSKOKA OFFICIAL PLAN POLICIES AND FRAMEWORK FOR ALTERNATIVE POLICY OPTIONS 9.0 REVIEW OF OFFICIAL PLAN POLICIES AND GUIDELINES Introduction Provincial Policy Statement District of Muskoka Official Plan Interim Options Report February 2013

5 9.4 Support for Resort and Tourist Commercial Development Definition of Resort and Tourist Commercial Uses Tests for Resort Commercial Use Establishing New Resorts Discouraging the down-zoning of Resorts and Tourist Commercial Uses Servicing Requirements for Resorts Area Municipal Official Plans Summary SUMMARY OF KEY FACTORS IMPACTING ALTERNATIVE POLICY OPTIONS Background and Scope of Work Importance of the Resort and Tourism Sectors to Muskoka Resort and Tourism Trends Impacting Muskoka Trends in Resort Development and Ownership Industry Stakeholder Issues FRAMEWORK FOR ALTERNATE POLICY OPTIONS Introduction Positioning of Existing Policies Establishing a Philosophical Direction Alternative Policy Options Implications of Alternative Policy Options Alternative Policy Option Framework Definition of Resort Four Tests for Resort Commercial Use Considerations for Nature and Scale of New Resorts / Redevelopments Servicing Requirements for Multi-Unit Resort Condominium Developments Planning Requirements for New Resorts / Redevelopments Downzoning Options Summary of Alternative Policy Option Implications PROPERTY TAXATION POLICY CONSIDERATIONS Introduction Hotel and Resort Assessment Implications for Policy Considerations PRIVATE COTTAGE RENTALS POLICY CONSIDERATIONS Introduction Existing Resort Operator Concerns Alternative Options for Regulating Private Cottage Rentals Implications for Alternative Policy Options Interim Options Report February 2013

6 14.0 TRAILER PARKS, CAMPGROUNDS AND CAMPS POLICY CONSIDERATIONS Introduction Existing Operator Concerns Implications for Policy Considerations ACCOMMODATION SECTOR FINANCING - POLICY CONSIDERATIONS Introduction Stakeholder Input and Industry Trends Implications for Policy Considerations APPENDIX A GLOSSARY OF INDUSTRY TERMS Interim Options Report February 2013

7 EXECUTIVE SUMMARY SUMMARY OF KEY FACTORS IMPACTING ALTERNATIVE POLICY OPTIONS Background and Scope of Work The scope of work for the project has included the following: Overview of emerging trends in resort and overnight tourism product demand, development and ownership models, including an analysis of Muskoka s positioning in terms of built product, demand trends, and land use; Stakeholder input, including consultations with: local government and marketing agencies; a Stakeholder Workshop addressing relevant industry issues and Official Plan policies; and surveys of existing operators within the Muskoka Resort, Trailer Park, Campground, and Camp sectors; Analysis of the Muskoka Official Plan and local Area Municipality Official Plans, including an evaluation of the implications of alternative policy options on the resort and tourism sectors, and considerations of potential impacts on local government and other stakeholders; as well as an analysis of Municipal property assessment impacts. Importance of the Resort and Tourism Sectors to Muskoka The various types of resorts and other overnight tourism products in Muskoka offer a total capacity for over 100,000 visitors per night. More specifically, there are: 111 Resorts and Hotels with 4,100 units, providing a capacity approaching 10,000 persons; 30 Trailer Parks & Campgrounds offering 3,000 sites, and providing a capacity of about 10,000 persons; and 35 Camps offering an average of 350 beds, with a capacity of over 10,000 persons. While data does not exist for the trailer parks, campgrounds and camps the resort sector generates $400 Million annually ($50,000 per rental unit). In addition, there are 20,500 Cottages that can host over 75,000 persons. The cottage sector in Muskoka generates in excess of $600 Million in economic impacts to the District on an annual basis ($30,000 per cottage). Resorts have and will continue to generate the strongest level of annual economic impact on a per unit basis in Muskoka. This is not to suggest a diminished importance of the $600 Million generated by the Cottage sector annually in Muskoka. As an alternative, development of new multi-ownership condominium resort units will likely generate stronger impacts than new cottage units on a per unit basis. This combined with a greater level of density in multi-ownership/condominium resort developments, as opposed to cottage development, suggests strong potential for additional economic impact. Resort and Tourism Trends Impacting Muskoka Consumer expectations have evolved dramatically over the past decade, thanks to huge advances in technology, economic growth, lifestyle choices, etc. People tend to be looking for authentic experiences Prepared for: The District Municipality of Muskoka Page i

8 when they travel, as opposed to simple services and amenities. Furthermore, with increased options for resorts and increased opportunities to travel at less expensive costs and shorter planning time via internet, the traditional two-week annual holiday booked in advance is becoming a thing of the past. New trends in resort vacations include experiences ranging from eco-tourism and soft adventures (e.g. driving tours, trails and walking tours, wildlife viewing), spa breaks, weekend getaways, to fractional ownership. Fractional ownership options in the form of residences, hotels or clubs, have revolutionized the market, affording consumers the opportunity to enjoy a luxury, serviced holiday home without the enormous costs incurred by outright purchase. This trend does not appear to be subsiding in the short to mid-term. What the consumer is predominantly looking for in a wilderness or waterfront Ontario travel experience can generally be broken down into two types the traditional resort vacation, and an alternative cottage vacation. Thus is it the experience itself that is important to the consumer, as opposed to the specific product. The strongest source of new demand in Ontario is driven by people looking for that alternative cottage experience, which tends to correspond to the real estate product. Within the camp, campground and RV Park developments, more extensive recreation and programming are becoming more common, with some of the better properties located in communities where there is a strong appetite for second/vacation homes. Significant changes in travel demand patterns, including the increased use of online tools for travel planning, more frequent short getaways, and last minute bookings to locations outside Canada, as well as the evolving interest in obtaining an alternative cottage experience, have already had a significant impact on the Muskoka resort experience. Trends in Resort Development and Ownership There are a range of operating and development models currently in use in Muskoka from the traditional resort hotel to resort residential product offering, which is combined with varying levels of ownership and right to use. In recent years, the most prominent trend in resort development has been the renewed interest in joint accommodation and real estate development in the resort market. The cost of building a resort hotel today is prohibitive to most hotel developers, primarily due to the fact that market and seasonality conditions make it difficult for properties to perform at levels that support the significant cost of development. As a result of the significant costs associated with these projects, new resort product being constructed and/or considered in Ontario today is driven primarily off of a real estate component. Owners and purchasers of real estate components of resorts are looking for their right to use, and some level of capital appreciation, as opposed to returns off cashflow. The developer of this type of resort product is generally interested in securing a development profit, as opposed to investment returns off cashflow and capital appreciation. As such, vacation ownership resort product tends to be built as alternative cottages, with some level of personal use, but also include a transient rental portion to maintain the commercial aspect of the resort, and provide some level of cashflow to cover operating costs. Industry Stakeholder Issues I - The Resort Industry The Muskoka Resort Industry is currently suffering from poor performance levels, with the 87 resorts / 3,200 rooms achieving an annual market occupancy of under 50%, and as low as 30% in the winter and spring periods. In addition to poor performance levels, resort operators are concerned with a number of issues, including but not limited to: Prepared for: The District Municipality of Muskoka Page ii

9 Overall challenges in economic sustainability of existing operations; Restrictions on the ability to generate alternative forms of income through expansion and/or complementary development; Increased competition from private cottage rentals and new resort ownership/development models (i.e. fractionals); The need for additional regional and provincial marketing; High levels of property taxes for commercial waterfront properties; and Challenges in realizing the value of their asset. Traditional resort operators have a limited exit strategy; as they are limited in selling the business based on its enterprise value, and face restrictions on the ability to downzone to residential use which would otherwise maximize value. II - Development Stakeholders From the developer s perspective, there are concerns that without some form of unit sales, i.e. fractional, whole ownership, etc., it is not economically viable to build a resort development in Muskoka in the short to mid-term, and possibly in the long-term. There are also concerns that existing policies are too restrictive, for example: Processes related to obtaining an Official Plan Amendment to build new property are prohibitive; Despite the current servicing policies which permit private communal services, the requirement for posting a 100% replacement reserve is financially restrictive; The requirement for transient rental of units impacts personal use and therefore impacts the marketability of selling units; and The requirement to meet the range of commercial tests (i.e. availability to the travelling public, operation as a commercial enterprise for profit, operation under central on-site management, provision of ongoing services and facilities normally provided in a commercial setting) impacts the viability of operations. III - Trailer Parks & Campgrounds There are an estimated 30 private trailer parks and campgrounds in Muskoka, offering 3,000 campsites. Two Provincial Parks in the District also provide about 440 campsites. Preliminary estimates indicate that the private trailer parks and campgrounds are seasonal operations (open 6 months, usually May to October). Over 60% of the sites are rented to tenants for an entire season (with as much as 90% at some parks), providing an alternative cottage environment for users. The remaining sites are rented for transient use, and achieve a combined occupancy level of less than 30% for the operating season. Trailer park and campground operator concerns are similar to those of resort operators, including: Poor performance levels; Overall challenges in economic sustainability of existing operations Restrictions on the ability to generate alternative forms of income through expansion and/or complementary development; Challenges meeting local policy and planning requirements; and The need for additional regional and provincial marketing. In addition, a significant number of properties are interested in expansion, but are not able to because of local policies and guidelines, and challenges in obtaining planning approvals. Prepared for: The District Municipality of Muskoka Page iii

10 IV - Camps There are an estimated 35 children s and community camps in the District. Some of these are year-round facilities, offering day programs and facility rental options, while others are only used for summer residential youth camps. The typical camp has an average of 350 beds for overnight stays, suggesting an overnight capacity in excess of 10,000 guests. There are two distinct groups of camp operations, based on primary operating characteristics: 1. Not-For-Profit Camps (including youth agencies and religious organizations) 2. For-Profit Independent Camps (under private ownership) For the not-for-profit camps, the primary concerns are more focused on economic sustainability and the maintenance and upgrade of existing facilities. The for-profit independent camp operator concerns are similar to those of resort, trailer park and private campground operators, including: Poor performance levels; Overall challenges in economic sustainability of existing operations; Restrictions on the ability to generate alternative forms of income through expansion and/or complementary development; Challenges meeting local policy and planning requirements; Need for additional regional and provincial marketing; and Ever increasing competition from private cottage rentals. In addition, a significant number of properties are interested in expansion, but are not able to do so because of local policies and guidelines, and challenges in obtaining planning approvals. V Lake Associations / Ratepayers Lake Associations and ratepayer stakeholders in Muskoka voiced a number of specific concerns regarding noise, safety and security issues, and potential environmental impacts resulting from intensity of use at lakeside resorts and other tourism product developments; as well as the implication of capital losses of resorts becoming a burden to local tax-payers. VI - Local Government Local Government stakeholders voiced a number of broad concerns, including: the general health of the resort and tourism sector in Muskoka; the potential impacts of existing and expanded operations on other stakeholders (i.e. rate-payers associations); and the perceived over-supply of fractional resort products and impacts on existing operations. There was a strong interest from local government in a more defined and structured set of policies, guidelines, criteria and definitions governing resort operations, expansions, and development. This might include a number of specific issues that may require consideration or clarification when undertaking resort and tourist commercial planning policy revisions, such as: The need to clarify or expand the definition of a resort and tourist commercial uses; Development of criteria for: o An appropriate level/nature of resort development/re-development o The level of unit availability for rental (i.e. percent of units, specific time of year, etc.) o Assessing the impact of down-zoning on the commercial land base; Prepared for: The District Municipality of Muskoka Page iv

11 Establishment of more specific tests for resort operations and development, including definitions for: o Travelling public o Central management on location o Services and recreational facilities normally provided in a commercial setting; Consideration of available options for monitoring or enforcing operating models or unit rentals; and Development of policies and criteria specific to existing resort expansion/upgrades. There were mixed opinions with respect to supporting the retention of the resort commercial land base, versus allowing the downzoning of resorts to residential use. Another concern raised by a number of Municipal stakeholders was that existing policies are vague with respect to new resorts and redevelopments, and that there was not enough guidance for local planning departments to determine which resort projects will be best suited to their respective tourist and waterfront environments, and what to recommend to local Council. This is due in part to a lack of defining criteria with respect to what constitutes a resort, i.e. what amenities are appropriate, suitable nature and scale of development, and how the units will be used or made available for commercial purposes. FRAMEWORK FOR ALTERNATIVE POLICY OPTIONS The level of encouragement of new resort and tourism development is directly related to the level of restrictions imposed by Muskoka Official Plan (MOP) policies. In order to encourage resort development in the short term, policies would need to be more permissive. On the other hand, more restrictive policies could limit resort development. Thus, alternative options for MOP policy revisions should be considered under varying levels of restriction: Permissive which would provide a minimal level of restrictions on development or redevelopment in order to stimulate short-term development; Non-Restrictive which would provide a moderate level of restrictions on development or redevelopment; or Restrictive which would provide a higher level of restriction on development or re-development, and would limit and/or control short-term development. This report provides a detailed framework of considerations and implications for alternative options within each of the existing MOP policy sets relating to the resort and tourism sectors, as outlined below: Where existing policies lie on a spectrum of permissive to restrictive; Challenges with existing policy sets; Where there are gaps and inconsistencies with overall philosophical directions; and Implications of applying different policy options. The ultimate goal of this exercise was to demonstrate how to align the District s overall positioning towards either encouraging or restricting growth in the resort and tourism sectors with those of the Area Municipalities, through policies in the MOP. It will ultimately be the decision of the District and its six Area Municipalities to determine how restrictive or supportive they wish to be on the topic of Resort and Tourist Commercial development growth, in consideration of all the relevant implications. PKF is not recommending any particular focus at this time. Prepared for: The District Municipality of Muskoka Page v

12 Establishing a Philosophical Direction As identified, there are challenges for existing operators in maintaining profitability while trying to meet District and Area Municipal official plan policies and zoning regulations regarding upgrades and expansion, and local councils are challenged by a lack of criteria by which to measure potential projects. With this in mind, one of the fundamental questions to be addressed is whether Muskoka needs more or less resort and tourism product in the short to mid-term considering the following factors: Current industry performance levels, suggest that there is excess supply in all seasons, including the summer months and owners and operators are suffering. From the perspective of the development community, whose focus is recognizing opportunities in the short term, it is evident that they would require less restrictions and requirements in order to do so. From an economic development perspective, while it is important to encourage investment in the resort sector, the question is whether that focus should be on the encouragement of short-term development opportunities, or if a more long-term approach should be considered. Implications of Alternative Policy Options In determining the overall policy direction from an economic development perspective a number of factors should be considered. The short-term development of new resort product could have a negative impact on existing resort properties, which are already suffering from poor performance levels. Adjusting policies to being more permissive doesn t guarantee development; however, without adjusting current policies resort development in the short to mid- term may be limited. There is no way to guarantee that resorts will be built, since one cannot anticipate the future financial vehicles that might stimulate investment or effectively identify the range of market and product trends that may influence development. However, it is possible to lessen restrictions on developments, which may enhance the opportunities for short to mid-term development. As a result, the District and the Area Municipalities will need to agree on whether the focus should be on the encouragement of short-term development opportunities (i.e. 3 to 5 years), or if a more long-term approach should be considered. As noted, the issue is not the wording or intent of the existing policies encouraging resort development, but rather the wording and intent of other policies relevant to resorts at a District and an Area Municipality level. Alternative Policy Option Framework In order to establish a philosophical direction for moving forward based around either a more permissive or more restrictive approach to encouraging resort growth in the District, PKF has reviewed what is currently being permitted or mandated under existing policies, and what changes might be considered under an adjusted policy framework. This adjusted policy framework incorporates suggested additions or changes to the wording in existing policy sets that warrant further consideration from the District. Prepared for: The District Municipality of Muskoka Page vi

13 The Alternative Policy Framework identified what requirements might be mandated or permitted under a very permissive or very restrictive set of policies as a reference tool. Ultimately, the District and Area Municipalities may elect varying levels of permissions in the chosen approach. The framework was organized into 6 sections, based on existing policy sets: Definition of Resort Four Tests for Resort Commercial Development Considerations for Nature and Scale of New Resorts / Redevelopments Planning Requirements for New Resorts / Redevelopments Servicing Requirements for Multi-Unit Resort Condominium Developments Downzoning Options Implications for Alternative Policy Options There are many possible alternatives for the District to consider, which either encourage or limit resort development in the short to mid-term. The level of encouragement of new resort and tourism development is directly related to the level of restrictions imposed by MOP policies, yet some policy choices may be more restrictive or permissive than others under an adjusted policy framework. Ultimately, the District will need to determine how permissive or restrictive they wish to be with respect to development overall. The following list identifies key considerations for the District under an adjusted policy framework for resort and tourist commercial properties: Regardless of which perspective is adopted, further criteria and definitions need to be identified and enforcement will be needed; Allowing alternative forms of tenure and not restricting the nature of product types would be considered supportive of resort development; Tests for resort commercial use are required and should be retained, however, the mechanism for availability of resort units for third-party rental outweighs all other concerns (i.e. by establishing a minimum level of availability to the travelling public on an annual or seasonal basis), and intuitively includes a test for the motive for profit; If more definitive criteria are put in place within the tests for resort commercial use, there is little value unless periodic monitoring occurs; however, the costs of monitoring would be significant and Area Municipalities may wish to consider implementation of a tax, levy or licensing on unit holders to cover the cost of this monitoring; Any policy option involving a mix of resort commercial and resort related residential uses would require community and Council acceptance of a) multiple residential uses in the waterfront and b) potential District responsibility and liability for small, remote, private communal systems; The local OPA requirement is intended to ensure that comprehensive planning processes are undertaken, yet adjusting the existing policy to require a Zoning By-Law amendment as an alternative (which would include a public process) may be sufficient to address the needs of both developers and municipal stakeholders; Prepared for: The District Municipality of Muskoka Page vii

14 Responsibility for replacement costs associated with the establishment of private communal services must be addressed, yet as long as the land use remains 100% resort commercial, relying on the Condominium Act for reserve funds may be a viable option; The intent of the downzoning policy is good in terms of retaining significant tourist commercial land holdings in the District, yet all existing resorts are being impacted; an alternative could be to permit smaller-scale properties to downzone, provided that owners can demonstrate a rationale and that the properties have not been identified by the Area Municipalities as significant sites in terms of continued commercial use; and to only consider permitting larger properties to downzone if they pass more stringent testing. PROPERTY TAXATION POLICY CONSIDERATIONS The issues surrounding property assessment and property taxation across the province are complex, and become even more so when the specific factors impacting hotels, resorts and other tourist commercial properties such as camps and campgrounds are introduced. From the perspective of the owners and operators of these businesses the primary concern is the actual dollar amounts incurred annually which impact both their operating cashflow and ultimately the value of their business. These amounts are driven by three primary factors: 1. The determination of Asset Class (i.e. Commercial, Residential, Institutional etc.) 2. The Assessed Value of the business 3. The Tax Rates applied to this value in order to arrive at the overall property tax amount The determination of Asset Class and the determination of Assessed Value, fall within the mandate of the Municipal Property Assessment Corporation (MPAC), which is the provincial agency mandated to administer the provincial wide property assessment system. The Asset Class is determined by reviewing a range of factors including physical facilities and attributes as well as property use. The Assessed Value is determined by a range of factors including replacement costs and the sale of comparable properties. In the case of commercial properties the concept of business value based on the property s income potential is introduced. In general terms, across the province, commercial property tax rates are higher than residential tax rates. As a result, commercial properties generally pay more taxes than similarly valued residential properties. In jurisdictions such as Muskoka where waterfront land values far exceed the commercial value of the businesses, even with lower residential tax rates the overall property taxes incurred are higher than they would be under a commercial assessment. This has an even more significant implication for housekeeping resorts offering meals where commercial tax rates are applied to residential land values. MPAC developed a specific Resort Condominium Property Class, which still sees the property assessed at a residential value, but taxed at a class specific rate determined by the municipality; allowing for a more consistent tax base within this property type, regardless of whether they are available for transient rental or not. However, it should be recognized that the Resort Condominium Property Class is not necessarily reflective of a property s zoning. The concern is that this classification and valuation approach has not been implemented uniformly across the province, providing some operating advantages to resorts in specific destinations. Further there are concerns that the criteria for implementation are too restrictive. This includes, among other factors, the requirement for the resort to be in a community with a population of no more 10,000, and for the condominium units to be in a resort property that includes or is adjacent to a ski hill or a golf course. Few Muskoka resorts would qualify under these two criteria. Prepared for: The District Municipality of Muskoka Page viii

15 If there is an identified need to facilitate property tax changes, the District will need to take a proactive role with the tourism industry by lobbying the Province and MPAC to reconsider the inequities impacting the housekeeping sector (i.e. commercial assessments instead of residential assessments). Furthermore, the District will need to consider lobbying for MPAC to loosen restrictions within the Resort Condominium Property Class, particularly with respect to community size, which would allow more resorts within Muskoka to be taxed at the class specific rate. Both changes would have a direct positive impact on existing properties and future development, although there would ultimately be some loss of tax revenues to the District and Area Municipalities. PRIVATE COTTAGE RENTALS POLICY CONSIDERATIONS The total impact of private cottage rentals on the resort industry is considered to be significant, and will continue to pose concerns regarding the potential for existing resorts and future resort development in Muskoka. Based on PKF research and analysis, it is evident that the 3,200 resort units in Muskoka are forced to compete with a minimum of 2,000 cottage rental units. Many resort owners are looking for the District to develop options to restrict this level of competition, yet there are concerns regarding alienation of other stakeholder groups (i.e. cottagers and Lake Associations). One identified alternative would be to determine whether criteria could be defined by which business cottage rentals could be differentiated from those traditional cottage owners who rent at limited levels when they are not using the property for personal time. There are currently no policies restricting private cottage rentals. Alternative options regarding the regulation of these rentals involve zoning restrictions or licensing enforcement at the Area Municipality level. There are a number of options that the Area Municipalities may consider if they wish to implement policy regarding private cottage rental regulations, including the following: Defining residential use in the Zoning By-Law to include occasional and traditional cottage rentals (e.g. 2-4 weeks per year); Enforcing Zoning By-Laws that ensure unit rental is not permitted under properties zoned for Residential use; or Introducing a licensing system that is required for all private cottage short-term rentals. Restricting all forms of cottage rental would limit the level of economic impact that is currently being generated by these rentals. Alternatively, if the Area Municipalities consider regulating cottage rentals, then unit rental could only be allowed if the unit was licensed and license regulations would need to be enforced through by-law enforcement to ensure fire, safety and health regulations are being met and standards are being maintained. Looking to HST remittance requirements as a control mechanism has been suggested through the consultation process. However, this would likely not work as revenue thresholds would seldom apply. Nevertheless, regulating could be implemented through a licensing or permitting system. Implementing one of these options is intended to benefit the resort community by potentially reducing the number of private cottage units available for third-party rental, and creating a more competitive price point within the tourist market. Any of these options would require enforcement at significant costs to the Area Municipalities. Prepared for: The District Municipality of Muskoka Page ix

16 TRAILER PARKS, CAMPGROUNDS AND CAMPS POLICY CONSIDERATIONS Limited data is available on the total expenditures made by visits to camps, trailer parks and campgrounds in Muskoka. Nevertheless, stakeholders have voiced concerns over where these properties fit in relation to District policies and guidelines, and whether the District should consider their impacts from a more long-term perspective. In addition to the challenges outlined by campground and camp operators themselves, there were a number of concerns voiced by representatives of the various Area Municipalities. The Muskoka Official Plan currently has no definition of other Tourist Commercial properties (i.e. overnight tourism product outside of resorts), and no policies to guide development of trailer parks, campgrounds and camps. This has led many of the Area Municipalities to create their own local policies, some of which are more permissive than others with respect to new development of these alternative tourism establishments. In almost all cases, new tent and trailer parks require an Official Plan Amendment. Given the inconsistency in these local OP policies, concerns remain over how to properly assess development projects that incorporate new or redeveloped trailer parks, campgrounds, and camps. PKF research indicates that the health of the resort sector has a significant impact on other overnight product. For example, if resorts are doing well, then demand for other less expensive alternatives also tends to increase. Operators confirm that customers are demanding more choice in price point and product type (e.g. bed & breakfasts, trailer parks, camps and campgrounds), and the more successful properties are offering more experiential product and trying to reflect consumer concerns (e.g. environmental). It is evident that many of the existing campgrounds and camps are having significant difficulty accessing financing for upgrades and expansions, yet there are some that are quite successful. In order to meet consumer demand, the District might consider flexibility in the range of products permitted in Muskoka. Existing camps, trailers parks and campgrounds often have limited access to financing for facility upgrades, and have been encountering significant challenges obtaining planning approvals from local Area Municipalities. Furthermore, market and development community economics suggest that opportunities for new-build camp, trailer park and campground facilities on Tourist Commercial lands may be limited, which may restrict growth in the Muskoka s tourism sector. Tourist Commercial lands in Muskoka are valued based on potential future use, and particularly on the waterfront, land values often far exceed the commercial value of the businesses. It is unlikely that many camp, campground or trailer park projects would be economically viable since land value would likely exceed business value, particularly for waterfront properties. If the District wants to introduce policies, they may need to determine whether they want to encourage expansions/renovations of existing properties and new development of trailer parks, camps and campgrounds, particularly on the waterfront, where it may not be the highest and best use of the lands. If they do wish to consider, then a definition of Tourist Commercial that addresses these issues is required, along with similar policies for establishing the properties, such as an Official Plan Amendment requirement, which has been described in several of the local Official Plans (i.e. Lake of Bays), or a Zoning By-Law Amendment requirements, as described in the alternative options for resorts. If the District does not want to introduce policy, they need to continue to let the Area Municipalities regulate these properties through their Zoning By-Laws. Prepared for: The District Municipality of Muskoka Page x

17 Regardless of policy direction, the economic viability of and development potential for new camps, trailer parks and campgrounds on higher valued waterfront properties will be limited. ACCOMMODATION SECTOR FINANCING - POLICY CONSIDERATIONS One of the primary challenges raised by existing resort operators is the economic sustainability of existing operations and challenges in obtaining financing for upgrades and expansions. For the resort industry in Ontario, difficulty in obtaining funding in today s investment environment is combined with extremely low profit levels, which indicates that existing assets will have difficulty in generating the necessary capital required for upgrades and that new developments based on traditional debt/equity financing off cashflow cannot be supported. As such, Muskoka s resort industry is not much different than other communities across the Province. Opportunities for small resort recapitalization are highly dependent on access to financing, which is marketdriven. Given the financing challenges that are being faced by the resort industry throughout Ontario, it is evident that Muskoka resorts are not alone in the existing challenges, and that until market dynamics change, there is little that can be done to change this situation. While some programs have been introduced from time to time by both the Provincial and Federal governments, few address the capital financing needs of operators. Many programs are aimed at training initiatives and other operating options; however, capital funding remains largely in the mandate of traditional financial institutions. Consequently, there is little that the District can do from a policy perspective that might assist in this regard other than possibly providing some resources directing operators to the short-list of funding programs available. Prepared for: The District Municipality of Muskoka Page xi

18 PART 1: ANALYSIS OF MUSKOKA S RESORT AND TOURISM SECTOR POSITIONING, TRENDS ANALYSIS AND STAKEHOLDER CONSULTATION Prepared for: The District Municipality of Muskoka Page 1

19 1.0 INTRODUCTION 1.1 Study Background The District Municipality of Muskoka ( The District ) is currently undertaking a review of the Muskoka Official Plan (OP), which includes a review of the tourism, resort and related servicing policies. Various studies, including the Muskoka Economic Strategy (2009) confirm the importance of tourism and resorts to Muskoka s economy, which is why the District Official Plan (OP) includes policies to generally encourage their growth and rejuvenation. However, in light of evolving trends in demand for and development of resorts and tourism product, the District has identified a need to review relevant OP policies, in consideration of the fact that the future health of Muskoka s tourism sector depends on: Understanding the role of tourism in Muskoka; Understanding trends affecting tourism and resort development; and Ensuring that municipal official plans and zoning by-law recognize the importance of tourism to Muskoka. In September 2012, ( PKF ) was retained by the District Municipality of Muskoka to conduct a Resort and Tourism Official Plan Policy Review on their behalf. More specifically, PKF was retained to provide expertise in resort industry demand and development trends, and to work with District planning staff in order to identify alternative official plan policy options that are effective in supporting the tourism sector as a primary driver of Muskoka s economy, and eventually update tourist commercial policies in the Muskoka Official Plan. Subsequent to PKF s retention, the District obtained funding to expand the original study mandate in order for PKF to undertake three additional components, and initiate direct consultation with the six Area Municipalities, the Ontario Ministry of Tourism, Culture and Sport, and Regional Tourism Organization (RTO) 12. The three additional areas of research and analysis are as follows: 1. Municipal property assessment impacts relative to the resort inventory 2. Small resort business re-capitalization opportunities 3. Other overnight tourism product potential 1.2 Study Scope Under the expanded scope of work for the subject study, PKF has completed the following steps to date: Project Team orientation meeting and confirmation of study workplan; Prepared for: The District Municipality of Muskoka Page 2

20 Analysis of previous studies and relevant background documents; Overview of emerging trends in resort and overnight tourism product demand; Overview of emerging trends in resort and overnight tourism product development and ownership models; Analysis of Muskoka s positioning in terms of built product, demand trends, and land use; Consultations with: Area Municipality Planners, Economic Development Officers and Mayors, District Staff, RTO12, MTMA, District Chair, Chair of the Planning and Economic Development Committee (PEDC) focusing on current challenges in the resort community, specific challenges with Official Plan policy and guidelines, and concerns over new development/redevelopment of resorts; Stakeholder Workshop presentation and moderated roundtable discussion - to introduce interested stakeholders and the public to current trends in the resort industry, as well as the resort/tourism sector investment environment, and provide an opportunity for the public to discuss relevant trends and Official Plan policies; Survey of operating structures, utilization and challenges being faced regarding sustainability at Resorts, Trailer Parks and Campgrounds, and Camps operating in Muskoka; Analysis of Municipal property assessment impacts on Muskoka s existing resort inventory and on new build resort construction; Analysis of the Muskoka Official Plan and 6 local Area Municipality Official Plans; Analysis of the impacts of private cottage rentals on the Muskoka resort industry; Strategy session with the District Planning and Economic Development Department to discuss general options for policy changes; Evaluations of the implications of alternative policy changes on the resort and tourism sectors, and considerations of potential impacts on local government and other stakeholders; and Consolidation of research and findings in a Draft Final Report. Upon the District s review of the subject Draft Final Report, PKF will initiate direct consultation with the six Area Municipalities, the Ontario Ministry of Tourism, Culture and Sport, and Regional Tourism Organization (RTO) 12. Prepared for: The District Municipality of Muskoka Page 3

21 2.0 RESORT AND TOURISM SECTOR OVERVIEW 2.1 Introduction The following section provides an overview of the resort and tourism sector, including an evaluation of general trends in resort development and resort ownership models, and affiliated demand trends to resort areas in general and to Ontario in particular, and the potential implications for Muskoka. 2.2 Tourist Demand Trends Certain general demographic changes are having a significant impact on travel demand for Muskoka resorts and tourism related infrastructure, which have been outlined below Ontario Tourism Trends The Ontario Tourism Marketing Partnership Corporation (OTMPC) Travel Intention Study published in March 2012 indicated that visitation to Ontario is expected to remain status quo in the near term, with strong domestic travel demand and stable demand from other external sources. 1 Financial concerns have had a large impact on travel intent, with about ¾ of travellers in Canada and the US looking for discounts when considering travel options, however this proportion has not increased over 2011 data. There is concern that economic uncertainly has changed general intentions of current and potential tourists to Ontario, which also speaks to an increased interaction with online tools for travel planning and more short getaways and last minute bookings. As it relates to Muskoka, the concern may also spread to ease of travel and cheap flights to locations outside Canada, and the increased competition from all-inclusive and virtual resort products (i.e. online vacation property rental management). That being said, as it relates to the Ontario brand, the report suggests that the OTMPC s balance of nature/outdoors and urban/culture imagery have resonated well with consumers, and that RTO 12 (Muskoka, Parry Sound and Algonquin Park) is one of the primary regions that springs to mind for travellers. In general, Ontario is also still considered to be a less risky destination for US visitors, in that it provides a safer travelling experience with less financial risk than many other travel destinations. US visitors continue to look for outdoor activities, with an estimated 34% of visitors intending to visit a resort in Ontario during Spring % higher than the same period in TNS (March, 2012), OTMPC Travel Intentions Study Wave 16, p Ibid., pg. 45 Prepared for: The District Municipality of Muskoka Page 4

22 As for overseas tourists, with Canada being granted Approved Destination status, there has been an influx of visitation from China, from all market segments, which has been very favourable for Ontario. For instance, Chinese business travelers not only like to mix with business with pleasure, but are also the most apt to bring their families with them on business trips. Muskoka is already a well-recognized destination for Chinese travellers, with attractions like Bethune Memorial House and its new 3,500-square foot visitor centre, which acts as a symbol of friendship between our country and China TAMS Research on Resort Demand According to the most recent Travel Activities & Motivation Survey (TAMS) 2006: Canadian Travellers to Ontario report, public and private campgrounds and resorts (e.g., seaside resorts, lakeside/riverside resorts, ski or mountain resorts) were the most popular types of overnight accommodation used by Canadian Pleasure Travelers. Of a total of 2.9 million Canadian Pleasure Travellers (representing 73% of all travellers to the Province), 28% stayed at lakeside or riverside resorts, and 7% stayed at remote wilderness lodges or outposts during the past two years, which are proportionately high relatively to travellers to other provinces. The data also indicated that Canadian Pleasure Travelers who visited Ontario are slightly over-represented among those 55 and older who report above-average household incomes. Similarly, the TAMS 2006: U.S. Travelers to Ontario report indicates that of 14.1 million U.S. Pleasure Travellers who took a trip to Ontario during the prior 2 years, 24% stayed at a lakeside or riverside resort at one point during the trip, and were more likely to stay at resort type of accommodations than other possibilities. Other popular types of accommodation used by American visitors to Ontario included: campgrounds, ski or mountain resorts, wilderness lodges, motor homes and RVs, health spas, and country inns. At the time that this report was published, those U.S. visitors who took a trip to Ontario in the last two years were predominantly married and over-represented among those 55 and older, were more affluent than the average U.S. Pleasure Traveler, and had above-average household incomes Resort Vacation Trends As discussed, consumer expectations have evolved dramatically over the past decade, thanks to huge advances in technology, economic growth, lifestyle choices, etc. People tend to be looking for authentic experiences when they travel, as opposed to simple services and amenities. Furthermore, with increased options for resorts and increased opportunities to travel at less expensive costs and shorter planning time via internet, the traditional two-week annual holiday booked in advance is becoming a thing of the past. Prepared for: The District Municipality of Muskoka Page 5

23 New trends in resort vacations include experiences range from eco-tourism adventures, spa breaks, weekend getaways, to fractional ownership. The popularity and breadth of choice in contemporary property ownership schemes over the past few years has also had a serious impact on demand. Fractional ownership options in the form of residences, hotels or clubs, have revolutionized the market, affording consumers the opportunity to enjoy a luxury, serviced holiday home without the enormous costs incurred by outright purchase. This trend is already evident in Muskoka. From a demographic perspective, the dominant Baby Boomer generation, which is entering its retirement years, is a primary target market for the resort sector. Studies have shown that the Baby Boomer segment of the travel market is projected to continue to grow in upcoming years. Baby boomers and senior travelers are not only important to the industry because of their sheer numbers; they are important because of their discretionary buying power. Today s seniors have both the money to spend and the time to spend it. Additionally, retired vacationers do not have to restrict their holidays to weekends and the summer months. Rather, they are able to travel off-season and during the week, times when many hospitality properties have higher vacancies. Products that tap into the travel requirements and desires of this segment may allow operators to attract demand from this growing target market during low or off season periods. Across all age groups is a growing interest in physical health and wellness that will continue to support spa and like developments. Also, ecotourism, spa and soft adventures (e.g. driving tours, trails and walking tours, wildlife viewing) are attractive to both consumers and developers. Consumers appreciate ecotourism and soft adventures, as they respond to the public s heightened concern for the environment. Owners/operators appreciate the affordability of these adventures, which allow them to access a new demand segment. Real estate ownership with personal usage, as opposed to resort hotels focused on transient rental, has stimulated the majority of resort hotel development over the last 5 years. Real estate components of resort developments involve some level of ownership and right to use, ranging from: full title of a building and land to a single owner, full title of a resort unit to a single owner, purchase of a portion or fraction of a unit s ownership, to purchase of a share in the right to use a resort unit for a select number of weeks. In many cases, this represents alternative cottage ownership, as opposed to alternative resort ownership. The cottage component of resorts is expected to continue its growth, particularly within the fractional Prepared for: The District Municipality of Muskoka Page 6

24 component. Consumers are much more aware about the concept today than ever before. This concept will be detailed more specifically in the following section of this report. 2.3 History of the Resort Sector The North American resort sector has seen many evolutions throughout the twentieth century, with many of today s primary destination resorts and inns dating back to the late 1800s and early 1900s. Resort concepts are perceived in many different ways depending on varying regional and cultural markets. In Canada, some of the best known resorts were built in direct relation to innovations in transportation. Canadian Pacific Hotels, a division of Canadian Pacific Railway, built and operated a number of major resort hotels across the country, most of which are now operated under the Fairmont brand. In Muskoka the popularity of steamboat service in the area encouraged development of the first summer luxury wilderness resort, known as Rosseau House in the mid 1800s, Deerhurst in 1896 and a variety of smaller properties, such as: Windermere House and Clevelands House. 3 Innovation in technology and transportation remains a key influencer of resort supply and demand today. 2.4 Definition of Resorts Internationally, the term resort more often reflects a destination area encompassing a large number of hotels and recreational facilities. An article published by Cornell Hospitality Quarterly provides a good definition of a resort as a lodging facility that provides access to or offers a range of amenities and recreation facilities to emphasize a leisure experience. 4 Resorts are expected to serve as the primary provider of the guests experience, often provides services for business or meetings, and are characteristically located in vacation-oriented settings. Thus the concept of resort really centres on both the experience offered and location of the resort within a particular destination, as opposed to the exact services provided. In terms of built product, Resorts of Ontario a private not-for-profit association of over 100 member resorts, lodges cottages and country inns in Ontario uses the following classifications for resorts, as described in Table Brey, E. (August 2011), A Taxonomy of Resorts, Cornell Hospitality Quarterly, vol. 52, 3 Prepared for: The District Municipality of Muskoka Page 7

25 Resort Hotels Resort Lodges Cottage Resorts Country Inns TABLE 2-1 RESORTS OF ONTARIO - RESORT CLASSIFICATION SYSTEM Open Year-Round, with some exceptions Are on a large property, but may be mid-sized Predominantly water based Wide Range of Indoor and Outdoor Recreation/Programs/Activities Rooms, suites, cottages and condos Full Service Restaurant(s) Meeting and Convention facilities Range of Sizes Open year round, with some exceptions Smaller to mid-sized Predominantly water based Have a range of recreation with mostly built-in programs Mostly offer hotel room style accommodation, but some have cottages and/or condos Offer full food and beverage services with meal packages May have convention, meeting and retreat facilities Seasonal, with some exceptions Usually smallest in size Predominantly water based Some outdoor recreational facilities, but may be limited by season No indoor facilities Predominately Cottage/efficiency units for accommodation No Food and Beverage Service, with some exceptions Limited Meeting and Convention facilities Mostly open Year-Round Predominantly land based Usually smaller in size Limited to some indoor recreational facilities Predominately inn-style rooms Provide limited to extensive dining facilities May have some Meeting and Convention facilities Source: PKF Consulting, Resorts of Ontario This system has undergone minimal changes over the last 20 years; however, the distinction between some categories has become blurry, particularly as it relates to Resort Hotels and Resort Lodges. The consumer has also expressed confusion between the various categories, preferring to know whether resorts offer meal plans or not. Consumers are also enquiring about specialty resorts including spa, golf and ski resorts. Resorts offering fractional ownership models would still fall within one of these 4 built product types, and ownership models are discussed in further detail later in this report. While Resorts of Ontario continues to use these categories, their marketing efforts have put a stronger Prepared for: The District Municipality of Muskoka Page 8

26 focus on experiences, which is more in line with that the consumer is looking for, rather than built product. Canada Select, which is Canada s national grading system for the Accommodation Sector, provides minimal support in defining a resort. Their criteria are as follows 5 : 4+ rooms/units in main building under one roof; Minimum all rooms with private 3-piece bath; Minimum of 1 full service dining room; Must provide recreational facilities on premises; Destination property: o Resort Hotels, Condo Hotels, Lodges, Spas, Ranches, Housekeeping While there have been numerous efforts across North America to provide a definition of the physical and operating characteristics of a resort, none would provide a sufficient basis by which to adopt for planning purposes. 2.5 Resort Product Development Trends The landscape of resort accommodation products has grown in recent years both in terms of ownership opportunities, amenities and packaging offerings particularly with respect to the traditional resort model. In the past, resorts tended to serve a singular purpose, offering one type of recreation or one form of property ownership to a single market (i.e. ski resorts, ocean resorts, etc.) Increasingly, modern conceptions of luxury, value for money and convenience fall well beyond the parameters of the traditional resort model. Resorts that want to succeed within the context of heightened competition and demand will need to respond to evolving consumer expectations by providing activities and experiences that span seasons and generations, and creating an environment capable of marrying village charm with big brands, business tourism with family ambience, and environmental sustainability with modern luxuries. The good news for developers is that these new multi-use resorts are of higher value than their single-use predecessors because they create more revenue streams. More uses means more markets and higher visitor levels yearround, and contemporary property schemes such as fractionals, condo-hotels and lease backs can generate higher income levels by creating both a greater incentive to invest and a greater volume of potential investors. In recent years, the most prominent trend in resort development has been the renewed interest in joint accommodation and real estate development in the resort market. The cost of building a resort hotel today 5 Prepared for: The District Municipality of Muskoka Page 9

27 is prohibitive to most hotel developers, primarily due to the fact that market and seasonality conditions make it difficult for properties to perform at levels that support the significant cost of development. A typical resort project has development costs ranging from $300,000 per room, to as much as $500,000 per room or more. As a result of the significant costs associated with these projects, new resort product being constructed and/or considered in Ontario today is driven primarily off of a real estate component. The development profit generated via the sale of units (whether freehold residential homes or fractional/condo title/timeshare units), is what provides the equity required to support the overall resort development cost and in some cases operation. The real estate component of resorts is expected to continue its growth, particularly within the fractional form of ownership. However, it is important to recognize that while sometimes touted for their investment characteristics, purchasers of this type of resort product today are motivated first and foremost by their right to use Resort Development Models In general, there are 4 main types of resort development models functioning today, which have been described below. These models do not represent the built product or usage intended for the resort property, but rather the method of development and financing: Traditional Resort Hotel Development o This would include an individual hotel focused product in a major destination, such as Whistler or Mont Tremblant. Generally these projects are financed off cashflow; Destination Resort Development o Hotel(s) developed in conjunction with lake activities, ski, golf, and other demand generators. These projects also tend to be financed off cashflow; Resort Residential Development o Real estate product in resort areas, to be used solely for personal use, with sale of units generating development profit; and Mixed Use Resort Development o Combination of destination resort and resort residential product. Residential development profit offsets shortfall from resort hotel development. (This model is frequently used in the Caribbean). There tends to be two primary development models functioning today within the resort industry: Traditional Debt/Equity Financing off operations Prepared for: The District Municipality of Muskoka Page 10

28 o Typically this involves a 60% debt to 40% equity model, and applies more to the standard resort hotel, single ownership product; and Development profits off sale of units o This model tends to apply predominantly to the condominium style of resort product, in conjunction with condominium, fractional or timeshare ownership Ownership Models Within the real estate components of resort developments in North America (excluding the traditional resort product offering solely transient room rentals), there are 4 primary types of ownership models. As described in Section 2.2.3, real estate components of resort developments involve some level of ownership and right to use, as described below: Single/Whole Ownership This model involves giving the full title of building/land to single owner, and is typically a residential type product, generally for personal use. For example, resort product on estate lots. Condominium Ownership This model involves full title of a resort unit to a single owner, with land, amenities, and common elements under shared ownership through condominium structure. The building type can vary, and are generally for personal use, but there may be a transient rental element. The physical product is different than single ownership, with increased shared amenities, i.e. pool, spa, beach, etc. Fractional Ownership In a fractional ownership development, a purchaser buys a portion of the direct ownership of the property. Fractions are typically sold in 1/4; 1/8; 1/10 or 1/12th. While a fraction may cost more to purchase than a more traditional timeshare week, the shared ownership of the asset is enticing to purchasers as they stand to benefit from any increases in the value of the development in the form of capital gains. In many projects, transient rental of the unit is promoted, when not used by the owner. This rental pool generates an income stream to both the operator and the owner. It should be noted that in almost all situations, the annual cash on cash return to investors from rental pool income is negligible (if not negative), especially when debt service requirements are factored in. Most purchasers are satisfied with their right to use being off-set with a tax deductible business loss, resulting in an acceptable annual carrying cost for use and ownership. As noted, while purchasers may see a long-term opportunity for upside contingent on the appreciation of the Prepared for: The District Municipality of Muskoka Page 11

29 value of the asset, this is not the primary basis for the purchase. It is fractional ownership that has been the predominant development strategy of the most recent resort developments in Ontario. Timeshare/Interval Ownership In a timeshare, a purchaser pays for the time and effectively the purchaser owns the right to use intervals of time, typically one week at the same time every year. In this situation, purchasers don t actually have title to the unit, but they have the legalized right to use a specified week over an extended period of time (20-25 years). This often presents a more affordable option for individuals interested in vacation ownership, with a lower price point for purchasers. The building type can vary, and generally tends to exclusive to personal use, with less opportunity for a transient rental element, but more potential for involvement in user exchange programs with other destinations. Some examples of recent/ongoing real estate resort developments with a timeshare component in Ontario include: Blue Mountain Village Resort and Deerhurst Resort in Muskoka. 2.6 Trends in Other Overnight Tourism Product Types In addition to the full-service lodging facility, there are a number of other overnight tourism products evolving in North America that are currently impacting the Muskoka tourism sector, and may or may not have an impact on policy development in the District. Some notable examples that have been highlighted at the District level include: Trailer / RV Parks Campgrounds Camps (for profit and non-profit) Corporate Retreats The following is a brief synopsis of some of the trends in these product areas from both a demand and development perspective: Trailer / RV Parks In Canada, the earliest motor homes were built on car or truck bodies from about By the 1920s the Recreational Vehicle (RV) was well established in the U.S., with RV camping clubs established across the country, despite the unpaved roads and limited camping facilities. RV use in Canada quickly followed, Prepared for: The District Municipality of Muskoka Page 12

30 although traditionally here too RV Parks were simply rustic campgrounds with dirt roads, and limited facilities 6. Surveys conducted in some parts of the US and Canada show how RV sales have been on the rise since According to an article posted by Canada s GoRVing organization (a national association that promotes the RV lifestyle and is financially supported by RV dealers across the country), there are approximately one million motor homes on the road across Canada. In June 2012, David Sammut, president of Motor Home Travel in Bolton stated that Business is absolutely booming, our rental business is surging. The Bolton, Ontario based motor home dealer rents 80 RVs year-round and is booked for the summer months thanks to a steady influx of European tourists who want to enjoy the open North American roads and vistas that a motor home vacation offers. That customer base is backed by a Canadian clientele who typically do not own a cottage, but crave the summer outdoors experience, whether it be driving northward in the summer or to warmer southern climes during the winter. Consumers tend to look at their motor home as a mobile cottage. While many people still have think of motor homes as gas guzzlers geared to retirees, the reality is that RVs have made great strides in recent decades in terms of fuel efficiency; and these days motor homes are outfitted to provide all the luxuries of home including granite countertops, satellite television, big screen TVs, and full sized washers and dryers. RV can cost anywhere from $65,000 to over $1.0 Million. To appeal to RV clientele, campground operators have increased their service offerings as well, in order to ensure that all the enhanced luxuries that today s motor homes offer can be utilized when RVs pull off the road. In the US, RV Parks are becoming more like country clubs with manicured lawns, and on-site golf courses, clubhouses, swimming pools and tennis courts. Some parks go even further adding water slides, spas, restaurants and summer camps for children. In Canada, these additions are becoming more common as well, with some of the better parks located in communities where there is a strong appetite for second/vacation homes. For example the Emerald Lake Trailer Resort & Water Park located in Puslinch, Ontario offers all of the following recreational amenities: Pool, Hot Tub, Wading Pool, Lake Swimming, Boating, Pedalboat Rentals, Kayaking, Horseshoes, Recreation Hall, Basketball, Hiking Trails, Planned Activities and Programming, Playground, 6 RV/MH Heritage Foundation, "RV History." 7 Prepared for: The District Municipality of Muskoka Page 13

31 Sports Field, Spray Ground, and Volleyball. These types of facilities are available at a number of other RV Parks in Ontario. Overall, there appears to be a positive trend in RV Usage in Canada and the US in particular. With gains made in terms of fuel efficiency in recent years (RVs typically get between 13 and 18 miles per gallon, about the same mileage that owners of luxury SUVs achieve), there appears to increasing interest in renting or owning these types of vehicles as an alternative to a more fixed second home Campgrounds Unlike the stand-alone Trailer / RV Parks described in the previous section, Campgrounds are traditionally dedicated areas set aside for camping, often charge a user fee for limited overnight stays, offer few physical improvements, and may feature utility hookups for the use of motor homes on a transient basis. However, there are exceptions, particularly in privately run, for-profit campgrounds that are now offering heated, indoor swimming pools, games rooms and scheduled family events. Many campgrounds in Ontario are currently expanding their offering to create more of a resort scenario with more activities and events primarily to attract an audience beyond hard-core campers who may prefer the camping experience of provincial and national parks. However, there is still a range of demand for the camping experience, with some operators offering no sleeping facilities, some offering sheds and rustic cabins for campers who prefer not to sleep in tents, and some renting out deluxe units with full bathroom and kitchen facilities. According to a 2009 Angus Reid survey commissioned by Canadian Tire and Coleman Canada, at least 46% of Canadians now take camping trips as part of their summer vacations, and as of 2011, camping reservations at Parks Canada campgrounds had increased by 24% as compared to the five-year average. 8 Unlike the "glamping" or "glamorous camping" trend, which can be quite expensive in terms of built product, many Canadians are switching their allegiances back to the traditional great outdoors, based on a combination of cost-effectiveness, and a desire for a new experience to explore one s own backyard. In light of these interests, Ontario Parks and Parks Canada created Learn to Camp workshops to teach both long-time city dwellers and New Canadians about campsite, campfire and camp-stove set-up, food preparation and storage, campsite safety and cleanliness and how to have fun in the great outdoors. Another growing trend in Ontario parks and campgrounds is that of winter camping. An increased number of young families are booking winter adventures, often at parks that feature skating, snow tubing and 8 Kelly, D. (May 14, 2011) Camp Classic, The Globe and Mail Prepared for: The District Municipality of Muskoka Page 14

32 tobogganing. Winter roofed accommodations, including temporary yurts and cabins, are now being offered at seven Provincial parks in Ontario. There are few privately owned and operated dedicated campgrounds in Ontario. Most are an added amenity to existing facilities, such as Trailer / RV Parks and Marinas. In terms of both acreage and capacity, campgrounds in Ontario most are primarily Provincially-owned and operated. There are 334 Provincial Parks that attract an estimated 9.5 million visitors annually Camps The modern summer camp evolved from mom and pop resident camps, which were established in North America during the first half of the 20 th Century. These summer camps flourished rapidly, because they were considered relatively easy to establish and operate, lakefront property in remote locations was relatively inexpensive to purchase (due to its inaccessibility), and developers encountered fewer zoning and environmental regulations. During the mid-1970s the camp landscape changed significantly, with better transportation to remote locations and the increase in cottage ownership driving a significant increase in land value for residential camps. As such, many underperforming camp properties were sold to developers. The traditional day camps flourished during the 1950s and 1960s as an alternative to residential camps, and growth in the number of day camps has continued to increase over the past 20 years, with more families looking for childcare options or educational activities for children throughout the year. These day camps tend to be located in more urban and suburban areas, on much smaller land areas and require fewer capital and regulatory requirements than the residential summer camps. When summer camps were first introduced in North America, they were predominantly family owned and operated under private, for-profit models. Today, more than 95% of for-profit camps are owners by single owners with no other properties, with the remaining 5% owners by a group of investors. 10 One of the biggest challenges with the for-profit model is the difficulty in reducing fixed costs and finding new ways to increase camper demand in light of economic uncertainty Zenkel, D. (2010), Summer Camp History, Development and Trends ( Prepared for: The District Municipality of Muskoka Page 15

33 With respect to trends, according to the American Camp Association, an estimated 12,000 day and resident camps exist in the U.S. 11 Of these 12,000 camps, 8,000 (67%) are operated by non-profit groups, such as youth agencies and religious organizations, and 4,000 (33%) are privately-owned independent for-profit operations. Furthermore, an estimated 7,000 (58%) are resident camps, and 5,000 (42%) are day camps. The number of day camps is estimated to have grown by 90% over the past 20 years. Fees to attend camp run from $100 to $800 per week, and over a range of programming. According to the ACA, 88% of camps offer swimming, 48% offer horseback riding, and 22% wilderness programs, amongst other activities. The newest types of program additions in recent years have been those associated with adventure activities, such as: high and low ropes courses, climbing walls, zip lines, backpacking, mountain biking and cave exploration Corporate Retreats Corporate retreats provide a venue for companies to remove the team from outside distractions for a sufficient length of time to contemplate strategic and governance issues, including the team s own development. Prior to the economic downturn in 2008, the biggest trend in corporate retreats was corporate wellness, with many facilities offering programs to instigate a healthier and more mindful lifestyle" (i.e. yoga, massage, meditation). Following a lull in business travel on a global level, there now appears to be some pent up demand for corporate meetings outside the office (i.e. virtual meetings, conference calls), which has also translated into a renewed interest in corporate retreats. However, the corporate meeting market is now generally more value-conscious. As such, many companies are opting to use existing hotels and conference centres that can offer a broader range of budget options, as opposed to the dedicated retreat facilities. For those companies that are opting for more non-traditional retreat options, one of the newest trends appears to be that of extreme obstacle courses, wherein employees participate in a Tough Mudder or Spartan Race type of activity to break out of their cubicles and bond with co-workers, or simply vanquish them Summary From a travel demand perspective, resort and other overnight tourism product continue to be popular. However, the nature of this demand has changed, in terms of shorter vacation times and large discrepancy in family size (either couples or large family groups). Furthermore, the nature of travel planning has 11 American Camp Association, Camp Trends Fact Sheet ( 12 Graham, R. (June 7, 2012), New Trends in Coworker Bonding Sounds Exhausting and Dangerous, The Wall Street Journal. Prepared for: The District Municipality of Muskoka Page 16

34 changed, with many travellers using the internet to find discounts, and it is likely that the general tourist psyche has changed in light of continued economic challenges at the global level. What the consumer is predominantly looking for in a wilderness or waterfront Ontario travel experience can generally be broken down into two types the traditional resort vacation, and an alternative cottage vacation. Thus is it the experience itself that is important to the consumer, as opposed to the specific product. The strongest source of new demand in Ontario is driven by people looking for that alternative cottage experience, which tends to correspond to the real estate product. Within the camp, campground and RV Park developments, more extensive recreation and programming are becoming more common, with some of the better properties located in communities where there is a strong appetite for second/vacation homes. Owners and purchasers of real estate components of resorts are looking for their right to use, and some level of capital appreciation, as opposed to returns off cashflow. The developer of this type of resort product is generally interested in securing a development profit, as opposed to investment returns off cashflow and capital appreciation. As such, vacation ownership resort product tends to be built as alternative cottages, with some level of personal use, but also includes a transient rental portion to maintain the commercial aspect of the resort, and provide some level of cashflow to cover operating costs. In order to be profitable, resorts with a real estate component require on-site management with a focused transient rental marketing and sales effort, and some form of rental pool agreement that purchasers conform to. The question in the end is whether the resulting real estate resort product is marketable and consistently available for transient rental. 2.8 Implications for Muskoka Significant changes in travel demand patterns, including the increased use of online tools for travel planning, more frequent short getaways, and last minute bookings to locations outside Canada, have already had a an impact on the Muskoka resort experience. There are a range of development models currently in use in Muskoka from the traditional resort hotel to resort residential product offering, which is combined with varying levels of ownership and right to use. Similarly, there is a growing trend for other overnight accommodation types that can provide either an alternative cottage or resort like experience at a variety of price points in a more mobile environment. For instance, Ontario has seen an increase in parks catering to high-end motor homes and RVs, and more campgrounds are offering a variety of activities and event Prepared for: The District Municipality of Muskoka Page 17

35 programming to bring new demand. Even summer camps are looking to expand their activity base in an effort to increase demand. In today s difficult economic times, it is a challenge to operate a tourism-related business in Muskoka on a seasonal basis. However, PKF s belief is that there will continue to be demand for the real estate resort development, traditional resort development, as well as campgrounds and other forms of overnight tourism product. However, only those new developments that offer a mixed product offering, such as the resort with real estate components, are expected to be viable in the short to mid-term. With respect to implications on District planning, if policy is developed to drive resort and tourism development with a traditional focus, it may create challenges from an economic perspective. Prepared for: The District Municipality of Muskoka Page 18

36 3.0 THE CANADIAN HOTEL INDUSTRY LENDING ENVIRONMENT 3.1 Introduction The level of investment interest and the nature of investment activity in the Canadian Accommodation industry is influenced by a number of factors including but not limited to: The national and global economies The top line performance (i.e. demand levels, revenues) and bottom line performance (i.e. operating profits) of the industry itself The availability and cost of financing Investment risk and return expectations As we examine current and future investment trends for resort and tourist commercial operations and development in Muskoka each of these factors must be considered. 3.2 Investment Cycles in the Canadian Accommodation Sector The accommodation industry is cyclical and vulnerable to economic and travel fluctuations. The Canadian Accommodation Sector has really experienced five distinct investment cycles over the last 20 years. The Early 1990s The Latter Part of the 1990s The Period The Period The 2008/2009 Downturn and the Start of Recovery in 2010, 2011 and 2012 i) The Early 1990s This was a period of significant erosion in industry top line and bottom line performance resulting in the most difficult period in hotel industry ownership and investment in recent history. This was influenced by significant supply growth during the preceding years which, combined with a pro-longed period of economic downturn, resulted in reductions in both leisure and business travel. The hotel industry reacted by decreasing rates, which only further impacted top-line revenues and profits. There were a significant number of bank foreclosures during this period. The impacts were felt the greatest in Central Canada (i.e. Ontario and Quebec). Prepared for: The District Municipality of Muskoka Page 19

37 ii) The Latter Part of the 1990s After enduring the impacts of the downturn in the early part of the decade, the industry began a slow recovery in terms of demand levels, price increases and profit levels. There was minimal new supply developed during this period as hotel investment was focused on acquisitions of existing properties at well below replacement costs. As industry profits improved, the investment interest in the sector increased, and we saw the emergence of Public Companies and Real Estate Investment Trusts which targeted this sector. Industry profits reached their highest levels ever up to that time in 2000, and the number of new development projects was on the increase. Over 10,000 new hotel rooms entered the market in 2000, the strongest development year on record. Financing and investment were more readily available, and the strongest level of performance and investment was evident in Central Canada. iii) The Period After industry performance had recovered and reached a new peak in 2000, the industry was then severely impacted, first by the impacts of 9/11 in 2001 and then by the impacts of SARS in Performance tumbled, but development and investment interest remained high, especially in Central Canada, despite a slowing economy and eroding profit levels. There was also a regional shift in industry performance over this period. Profits in properties in Central Canada continued to erode, while profits levels for hotels in Western Canada, driven by the resource driven economy, continued to improve. iv) The Period This was a period where real estate investment as a whole was high. Interest rates were favourable, financing was readily available and investment return expectations were low. The level of transaction activity was unprecedented and the level of new development was strong. Many non-hotel investors entered the sector, which despite higher risks, offered the prospect of better returns than other forms of real estate were offering at the time. Industry profits, specifically in Western Canada surpassed 2000 levels. However, values being paid for assets reached and in some cases surpassed replacement costs. Despite continued industry improvement over this period, profit levels in Central Canada still remained below 2000 levels. v) The 2008/2009 Downturn and the Start of Recovery in 2010, 2011 and 2012 While the impacts of the most recent economic downturn on the Canadian hotel sector were significant, they were not as dramatic as those of the downturn in early 1990s. Further as lenders were more conservative in their lending and financing structures, the number of bank foreclosures during this period was also much lower. Initially the lending community literally abandoned the hotel sector, however as the Prepared for: The District Municipality of Muskoka Page 20

38 sector began to show improvement in 2010, they began to come back and continued to do so in 2011 and Profitability of the Ontario Accommodation Industry Investment in the Canadian accommodation sector is directly tied to its profitability levels. The challenges impacting the Canadian Accommodation Industry have been even more prevalent in Ontario where profitability has eroded from peaks in the year 2000, and has yet to recover. 3.4 Financing in the Canadian Hotel Sector Beyond actual financial performance levels, the other primary influencer of investment returns is the nature and availability of financing. This is measured in part by the loan amount secured, by the number of years (amortization term) by which the cost of payback is calculated, and by the actual cost of funds/interest rate being charged. Prepared for: The District Municipality of Muskoka Page 21

39 The key factors impacting hotel and resort financing today include the following: Lower loan to value ratios which means a higher level of equity is required by owners, operators and developers. In many instances shorter amortization periods, meaning annual principal repayment requirements are higher, resulting in higher overall annual payments. In general lower interest rates are lower than they were in the past, but higher risk assets such as resorts must pay a premium. A greater reliance on sourcing financing from Trust Companies, Credit Unions and Finance Companies as Chartered Banks continue to limit their lending to the sector. Based on on-going surveys undertaken by PKF Consulting, lenders that are active in the accommodation sector apply a number of factors or restrictions to their company s lending activity. TABLE 3-1 FACTORS OR RESTRICTIONS ON LENDING Hotel financing only available in certain regional markets 67% 78% Hotel financing available only for branded properties 42% 78% Hotel financing restricted to certain hotel asset types 11% 56% Hotel financing available for both existing assets and new builds 58% 56% Hotel financing available, but there is a ceiling to the overall amount lent to this sector 33% 56% Hotel financing available, but there is a limited amount lent per hotel asset 42% 44% Hotel financing available only for existing assets 33% 33% Hotel financing available for all hotel asset types in all markets nationally 0% 11% Hotel financing available for both independent and branded properties 58% 11% Source: PKF Hotel Investor and Lender Survey, 2011/ Accommodation Supply Implications As of year-end 2011, Canada s accommodation sector was comprised of an estimated 426,000 guest rooms. As the country s most densely populated Province, with the highest visitation levels in the country, Ontario hosts an estimated 35% of that room supply (146,000 rooms). Over the last 12 years, supply growth at both the National and Provincial levels has been in the range of 1-2% per annum. Current economic conditions and investment concerns indicate that supply growth will remain at the lower end of this range over the short term. Prepared for: The District Municipality of Muskoka Page 22

40 3.6 Overall Conclusions/Implications The foregoing provides an indication of how the lending community views financing within the Canadian Accommodation Industry and the difficulty in obtaining funding in today s investment environment. That combined with extremely low profit levels indicates that existing assets will have difficulty in generating the necessary capital required for upgrades and that new developments based on traditional debt/equity financing off cashflow cannot be supported. Furthermore, supply growth in Canada, and more specifically in Ontario, are expected to remain restrained in the near term. Prepared for: The District Municipality of Muskoka Page 23

41 4.0 MUSKOKA S RESORT AND TOURISM POSITIONING 4.1 Introduction The following section provides an overview of the market environment within which Muskoka resorts and overnight tourism product compete, from both a provincial and regional perspective. It further includes an evaluation of demand trends to resort areas in general and to Muskoka in particular. 4.2 District of Muskoka Tourism Overview Tourism in the District of Muskoka is directly related to the abundant natural habitats and historic landmarks in the area, but is limited in terms of winter offerings. Related marketing tends to be concentrated around outdoor and arts/culture/heritage activities, particularly in the summer months. In addition to the various types of resort and overnight accommodation product in the District, tourist attractions and annual festivities that induce travel to Muskoka include, but are not limited to, the following: Santa s Village and Sportsland, Bracebridge; Eaglecrest Aerial Park, Bracebridge; Bethune Memorial House (National Historic Site), Gravenhurst; RMS Segwun Steamship, Gravenhurst; Gravenhurst Opera House; Hidden Valley Ski Area, Huntsville; Muskoka Heritage Place, Steam Train and Pioneer Village; Big Chute Marine Railway, Georgian Bay; KEE to Bala, Muskoka Lakes; Dorset Fire Tower, Lake of Bays; Various Golf Courses many affiliated with resorts (i.e. Deerhurst); Various Provincial Parks (Algonquin, Six Mile Lake, Hardy Lake, Arrowhead); Various festivals; and Various outdoor recreational activities (camping, hiking, skiing, canoeing, kayaking, beaches, marinas, fishing, etc.). Using data provided by the most recent Statistics Canada s Travel Survey of Residents of Canada (TSRC) and International Travel Survey (ITS) surveys from 2010, a visitation profile for the Muskoka District Municipality (CD44) has been summarized below. These data sources track same-day and overnight visitation to by purpose of trip, origin, length of trip, etc. Overnight visitors are also segmented by accommodation type used, including: Roofed Commercial (hotel, motel, commercial cabins/cottages, other), Camping/RV Facilities, Private Homes, Private Cottages and Other accommodation types. Prepared for: The District Municipality of Muskoka Page 24

42 As shown in Figure 4-1, total visitation to Muskoka District has decreased by 8.5% during the 2008 to 2010 period, from 2.45 million visitors in 2008 to 2.24 million visitors in However, the bulk of this decline was in the same-day visitor market, which decreased by 18.5%, as compared to the 3.8% decline in overnight visits. At 2.2 million visits in 2010, visitation to Muskoka District represented 2.2% of all visitors to Ontario (103.7 million). However, the proportion of overnight to same-day visits is much stronger in Muskoka, with 72% of visitors staying one night or more in the District, as compared the provincial average of 41% (see Figures 4-2 and 4-3). Prepared for: The District Municipality of Muskoka Page 25

43 As shown in Table 4-1, domestic visitation accounted for the majority of tourism to Muskoka in 2010 at 95%, or 2.1 million visits. American travelers accounted for about 3% of overnight visitors (75,000 visits), while Overseas travelers accounted for about 2% of overnight person visits to the District (48,000 visits). In total, 1.6 million visitors stayed overnight (72%), while 630,000 were same-day visits (28%), of which 96% derived from other parts of Ontario. TABLE 4-1 VISITATION GEOGRAPHIC PROFILE (2010) MUSKOKA DISTRICT MUNICIPALITY Origin Overnight Same-Day TOTAL VISITATION Ontario 1,497, % 606, % 2,103, % Other Canada 14, % 0 0.0% 14, % Total Canada 1,511, % 606, % 2,117, % Total U.S. 57, % 18, % 75, % Total Overseas 42, % 6, % 48, % TOTAL 1,610, % 630, % 2,240, % Source: Statistics Canada TSRC & ITS, 2010 The majority of visitors coming to the area are from the Pleasure segment, which accounted for a combined 1.6 million visitors or 66% of total person visits in Visiting friends and relatives (VFR) travel accounted for another 526,000 visits (22%), while the Personal/Other travel segment accounted for about 3.5% of person trips in The Business/Corporate sector, which includes demand for meetings and conventions at resorts and other related infrastructure, made up the remaining 55,000 visits or 2.3% of total visitation to Muskoka. TABLE 4-2 MAIN PURPOSE OF TRIP (2010) MUSKOKA DISTRICT MUNICIPALITY Purpose Person Visits Share Pleasure 1,576, % Visiting Friends and Relatives (VFR) 526, % Business/Corporate 55, % Personal/Other 83, % TOTAL 2,395, % Source: Statistics Canada TSRC & ITS, 2010 Prepared for: The District Municipality of Muskoka Page 26

44 As illustrated in Figure 4-4, 51% of total person visits spent in the Muskoka District took place during the July to September period. This is generally expected, given the proportion of Pleasure segment tourism demand in the Muskoka District, which is predominantly generated during the summer months. As shown in Figure 4-5, the majority of visitors to Muskoka involved the natural landscape, with 62% participating in some type of outdoor or sporting activity, and 13% visiting either a National or Provincial nature parks in the District in An estimated 38% of visitors were involved in boating activities in Prepared for: The District Municipality of Muskoka Page 27

45 At an average party size of 3.3, Muskoka tourists tend to travel in larger groups than the Provincial average (2.8 people), and whereas 16% of visitors to Ontario were parties with children in 2010, 22% of visitors to Muskoka involved larger family groups. This ratio of larger family groups coming to Muskoka has stayed consistent since 2008, as compared to party size, which was has dropped from a high of 4.0 in 2008 to the current average of 3.3. When applying the TAMS 2006 data, it is evident that the trend of people staying in accommodations that match their activity interests continues today with the majority of travellers interested in boating staying at waterfront resort accommodations. An analysis of Muskoka accommodation performance is provided in the following sections. 4.3 Muskoka Accommodation Sector Muskoka Accommodation Supply The District of Muskoka has identified tourism as the foundation of its economy, in recognition of the fact that the area has been used for vacation purposes since the late 19 th Century. Apart from the natural setting, the variety of resort accommodations have been and continued to be a key aspect of the District s attractiveness to the vacationing public. It is understood that while the number of cottages has continued to increase in Muskoka, the resort inventory has continued to decline, from a high of 554 properties in 1957, to a low of 126 in 1991, according to District Official Plan (p. C7). According to the most recent accommodation inventory provided by the District Planning and Economic Development Department, as of year-end 2011 there were an estimated 87 resorts, with 3,200 rooms operating in the District (excluding bed & breakfast establishments). This represents an 84% decline in resort establishments over the 50+ year period. However, there are also an estimated 24 hotel/motel properties operating in Muskoka, representing approximately 900 rooms, as of year-end Hence, the total Muskoka accommodation market includes 111 properties, and over 4,000 rooms Potential for Future Accommodation Development With respect to the potential for future development, PKF research indicates that specific market and development factors will be the primary influencers. However, historic market trends and levels of supply growth witnessed at the provincial and national level (1-2% per annum) would suggest that supply growth for traditional hotel and resort product in Muskoka would have been in the range of units over the Prepared for: The District Municipality of Muskoka Page 28

46 next 10 years. At these levels, it is suggested that the Muskoka accommodation market could absorb units annually, if their development was economically viable Muskoka Accommodation Demand PKF Consulting s Monthly Trends database, which includes top-line occupancy and average daily rate performance for an estimated 80% of the national supply inventory, currently tracks data from 11 Muskoka resorts, representing 1,100 rooms and 10 hotels, representing 600 rooms. It is recognized that on an available room basis, PKF s sample of resort product represents just over one-third of Muskoka s resort inventory, and this sample is representative of the larger full-service resorts that operate on a year-round basis, thereby providing an indication of the better performers in the competitive market. Table 4-3 provides a comparison of occupancy performance within these two Muskoka markets, as compared to the Ontario Resort market, the full Ontario accommodation market, and the full National accommodation market. TABLE 4-3 MUSKOKA RESORT SECTOR OCCUPANCY PERFORMANCE F Actual Actual Actual Actual Forecast Canada 63% 58% 60% 61% 62% Ontario 61% 57% 60% 61% 62% Ontario Resorts 51% 46% 49% 49% 52% Muskoka Hotels 48% 46% 49% 45% 45% Muskoka Resorts 47% 43% 45% 45% 47% Source: Market occupancy performance in the Muskoka competitive resort market has typically been within the 43% to 47% range, as compared to the hotel market, which has remained in the 45% to 49% range. In 2010, the market experienced a partial recovery in demand to 2008 occupancy levels. The low occupancy rates realized in the Muskoka resort sector stems primarily from the seasonal nature of room night demand, with little activity offerings in the winter months, as compared to other resort areas like Collingwood and Blue Mountains. In general, it is evident that in recent years, factors such as climate change, the strengthening Canadian dollar, changing travel patterns, and the decline in US leisure travel have all weighed heavily on the resort sector. It is unclear as to whether Ontario resorts will ever reach previous occupancy levels in the mid to high 50% range. Prepared for: The District Municipality of Muskoka Page 29

47 Based on year-to-date August 2012 data, PKF s forecast for 2012 indicates that the Muskoka resort market is expected to reach occupancy levels about 15 percentage points lower than the National and Provincial averages, and 5 points lower than overall Ontario resorts, but 2 points higher than the Muskoka competitive hotel market. As shown in Figure 4-6, based on PKF s sample of 11 resort properties, an estimated 61% of resort accommodation demand in Muskoka is leisure based, which represents both independent travellers and tour groups. The meeting/conference sector represents another 37% of demand as of year-end Figure 4-7 and Table 4-4 further demonstrate that summer represents the peak demand season for the resort market at 43% of overall demand in 2011, with occupancy levels reaching the 67% range. This is not surprising given the more favourable weather conditions, and the fact that more families have time available for travel with children out of school, etc. The spring and winter seasons are the most challenging for Resort properties in Ontario with occupancy rates falling to the upper 30% range during these periods, and represent a combined total of 35% of total demand. Fall tends to be a stronger demand period for this market, with occupancies Prepared for: The District Municipality of Muskoka Page 30

48 reaching 56%), which is supported, at least in part, by the high level of meeting/conference business demand during this season. TABLE 4-4 SEASONALITY OF RESORT DEMAND Season Occupancy % Spring (Apr-May) 30% Summer (Jun-Aug) 67% Fall (Sep-Oct) 56% Winter (Jan-Mar, Nov-Dec) 29% Source: PKF Consulting Inc 4.4 Other Overnight Tourism Product In addition to the resort sector, there are several other forms of overnight tourism product that generate significant impacts in the Muskoka community Cottages Although styles and patterns of use may have changed, cottages have been an important aspect of Muskoka s charm since the end of the 19 th Century alongside resorts, and accommodate a substantial supply of summer vacation demand. According to the 2004 Second Home Study, published by the District of Muskoka Planning & Economic Development Department in 2005, there are an estimated 20,500 seasonal dwellings or seasonal dwellings in Muskoka, and approximately 76,000 seasonal residents. Seasonal residents are considered those who consistently reside in the cottage for a period between 30 and 180 days in a typical year. The estimate of total seasonal residents in Muskoka was based on the number of seasonal dwellings and average seasonal household size, which was calculated at 3.66 persons per household in With respect to ownership, the 2004 study indicates that the majority of cottages are under sole ownership, and most owners plan to bequeath their second homes to family members, as opposed to selling. With respect to usage, 57% of residents spend more than 31 summer days in Muskoka, and over 80% visit the cottage at least once during the Spring and almost 90% visit at least once during the Fall. About 44% of all second homes in Muskoka were winterized at the time that this study was conducted. 13 District Municipality of Muskoka Planning & Economic Development Department (September 2005), 2004 Second Home Study Final Report, p. 9 Prepared for: The District Municipality of Muskoka Page 31

49 The combination of seasonal residents, extended family members, and other guests of cottage households represent approximately 6.5 million seasonal resident and visitors days per year. These visitors generate a combined total of about $600 Million in direct expenditures annually in the District Private Cottage Rentals In addition to the 76,000 seasonal residents who travel with extended family and guests to Muskoka on an annual basis, there are also a large number of travellers who rent privately owned cottages in the District. In a preliminary assessment of cottage rental impacts conducted by the Muskoka Tourism Marketing Agency, it was determined that an estimated 1,490 cottages are currently registered with rental agencies. 15 Stakeholder feedback indicates that this is a conservative estimate, as there are many other unregistered cottages providing rental inventory throughout Muskoka. The 2004 Second Home Study, which was conducted by the District of Muskoka, reported that of the estimated 20,600 seasonal dwellings in Muskoka, an estimated 8% were being rented when not in use by the owners equating to about 1,650 cottages. There are 3,200 resort units in Muskoka. These are forced to compete with another 1,500 registered cottage rental units. Consequently, the total impact of private cottage rentals on the resort industry is considered to be significant, and will continue to pose concern on the potential for existing resorts and future resort development in Muskoka Camps and Campgrounds The District Municipality of Muskoka compiled an inventory of camps and campgrounds in the District for PKF s review. The District data was supplemented by PKF with individual website data. According to available research, there are an estimated 30 Trailer/RV Parks and Campgrounds occupying a total of 1,700 acres in Muskoka, and providing approximately 3,000 camp sites. These operations range in size from 7 to 175 acres, and from 20 to 300 sites. These are primarily seasonal properties open from May through October that cater to both seasonal guests, who rent a campsite or serviced trailer site for the season, and transient guests, who may stay for a weekend or longer. Two Provincial parks in the District also provide about 440 camp sites on over 6,100 acres of parkland. 14 Ibid., p Telephone interview with Michael Lawley, Executive Director of Muskoka Tourism Marketing Agency September 24, 2012 Prepared for: The District Municipality of Muskoka Page 32

50 There are also an estimated 35 children s and community camps in the District occupying an estimated 4,200 acres, and ranging in size from 3 to 540 acres. Some of these are year-round facilities, offering day programs and facility rental options, while others are only used for summer residential youth camps. Many have a significant amount of parkland on property. Based on PKF survey research, the typical camp in Muskoka has an average of 350 beds for overnight stays, suggesting overnight capacity in excess of 10,000 guests from this segment. Thus at a combined total of close to 12,000 acres, camps and campgrounds provide a significant level of overnight tourist product in the District. 4.5 The Importance of All Overnight Tourism Products in Muskoka While there is information available on the economic impact of cottages, resorts and hotel visitation, limited data is available on the total expenditures made be visits to camps, trailer parks and campgrounds in Muskoka. However, PKF research and analysis indicates that the total capacity provided by overnight tourist products in Muskoka is quite significant, as summarized below: The 111 Resorts and Hotels include 4,100 units, providing a capacity approaching 10,000 persons; The 20,500 Cottages can host over 75,000 persons; The 30 Trailer Parks & Campgrounds offer 3,000 sites, providing a capacity of about 10,000 persons; and The 35 Camps in Muskoka, offering an average of 350 beds, have a capacity of over 10,000 persons. This data suggests that overnight tourism products in Muskoka offer a total capacity for over 105,000 visitors per night on an annual basis. From an economic impact perspective, PKF research indicates that the full Muskoka accommodation inventory represents a total of 4,000 units that generate an estimated 2 million visitor days per year, and $400 Million in direct expenditures annually in the District. The per visitor day spend by resort and hotel guests at $200 per day is twice that of cottagers and their guests at under $100 per day. The annual per unit expenditures generated by resorts and hotels at $50,000 per room is 40% higher than the annual expenditures generated per cottage in Muskoka at $30,000 per annum. Prepared for: The District Municipality of Muskoka Page 33

51 In 2009, the District Planning and Economic Development Department conducted a Fractional Ownership Survey, targeting both Unit Owners and Resort Operators. In total, Unit Owner respondents spent between $235 and $3,200 per week in Muskoka on a range of common purchases (i.e. groceries, convenience items, auto related expenses, marina services, entertainments, small appliances/hardware, alcohol and sporting/recreational goods). The sample of Unit Owner respondents who made major purchases was quite limited, thus it was not possible to estimate a range of expenses under this category. According to the survey results, the typical Unit Owner of individual fractions indicated that they stay for 5 weeks per year, at an average of 1 week per visit. In comparison to traditional Cottage owners, fractional owners tend to spend more on common expenditures per trip, but not as much as most Resort and Hotel guests. In order to estimate the full economic impact of visitation and expenditure patterns of owners of fractional units in Muskoka, it would be helpful to conduct an additional survey focusing on all purchases. The overall implications for future development in Muskoka this as follows: Resorts have and will continue to generate the strongest level of annual economic impact on a per unit basis in Muskoka. However current performance levels in the resort sector specifically support concerns for existing operators and limitations for the development of new traditional resorts. As an alternative, development of new commercial fractional units will likely generate stronger impacts than new private residential cottage units on a per unit basis. This combined with a greater level of density in fractional/condominium resort developments as opposed to cottage development suggests strong potential. This is not to suggest a diminished importance of the $600 million generated by the Cottage sector annually in Muskoka. Prepared for: The District Municipality of Muskoka Page 34

52 5.0 RESORT OWNER SURVEY RESULTS 5.1 Introduction As a supplement to the analysis of the competitive Muskoka resort market s positioning from a supply and demand perspective, PKF also conducted a review of some of the ownership and operating models that are currently in use at some of the newer condominium and fractional resorts in Muskoka. The distribution list was generated by the District Planning and Economic Development Department, based on their knowledge of resorts that are providing some form of vacation ownership product in Muskoka. This survey was distributed via during October 2012 to a total of 17 resort properties. Six completed surveys were received, representing a response rate of 35%. The following section summarizes the results of this survey. It should be noted that half of the respondents represented larger, urban resorts, which provide 83% of the room supply in the sample. Thus, this discussion is not intended to suggest that the sample is representative of the development throughout the District, but does demonstrate the breadth of facilities, ownership structures and operations. 5.2 General Operating Characteristics Participating respondents included resorts in 4 of the 6 Area Municipalities, including: Lake of Bays, Muskoka Lakes, Gravenhurst and Huntsville, and all were waterfront resort properties. There was also representation of both year-round and seasonal resort product with the seasonal properties open from mid-may to mid-october. Half of these resorts have reservation systems, and two were branded properties, demonstrating a propensity towards seeking out additional marketing assistance. The majority of respondents represented properties that are redevelopments of existing resorts under new ownership, and most of these opened since The majority were also considering expansion, as part of either a short or mid-term plan, indicating some level of optimism from an economic perspective. 5.3 Ownership Structure Respondent resorts represented a range of ownership structures in the categories of: Single, Condominium, Fractional and Alternative ownership. Alternative ownership models included corporations with individual Prepared for: The District Municipality of Muskoka Page 35

53 shares held by individuals. Those representing a single ownership type featured anywhere from 1 or 2 unit types, while those with more than one ownership types also represented more than one unit type. The responding sample included a range of unit types. As shown in Table 5-1, about two-thirds of units were hotel style, with about 30% in the townhome / duplex / triplex style, and 5% featuring detached cottages or cabins with kitchens. No housekeeping cottages/cabins without kitchens were represented at these resorts. The most prominent style of ownership was condominium (64%), with the remaining under single resort ownership (28%), fractional (3%) and alternative (4%). No timeshare structures were represented in this sample. Of note, the majority of single resort ownership structures features hotel-style room product, while most condominium resorts featured townhome/duplex units. The conclusion being that there is a wide range of ownership and built product represented in Muskoka. TABLE 5-1 RANGE OF OWNERSHIP STRUCTURE BY UNIT TYPE (N=6) Townhome/ Detached Duplex / cottage/cabin Hotel-Style Triplex with kitchen Housekeeping cottage/cabin no kitchen Ownership Types by Product TOTAL Single Resort Owner 42% 0% 3% 0% 28% Condominium 58% 92% 0% 0% 64% Fractional 0% 8% 17% 0% 3% Timeshare 0% 0% 0% 0% 0% "Alternative" 0% 0% 80% 0% 4% Total Units 66% 29% 5% 0% 100% Source: PKF Consulting, Muskoka Resort Owner/Operator Survey With respect to reasons for choosing one ownership structure over another, respondents answered that it was either the most financially viable option, or that the structure had been inherited upon purchase of the resort. 5.4 Built Product and Amenities With respect to types of units available, the range of units and sizes varied significantly as well. As shown in Table 5-2, resorts with hotel-style rooms tend to have the highest number of units, but those with cottages or cabins had the widest range in terms of square footage. The surveyed resort sample offered anywhere from 13 to 221 units, and featured units ranging from 350 to 3,000 square feet. A total of 578 units were identified at the 6 participating resorts. Prepared for: The District Municipality of Muskoka Page 36

54 TABLE 5-2 BUILT PRODUCT RANGES AT MUSKOKA RESORTS (N=6) Total Units Unit Size Minimum Maximum Minimum Maximum Hotel-Style rooms ,200 Townhome / Duplex / Triplex ,000 2,400 Detached Cottage/ Cabin with Kitchen ,000 Total Units ,000 Source: PKF Consulting, Muskoka Resort Owner/Operator Survey In terms of amenities offered, the survey results were not surprising in that the most prevalent amenities were water-based: pools and beach access. Six amenities that were present at two-thirds of the resorts were: meeting space, tuck shop, tennis courts, spa, clubhouse, equipment rental (predominantly boats), and other outdoor amenities. Two important facts derived from this survey were that only half of the resorts offer food and beverage facilities, and no one specific amenity is present at all resorts in the sample. Furthermore, none of the resorts sampled were considering adding amenities to their properties only room product, which suggests that these resorts are not looking for additional revenue streams. 5.5 Operating Structure All respondents indicated that central on-site management was available at their resort. In terms of guest services offered, on-site management takes care of housekeeping, maintenance, and recreational amenities at all Muskoka resorts in the sample. Reservations are also managed on-site in the majority of resorts, apart from those with a brand affiliation. For those offering a restaurant or bar, two-thirds are managed on-site, while one-third involves off-site catering. 5.6 Rental Structure Table 5-3 identifies the variety of rental structures available under different ownership models at Muskoka resorts. Of the total 578 units at the 6 participating resorts, respondents identified that 35% were being used exclusively for transient guests, 29% were exclusively used by owners, 27% were part of a mandatory rental pool, and 9% were part of a voluntary rental pool. With few exceptions, 1/3 of room inventory at Muskoka resorts were being used by transient guests, 1/3 by owners, and 1/3 were in some form of rental pool. Prepared for: The District Municipality of Muskoka Page 37

55 Table 5-3 further shows the distribution of rental structure in the sample of Muskoka resorts by ownership structure. As shown, single resort ownership models have a propensity to reserve units for transient guests, while rental pools are predominant under condominium and fractional and alternative ownership structures. TABLE 5-3 RENTAL STRUCTURES AT MUSKOKA RESORTS (N=6) Exclusively Used for Transient Guests Mandatory Rental Pool Voluntary Rental Pool Exclusive Owner Use Single Resort Owner 100% Condominium Resort 10% 36% 10% 44% Fractional 0% 0% 68% 32% "Alternative" Ownership 0% 100% 0% 0% Source: PKF Consulting, Muskoka Resort Owner/Operator Survey Those resorts offering a mandatory rental pool indicated that the greatest number of days offered for personal use occur during the summer and fall. 5.7 Unit Availability for Transient Rental The 578 resort units represented by the survey respondents generated a total of approximately 110,000 available room nights for transient use in Table 5-4 shows the range of availability of resort units for transient rental based on the sample of year-round operations with either mandatory or voluntary rental Prepared for: The District Municipality of Muskoka Page 38

56 pools. As shown, the greatest share of room inventory is being allocated for transient rental purposes during the winter months, at 25-30% of available days. TABLE 5-4 AVAILABILITY OF RENTAL POOL UNITS FOR TRANSIENT RENTAL Winter (Jan-Mar) 25-30% Spring (Apr-Jun) 10-15% Summer (Jul-Sep) 15-20% Fall (Oct-Dec) 10-15% Source: PKF Consulting, Muskoka Resort Owner/Operator Survey 5.8 Other Issues With respect to challenges from an operational perspective, responses included the following: Maintaining profit levels to make capital expenditure requirements Cost of running a resort in Ontario Marketing - need greater awareness during winter months Other issues impacting viability included difficulty in working with local government, in terms of meeting local planning and policy requirements, which are considered quite restrictive in some jurisdictions. In order to ensure the future success of their respective resorts, respondents were also asked to rate the importance of a range of elements on a scale of 1 to 3. Table 5-5 shows that the most important requirement for future resort sustainability was marketing support at both the regional and provincial level. TABLE 5-5 RATING OF REQUIREMENTS FOR FUTURE RESORT SUSTAINABILITY - Scale of 1-3 (N=5) Marketing Support - Regional 2.6 Marketing Support - Provincial 2.6 Access to financing for facility upgrades 2.4 Flexibility in permitted on-site uses in order to generate investment capital 2.4 Flexibility in permitted on-site uses in order to generate operating income 2.2 Source: PKF Consulting, Muskoka Resort Owner/Operator Survey Prepared for: The District Municipality of Muskoka Page 39

57 5.9 Summary & Implications Based on the results of the preceding analysis, a number of factors warrant further deliberation when considering new resort related policy in Muskoka, including the following: There appears to be no consistency in the nature of product being developed at these properties, including the provision of on-site food and beverage; The range of ownership structures appears to be unique to the specific project; While on-site management is being provided, the nature of marketing and sales efforts was not determined; Regardless of the rental pool structure, personal use is the stronger during the summer period, and transient rental unit availability is the greatest during the winter period, which is directly opposite to demand characteristics and puts additional competitive pressure on traditional resorts during the off-season. Prepared for: The District Municipality of Muskoka Page 40

58 6.0 TRAILER PARK & CAMPGROUND SURVEY RESULTS 6.1 Introduction In order to get a better sense of the operating characteristics of other overnight tourism establishments in Muskoka, and the significance of these properties within the region, PKF also conducted a survey of Trailer / RV Parks and Campgrounds. The distribution list was generated by PKF using available website data, based on the original inventory compiled by the District Planning and Economic Development Department. This survey was distributed via during December 2012 to a total of 21 properties, and 8 more were contacted via telephone. Seven completed surveys were received, representing a response rate of 24%. The following section summarizes the results of this survey. This discussion is not intended to suggest that the sample is representative of all trailer parks and campgrounds throughout the District, but does demonstrate the breadth of facilities, operational structure, utilization and relevant issues faced by properties in this segment. 6.2 General Operating Characteristics Participating respondents included properties in 5 of the 6 Area Municipalities, including: Bracebridge, Georgian Bay, Gravenhurst, Huntsville and Muskoka Lakes, and 5 of the 7 respondents represented waterfront properties. All trailer parks and campgrounds were seasonal operations, open between May and October. With none of the participating properties open on a year-round basis, the trends towards an increased interest in winter utilization was not confirmed through our survey process. Participating properties ranged in size from 14 to137 acres, for an average of 75 acres per property. The physical site area dedicated to trailer and RV sites ranged from 4% to 95%, according to participants, with the typical property allocating 50% of site area to trailers and RVs. This indicates the importance of natural landscape and open space as part of the experiences for visitors to these properties. 6.3 Built Product and Amenities With respect to types of built product available, survey respondents were asked to identify the number of fully serviced and partially or non-serviced trailer/rv sites, cabins/cottages, and other forms of accommodation available. Full services refer to full hook up for water and electricity. Only one property Prepared for: The District Municipality of Muskoka Page 41

59 indicated the presence of other built accommodations on-site in the form of cabins, which were built to accommodate visitors who are new to camping, or dislike the tent and trailer experience. The surveyed sample offered in the range of 22 to 300 trailer sites, with the average property offering 144 sites, of which 113 were fully serviced. As shown in Figure 6-1, the average trailer park/campground surveyed identified that 78% of built product was in the form of fully serviced trailer sites, 21% was in the form of trailer sites with partial or no services, and 1% cabins/cottages. About two-thirds of the surveyed property owners were considering expansions. One property is planning to add a number of cabin-style trailers, in line with current trends identified in Section of this report. Two properties indicated that they are currently unable to do so, based on existing by-laws, and one property was in process of expanding, but has been delayed by local permit approvals. This feedback speaks to an issue at the local Official Plan level in terms of permitted uses of tourist commercial properties. An estimated 71% of survey respondents have organized programs and events at their properties. These activities include, but are not limited to, the following: Pot-luck and BBQ dinners Horseshoe tournaments Music concerts Kids summer programs (i.e. Kids Sports Day) Golf tournaments Free movie screenings Cross-country ski Indoor activities Prepared for: The District Municipality of Muskoka Page 42

60 Nature walks Wagon rides, In terms of amenities offered, the survey results were similar to those of the Resort Survey in that the most prevalent amenities were water-based, i.e. pool, boathouse, swim docks, and beach access. The sample identified an average of 6 amenities, based on the list provided, with the most prevalent being: boathouse / swim docks, beach access, basketball or tennis courts, equipment rental (i.e. pedal boats), and horseshoes. No respondents identified food and beverage facilities on-site, and less than half of the respondents featured a tuck shop or convenience store. In terms of other facilities, most were equipped with washrooms and showers, and some had laundry facilities on-site. None of the trailer parks and campgrounds sampled were considering adding amenities to their properties only one mentioned pop and ice machines, which suggests that these properties are not looking for additional revenue streams. Over 70% of respondents were on private services, with a combination of drilled wells and filtered water, and septic systems. 6.4 Utilization With respect to utilization, the survey sample identified that about 60% (average of 86 sites per property) were allocated to seasonal visitors, i.e. those who paid for access to a particular site for the season, and 40% (average of 57 sites per property) were for transient use. Table 6-1 identifies the typical utilization levels at seasonal trailer sites within the sample group of trailer parks and campgrounds. The average seasonal visitor took as few as 1 trip to as many as 26 trips per season, with the average visitor spending one week (7 nights) per trip. Several respondents indicated that they have several visitors who live in the local area, and stay at their trailer for the entire summer, while others come only on the weekends, particularly from the GTA. Seasonal rates ranged from a low of $2,000 to a high of $4,000, for an average of $2,575. Prepared for: The District Municipality of Muskoka Page 43

61 TABLE 6-1 UTLIZATION LEVELS AT SEASONAL SITES (n=4) Average # of Seasonal Sites per Property 86 # of Trips per Season 18 Average Length of Stay per Trip (nights) 7 Average Seasonal Rate $2,575 Source: PKF Consulting, Survey of Trailer Parks & Campgrounds Table 6-2 identifies the typical utilization levels at transient trailer sites for the sample group. Peak occupancy levels in July and August ranged from 45% to 65%, while occupancies ranged from 15% to 30% for the rest of the operating season, for an average annual occupancy of 28% in The average transient visitor stayed for two nights. Several respondents identified a trend towards increased visitation from overseas origins in the Spring months, whereas they used to come more predominantly in Fall to see the changing colours. A number of Muskoka campgrounds and trailer parks are on recognized Canadian camping routes, which generate significant demand from Europe particularly Germany, Sweden, France, and the Netherlands. These sites do not pay for this exposure. Overnight rates at trailer/rv sites ranged from a low of $29 to a high of $68 per night, for an average of $38. TABLE 6-2 UTLIZATION LEVELS AT TRANSIENT SITES (n=7) Estimated Annual Occupancy (2011) 28% Average Length of Stay (nights) 2 Average Overnight Rate $38 Source: PKF Consulting, Survey of Trailer Parks & Campgrounds When combined with the seasonal sites, which represent 100% occupancy for the season whether or not visitors are physically on-site, the surveyed sample of trailer sites had a combined occupancy of 71%. However, at an estimated 28% in 2011, transient trailer site occupancy levels were much lower than the Muskoka resort market at 45% (see Section 4.3.3). 6.5 Other Issues With respect to challenges from an operational perspective, Table 6-3 shows the range of issues that were most prevalent within the survey sample. As shown, obtaining planning approvals and processes for expansion, as well as compliance with government regulations were challenges experience by 57% of respondents. Prepared for: The District Municipality of Muskoka Page 44

62 TABLE 6-3 CHALLENGES OPERATING TRAILER PARKS / CAMPGROUNDS IN MUSKOKA (n=7) Planning Approvals/Processes for Expansion/Building Standards 57% Government Regulations/Compliance (Health & Safety, Environment, etc.) 57% Servicing / Local Health & Safety Regulations 29% Local Political Concerns 29% Financing / Development Fees 14% Source: PKF Consulting, Survey of Trailer Parks & Campgrounds In order to ensure the future sustainability of their respective properties, respondents were asked to rate the importance of a range of elements on a scale of 1 to 3, where 1 = low importance and 3 = high importance. Table 6-4 shows that the most important requirement for future trailer park and campground sustainability was access to financing for facility upgrades. TABLE 6-4 RATING OF REQUIREMENTS FOR FUTURE TRAILER PARK / CAMPGROUND SUSTAINABILITY - Scale of 1-3 (n=7) Access to financing for facility upgrades 2.5 Marketing Support - Regional 2.3 Marketing Support - Provincial 2.3 Flexibility in permitted on-site uses in order to generate operating income 2.3 Flexibility in permitted on-site uses in order to generate investment capital 2.3 Source: PKF Consulting, Muskoka Resort Owner/Operator Survey 6.6 Summary & Implications Based on the results of the preceding analysis, a number of factors warrant further deliberation when considering new tourist commercial related policy in Muskoka, including the following: As with the majority of resort properties in Muskoka, few trailer parks and campgrounds have the capability to remain open year-round; Most trailer parks and campgrounds provide an alternative cottage environment, with related waterfront activities and organized events/programming, and more seasonal visitors (60%), as compared to transient visitors; Transient trailer sites show much lower demand levels than Muskoka Resort product; Prepared for: The District Municipality of Muskoka Page 45

63 Over 50% of surveyed properties are interested in expansion, but are not able to because of local policies and guidelines, and challenges in obtaining planning approvals; and The most important concern is access to financing for facility upgrades to meet Provincial standards (i.e. health and safety). Prepared for: The District Municipality of Muskoka Page 46

64 7.0 CAMP SURVEY RESULTS 7.1 Introduction In addition to the survey of Trailer / RV Parks and Campgrounds, PKF also conducted an examination of Camp operations in Muskoka. The distribution list was generated by PKF using available website data, based on the original inventory compiled by the District Planning and Economic Development Department. This survey was distributed via during December 2012 to a total of 35 properties. Ten completed surveys were received, representing a response rate of 29%. These results have been grouped into two distinct groups of respondents based on primary operating characteristics: 1. Not-For-Profit Camps (including youth agencies and religious organizations) 2. For-Profit Independent Camps (under private ownership) The following section summarizes the results of this survey, which was focused on each camp s utilization by overnight visitors, which occurs predominantly during the summer months. It should be noted that 8 of the respondents represented Not-For-Profit camps (73%), while 3 represented the Independent For-Profit category (27%). This discussion is not intended to suggest that the sample is representative of all camps throughout the District, but does demonstrate the breadth of facilities, operational structure, utilization and relevant issues faced by properties in both categories. 7.2 General Operating Characteristics Participating respondents included properties from all 6 Area Municipalities, all of which were waterfront properties. As mentioned in the introduction, 8 of the 11 respondents represented not-for-profit camps, while 3 represented the for-profit category. Of the not-for-profits camps, 6 were affiliated with religious organizations, while 2 were charity-based youth camps. With respect to operating season, 25% of not-for-profits and 33% of for-profit camps were open on a yearround basis. One of the for-profit camps operates as summer camp in July and August, and as a private day school for the balance of the year. As mentioned, the results of this survey were focused on the Prepared for: The District Municipality of Muskoka Page 47

65 overnight visitor usage. Of the remaining camps in the sample, the typical operating season lasted just over 3 months for not-for-profit camps, and closer to 4 months for for-profit camps. An estimated 38% of the not-for-profit camps and 100% of the for-profit camps offer day programs. Further 88% of the not-for-profit camps and 100% of the for-profit camps in the sample offered other programming and activity options. This trend at for-profit camps towards offering more day and other alternative programming under longer operating seasons, corresponds to the trends discussed in Section of this report. Table 7-1 provides an indication of the range of additional programs and activities available at Muskoka camps, including: social, religious, educational, and meeting/conference or training-related events. As shown, use of camps for facility rentals to accommodate social events, such as weddings, private parties or family reunions was the most popular alternate form of programming at both not-for-profit and for-profit camps. TABLE 7-1 OTHER PROGRAMMING / ACTIVITIES AT MUSKOKA CAMP OPERATIONS Activity Type Not-For-Profit (n=8) For-Profit (n=3) TOTAL (n=11) Social 50% 100% 64% Education 50% 67% 55% M&C 38% 33% 36% Religious 38% 33% 36% Source: PKF Consulting, Survey of Camp Operators 7.3 Built Product and Amenities Camp respondents indicated a range of total buildings on site, from a low of 13 to a high of 154, for an average of 52 per properties. Of these, between 6 and 94 were used for accommodations, for an average of 30 buildings per camp, representing 59% of overall buildings on-site. The ratio of accommodations to total camp buildings was slightly higher in the not-for-profit camps, at 59%, as compared to 57% at for-profit camps. This may be an indication of more space required for additional programming and facility rentals at the independent properties. Table 7-2 provides an indication of capacity levels within the surveyed camps by visitor type and by building type. As shown, the typical camp surveyed has a total of 240 beds for campers (69%), 88 beds for counselors and directors (25%), and 19 beds for other staff and/or guests (6%). The ratio of beds for Prepared for: The District Municipality of Muskoka Page 48

66 campers as compared to counselors was slightly higher in the for-profit camps at 73% of bed capacity, as compared to 67% at not-for-profit camps. With respect to building type, on average 321 beds were available in cabins (92%), 9 beds in a main building or lodge (3%), and 18 beds were available in other forms of accommodation (5%), within the survey sample. A wider range of building types were available in the not-for-profit sample, wherein other accommodations included: trailers or bunkies, separate staff housing, and large cottages/cabins. One of the for-profit camps also used tipis and treehouses for rotating groups of campers. TABLE 7-2 RANGE OF BUILT PRODUCT TYPES AND BEDS AVAILABLE AT MUSKOKA CAMPS (N=10) Average # of Beds Not-for-profit (n=8) For-Profit (n=2) All Camps (n=10) Available # % # % # % Capacity by Visitor Type Campers % % % Counsellors / Directors 81 27% % 88 25% Other Staff / Guests 20 6% 18 4% 19 6% TOTAL BEDS % % % Capacity by Building Type Cabins % % % Lodge / Main Building 13 4% 0 0% 9 3% Other Accommodations 18 6% 18 4% 18 5% TOTAL BEDS % % % Camper beds per cabin Source: PKF Consulting, Survey of Camp Operators Overall, the for-profit camps had a higher capacity for overnight visitors, at a total of 463 beds, as compared to 305 beds at not-for-profit camps. On a per available cabin basis, surveyed not-for-profit camps reported an average of 6.6 camper beds per cabin, as compared to 12.0 beds per cabin at for-profit camps. Thus, for-profit camps in the sample tend to have larger capacities than the not-for-profit alternatives. Only one respondent indicated that a property expansion was being considered, with most looking to upgrade or replace existing facilities. In terms of amenities offered, all camps featured both a dining room/hall and meeting space. All for-profit camps and the vast majority of the not-for-profits offered a beach area, a wide range of summer games and sports (hiking, volleyball, basketball, baseball), tuck shop, trips (backpack and canoe), and water sports Prepared for: The District Municipality of Muskoka Page 49

67 (sailing, canoeing, kayaking, windsurfing, etc.). About two-thirds of both types of camps offered some levels of adventure sports and games, such as high ropes courses, rock climbing and mountain biking. This corresponds to new programming trends at all types of summer camps, as identified in Section In general, more amenities and facilities were available at the for-profit camps. About half of the not-for-profit camps and 1/3 of the for-profit camps were considering adding new amenities. Many were more interested in upgrading or retrofitting existing facilities, as opposed to increasing capacity levels. Over 90% of respondents were on private services, with a combination of drilled wells and filtered water, and septic tanks and lagoons on property. 7.4 Camper Utilization Respondents were asked to describe camp utilization by overnight campers during the peak operating season. As such, utilization was only calculated for seasonal camp operations. As shown in Table 7-3, the not-for profit respondents indicated that campers tend to stay for 2 weeks during the average 14 week summer operating period, generating an estimated 253 campers annually, and overall 42% annual occupancy. In comparison, for-profit camp operators identified a longer length of stay at 3 weeks, and a longer operating period of 15 weeks, for an estimated 322 campers annually, yielding a lower occupancy level of 40%. The average weekly rate at not-for-profit camps was $770, as compared to $900 at for-profit camps. TABLE 7-3 SUMMER CAMP UTILIZATION ESTIMATES Not-for- Profit (n=6) For-Profit (n=3) All Camps (n=9) Length of Stay (weeks) Average Operating Season (weeks) Average Annual Campers Estimated Annual Occupancy 42% 40% 41% Typical Weekly Rate $770 $900 $800 Source: PKF Consulting, Survey of Camp Operators At an estimated 41% in 2011, summer camp occupancy levels were slightly lower than the Muskoka resort market at 45%. Prepared for: The District Municipality of Muskoka Page 50

68 7.5 Other Issues With respect to challenges from an operational perspective, obtaining planning approvals and processes for expansion, access to financing and lofty development fees, as well as compliance with government regulations were challenges experience by two-thirds of all camp respondents. Other issues included flat enrollment levels, and challenges meeting local planning and policy requirements. In order to ensure the future sustainability of their respective properties, respondents were asked to rate the importance of a range of elements on a scale of 1 to 3, where 1 = low importance and 3 = high importance. Table 7-4 the variation in responses with respect to camp sustainability. On average, the issues listed were less important to the not-for-profit camps as compared to the for-profit camps. For instance, provincial marketing support, access to financing for facility upgrades, and flexibility in permitted uses to generate investment capital were comparatively more important to for-profit camps, who rated all three issues at 2.7 out of 3, as compared to ratings of 2.0, 2.0 and 1.8 respectively by the not-for-profits. TABLE 7-4 RATING OF REQUIREMENTS FOR FUTURE CAMP SUSTAINABILITY - Scale of 1-3 (N=10) Not-for-profit (n=8) For-profit (n=3) All Camps (n=11) Marketing Support - Provincial Access to financing for facility upgrades Marketing Support - Regional Flexibility in permitted on-site uses in order to generate investment capital Flexibility in permitted on-site uses in order to generate operating income Source: PKF Consulting, Survey of Camp Operators 7.6 Summary & Implications Based on the results of the preceding analysis, a number of factors warrant further deliberation when considering new tourist commercial related policy in Muskoka, including the following: The typical operating season lasted just over 3 months for not-for-profit camps, and closer to 4 months for for-profit camps; Prepared for: The District Municipality of Muskoka Page 51

69 There is a trend towards for-profit camps towards offering more day and other alternative programming under longer operating seasons than not-for-profits, which correspond to a need to diminish fixed costs and finding new ways to increase camper demand without access to financing; Use of camps for facility rentals to accommodate social events, such as weddings, private parties or family reunions was the most popular alternate form of programming at both not-for-profit and forprofit camps. Overall, the for-profit camps had a higher capacity for overnight visitors, at a total of 463 beds, as compared to 305 beds at not-for-profit camps. On a per available cabin basis, surveyed not-forprofit camps reported an average of 6.6 camper beds per cabin, as compared to 12.0 beds per cabin at for-profit camps. Thus, for-profit camps in the sample tend to have larger capacities than the not-for-profit alternatives. About two-thirds of both types of camps offered some levels of adventure sports and games, such as high ropes courses, rock climbing and mountain biking; In general, more amenities and facilities were available at the for-profit camps; Respondents were more interested in upgrading or retrofitting existing facilities, as opposed to increasing capacity levels which is directly opposite from the Resort Survey results; At an estimated 41% in 2011, summer camp occupancy levels were slightly lower than the Muskoka resort market at 45%; Obtaining planning approvals and processes for expansion, access to financing and lofty development fees, as well as compliance with government regulations were challenges experienced by two-thirds of all camp respondents; and Provincial marketing support, access to financing for facility upgrades, and flexibility in permitted uses to generate investment capital were comparatively more important to for-profit camps. Prepared for: The District Municipality of Muskoka Page 52

70 8.0 STAKEHOLDER INPUT 8.1 Introduction The following section summarizes initial feedback from interviews with a cross-section of municipal representatives at a District and Township level over the September-October period. It also summarizes the events of a Resort and Tourism Stakeholder Workshop, which was hosted at the Port Carling Community Centre on Thursday, November 1 st, Municipal Stakeholder Input A total of 25 municipal stakeholder representatives, including: the District Chair, Chair of the PEDC, Area Municipality Mayors, Planners and Economic Development Officers, MTMA, and RTO12 were interviewed to provide their initial input into the current mandate of updating tourist commercial policies in the Muskoka Official Plan. Each representative was contacted, to generate a better understanding specific issues and challenges regarding resort development and related policies within the Area Municipality that they represented. In general terms, the four areas that were discussed were as follows: 1. From the perspective of existing resorts and potential new resort developments, what are some of the general concerns for stakeholders throughout their Area Municipality? 2. Did they have any specific concerns with respect to policies and guidelines governing development of new resort projects in their Area Municipality? 3. Were there any proposed or existing tourist commercial projects in their Area Municipality that they would be willing to discuss to which would help in better understanding some of their specific concerns? 4. Identification of any other items or concerns. The following is a brief synopsis of the range of issues and concerns that were raised during these discussions. General Concerns re: Existing and Potential Resorts Traditional resorts are struggling and the inventory is tired Opportunities for reinvestment are scarce with limited demand and low occupancy rates Historic resorts and camp operators have no exit strategy i.e. cannot pass down their property to relatives or downzone Smaller family-owned resorts are not getting the same continuity of demand as in previous years Prepared for: The District Municipality of Muskoka Page 53

71 Financing for new and existing resorts is a concern Muskoka is not a year-round destination difficult to increase demand levels Pattern of people travelling has changed, travel decisions are much more last minute Private Cottage rentals are competing with resorts, and people spend less money while staying at cottages Keeping up infrastructure and new/innovative ideas to attract demand is very difficult Difficulties with expansions and contention from lakeside neighbours Over-supply of fractional resort product Ownership type appears to be more condominium now High taxes on waterfront properties Main issue for potential resorts is servicing Specific Concerns re: Policies and Guidelines Governing Development The travelling public terminology may no longer be valid Limited flexibility regarding resort condominium servicing No definition of Tourist Commercial - do other forms of tourism product fit in (i.e. campgrounds, corporate retreats, etc.)? No criteria regarding how much of resort inventory has to be in the rental pool OP amendment process is lengthy No clear definition of what constitutes commercial and residential in the District Plan How can the District / Area Municipalities encourage resorts to expand and rejuvenate Controversy over need to retain resort commercial lands Examples of Resort Projects that are Generating Concern A long-list of examples of resort projects that are generating concerns was provided during the discussions. These projects referred to a range of challenges were raised that were more specific to planning and Zoning by-laws within the 6 Area Municipalities, as opposed to generating concerns more relevant to the District Official Plan. However, one consistent challenge was the desire for more guidance regarding criteria for acceptance of new resort applications. From this respect, specific challenges included: how to ensure that a resort will have an appropriate level of commercial facilities to attract the travelling public and maintain central management without requiring a usage plan, and how to evaluate other overnight tourism product (i.e. corporate retreats, trailer parks). Other Issues / Concerns Difficulty in providing incentives to encourage economic development and drive investment in the resort community What is the travelling public is looking for in a Muskoka resort? Prepared for: The District Municipality of Muskoka Page 54

72 To what extent should travel trends impact local focus on development application selection? What is the future of summer camps, trailer parks and campgrounds in Muskoka? Will demand for the traditional waterfront cabin continue? Should the Muskoka resort community become more involved in generating meeting & convention business? 8.3 Stakeholder Workshop Following the discussion with the Municipal representatives, PKF hosted a workshop, which was open to stakeholders across the District. This Workshop was intended to introduce interested stakeholders and the public to current trends in the resort industry, as well as the resort/tourism sector investment environment in a presentation format, and to provide an opportunity to discuss relevant trends and Official Plan policies. Upon arrival at the Workshop, attendees were registered under one of five (5) categories: 1. Government/Non-Government Organization/Affiliate 2. Resort Owner/Operator/Affiliate 3. Developer/Consultant/Planner 4. Rate Payer/Cottager Association/Affiliate 5. Tourism Sector Affiliate After the presentation of industry issues, the attendees were broken out into four groups, with each group having a representative mix of the five stakeholder groups above. Two PKF staff members and two District Planning & Economic Development Department staff facilitated the roundtable discussions. The discussions were focused on the following three topics, which have been detailed in the following sections: TOPIC #1 - Current State of Muskoka s Resort and Tourism Industry TOPIC #2 - Policy Basis: What objectives should drive resort and tourism policy and guidelines? TOPIC #3 - Policy Issues Impacting Resort and Tourism Operation Development / Redevelopment Topic #1 - Current State of Muskoka s Resort and Tourism Industry The objective of this topic was to gain a better understanding of the needs of and challenges faced by existing resorts and tourism operations to encourage their future sustainability within the District. The following questions were posed of the attendees: 1. What primary factors are influencing resorts and tourism operations in Muskoka from an operational, market and/or capital investment perspective? Prepared for: The District Municipality of Muskoka Page 55

73 2. What influences are existing resort and tourism operations having on other stakeholders in the District? These two questions generated 7 primary discussion areas. A range of issues were generated within each discussion area, which have been summarized below. Market Demand o Most Muskoka resorts and other forms of tourism product are suffering from challenges with seasonality, such as the lack of year-round tourism infrastructure. There is significant competition at a global level for resort product. The demographics of tourists and resort product buyers are changing (e.g. different family groups, less youth, increased interest in exclusive use). Further, global economic challenges have led to challenges for resort operators to drive pricing, and have led to shorter lengths of stay. Operations / Ownership Models o Resort owners have identified a challenge with mandating a 2-night minimum stay, based on reduced length of stay. Fractional and condominium resort operators are finding it challenging to find a balance between catering to transient rentals and meeting unit owner desires for exclusive personal use. Current policies are particularly challenging for new resort developers to operate: product mix restrictions, servicing, on-site management requirements, and the need to make units available to travelling public. Other policies are more challenging for existing operators: downzoning restrictions, options for exit strategies and/or operating assistance. Capital Re-Investment o Both existing operators and new resort developers are finding it challenging to meet facility expectations of tourists and the District s requirements with limited incentive for redevelopment, and existing challenges with zoning and cost of redevelopment and/or expansion. For instance, what amenities and unit types should be offered at resort facilities? How is it possible to maintain profitability without cashflow? Built Product o The health of the resort sector has a significant impact on other overnight product (if resorts are doing well, then demand for other less expensive alternatives also tends to increase). Customers are demanding more choice in price point and product type (e.g. bed & breakfasts, trailer parks, camps and campgrounds). Successful resorts are offering more experiential product and are trying to reflect consumer concerns (e.g. environment). In order to meet consumer demand, there should be more flexibility in the range of products permitted in Muskoka. Marketing o Assistance from provincial and regional tourism marketing is limited, which means that many of the resort marketing needs are not being met. Many stakeholders are concerned that resorts and tourism require more year-round demand draw, and they are not getting this from current efforts. What are the options for smaller resorts and tourism products that do not do their own marketing? Should more resorts be working together on marketing initiatives? Prepared for: The District Municipality of Muskoka Page 56

74 Destination Development o The seasonality of Muskoka and the lack of year-round attractions and other tourism infrastructure (e.g. retail, restaurants) make destination development a challenge. There is also a challenge in terms of trying to build a destination to accommodate changing demographics. Influences on Other Stakeholders o Rate-payers are generally concerned about the impact of resorts on the environment (e.g. use of septic systems, intensity of use), and the economy (e.g. issues with bankruptcy, projects not getting completed, capital losses). Topic #2 - Objectives Driving Resort and Tourism Policy and Guidelines The objective of this topic was to identify the potential direction(s) for future resorts and tourism policies. The following questions were posed of the attendees: 1. In the short to mid-term, does Muskoka need more or less resort and tourism product? 2. To what degree should we be protecting tourist commercial properties for future resort operations, or for future resort development/redevelopment? 3. To what degree should the short-term economic needs of existing resort owners influence resort and tourism planning policies, relative to issues such as: downzoning or other permitted on-site uses for revenue generation? i) Requirements for More or Less Resort & Tourism Product The objective was to generate debate on the philosophical issue of whether Muskoka needs more or less resort and tourism product to help guide the resort and tourist commercial policy review. There was a range of issues in support of less resort and tourism product. For instance, some stakeholders expressed concern over building more resort and tourism product when demand is already so low in Muskoka, and there is a perceived oversupply in some segments (i.e. fractional resorts). Furthermore, there are challenges in terms of both of building and supporting waterfront properties. For instance, developers encounter restrictions during the planning process, and existing operators are having trouble generating revenue to cover costs. Prepared for: The District Municipality of Muskoka Page 57

75 In general, stakeholder support of the District s continued encouragement of resorts and tourism development was more prevalent than the alternative in the moderated roundtable discussion. Perspectives in support of more resort and tourism product focused on the need to meet tourism demand by offering a wider range of price points and product type, which would involve providing policy flexibility to include products like trailer parks, camps and corporate retreats. There was also a significant level of discussion regarding the perceived restrictions in support of more development. For instance, certain policy restrictions (i.e. restrictions on backlot development) are causing some developers to shoehorn product models into existing policy models that do not necessarily meet consumer demands and are limiting phased resort developments. There are also many restrictions being placed on site selection, which is a challenge when most developers select sites based on location, not existing zoning. Some policies are restricting the variety of possible product types permitted at resorts, and there are concerns over the future viability of current resort product types (i.e. small housekeeping cottages, and large resorts with hotel-style rooms). Some stakeholders suggested that in order to support new development and existing resort redevelopment, more flexibility would be required with respect to: Encouraging additional tourism infrastructure (e.g. attractions, retail, food and beverage operations, etc.) to support resorts and other tourism products (e.g. camps and campgrounds, trailer parks); Accepting alternative forms of revenue generation to maintain operations, such as allowing existing resorts to add meeting space, marina facilities, etc.; Providing more regional marketing support (e.g. packaging with attractions, focusing on variety of experiences offered at Muskoka accommodations); Reducing restrictions on backlot development and residual lands; Ability to expand and rejuvenate resorts and associated tourism facilities with current roadblocks (i.e. need for Official Plan Amendments, challenges with Ontario Municipal Board requirements, Ministry of Environment water quality tests, etc.); and Allowing alternatives to resorts, such as campgrounds or corporate retreats. Prepared for: The District Municipality of Muskoka Page 58

76 ii) Perspectives on Retention of Tourist Commercial Lands With respect to the issue of retaining tourist commercial lands for future resort operations or redevelopment, a number of issues were raised. Those in support of the retention of lands for long-term tourism use referenced the overall importance of tourism to the Muskoka economy, and the need to ensure sustainability of the resort sector under a cautious approach. It was recognized that the District may not be able to predict new product concepts, and local planning departments might need more flexibility to determine which lands should be preserved and which could be downzoned. Those in favour of allowing tourist commercial lands to be severed and/or downzoned identified the lack of guaranteed future demand and/or interested developers with commercial opportunities. They also expressed concern over the viability of retaining vacant lands for an unknown future potential of tourist commercial development. Some stakeholders believed that a balance is required, allowing for retention of some lands, and allowing alternative owner/operating models, while also improving operating efficiencies for existing resorts. However, the biggest issue with creating a balance would be how to manage which lands will be retained, given that once lands are downzoned it is highly unlikely that they can be retrieved in future. Another perspective was that the market should dictate which lands should or should not be retained, and that this is not a Municipal Planning issue at all. This would involve allowing the market to determine which lands should be downzoned to residential uses, and which should be upzoned to permit commercial uses. iii) Drivers of Long-term Policy Objectives Stakeholders provided a long-list of issues that they believed should be considered with respect to longterm policy development. These issues have been summarized under 4 main topic headings: Muskoka Economy / Demand o A key component for developers is to understand what the consumer wants. In general, new and returning visitors to Muskoka are looking for some level of destination development in the form of quality tourism infrastructure, particularly if they are going to return outside the summer months. However, more marketing support is required to change the perception of Muskoka as more than just a summer destination. There may Prepared for: The District Municipality of Muskoka Page 59

77 be a requirement for comprehensive marketing campaigns across the District. At the same time, additional funding support may be required to promote and maintain the heritage and cultural value of existing resorts. Municipal Tax Assessments o There is a perception that it is cost prohibitive to own and operate a resort in Muskoka based on current property tax assessment levels. Taxes on tourist commercial establishments should be assessed on operating income, not land value. However, it was identified that this a Municipal Property Assessment Corporation issue, and more research is required to consider other models for resort and multi-residential resort property assessments and taxation. Downzoning o Do the District policies need to encourage retention of all of tourist commercial lands? Up-zoning of residential properties to commercial is possible. It is currently a challenging decision for local planning departments to decide which properties are eligible for downzoning. What are the criteria for determining when a property can be deemed not commercially viable? Is there a role for the local planning departments at all or should they let the market dictate when and which properties can be allowed to downzone? Development Applications Process / New Resorts o Is the District satisfied with the current tests applied to new resorts to determine economic viability? Perhaps policies should include performance metric guidelines, to assist local planning departments to determine which applications are likely to be successful. Some developers identified a concern that policies were negatively impacting their project s financial viability. Also, the line between standards and policies applied at commercial and residential properties have to be clarified. For instance, the requirement for on-site management at resorts is not required for private cottage rentals. Topic #3 - Policy Issues Impacting Resort and Tourism Operations, Development and /or Redevelopment The objective of this topic area was to gain a better understanding of the planning and policy factors influencing new resort and tourism product development/redevelopment. The following questions were posed of the attendees: 1. To what extent are policies and guidelines: a. Supportive of development or redevelopment, and should be retained? b. Restricting the nature and type of resorts and tourism operations that are being developed or redeveloped? Attendees were specifically asked whether policies and guidelines were either supportive or restrictive of resort development and re-development relative to: Prepared for: The District Municipality of Muskoka Page 60

78 - Land use - Servicing (water and sewer) - Definition of travelling public - Requirement for on-site management A range of issues relevant to each topic area have been summarized in the sections below. Land Use / Commercial Viability Tests From the resort owner s perspective, some key concerns included the challenge in balancing District policy with Ministry of the Environment policy requirements, and the perceived lack of options regarding exit strategies. From the developer s perspective, purchasing tourist commercial lands on the basis of their assessed land value, is not considered a fair indicator of market value for these properties (in that market value would be lower). Some stakeholders indicated that permitted uses at resorts are both restricting developer needs and resort goer wants, and that Official Plan policies and Zoning By-Law provisions are restricting product choice and ownership models for some development applications. At a more general level, stakeholders pointed to a need for clear criteria to assess the impact of downzoning, and loss of commercial land base, should all resort lands be retained. Clarity is also required in terms of what the District s role should be in making decisions relating to land use, in comparison to the Area Municipality s role. Servicing There was division on the relative level of support concerning policies on services. Some stakeholders believe that multi-residential types of resort properties should be restricted to urban areas where municipal services are already set up. However, other stakeholders argued that resort areas should be allowed to have a mix of residential and commercial uses on private services on the waterfront. In general, there appears to be a need for further research into whether alternative servicing models might be available to replace of private communal services in Muskoka. Prepared for: The District Municipality of Muskoka Page 61

79 Definition of Travelling Public The general consensus on the issue of requirements for resort unit availability to the travelling public was that the definition is unclear. As it is currently being interpreted, the term is generally restricting of new / redevelopment of resorts, since the traditional tourist has changed, and there are new permutations. For instance, is a fractional/resort condominium unit owner considered to be a tourist or a seasonal resident? Furthermore, is a seasonal resident a tourist? Does a Corporate Retreat cater to the travelling public? The Area Municipalities may need to have different definitions for resort and tourist commercial related terminology. These are considerations that the District will need to take into account when considering policy revisions. Requirement for on-site Management In general, stakeholders felt that policies regarding ownership types and models are supportive; however, the requirement for on-site management presents a challenge. Some stakeholders felt that access to management is important to take responsibility for services, complaints, etc., and that use and intensity of usage has an impact on the environment, which necessitates effective management The issue of whether this management actually needs to be physically present on site remains under debate. It also remains unclear as to whether on-site management should be monitoring public rental use and private unit owner use in the same way. It seems that many resorts are using the internet to manage rentals, but it remains unclear as to the effectiveness of this as an overall management tactic. Other Issues / Definitions The following is a summary of other issues and requirements for definitions that were raised with respect to District policies for tourist commercial and resort properties: There is a requirement for a better definition of resort and types of resorts, including virtual resorts; The District needs to eliminate all obsolete definitions, which will require further consideration in Area Municipal Official Plans; Zoning By-Laws are more restrictive in some ways than the District and local Official Plans; is there opportunity for flexibility in zoning provisions? How will changes to policy/zoning affect cottager and rate payers associations? Prepared for: The District Municipality of Muskoka Page 62

80 Rate-payers are very concerned about intensity of use on resorts with small frontages; Clarification is required as to what constitutes commercial as compared to residential land use at resorts; There may be a need for more flexible policies regarding use, downzoning and definitions; Where do campgrounds, children s camps, institutional camps and corporate retreats fit into District policies and guidelines? Prepared for: The District Municipality of Muskoka Page 63

81 PART 2: REVIEW OF MUSKOKA OFFICIAL PLAN POLICIES AND FRAMEWORK FOR ALTERNATIVE POLICY OPTIONS Prepared for: The District Municipality of Muskoka Page 64

82 9.0 REVIEW OF OFFICIAL PLAN POLICIES AND GUIDELINES 9.1 Introduction Tourism operations and resorts have been an important part of the economy, cultural heritage, and visitor experience of Muskoka since before the turn of the last century. Various studies have continued to identify that tourism and resorts are central to the local economy and landscape of the area. For these reasons, policies exist at all levels of government to encourage the development and retention of resort and other tourist commercial facilities. A review of existing planning documents is provided to give a policy context to the development of resorts and tourist commercial operations in Muskoka. 9.2 Provincial Policy Statement The Provincial Policy Statement (PPS) recognizes that sustainable long-term prosperity relies on a combination of a healthy environment, social well-being, and a strong economy. In turn, these elements of sustainability depend on managing change and promoting efficient use of land and development patterns that support strong, livable and healthy communities, protect the environment and public health and safety, and facilitate economic growth. More specifically, the PPS provides a number of policies intended to support economic prosperity, including promoting opportunities for sustainable tourism, provided that development makes efficient use of land and services and that sensitive features are adequately protected. In the rural area, where most resorts in Muskoka are located, the PPS permits resource-related recreational development, such as resorts, and promotes compatible tourism and economic opportunities. The policies in the PPS are generally supportive and do not present a barrier to resort or tourist commercial development in Muskoka. 9.3 District of Muskoka Official Plan The guiding vision in the Muskoka Official Plan (MOP) is one of a predominately forested landscape that supports diverse and functioning ecosystems including lakes, wetlands, forests, barrens and open fields. Interspersed in the natural setting are small to mid-sized communities and rural and waterfront developments that provide a wide range of economic opportunities and lifestyle options. (Section B) Under this strategic vision, the guiding principles for policy implementation are as follows: The forested landscape of Muskoka will be protected. Prepared for: The District Municipality of Muskoka Page 65

83 Development will be based on the principle of a carrying capacity to ensure that the quality of the environment is maintained. Tourism and recreational opportunities will be enhanced. Improvement to services that support economic development will be promoted. Urban-type development will occur in serviced urban areas. The objectives of the MOP recognize the importance of strengthening the tourism sector by encouraging the growth and development of facilities, services, resorts, accommodations, and attractions consistent with the primary recreational economic base of Muskoka (Policy B.8). The MOP indicates that as a principal contributor to the recreation economy, the tourism sector impacts a wide variety of businesses and economic activities. Therefore, maintaining a vibrant and accessible supply of quality tourist accommodations, attractions, and services within a healthy natural environment is considered critical to ensuring the long-term economic prosperity of Muskoka. To meet the objective of enhancing tourism and recreational opportunities in Muskoka, the MOP includes policies which: Support and encourage resort and tourist commercial development; Provide a definition for resorts and tourist commercial uses; Establish tests to confirm resort commercial uses; Outline matters to be addressed when considering the establishment of new resorts; Discourage down-zoning of resorts and tourist commercial lands to residential uses; and Establish servicing requirements for resorts to minimize the risk to the District and its taxpayers. Each policy set is further described below. 9.4 Support for Resort and Tourist Commercial Development Resorts and other tourist commercial operations have been considered to be important facilities that generate employment, attract tourists to the area, contribute to assessment value, and produce other indirect and induced economic impacts (e.g. construction and services sectors). Because of the importance Prepared for: The District Municipality of Muskoka Page 66

84 of resorts and tourist commercial operations to the local economy, policies in the MOP were designed to encourage the retention and rejuvenation of such facilities, especially within the Waterfront designation. The MOP supports the growth and diversification of the tourism sector by encouraging the upgrading and expansion of existing facilities and the establishment of new operations. Specific District policies in Section C that are intended to strengthen the tourism sector include the following: C.23 - Existing facilities should rejuvenate and expand, large tourist commercial properties with water frontage should be maintained and redeveloped, and support facilities and services encouraged; C.24 - Efforts to make commercial tourism year round will be supported; and C.25 - Development of new attractions, facilities, services and events that enhance and complement the existing tourism base will be encouraged. Policy C.26 sets the framework for evaluating the appropriateness of new, expanding or redeveloping tourist commercial uses including responding to topographic constraints, preserving natural and cultural heritage, incorporating open space and maintaining shoreline vegetation. Section C of the MOP also introduces resorts as a vital component of the tourism industry, providing an historic link between the origins of tourism in Muskoka and present day use (Introduction to Resorts, Section C) and encourages their rejuvenation and expansion. The policies recognize that resorts in all designations contribute to the local economy in different ways by providing direct and indirect employment, revenue to local businesses, and diversity in tourist commercial services. 9.5 Definition of Resort and Tourist Commercial Uses In order to ensure that resorts are indeed commercial in nature and not multi-unit residential uses (which are not permitted in the Waterfront or Rural designations), a definition of resort and associated tests for commerciality were developed. The definition of a resort commercial use is relatively broad and the policies in the MOP are intended to be flexible and to accommodate changes to the resort industry, including alternate forms of tenure. Specifically, policy C.29 defines resorts as lodging or other accommodation other than tent and trailer parks. The policies in Section C are intended to guide resort commercial development which meets that definition. However, the definition of resort is quite broad and could arguably encompass hotels, motels, bed and breakfast establishments and other roofed accommodation, excluding campground type developments. In Prepared for: The District Municipality of Muskoka Page 67

85 addition, there is a lack of policies to guide other forms of overnight tourist commercial accommodations which fall outside the definition of resort, such as tent and trailer parks, institutional camps, and corporate retreats. This leads to uncertainty as to where these uses fit within the spectrum of tourist accommodations. The definition of a tourist commercial use may also require some refining from the general guidance provided by policy C.25, which refers to attractions, facilities, services and events. Policy D.17 does provide some further direction by identifying permitted uses in the commercial Waterfront designation as follows: D Tourist Commercial and other commercial uses that relate to the waterfront area (i.e. resorts, camps, restaurants and attractions) 9.6 Tests for Resort Commercial Use The MOP states that all forms of resort tenure will be considered and sets out the tests that resort commercial uses must meet, regardless of the form of tenure: Availability to the travelling public. The MOP requires that overnight accommodations be available to the travelling public. Operation as a commercial enterprise for profit. To be considered a resort commercial use in the MOP, facilities offering accommodations must be operated with the intention of making a profit. The requirement for availability to the travelling public combined with the requirement to make a profit have generally been interpreted as the need to have rooms or units available for rent. Operation under central, on-site management. The MOP requires that resorts have some sort of reception area or office where keys are obtained, problems are reported, bookings are managed, payments are rendered, and site security is based. Provision ongoing services and recreational and facilities normally provided in a commercial setting Basic services that would appear essential to a resort would include, at minimum, periodic housekeeping services and recreational facilities such as shoreline, hiking trails, or other similar amenities. To ensure that these tests are met, documentation, enforceable by the municipalities is required that demonstrates commercial use and maintenance of the commercial components of the development (Policy C.29). No specific criteria for enforcement or monitoring mechanisms are identified in this policy and difficulties enforcing development agreements and zoning by-laws both in terms of available resources and the difficulty of proving that a contravention has occurred have been noted. Prepared for: The District Municipality of Muskoka Page 68

86 The tests for a resort commercial use are intended to apply regardless of tenure and were developed to be flexible enough to accommodate changing situations as the resort industry evolves over time. However, today there are a number of innovative ownership arrangements (e.g. fractional ownership) and development forms (e.g. larger cottage type units with minimal recreational services and facilities) that may not have been contemplated when the tests were originally developed. Some of these new tenure or development concepts may have difficulty meeting the current resort commercial tests. In addition, a variety of questions have been raised regarding the definition and interpretation of certain terms, such as: Who is the travelling public? Does this include the vacationing public, seasonal residents, or owners of resort fractions? What constitutes availability to the travelling public? Do all units need to be available at all times or is it sufficient that some units are available some of the year? Do unit exchange programs count as availability to the travelling public? Is making a profit important or would a revenue stream be sufficient? What are the economic benefits either way (e.g. employment, visitor spending, use of local services, etc.)? Does management need to be on-site? Could it be on an adjacent property or conducted over the internet? What should on-site managers be expected to do? What facilities and services are normally provided in a resort setting? What would constitute a minimum set of facilities and services to meet the policy requirement? Is a shoreline area with a dock enough? 9.7 Establishing New Resorts The establishment of a new resort in the Waterfront designation on a property where development rights do not already exist is required to proceed by a local official plan amendment (OPA). The OPA requirement was intended to ensure that a comprehensive planning process is undertaken and that new facilities are appropriately located and compatible with surrounding uses. Policy C.29 contains a detailed list of criteria to be considered when locating new resorts, complimentary facilities and attractions including scale, density, compatibility, servicing, access, and environmental and cultural heritage protection, among other matters. Experience in Muskoka has shown that the establishment of new tourist commercial resorts is rare and that revitalization of this sector has depended on the redevelopment of existing tourist commercial operations or the establishment of a new operation on an existing tourist commercial property where development rights exist through zoning. Part of the reason for this could be the requirement for a local OPA for the Prepared for: The District Municipality of Muskoka Page 69

87 establishment of a new waterfront resort. Stakeholder consultation undertaken as part of a variety of projects over time has confirmed that the requirement for an OPA is perceived as a barrier to new resort development and some stakeholders feel it should be removed from the MOP. In contrast, others have noted that existing resorts are having trouble attracting enough visitors to remain viable and that additional resorts would further dilute the market. Lake ratepayers also appear to appreciate the comprehensive planning process required as part of an OPA to ensure that new resorts do not negatively impact the natural, cultural, social or aesthetic environments around lakes. Even if the requirement for an OPA was removed, there would still likely be significant objections from surrounding ratepayers to new resort proposals. 9.8 Discouraging the down-zoning of Resorts and Tourist Commercial Uses The MOP contains down-zoning policies aimed at preserving the waterfront tourist commercial land base in Muskoka and preventing the loss of large resort properties on water. Down-zoning policies for tourist commercial land holdings with water frontage encourage retention of lands as outlined below: C.23 Large land holdings that are designated and zoned tourist commercial and have water frontage will be encouraged to be maintained and redeveloped as appropriate. The MOP indicates that the maintenance of existing resorts, especially those with a large land base, is important to support the tourist economy and maintain the resort/cottage mix in the waterfront that is fundamental to the character of the area (Introduction to Resorts, Section C). On that basis, policy C.30 indicates that the down-zoning of resort properties with significant land holdings and frontage on water will not generally not supported. However, in extenuating circumstances, down-zoning may be considered where it has been demonstrated that the loss of the commercial land would not negatively impact the critical mass of the tourism infrastructure and land base in Muskoka. Despite having a down-zoning policy in place since the early 1990s, monitoring indicates that the number of waterfront resort commercial establishments continues to decline. Increasing land values and demand for residential cottages coupled with decreasing resort revenues and difficulty financing improvements to existing resorts has led to increased pressure to down-zone resort commercial properties to permit residential uses. Resort owners of retirement age may wish to downzone their resorts as an exit strategy or to provide retirement income when there is little interest from the next generation in continuing operation of the resort. In this environment, the implementation of the down-zoning policies has proved difficult, Prepared for: The District Municipality of Muskoka Page 70

88 particularly without specific criteria to guide the analysis and determination of a negative impact on the critical mass of tourism infrastructure District-wide. 9.9 Servicing Requirements for Resorts The District s policy on private communal services has evolved over time in response to a number of planning, engineering and financial considerations. Initially, private communal services were not permitted outside of Urban Centres because the District did not want to assume responsibility for remote satellite (private communal) systems, which would have been required by the Ministry of the Environment. However, in the mid-1980 s there was growing evidence that commercial resorts in the Waterfront designation needed flexibility, as is provided through the condominium process, to obtain the necessary financial resources to redevelop aging resort facilities. In recognition of the important role played by resorts in Muskoka s economy and character, the District was prepared to consider permitting private communal systems in limited circumstances for resort commercial developments only. The situation for a resort development differs from that of a residential development because the resort is required to be commercial in nature and if it does become necessary for a resort to shut down because it is unable to maintain its infrastructure, people are not removed from their homes. Discussions with the MOE ensued and the resulting policies in the MOP prohibit private communal services for any type of residential or mixed residential and resort developments but permit private communal systems for commercial resorts where ownership is divided by condominium description, provided a number of requirements intended to minimize municipal liability are met (i.e. construction, financial, operation and monitoring requirements). Specifically, Section H of the District Official Plan indicates In order to finance the development and redevelopment of resort properties, resort owners have used the Condominium Act. Under the Condominium Act, the condominium corporation is responsible for the water supply and sanitary sewage disposal system which services a multi-unit commercial development. The Ministry of the Environment may refer to this form of servicing as communal and it is, therefore, their position that where development is registered by way of condominium description the municipality has a liability to ensure that the system remains operable and safe. In order to minimize the liability of the municipality, reserve funds and an ongoing maintenance program is required. Prepared for: The District Municipality of Muskoka Page 71

89 The details are provided in policy H.28 regarding the requirements for both waterworks and sewage services. Where property has been registered by way of condominium description, private communal servicing may be permitted for multi-unit resort commercial developments where: The works meet a standard satisfactory to the Ministry of the Environment and the District Municipality of Muskoka; and An authorized and enforceable agreement is registered against the title of each unit within the condominium, which requires a reserve fund for capital replacement providing for 100% value of the works plus the cost of inflation within a period not greater than ten years and implementation of financial controls and operational requirements, among other matters. More recently, the Safe Drinking Water Act (SDWA) was enacted in This legislation regulates all drinking water systems and requires a municipal Consent to the construction of a private communal system. This is essentially a municipal guarantee of such systems, thereby increasing the risk to Muskoka and its taxpayers of having to bear the cost and responsibility for small, remote systems should they fail or be abandoned. Given the potential liability issues associated with private communal services for residential development, permitting such servicing arrangements for resorts make the commercial tests for resort uses even more important. If developers wish to establish a mixed resort and residential development, the MOP requires that they be connected to municipal water and sewer services, which are generally located in Urban Centres. For resorts offering a mix of multi-residential and commercial units in urban areas, the commercial component must be developed in the first phase of the project and it is subject to many of the same tests as resort commercial operations in other designations (i.e. central management on location for profit and providing ongoing services and recreational facilities normally provided in a commercial setting). Despite the current servicing policies which permit private communal services for commercial resorts, there has been pressure from developers to permit a residential component in new or redeveloping waterfront resorts outside of urban areas. They argue that issues surrounding municipal liability for private communal services can be overcome. However, the issues of character, desirability, growth management, and environmental impacts may still remain. Even if no residential component is proposed, many developers perceive these policies as a financial barrier. Prepared for: The District Municipality of Muskoka Page 72

90 9.10 Area Municipal Official Plans There are similar references to encouragement of resort facilities and tourist commercial uses, inclusion of commercial tests, requirements for establishing new resorts, down-zoning policies, and restrictions related to private communal services within the Local Official Plans in each of the six Area Municipalities. This is to be expected as local Plans must conform to the MOP. Although there is a general uniformity in the basic underlying principles, Area Municipal Official Plans take a variety of approaches in implementing the MOP policies in recognizing their unique character and circumstances (e.g. density provisions, types of ownership envisioned, documentation required, etc.). However, additional consistency around the definition of a resort commercial use may be warranted. Several Area Municipalities are undergoing official plan reviews, which may correct some of these issues Summary The following is a list of issues that may require consideration or clarification when undertaking resort and tourist commercial policy revisions: Clarify or expand definition of a resort and tourist commercial uses; Include criteria for: o An appropriate level/nature of development/re-development o The level of unit availability for rental (i.e. percent of units, specific time of year, etc.) o Assessing the impact of down-zoning on the commercial land base; Include definitions for: o Travelling public o Central management on location o Services and recreational facilities normally provided in a commercial setting; Consider available options for monitoring or enforcing operating models or unit rentals; and Include a policy and criteria specific to existing resort expansion/upgrades Prepared for: The District Municipality of Muskoka Page 73

91 10.0 SUMMARY OF KEY FACTORS IMPACTING ALTERNATIVE POLICY OPTIONS 10.1 Background and Scope of Work The scope of work for the Muskoka Resort and Official Plan Policy Review project has included the following: Overview of emerging trends in resort and overnight tourism product demand, development and ownership models, including an analysis of Muskoka s positioning in terms of built product, demand trends, and land use; Stakeholder input, including consultations with: local government and marketing agencies; a Stakeholder Workshop addressing relevant industry issues and Official Plan policies; and surveys of existing operators within the Muskoka Resort, Trailer Park, Campground, and Camp sectors; and Analysis of the Muskoka Official Plan and local Area Municipality Official Plans, including an evaluation of the implications of alternative policy options on the resort and tourism sectors, and considerations of potential impacts on local government and other stakeholders; as well as an analysis of Municipal property assessment impacts Importance of the Resort and Tourism Sectors to Muskoka The various types of resorts and other overnight tourism products in Muskoka offer a total capacity for over 100,000 visitors per night. More specifically, there are: 111 Resorts and Hotels with 4,100 units, providing a capacity approaching 10,000 persons; 30 Trailer Parks & Campgrounds offering 3,000 sites, and providing a capacity of about 10,000 persons; and 35 Camps offering an average of 350 beds, with a capacity of over 10,000 persons. While data does not exist for the trailer parks, campgrounds and camps the resort sector generates $400 Million annually ($50,000 per rental unit). In addition, there are 20,500 Cottages that can host over 75,000 persons. The cottage sector in Muskoka generates in excess of $600 Million in economic impacts to the District on an annual basis ($30,000 per cottage). Resorts have and will continue to generate the strongest level of annual economic impact on a per unit basis in Muskoka. This is not to suggest a diminished importance of the $600 Million generated by the Prepared for: The District Municipality of Muskoka Page 74

92 Cottage sector annually in Muskoka. As an alternative, development of new multi-ownership condominium resort units will likely generate stronger impacts than new cottage units on a per unit basis. This combined with a greater level of density in multi-ownership/condominium resort developments, as opposed to cottage development, suggests strong potential for additional economic impact Resort and Tourism Trends Impacting Muskoka Consumer expectations have evolved dramatically over the past decade, thanks to huge advances in technology, economic growth, lifestyle choices, etc. People tend to be looking for authentic experiences when they travel, as opposed to simple services and amenities. Furthermore, with increased options for resorts and increased opportunities to travel at less expensive costs and shorter planning time via internet, the traditional two-week annual holiday booked in advance is becoming a thing of the past. New trends in resort vacations include experiences ranging from eco-tourism and soft adventures (e.g. driving tours, trails and walking tours, wildlife viewing), spa breaks, weekend getaways, to fractional ownership. Fractional ownership options in the form of residences, hotels or clubs, have revolutionized the market, affording consumers the opportunity to enjoy a luxury, serviced holiday home without the enormous costs incurred by outright purchase. This trend does not appear to be subsiding in the short to mid-term. What the consumer is predominantly looking for in a wilderness or waterfront Ontario travel experience can generally be broken down into two types the traditional resort vacation, and an alternative cottage vacation. Thus is it the experience itself that is important to the consumer, as opposed to the specific product. The strongest source of new demand in Ontario is driven by people looking for that alternative cottage experience, which tends to correspond to the real estate product. Within the camp, campground and RV Park developments, more extensive recreation and programming are becoming more common, with some of the better properties located in communities where there is a strong appetite for second/vacation homes. Significant changes in travel demand patterns, including the increased use of online tools for travel planning, more frequent short getaways, and last minute bookings to locations outside Canada, as well as the evolving interest in obtaining an alternative cottage experience, have already had a significant impact on the Muskoka resort experience. Prepared for: The District Municipality of Muskoka Page 75

93 10.4 Trends in Resort Development and Ownership There are a range of operating and development models currently in use in Muskoka from the traditional resort hotel to resort residential product offering, which is combined with varying levels of ownership and right to use. In recent years, the most prominent trend in resort development has been the renewed interest in joint accommodation and real estate development in the resort market. The cost of building a resort hotel today is prohibitive to most hotel developers, primarily due to the fact that market and seasonality conditions make it difficult for properties to perform at levels that support the significant cost of development. As a result of the significant costs associated with these projects, new resort product being constructed and/or considered in Ontario today is driven primarily off of a real estate component. Owners and purchasers of real estate components of resorts are looking for their right to use, and some level of capital appreciation, as opposed to returns off cashflow. The developer of this type of resort product is generally interested in securing a development profit, as opposed to investment returns off cashflow and capital appreciation. As such, vacation ownership resort product tends to be built as alternative cottages, with some level of personal use, but also include a transient rental portion to maintain the commercial aspect of the resort, and provide some level of cashflow to cover operating costs Industry Stakeholder Issues The Resort Industry The Muskoka Resort Industry is currently suffering from poor performance levels, with the 87 resorts / 3,200 rooms achieving an annual market occupancy of under 50%, and as low as 30% in the winter and spring periods. In addition to poor performance levels, resort operators are concerned with a number of issues, including but not limited to: Overall challenges in economic sustainability of existing operations; Restrictions on the ability to generate alternative forms of income through expansion and/or complementary development; Increased competition from private cottage rentals and new resort ownership/development models (i.e. fractionals); Prepared for: The District Municipality of Muskoka Page 76

94 The need for additional regional and provincial marketing; High levels of property taxes for commercial waterfront properties; and Challenges in realizing the value of their asset. Traditional resort operators have a limited exit strategy; as they are limited in selling the business based on its enterprise value, and face restrictions on the ability to downzone to residential use which would otherwise maximize value Development Stakeholders From the developer s perspective, there are concerns that without some form of unit sales, i.e. fractional, whole ownership, etc., it is not economically viable to build a resort development in Muskoka in the short to mid-term, and possibly in the long-term. There are also concerns that existing policies are too restrictive, for example: Processes related to obtaining an Official Plan Amendment to build new property are prohibitive; Despite the current servicing policies which permit private communal services, the requirement for posting a 100% replacement reserve is financially restrictive; The requirement for transient rental of units impacts personal use and therefore impacts the marketability of selling units; and The requirement to meet the range of commercial tests (i.e. availability to the travelling public, operation as a commercial enterprise for profit, operation under central on-site management, provision of ongoing services and facilities normally provided in a commercial setting) impacts the viability of operations Trailer Parks & Campgrounds There are an estimated 30 private trailer parks and campgrounds in Muskoka, offering 3,000 campsites. Two Provincial Parks in the District also provide about 440 campsites. Preliminary estimates indicate that the private trailer parks and campgrounds are seasonal operations (open 6 months, usually May to October). Over 60% of the sites are rented to tenants for an entire season (with as much as 90% at some parks), providing an alternative cottage environment for users. The remaining sites are rented for transient use, and achieve a combined occupancy level of less than 30% for the operating season. Trailer park and campground operator concerns are similar to those of resort operators, including: Poor performance levels; Prepared for: The District Municipality of Muskoka Page 77

95 Overall challenges in economic sustainability of existing operations; Restrictions on the ability to generate alternative forms of income through expansion and/or complementary development; Challenges meeting local policy and planning requirements; and The need for additional regional and provincial marketing. In addition, a significant number of properties are interested in expansion, but are not able to because of local policies and guidelines, and challenges in obtaining planning approvals Camps There are an estimated 35 children s and community camps in the District. Some of these are year-round facilities, offering day programs and facility rental options, while others are only used for summer residential youth camps. The typical camp has an average of 350 beds for overnight stays, suggesting an overnight capacity in excess of 10,000 guests. There are two distinct groups of camp operations, based on primary operating characteristics: 1. Not-For-Profit Camps (including youth agencies and religious organizations) 2. For-Profit Independent Camps (under private ownership) For the not-for-profit camps, the primary concerns are more focused on economic sustainability and the maintenance and upgrade of existing facilities. The for-profit independent camp operator concerns are similar to those of resort, trailer park and private campground operators, including: Poor performance levels; Overall challenges in economic sustainability of existing operations; Restrictions on the ability to generate alternative forms of income through expansion and/or complementary development; Challenges meeting local policy and planning requirements; and Need for additional regional and provincial marketing. Prepared for: The District Municipality of Muskoka Page 78

96 In addition, a significant number of properties are interested in expansion, but are not able to do so because of local policies and guidelines, and challenges in obtaining planning approvals Lake Associations / Ratepayers Lake Associations and ratepayer stakeholders in Muskoka voiced a number of specific concerns regarding noise, safety and security issues, and potential environmental impacts resulting from intensity of use at lakeside resorts and other tourism product developments; as well as the implication of capital losses of resorts becoming a burden to local tax-payers Local Government Local Government stakeholders voiced a number of broad concerns, including: the general health of the resort and tourism sector in Muskoka; the potential impacts of existing and expanded operations on other stakeholders (i.e. rate-payers associations); and the perceived over-supply of fractional resort products and impacts on existing operations. There was a strong interest from local government in a more defined and structured set of policies, guidelines, criteria and definitions governing resort operations, expansions, and development. This might include a number of specific issues that may require consideration or clarification when undertaking resort and tourist commercial planning policy revisions, such as: The need to clarify or expand the definition of a resort and tourist commercial uses; Development of criteria for: o An appropriate level/nature of resort development/re-development o The level of unit availability for rental (i.e. percent of units, specific time of year, etc.) o Assessing the impact of down-zoning on the commercial land base; Establishment of more specific tests for resort operations and development, including definitions for: o Travelling public o Central management on location o Services and recreational facilities normally provided in a commercial setting; Consideration of available options for monitoring or enforcing operating models or unit rentals; and Development of policies and criteria specific to existing resort expansion/upgrades. There were mixed opinions with respect to supporting the retention of the resort commercial land base, versus allowing the downzoning of resorts to residential use. Prepared for: The District Municipality of Muskoka Page 79

97 Another concern raised by a number of Municipal stakeholders was that existing policies are vague with respect to new resorts and redevelopments, and that there was not enough guidance for local planning departments to determine which resort projects will be best suited to their respective tourist and waterfront environments, and what to recommend to local Council. This is due in part to a lack of defining criteria with respect to what constitutes a resort, i.e. what amenities are appropriate, suitable nature and scale of development, and how the units will be used or made available for commercial purposes. Prepared for: The District Municipality of Muskoka Page 80

98 11.0 FRAMEWORK FOR ALTERNATE POLICY OPTIONS 11.1 Introduction The results of this study confirm the importance of tourism and resorts to Muskoka s economy, and the need for policies to generally encourage their growth and rejuvenation. The District s recognition of the economic contribution of resorts and other overnight tourism establishments should be retained in any future policy considerations. However, it is also evident that current policy sets when applied in combination are not necessarily meeting the intended goal of continued sustainability of existing or development/redevelopment of resorts and other overnight tourism products in Muskoka. Furthermore, existing policy sets may pose challenges as built products and ownership structures continue to evolve. The level of encouragement of new resort and tourism development is directly related to the level of restrictions imposed by Muskoka Official Plan (MOP) policies. In order to encourage resort development in the short term, policies would need to be more permissive. On the other hand, more restrictive policies could limit resort development. Thus, alternative options for MOP policy revisions should be considered under varying levels of restriction: Permissive which would provide a minimal level of restrictions on development or redevelopment in order to stimulate short-term development; Non-Restrictive which would provide a moderate level of restrictions on development or redevelopment; or Restrictive which would provide a higher level of restriction on development or re-development, and would limit and/or control short-term development. The following paragraphs provide a detailed framework of considerations and implications for alternative options within each of the existing MOP policy sets relating to the resort and tourism sectors, as outlined below: Where existing policies lie on a spectrum of permissive to restrictive; Challenges with existing policy sets; Where there are gaps and inconsistencies with overall philosophical directions; and Prepared for: The District Municipality of Muskoka Page 81

99 Implications of applying different policy options. The ultimate goal of this exercise is to demonstrate how to align the District s overall positioning towards either encouraging or restricting growth in the resort and tourism sectors with those of the Area Municipalities, through policies in the MOP. It will ultimately be the decision of the District and its six Area Municipalities to determine how restrictive or supportive they wish to be on the topic of Resort and Tourist Commercial development growth, in consideration of all the relevant implications. PKF is not recommending any particular focus at this time Positioning of Existing Policies The MOP supports the growth and diversification of the tourism sector by encouraging the upgrading and expansion of existing facilities and the establishment of new operations, and policies are designed with the intention of strengthening the tourism sector, as detailed below: C The tourism sector will be strengthened, enhanced, expanded and diversified by encouraging the upgrading and expansion of existing facilities or operations and the establishment of new uses. Growth and development in this sector will be based on the following principles: A. Existing facilities should rejuvenate and expand their operations; B. Large land holdings that are designated and zoned tourist commercial and have water frontage will be encouraged to be maintained and redeveloped as appropriate; C. Facilities and services that support tourist commercial operations will be encouraged; and D. The quality of the cultural and natural heritage of Muskoka will be preserved. C.24 - Efforts to make commercial tourism year round will be supported. C.25 - The development of new attractions, facilities, services and events that enhance and complement the existing tourism base will be encouraged. In general, these existing policies would be considered permissive, as they encourage development and exclude any quantifiable restrictions that would limit expansion or new development on resort commercial lands. However, other policies that follow in some cases impose greater restrictions than these policies would seem to imply Establishing a Philosophical Direction As identified, there are challenges for existing operators in maintaining profitability while trying to meet District and Area Municipal official plan policies and zoning regulations regarding upgrades and expansion, and local councils are challenged by a lack of criteria by which to measure potential projects. Prepared for: The District Municipality of Muskoka Page 82

100 With this in mind, one of the fundamental questions to be addressed is whether Muskoka needs more or less resort and tourism product in the short to mid-term considering the following factors: Current industry performance levels, suggest that there is excess supply in all seasons, including the summer months and owners and operators are suffering. From the perspective of the development community, whose focus is recognizing opportunities in the short term, it is evident that they would require less restrictions and requirements in order to do so. From an economic development perspective, while it is important to encourage investment in the resort sector, the question is whether that focus should be on the encouragement of short-term development opportunities, or if a more long-term approach should be considered Alternative Policy Options Three examples have been developed to demonstrate how policies could become either more permissive or more restrictive, should the District wish to encourage growth or whether they would look to restrict further resort development. It should be noted that development is going to be more limited if too many restrictions are placed on new projects, and new development in any location is bound to create competition that will impact the performance of existing resorts. An example of permissive to restrictive policy ranges could include: 1. Permissive - Enhance existing policies that encourage the upgrading and expansion and/or the redevelopment of existing resorts, and that encourage the development of new year-round resort product, by adopting a pro-development mandate for all forms of resort commercial development. This would require adjusting policies to be more accepting of alternative ownership types, with limited restrictions on the nature of the built product developed and with limited restrictions on the requirements for transient rental. 2. Non-Restrictive - Maintain existing policies that encourage the upgrading and expansion and/or the re-development of existing resorts, and that encourage the development of new year-round resort product. This would require adjusting policies to better define what alternative ownership types would be acceptable, and to provide policies on the nature of the built product developed and on the requirements for transient rental while ensuring these policies are not overly restrictive. 3. Restrictive - Maintain existing policies that encourage the upgrading of existing resorts, but provide greater restrictions on the nature and type of development. Alternatively if industry performance is a concern, existing policies could be adjusted to only support expansion or re-development of existing resorts or the development of new resorts, if those developments can demonstrate they will draw new visitors to the District, and if they can demonstrate they will not have a negative impact on the performance of existing resort operations. Prepared for: The District Municipality of Muskoka Page 83

101 11.5 Implications of Alternative Policy Options In determining the overall policy direction from an economic development perspective a number of factors should be considered. The short-term development of new resort product could have a negative impact on existing resort properties, which are already suffering from poor performance levels. Adjusting policies to being more permissive doesn t guarantee development; however, without adjusting current policies resort development in the short to mid- term may be limited. There is no way to guarantee that resorts will be built, since one cannot anticipate the future financial vehicles that might stimulate investment or effectively identify the range of market and product trends that may influence development. However, it is possible to lessen restrictions on developments, which may enhance the opportunities for short to mid-term development. As a result, the District and the Area Municipalities will need to agree on whether the focus should be on the encouragement of short-term development opportunities (i.e. 3 to 5 years), or if a more long-term approach should be considered. As noted, the issue is not the wording or intent of the existing policies encouraging resort development, but rather the wording and intent of other policies relevant to resorts at a District and an Area Municipality level. The District may need to also take a position on how permissive or restrictive they want to be on defining and developing criteria for the following: - What is a resort? - Scale and nature of development - Who is the travelling public? - Commercial requirements - Unit usage and availability - Ongoing operational monitoring It should be noted, however, that there is a risk of further challenges emerging through the establishment of more detailed definitions and criteria. There is no ideal resort model for Muskoka with respect to physical size and facilities or management style and availability of units. Thus, implementing more detailed definitions, that may not necessarily be applicable to any new ownership or resort development types that evolve in future, and may potentially restrict growth in resort development in the short and long-term. Prepared for: The District Municipality of Muskoka Page 84

102 11.6 Alternative Policy Option Framework In order to establish a philosophical direction for moving forward based around either a more permissive or more restrictive approach to encouraging resort growth in the District, PKF has developed a matrix to identify what is currently being permitted or mandated under existing policies, and what changes might be considered under an adjusted policy framework. This adjusted policy framework incorporates suggested additions or changes to the wording in existing policy sets that warrant further consideration from the District. The Alternative Policy Option matrix also shows what requirements might be mandated or permitted under a very permissive or very restrictive set of policies as a reference tool. Ultimately, the District and Area Municipalities may elect varying levels of permissions in the chosen approach. The Alternative Policy Option Matrix has been provided in Exhibit As shown, the matrix has been organized into 6 sections, based on existing policy sets: Definition of Resort Four Tests for Resort Commercial Development Considerations for Nature and Scale of New Resorts / Redevelopments Planning Requirements for New Resorts / Redevelopments Servicing Requirements for Multi-Unit Resort Condominium Developments Downzoning Options One of the most significant issues raised by stakeholders during the study process was that existing MOP policies do not provide enough detail or criteria with which to make appropriate decisions. As such, within each of the 6 sections of the Alternative Policy Option Matrix, those requirements under existing policies are compared with more permissive and more restrictive criteria. The following section provides policy considerations for the Definition of Resort. Prepared for: The District Municipality of Muskoka Page 85

103 11.7 Definition of Resort Positioning of Existing Policies The MOP supports the growth and diversification of the tourism sector by encouraging the upgrading and expansion of existing facilities and the establishment of new operations, and policies are designed with the intention of strengthening the tourism sector, as detailed below: C.29 - In the Waterfront, Rural and Community designations: A. All forms of tenure will be considered for new, expanded or redeveloped resorts within the principles, goals and objectives of this plan. A resort is defined as lodging or other accommodation other than tent and trailer parks. Policy C.29 A would be considered non-restrictive, since it suggests that all forms of tenure at resorts will be considered, however, it falls short of providing a detailed definition from a product perspective Alternative Policy Options for the Definition of Resort Some stakeholders at the local government level have identified a desire for more detailed definitions relating to resorts from the perspective of their availability to the travelling public and product types. When considering new projects and their potential impacts on the commercial land base, it would be helpful to have a more precise idea of acceptable unit size, usage plans, and facilities typical of resorts. At the same time, implementing more detailed definitions may limit any new ownership or resort development types that cannot be anticipated at this time. Thus, the more detailed the definition of resort, the more restrictive the District would be towards growth in resort development in the short and long-term. As far as the development community is concerned, more flexible definitions would be desired to meet product and demand trends, in order to stimulate short-term investment. With respect to alternative ownership components, the District will need to decide how permissive or restrictive they want to be in developing policies that encourage or restrict these alternative forms of ownership, and the related development forms and land use (1) Forms of Tenure/Ownership Types Table 11-1 summarizes the forms of tenure accepted under existing policies, in comparison to more permissive and more restrictive considerations. Prepared for: The District Municipality of Muskoka Page 86

104 TABLE 11-1 ALTERNATIVE POLICY OPTION MATRIX - DEFINITION OF RESORT - FORMS OF TENURE ACCEPTED C.29 - In the Waterfront, Rural and Community designations: A.All forms of tenure(1) will be considered for new, expanded or redeveloped resorts within the principles, goals and objectives of this plan. A resort is defined(2) as lodging or other accommodation other than tent and trailer parks. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (1) Forms of Tenure Accepted Sole Ownership Accommodation Units with Rental Component x x x x Sole Ownership Accommodation Units without Rental Component Sole Ownership and Multiple Shareholder Units with Rental Components (i.e. fractional) x x x x Sole Ownership and Multiple Shareholder Units without Rental Components (i.e. fractional) x Multiple Ownership Accommodation Units with Rental Component (i.e. fractional) x x x x Multiple Ownership Accommodation Units without Rental Component (i.e. fractional) x Alternative Ownership Accommodation Units with Rental Component (i.e. timeshare) x x x x Alternative Ownership Accommodation Units without Rental Component (i.e. timeshare) x x Commercial Accommodation Units x x x x The Existing Policy Framework currently supports sole, multiple and alternative ownership. It also supports sole ownership with multiple shareholders (as in many of the existing fractional resorts in Muskoka), as well as traditional commercial resort units rented to the travelling public. However, supporting policies dictate that the resort must be operated for profit and must be available to the travelling public. This has been interpreted as requiring a rental pool. As a result, the policy framework does not support the development of these forms of tenure for the exclusive use of the ownership group. This is intended to ensure that these facilities maintain their commercial focus and that built units are made available to the travelling public. To broaden the opportunities for the development community, under an adjusted policy framework, the District might adjust policy to provide some consideration for including forms of tenure that do not conflict with the exclusive use criteria by generating a specified level of user turnover. This could include concepts such as timeshare development with a functioning exchange program, whether or not there is an active rental component, or sole ownership with multiple shareholders at existing fractional resort properties, providing that individual timeshare or shareholder usage is limited to one or two weeks annually. The development community would argue for even more permissive policies, eliminating or minimizing the restrictions on exclusive use and reducing the requirements for commercial rental. If the District were to be more permissive towards encouraging short to mid-term resort growth, they might consider including multiple fractional ownership units within the commercial definition whether or not the units offer a rental component pool. Some restrictions or criteria would need to be defined in terms of a minimum number of different owners and a maximum number of fractions held by one owner. The Prepared for: The District Municipality of Muskoka Page 87

105 development community would be supportive of this, with data suggesting these units and their users generate stronger economic impacts on a per unit basis than traditional cottages although not as much as traditional resort units. If the District intends to control or limit short-term development, a more restrictive approach could be adopted. While the forms of tenure allowed could remain the same as existing policies, other supporting policies and criteria could be more restrictive. Regardless of the selected approach to the issue of tenure, exclusive use of resort units by sole owners should not be permitted under a tourist commercial designation. (2) Resort Product Definition As shown in Table 11-2, with respect to resort product, existing policies are very broad and only identify a requirement for lodging or other accommodation. This is not defined, and could be interpreted as only needing to provide an overnight rental unit regardless of the physical form of the unit without any requirement to provide any support facilities such food and beverage, meeting space or recreation. TABLE 11-2 ALTERNATIVE POLICY OPTION MATRIX - DEFINITION OF RESORT - RESORT PRODUCT DEFINITION C.29 - In the Waterfront, Rural and Community designations: A.All forms of tenure(1) will be considered for new, expanded or redeveloped resorts within the principles, goals and objectives of this plan. A resort is defined(2) as lodging or other accommodation other than tent and trailer parks. Existing Policy Adjusted Policy Permissive Policy Restrictive Policy (2) Resort Product Definition Framework Considerations Considerations Considerations Overnight Accommodation Units Required x x x x Hotel Guest Rooms Required x Food & Beverage Required x Meeting Space Required x This is considered to be a non-restrictive policy, as it allows other potential revenue-generating commercial aspects of the resort to be left to the discretion of the developer, and would not require adjustment under a more permissive policy set. However, if the District wished to restrict short to mid-term growth in the sector, a more restrictive approach could involve requirements for a standard resort hotel, including tradition hotelstyle guest rooms, food and beverage facilities, and meeting space. Prepared for: The District Municipality of Muskoka Page 88

106 Implications for Policy Direction As identified, with respect to current policy, the intent of allowing alternative forms of tenure and not restricting the nature of the product type would be considered supportive of resort development; however, the approach to defining supporting policies and criteria will dictate whether these policies actually encourage or discourage development. The approach to the Four Tests for Resort Commercial Development, as discussed in the following section, will ultimately assist in determining to what extent the District might wish to be with respect to resort development in the short and mid-term Four Tests for Resort Commercial Use Positioning of Existing Policies The following MOP policy was established to provide tests for ensuring that a proposed resort development or redevelopment would retain a commercial use element. C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be made available to the travelling public, be operated under central management on location for profit, and will provide ongoing services and recreational facilities normally provided in a commercial setting. Documentation, enforceable by the municipalities, including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Policy C.29 B begins to place some restrictions on availability at a resort development, although availability is not defined, and it also lacks criteria with respect to who constitutes the travelling public and what facilities are provided in a commercial setting. There are further requirements for on-site management as well as documentation to justify commerciality, but the policy lacks associated criteria and guidelines for enforcing requirements and maintenance of commercial elements. Consequently, this policy is considered restrictive to virtually all related stakeholders Alternative Policy Options for the Four Tests for Resort Commercial Use The tests for resort commercial use were originally intended to apply regardless of tenure and were developed to be flexible enough to accommodate changing situations as the resort industry evolves over time, however, some of the newer tenure or development concepts have difficulty meeting the current resort Prepared for: The District Municipality of Muskoka Page 89

107 commercial tests. In addition, a variety of questions have been raised regarding the definition and interpretation of certain terms, and criteria in order to evaluate test results. As with the resort definition, as far as the development community is concerned, more flexible tests for resort commercial use would be desired to meet product and demand trends, and stimulate short-term investment. With respect to alternative ownership components, the District will need to decide how permissive or restrictive they want to be in developing policies that encourage or restrict these alternative forms of development. (3) Third-Party Rental Availability Criteria Table 11-3 summarizes the level of third-party availability permitted under existing policies, in comparison to more permissive and more restrictive considerations. TABLE 11-3 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - THIRD PARTY RENTAL AVAILABILITY CRITERIA C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. (3) Third-Party Rental Availability Criteria Optional No Defined Availability Defined Minimum Availability Full Availability Existing Policy Framework x Adjusted Policy Considerations x Permissive Policy Considerations x Restrictive Policy Considerations x The requirement for availability to the travelling public combined with the requirement to make a profit have generally been interpreted as the need to have rooms or units available for rent. Thus, under the existing interpretation of the Existing Policy Framework, as a rest for resort commercial use, resort operators are required to make accommodation units available for third party rental (i.e. the travelling public ). However, no criteria are provided for determining a reasonable level of availability, or the scale or number of units that need to be available. Furthermore, based on current industry performance levels, it is evident that there is an excess of resort accommodation units available in all seasons summer included and that both owners and operators are being impacted. Prepared for: The District Municipality of Muskoka Page 90

108 To broaden the opportunities for the development community, under an adjusted policy framework, the District might adjust policy to provide some consideration defining a minimum level of availability on either an annual or seasonal basis, providing this level of availability does not impact the appeal of these units to the owner / purchaser. The development community would like to eliminate the requirement for availability for commercial rental entirely. Permitting a resort to operate without rental to other transient travellers and vacationers would satisfy the development community. If the District were to be more permissive towards encouraging short to mid-term resort growth, they might consider making third-party rental availability of resort units an optional component. This could include usage by multiple or fractional owners. However, this would require enforcement of the Zoning By-Laws, likely through the Area Municipalities, which would require additional allocation of resources. If the District intends to control or limit short-term development, a more restrictive approach could be adopted, wherein resort units are only available for third-party rental, excluding use by individual unit owners. As such, the District would be trying to maximize tourist visitation, but this level of restriction would discourage any level of development in the short to mid-term. (4) Use Included in Definition of Travelling Public The MOP requires overnight accommodations to be made available to the travelling public, as shown in Table TABLE 11-4 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - USE INCLUDED IN THE DEFINITION OF TRAVELLING PUBLIC C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Existing Policy Adjusted Policy Permissive Policy Restrictive Policy (4) Use Included in Definition of Travelling Public Framework Considerations Considerations Considerations Exclusive Use by Sole Owner of Unit Exclusive Use by Multiple Owners/Users of Unit x Exclusive Use by Alternative Owners/Users of Unit x Travellers and Vacationers (Including Unit Owners) x x Travellers and Vacationers (Excluding Unit Owners) x x x x Prepared for: The District Municipality of Muskoka Page 91

109 Although the existing policy does not provide a definition of travelling public, it is evident that with the requirement for third-party rental, the District is not allowing exclusive use with any form of ownership. Consequently, the existing policy indirectly defines the travelling public as only transient travellers and vacationers who do not have an ownership or right to use in a resort property, although the policy wording leaves this to interpretation. From the perspective of new forms of tenure and product that currently exist in Muskoka, the District might consider leaving the existing definition unchanged, and maintain the focus on travellers and vacationers, since the issue is not in the definition itself, but in the requirement for third-party rental availability. However, under an adjusted policy framework, the District might consider including unit owners within the concept of travelling public. However, the test for third-party availability would have to ensure that minimum criteria were in place (i.e. minimum number of weeks per season). If the District were to satisfy the needs of the development community, they might consider being more open to accepting multiple and alternative ownership and usage of resort units, and allowing these to fall within the definition of the travelling public. As previously discussed, data suggests that fractional and other forms of alternative tenure of units and their users generate stronger economic impacts on a per unit basis than traditional cottages, although not as much as traditional resort units. Should the District consider more restrictions on short and mid-term resort development, the definition of the travelling public would not need to change, yet higher minimum requirements would be necessary for thirdparty rental availability. At a base level, all the definition currently does is restrict exclusive use. The concern with this policy issue is directly related to unit availability to the travelling public. (5) Management Considerations As shown in Table 11-5, existing policies currently require central management on location at resorts, yet there are no criteria for what that entails. Prepared for: The District Municipality of Muskoka Page 92

110 TABLE 11-5 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - MANAGEMENT CONSIDERATIONS C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Existing Policy Adjusted Policy Permissive Policy Restrictive Policy (5) Management Considerations Framework Considerations Considerations Considerations Management Optional x Off-site Management Required x On-site Management Required x x x The requirement for on-site management suggests that resorts should have some sort of reception area or office where keys are obtained, problems are reported, bookings are managed, payments are rendered, and site security is based; although the policy wording leave this to interpretation. If this is the intent, supporting policies should better define this. Alternatively, there are effective models in the resort community that involve management services being provided from off-site locations. For example, a booking agency could coordinate housekeeping services for individual resort units, particularly at resort properties that have individual cottage or townhouse style units. As such, the District might consider both on-site and off-site management options under an adjusted policy framework, providing minimum service levels are met. The development community would certainly welcome more permissive considerations in MOP policy, wherein management of resort units would be optional at resorts that have multiple and alternative forms of ownership and usage. Under a more restrictive policy, the District would identify an extensive list of management requirements. The primary challenge in reducing the requirement for on-site management would be the potential inconsistency in the nature and availability of management services, and the reduced level of control, with potential increases in negative impacts on guests and neighbouring properties. On the other hand, more flexible requirements for management may respond to the varied types and scales of resorts that might be developed. (6) Element of Profit As shown in Table 11-6, the existing policy requires an element of profit as a test for resort commercial use. Prepared for: The District Municipality of Muskoka Page 93

111 TABLE 11-6 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - ELEMENT OF PROFIT C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Existing Policy Adjusted Policy Permissive Policy Restrictive Policy (6) Element of Profit Framework Considerations Considerations Considerations No Transaction or Profit Requirement x Alternative Transactions Required (e.g. ownership exchange programs) x Financial Transactions For Profit Required x x x The current interpretation of the existing policy framework is that to be considered a resort commercial use in the MOP, facilities offering accommodations must be operated with the intention of making a profit, which in turn implies a financial transaction will take place when a unit is rented. Under an adjusted policy framework, the District might consider incorporating a requirement for transaction, be it financial or some alternative exchange. This could help retain economic impact in the District from alternative forms of usage, but not necessarily guarantee direct profit to the resort itself. If the District were to be more encouraging of short to mid-term development needs, they might consider eliminating the requirement for either a transaction or element of profit altogether, provided there is a guaranteed guest turnover, as is the case with fractional ownership. However, this level of flexibility could generate challenges in terms of resort commercial definitions in Zoning By-Laws and their implementation and enforcement. On the other hand, maintaining the requirement for financial transactions for profit at a resort through on-site management may limit the level of short to mid-term, and possibly long-term resort development. (7) Ongoing Services As shown in Table 11-7, the existing policy requires that management provide ongoing services at a resort. Prepared for: The District Municipality of Muskoka Page 94

112 Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (7) Ongoing Services No Defined On-Going Services x x Housekeeping x x Reservations x x Security x x Maintenance x x Marketing & Sales TABLE 11-7 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - ONGOING SERVICES C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. x The current interpretation of the existing policy suggests that management provide basic services that would appear essential to a resort. However, what these basic services entail is not clearly defined. As such, the current policy creates challenges in identifying and enforcing provision of ongoing services. If the District were to consider a more specific definition of these services, it could include housekeeping, reservation, security, maintenance and sales & marketing responsibilities. Under an adjusted policy framework, the sales & marketing piece may not be essential, but would be worth considering within the minimal level of base services in the MOP framework. The resort development community would not want any ongoing service levels mandated for new and existing management models. Thus, under a framework that encourages further short to mid-term resort development, the District might consider only identifying a requirement for housekeeping services. It should be noted, however, that housekeeping services may be hard to mandate, considering the fact that a traditional cottage resort only provides periodic services of this nature. Under a more restrictive policy framework with respect to resort growth, if the District were to maintain the existing definition of the travelling public as transient travellers and vacationers, they might want to introduce the sales & marketing service as an assurance for transient rental availability. However, the more restrictions that are placed on management services, the more restrictions will presumably be placed on product types that could be developed. Prepared for: The District Municipality of Muskoka Page 95

113 (8) Facilities Provided in a Commercial Setting As shown in Table 11-8, the existing policy requires that resorts provide recreational facilities normally provided in a commercial setting. TABLE 11-8 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - FACILITIES PROVIDED IN A COMMERCIAL SETTING C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (8) Facilities Provided in a Commercial Setting No Defined Commercial Facilities x Defined Indoor Recreation Required (i.e. fitness centre, games room) x x Defined Outdoor Recreation Required (i.e. shoreline, hiking trails, play area) x x The current interpretation of the existing policy requires that recreational facilities and amenities are included at a resort, yet these are not clearly defined in the MOP. As such, the current policy creates challenges in identifying and enforcing provision of recreational services. Under an adjusted policy framework, the District might want to consider a more specific definition of these facilities, inclusive or specific indoor recreation facilities (i.e. fitness centre and games room) and outdoor recreation facilities (i.e. shoreline, hiking trails and play area). As with ongoing services, the development community would not want any type of facilities or amenities mandated for new and existing product types. Thus, under a framework that encourages more short to midterm resort development, the District might consider eliminating this part of the tests for resort commercial use. Under a more restrictive policy framework, however, the District may need to provide more specific indoor and outdoor recreation facilities. (9) Documentation Enforceable by Municipalities As shown in Table 11-9, the existing policy requires certain documentation is available at a resort commercial property. Prepared for: The District Municipality of Muskoka Page 96

114 TABLE 11-9 ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - DOCUMENTATION ENFORCEABLE BY MUNICIPALITIES C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (9) Documentation Enforceable by Municipalities No Documentation Requirement x Undefined Zoning Documentation and Agreements Requiring Commercial Use and Maintenance of Commercial Components x Defined Documentation Requiring Commercial Use and Maintenance of Commercial Components x x Other Considerations - Documentation Provide Guidelines to Define Documentation Requirements for Use x x Provide Guidelines to Define Documentation Requirements for Management and Operations x x To ensure that the tests for resort commercial use are met, the existing policy framework requires documentation, enforceable by the municipalities, that demonstrates commercial use and maintenance of the commercial components of the development. Under an adjusted policy framework, the District might consider providing a more detailed list of documentation relating to the four tests. For example documentation on availability or usage agreements, management service requirements, mandated transaction component, etc. The same type of list might be considered under a policy framework that was more restrictive to resort development growth in the nearterm, however, the restriction on availability to the travelling public, management requirements, and operations would need to be much more distinct. Alternatively, under a pro-development mandate, the District might consider eliminating the requirement for documentation. There are, however, no specific criteria for enforcement or monitoring mechanisms are identified in this policy, and to date, the Area Municipalities have identified some difficulty in enforcing Zoning By-Laws. As such, providing more details in terms of documentation may lead to further challenges with enforcement Other Considerations Operational Monitoring As shown in Table 11-10, the existing policy framework does not include a requirement for operational monitoring. Prepared for: The District Municipality of Muskoka Page 97

115 TABLE ALTERNATIVE POLICY OPTION MATRIX - FOUR TESTS FOR RESORT COMMERCIAL USE - OTHER CONSIDERATIONS: OPERATIONAL MONITORING C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Other Considerations - Operational Monitoring Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations No Requirement x x Periodic Monitoring x Detailed Usage/Availability Compliance Restrictive Policy Considerations x If the District determines that more definitive criteria need to be put in place within the tests for resort commercial use, there is little value unless a monitoring element is established. As such, under an adjusted policy framework, periodic monitoring needs to be considered, likely at the Area Municipality level, to ensure criteria are being met. The challenge with implementing operational monitoring is that it would involve a financial cost and additional resource allocation. The Area Municipalities may need to look at ways of obtaining funding, i.e. implementing a tax, levy or licensing system for unit holders. Depending on the level of growth that the District wishes to encourage in the short to mid-term, this may or may not be a very detailed process. In a more permissive framework, where various forms of tenure and product are accepted, then no requirements may be necessary. However, under a more restrictive policy framework, detailed usage and availability compliance will need to be met, and this will require additional resources from a monitoring perspective Implications for Policy Direction As identified, the existing tests for resort commercial use were originally intended to apply regardless of tenure and were developed to be flexible enough to accommodate changing situations as the resort industry evolves over time, however, some of the newer tenure or development concepts have difficulty meeting the current tests for resort commercial land use. In addition, a variety of questions have been raised regarding the definition and interpretation of certain terms, and criteria in order to evaluate test results. As with the resort definition, as far as the development community is concerned, more flexible tests for resort commercial use would be desired to meet product and demand trends, and stimulate short-term investment. With respect to alternative ownership components, the District will need to decide how Prepared for: The District Municipality of Muskoka Page 98

116 permissive or restrictive they want to be in developing policies that encourage or restrict these alternative forms of development. While the general intent of the existing policy framework is good, the policy lacks criteria and guidelines regarding availability to the travelling public, facilities and management services; all of which are considerations in determining resort commercial land use options. As such, under an adjusted policy framework, the District might consider providing more detail in terms of defining a minimum level of availability, on either an annual or seasonal basis, to travellers and vacationers (i.e. the travelling public); accepting on and off-site management models and listing a minimal level of base management services; requiring a transaction (i.e. financial or alternative form of exchange); identifying a more specific definition of indoor and outdoor recreation facilities required at a resort; defining documentation requirements; and creating roles and responsibilities for operational monitoring. Should the District consider a more permissive stance regarding encouragement of short to mid-term growth, they might considering making third-party rental availability an optional component; accepting multiple and alternative ownership of resort commercial units; eliminating the requirement for on-site management, an element of profit, ongoing services, commercial facilities and documentation. The resulting land use may not meet the current definition of resort commercial, but it would also not fall within the definition of residential land use. Alternatively, if the District intends to control or limit short-term development, restrictions would be required on any form of exclusive use, such that resort units are only available to the travelling public (i.e. travellers and vacationers); only on-site management would be accepted; a list of management requirements would need to be provided in the policy, including a requirement for financial transactions for profit, and a sales and marketing component, as well as a detailed list of specific indoor and outdoor recreation facilities; more definitive documentation for the commercial nature of a resort would be required; and detailed usage and/or availability compliance would need be monitored, likely by the Area Municipalities. It may warrant District consideration to create a new approach to the tests for resort commercial use. For example, the current policy could be reorganized, and categorized around the following 4 key elements of resort commercial use: Availability to the Travelling Public Product Prepared for: The District Municipality of Muskoka Page 99

117 Management Services Guest Services These components do not directly address the element of profit, but it would be implicitly included in the test for availability to the travelling public. Under this alternative approach, if the District were trying to rank these four elements in order to satisfy tests for resort commercial use, they should be ranked as follows: #1 Availability to the Travelling Public #2 Management Services #3 Guest Services #4 Product Type and Facilities There is a market for a wide range of product types, but trying to dictate what those are today is not reasonable or practical from a policy perspective. Furthermore, the level of availability, model for management and types of guest services offered would dictate the type of product that could be developed at a resort property. From a consumer perspective, these elements of resort commercial use would be ranked in a different order: #1 Availability to the Travelling Public #2 Product Type and Facilities #3 Guest Services #4 Management Services The reason for this category change is that consumers tend to choose a resort based on the product provided (e.g. unit size, outdoor facilities offered, etc.), and then look for the ongoing services offered, but care little about the management model. However, if the units are not available, the product and services offered are irrelevant. Alternatively, within a commercial test environment, the individual consumer is not the first priority. Ultimately the test for availability of resort units for the travelling public outweighs all other concerns from a resort commercial perspective. The next section will provide further alternative considerations for the scale, size and density requirements at a resort. Prepared for: The District Municipality of Muskoka Page 100

118 11.9 Considerations for Nature and Scale of New Resorts / Redevelopments Positioning of Existing Policies As discussed, establishment of new tourist commercial resorts is rare in Muskoka, and most new projects incorporate redevelopment of existing operations. Part of the reason for this may be due to restrictions on the nature and scale of resort product. The following MOP policy was established to address issues of size, scale and nature of development at either new or redeveloped resort properties. C.29 - In the Waterfront, Rural and Community designations: C. New resorts, complementary facilities and attractions are encouraged to locate in appropriate locations subject to the following issues being satisfactorily addressed: i) the scale, size, and density of development, ii) compatibility of use, iii) site characteristics, iv) water quality, v) protection of shorelines, vi) preservation of the quality of the natural and cultural heritage, vii) impact on Heritage Areas and Provincially significant wetlands, viii) servicing, ix) access as it relates to District facilities. Policy C.29 C. is very specific in terms of the need for resorts to satisfactorily address issues relating to scale, compatibility of use, density and other components relating to specific site and location factors. However, these are primarily dictated at the local Area Municipality level, and there are no criteria or definitions provided at all Alternative Policy Options for Nature and Scale of New Resorts / Redevelopments As previously identified, particularly at the Area Municipality level, when considering new projects and their potential impacts on the commercial land base, it would be helpful to have a more precise idea of the nature and scale of development, whereas the development community would prefer fewer or no restrictions. With respect to nature and scale, the District will need to decide how permissive or restrictive they want to be in this regard. (10) Scale, Size and Density of Development As shown in Table 11-11, the existing policy lacks defining criteria regarding scale, size and density of development. Prepared for: The District Municipality of Muskoka Page 101

119 TABLE ALTERNATIVE POLICY OPTION MATRIX - CONSIDERATIONS FOR NATURE AND SCALE OF NEW RESORTS / REDEVELOPMENTS - SCALE, SIZE AND DENSITY OF DEVELOPMENT C.29 - In the Waterfront, Rural and Community designations: C) New resorts, complementary facilities and attractions are encouraged to locate in appropriate locations subject to the following issues being satisfactorily addressed: i) the scale, size, and density of development(10), ii) compatibility of use, iii) site characteristics, iv) water quality, v) protection of shorelines, vi) preservation of the quality of the natural and cultural heritage, vii) impact on Heritage Areas and Provincially significant wetlands, viii) servicing, ix) access as it relates to District facilities. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations (10) Scale, Size and Density of Development No Defined Criteria x x Equal to or less than allowable density x Equal to or less than existing density Restrictive Policy Considerations x Two options for an adjusted policy framework could be considered with respect to nature and scale of development. On the more permissive scale, this specific policy would be eliminated, leaving the Area Municipalities with more flexibility based on their own respective commercial land areas. The other option would be to create more parameters within the policy, potentially restricting developments to existing density levels on a given site. In an adjusted policy framework, the District might also consider encouraging new resorts and redevelopments to reach levels of allowable density on a specific site. If this policy is going to be maintained or adjusted, the responsibility for monitoring and evaluating plans will be left to the Area Municipalities, yet they have specifically requested more direction in terms of criteria Other Considerations Mixed Use Development There are other considerations with respect to phasing and mixed use that might be considered under an adjusted policy framework, as detailed in Table TABLE ALTERNATIVE POLICY OPTION MATRIX - CONSIDERATIONS FOR NATURE AND SCALE OF NEW RESORTS / REDEVELOPMENTS - OTHER CONSIDERATIONS: PHASING AND MIXED USE C.29 - In the Waterfront, Rural and Community designations: C) New resorts, complementary facilities and attractions are encouraged to locate in appropriate locations subject to the following issues being satisfactorily addressed: i) the scale, size, and density of development(10), ii) compatibility of use, iii) site characteristics, iv) water quality, v) protection of shorelines, vi) preservation of the quality of the natural and cultural heritage, vii) impact on Heritage Areas and Provincially significant wetlands, viii) servicing, ix) access as it relates to District facilities. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations Other Considerations - Phasing and Mixed Use Sole Ownership Accommodation Units with Rental Component x x x x Sole Ownership Accommodation Units without Rental Component Multiple Ownership Accommodation Units with Rental Component x x x x Multiple Ownership Accommodation Units without Rental Component Alternative Ownership Accommodation Units with Rental Component x x x x Alternative Ownership Accommodation Units without Rental Component x Development of Mixed Use (Sole/Multiple/Alternative Ownership Resort Commercial and Resort-related Residential Units in conjunction with Traditional Resort Hotel Units) Requiring Hotel Developed in First Phase x Prepared for: The District Municipality of Muskoka Page 102

120 Within an adjusted policy framework, the District might consider permitting other forms of tenure, including sole, multiple and alternative ownership of accommodation units, but would also need to dictate in the approach that resort commercial compliance is present, in the form of a rental component. This is not to suggest that policy should change in an adjusted framework, but rather would be more detailed. Despite the current servicing policies which permit private communal services for commercial resorts, there has been pressure from developers to permit a residential component in new or redeveloping waterfront resorts outside of urban areas. As a result of the significant costs associated with these projects, new resort product being constructed and/or considered in Ontario today is driven primarily off of a real estate (i.e. residential) component. Under more permissive considerations, the concept of mixed commercial and resort related residential uses may be introduced. Although challenges with resort development exist, there are different development models all over the world. Historically, the most successful resort developments have had a balance of residential, alternative ownership commercial, and traditional commercial hotel-style units. While it would be ideal to have a formula to guarantee this type of balance (i.e. 1/3 resort residential units, 1/3 fractional units, 1/3 transient hotel guest units), economics, development costs and market specific factors suggest that this cannot be adhered to. Additional flexibility in permitted uses might present more opportunities for development in the District overall Implications for Policy Direction Multiple residential development is not currently permitted in waterfront areas due to historical community concerns related to the natural environment and character, including density of development and intensity of use at the shoreline. In addition, as detailed in Section 11.10, the Muskoka Official Plan prohibits the use of private commercial services for any type of residential development, due to the requirement under the Safe Drinking Water Act for the District to be responsible for these systems, and the resulting municipal liability and cost to taxpayers should they fail. Any policy option involving a mix of resort commercial and resort related residential uses would require community and Council acceptance of a) multiple residential uses in the waterfront and b) potential District responsibility and liability for small, remote, private communal systems. Prepared for: The District Municipality of Muskoka Page 103

121 11.10 Servicing Requirements for Multi-Unit Resort Condominium Developments Positioning of Existing Policies There has been growing evidence that commercial resort developments need flexibility in order to proceed. This has in part been provided through Condominium registration. In recognition of the important role played by resorts in Muskoka s economy and character, District official plan policies permit private communal systems in limited circumstances for resort commercial developments, as detailed below: H Where property has been registered by way of condominium description, private servicing may be permitted where: a) the sewage works have been built or upgraded to a standard satisfactory to the Ministry of the Environment and the District Municipality; b) an authorized and enforceable agreement is registered against the title of each unit within the condominium: i) requires the establishment and administration of a reserve fund to ensure that adequate revenue is available to repair, maintain, replace and upgrade the works as required. The reserve fund for capital replacement shall provide for one hundred (100) percent value of the works plus the cost of inflation within a period not greater than ten (10) years; and ii) outlines and requires implementation of financial controls to the satisfaction of the Province and District to ensure the provision of i) preceding and requires the annual review of same by the District and the Ministry of the Environment; and iii) references an operation and maintenance program manual accepted by the Ministry of the Environment and District which includes, but is not limited to, a description of normal operating procedures, sampling procedures including frequency of sampling, and the requirement of an annual operation and maintenance inspection by the District; and iv) requires operation of the private works by a qualified operator certified under a provincial certification program; and, v) requires the owner on demand by the District to do all things necessary including the transfer of easements and/or ownership of the works into the name of the District Municipality of Muskoka, among other matters, where required and necessary to fulfill the statutory obligations required of the District; and, vi) requires the owner to submit to the District and the Ministry of the Environment, an annual report prepared by a Certified Chartered Accountant and a Registered Professional Engineer outlining the status of the reserve fund and deficiencies in the works on an annual basis. c) The development is in accord with all other policies of this Plan and constitutes multi-unit resort commercial development of Muskoka. H Where property has been registered by way of condominium description, private servicing may be permitted where: a) the water works (same as above) Prepared for: The District Municipality of Muskoka Page 104

122 Alternative Policy Options for Servicing Requirements for Multi-Unit Resort Condominiums (11) Financial Reserve Requirements for Servicing Table shows that the existing policy framework is very detailed in terms of the requirement for a reserve fund that provides for 100% of replacements costs for private communal systems, with no option for partial compliance or lack of compliance in any circumstance. TABLE ALTERNATIVE POLICY OPTION MATRIX - SERVICING REQUIREMENTS FOR MULTI-UNIT RESORT CONDOMINIUM DEVELOPMENTS - FINANCIAL RESERVE REQUIREMENTS FOR SERVICING H Where property has been registered by way of condominium description, private servicing may be permitted where: a) the sewage works... Where property has been registered by way of condominium description, private servicing may be permitted where: a) the sewage works have been built or upgraded to a standard satisfactory to the Ministry of the Environment and the District Municipality; b) an authorized and enforceable agreement is registered against the title of each unit within the condominium: i) requires the establishment and administration of a reserve fund to ensure that adequate revenue is available to repair, maintain, replace and upgrade the works as required. The reserve fund for capital replacement shall provide for one hundred (100) percent value of the works plus the cost of inflation within a period not greater than ten (10) years(11)... H.28.2 same policy with respect to water works Existing Policy Adjusted Policy Permissive Policy Restrictive Policy (11) Financial Reserve Requirements for Servicing Framework Considerations Considerations Considerations No Requirement x Full Requirement x x x There are two options for District consideration with respect to servicing requirements: 1) leaving the policy as is, 2) eliminating the requirements for a reserve in the Muskoka Official Plan, and relying entirely on the legislative requirements under the Condominium Act. Leaving the policy unchanged still results in a perceived barrier. However, some level of reserve fund will be required notwithstanding any changes made to the MOP. The difference lies in the level of involvement and control of the District Implications for Policy Direction As long as the land use remains 100% resort commercial, relying on the Condominium Act for reserve funds may be a viable option. However, should a mix of resort commercial / resort related residential uses be contemplated, the requirements of the Safe Drinking Water Act (SDWA) would apply. In this regard, the SDWA requires a municipal consent to the construction of a private communal system for residential development. This is a municipal guarantee of such a system and therefore increases potential responsibility, risk and liability for the District. Prepared for: The District Municipality of Muskoka Page 105

123 11.11 Planning Requirements for New Resorts / Redevelopments Positioning of Existing Policies The establishment of a new resort in the Waterfront designation on a property where development rights do not already exist is required to proceed by a local official plan amendment (OPA), as summarized in the following policy: C.28 - New resort development may only be established in the Waterfront Designation by amendment to the Local Official Plan. The OPA requirement was intended to ensure that a comprehensive planning process is undertaken and that new facilities are appropriately located and compatible with surrounding uses, which is further detailed in Policy C.29. However, there are no criteria or definitions provided to outline this planning process and evaluation of facilities from a compatibility standpoint Alternative Policy Options for Planning Requirements for New Resorts / Redevelopments As with Policy C.29 C, Area Municipality feedback points to a desire for more definitions and criteria, and to enhance existing checks and balances for resort development, whereas the development community would prefer fewer or no restrictions. The District will need to decide how permissive or restrictive they want to be in this regard. (12) Local Official Plan Amendment As shown in Table 11-14, the existing policy lacks defining criteria regarding requirements for an Official Plan Amendment at the local level. TABLE ALTERNATIVE POLICY OPTION MATRIX - PLANNING REQUIREMENTS FOR NEW RESORTS / REDEVELOPMENTS - REQUIREMENT FOR OFFICIAL PLAN AMENDMENT C.28 - New resort development may only be established in the Waterfront Designation by amendment to the Local Official Plan(11). Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (12) Requirement for Official Plan Amendment Zoning By-Law Amendment x x x x Local Official Plan Amendment x x x Muskoka Official Plan Amendment x Prepared for: The District Municipality of Muskoka Page 106

124 Two options for an adjusted policy framework could be considered with respect to planning requirements for new resorts and redevelopments. On the more permissive scale, this need for a local Official Plan amendment could be eliminated, although it would remain the responsibility of the Area Municipalities to ensure comprehensive planning processes were being carried out, and that new developments were either compliant with or require zoning by-law amendments (which would include a public process). A constraint for new resort development may be in part the requirements for a local OPA being perceived as a barrier, both financially and in terms of timelines. Therefore removing this requirement would be welcomed by the development community. A more restrictive option could be to require an amendment to the Muskoka OP in addition to the local OP. However, this would extend current timelines for developers, and could further limit new development Other Considerations Viability / Business Case Requirements One consideration that may help to better determine appropriateness of plans for new resorts and redevelopment is to introduce tests for viability, as detailed in Table TABLE ALTERNATIVE POLICY OPTION MATRIX - PLANNING REQUIREMENTS FOR NEW RESORTS / REDEVELOPMENTS - OTHER CONSIDERATIONS: VIABILITY/BUSINESS CASE REQUIREMENTS C.28 - New resort development may only be established in the Waterfront Designation by amendment to the Local Official Plan(11). Other Considerations - Viability/Business Case Requirements No Requirements Undefined Requirements for Assessment of Loss to Commercial Land Base Owner Business Case Third-Party Business Case Third-Party Market Impact Assessment Existing Policy Framework x Adjusted Policy Considerations x Permissive Policy Considerations x Restrictive Policy Considerations x x There are currently no tests for financial and market viability of a resort, nor for any provision of a business case (either prepared by the owner or prepared by a qualified third party) or market impact assessment under the existing policy framework, as is sometimes required for the retail market. Although we are not aware of any specific municipalities that have comparable tests in place for resorts, in some cases they are required at the Provincial of Federal level when developers are looking for project funding. Within an adjusted policy framework, the District may not require any change in this respect, provided that the resort met other requirements relating to scale and density, as described in the preceding section. The same discussion would hold true for more permissive policies; however, under a more restrictive Prepared for: The District Municipality of Muskoka Page 107

125 perspective towards new resort development, the District might implement a requirement for a business case and market impact assessment prepared by qualified third-party advisors, in order to demonstrate the benefit of development. In line with the considerations provided for nature and scale of development, much of the decision-making for new resort development occurs at the Area Municipality level. Thus, more detailed requirements for ensuring the viability of a particular resort development might be considered under a more restrictive policy framework. As this type of market impact assessment is difficult to quantify, and could demonstrate a negative impact on existing resorts; it is unlikely that any new development would occur in the District under more restrictive policies requiring this documentation Downzoning Options Positioning of Existing Policies The following policy was created to help maintain the tourist commercial land base and discourage downzoning of resort commercial properties: C.30 - The preservation of the quality tourist commercial land base fronting on water is essential to the long term health of the local tourism industry of Muskoka. The down zoning of resort commercial properties with significant land holdings and frontage on water will not generally be supported. In extenuating circumstances down zoning may be considered where the impact of the loss of the commercial land base has been analyzed and it is demonstrated that it would not negatively affect the critical mass of the tourism infrastructure and land base in Muskoka. The existing policy concerning downzoning is predominantly aimed at preserving the waterfront tourist commercial land base in Muskoka and preventing the loss of large commercial properties on the waterfront. The intent of the policy is good in terms of the need to retain significant commercial land holdings, yet the implication is that every waterfront resort owner is impacted regardless of size and nature of existing operations Alternative Policy Options for Downzoning It is evident that the District s policies give greater protection to large tourist commercial and resort properties on the water. Industry trends point to continued interest in waterfront resort properties from the Prepared for: The District Municipality of Muskoka Page 108

126 perspective of North American pleasure travellers, and in general, waterfront land has a higher value than other urban, rural and community lands in Muskoka. The District may need to determine whether size of a property is as significant as the proportion of frontage on the water, in terms of tourist commercial property retention. In general, size would be considered significant, as larger properties would provide a greater opportunity for larger and potentially more viable projects, with stronger impacts on the local economy. (13) Scale of Property on Waterfront Criteria Table summarizes the possible options relating to downzoning with respect to scale of property on the waterfront. TABLE ALTERNATIVE POLICY OPTION MATRIX - DOWNZONING OPTIONS - SCALE OF PROPERTY ON WATERFRONT CRITERIA C.30 - The preservation of the quality tourist commercial land base fronting on water is essential to the long term health of the local tourism industry of Muskoka. The down zoning of resort commercial properties with significant land holdings and frontage on water(13) will not generally be supported. In extenuating circumstances down zoning may be considered where the impact of the loss of the commercial land base(14) has been analyzed and it is demonstrated that it would not negatively affect the critical mass of the tourism infrastructure and land base in Muskoka. (13) Scale of Property on Waterfront Criteria Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Downzoning on Large-Scale Properties Permitted Downzoning on Mid-Scale Properties Permitted x Downzoning on Small-Scale Properties Permitted x x Downzoning Discouraged x No Downzoning Permitted Restrictive Policy Considerations x The current policy discourages downzoning for resort properties on the waterfront, regardless of property size, existing development density and allowable development density levels. As previously discussed, resort owners are facing many challenges, particularly with respect to older, smaller operations that are no longer viable. Consequently, many operators would like the opportunity to downzone resort commercial properties to permit residential uses as an exit strategy, in order to maximize property value. Under an adjusted policy framework, the District might consider permitting downzoning on smaller scale properties. This would still create a need to define small-scale, as compared to mid or large-scale; however, this may be best defined at the Area Municipality level. Under a more permissive policy framework, the District might permit downzoning of mid-scale properties as well. A more restrictive framework would prevent downzoning under any circumstance. Prepared for: The District Municipality of Muskoka Page 109

127 While there is no quantifiable benchmark for the potential loss of commercial lands, which will be discussed in the following section, it is evident that loss of large-scale properties on the waterfront could present limitations for future resort development. (14) Considerations for Addressing Downzoning Impacts Table details existing and potential considerations for addressing the potential impacts of downzoning with respect to the tourist commercial land base in Muskoka. TABLE ALTERNATIVE POLICY OPTION MATRIX - DOWNZONING OPTIONS - CONSIDERATIONS FOR ADDRESSING DOWNZONING IMPACTS C.30 - The preservation of the quality tourist commercial land base fronting on water is essential to the long term health of the local tourism industry of Muskoka. The down zoning of resort commercial properties with significant land holdings and frontage on water(13) will not generally be supported. In extenuating circumstances down zoning may be considered where the impact of the loss of the commercial land base(14) has been analyzed and it is demonstrated that it would not negatively affect the critical mass of the tourism infrastructure and land base in Muskoka. Existing Policy Adjusted Policy Permissive Policy (14) Considerations for Addressing Downzoning Impacts Framework Considerations Considerations No Defined Criteria x x Owner Land Base Test & Business Case Third-Party Land Base Test & Business Case - Existing use no longer viable - Alternative permissable uses not viable - Alternative uses impact other stakeholders (i.e. rate-payers) On Small-Scale Properties On All Properties Restrictive Policy Considerations On Mid-Scale and Large-Scale Properties On All Properties The current policy indicates that downzoning would only be considered where the impact of the loss of the commercial land base has been analyzed, yet there are no criteria to determine how this impact would be quantified. District monitoring indicates that the number of waterfront resort commercial establishments continues to decline, yet the implementation of the downzoning policies has proved difficult, particularly without specific criteria to guide the analysis and determination of a negative impact on the critical mass of tourism infrastructure District-wide. Under an adjusted policy framework, the District might consider providing tests to measure applications for downzoning. These tests could range from demonstrating a rationale for the loss of commercial lands and a business case for downzoning on behalf of the ownership group, to full land base testing and preparation of a business case by a qualified third-party advisory firm that demonstrates: 1) the existing use of a property is no longer viable, 2) alternative permissible uses are not viable, and 3) alternative uses would not have a negative impact on other stakeholders. Given current challenges for resort operators, the District might consider permitting owner rationale and business case documentation for smaller-scale properties, provided Prepared for: The District Municipality of Muskoka Page 110

128 that they include consideration for long-term potential of other commercial operations on-site; and require third-party prepared business case and land base tests on mid-scale and large-scale properties. Under a more permissive policy framework regarding resort growth, the District might accept ownerprepared land base tests and business case documentation, while under a more restrictive framework, thirdparty documentation might be mandated. Regardless of which level of documentation is required, definitions will be required for the scale of property under consideration for downzoning, which may need to be detailed at the Area Municipality level. As a suggestion for determining scale of property, the Township of Lake of Bays has developed policy in recognition of the fact that resorts provide employment and spin-off benefits, yet many resorts are having difficulty operating or in obtaining financing for upgrading. Nevertheless, land that is zoned for tourist commercial use is more likely to be developed or redeveloped, and small operations may be as valuable to the economy as larger properties. The Township has created specific tests for those properties that can clearly demonstrate they are not suitable for tourist commercial use (F.10), with permission to downzone if: a. another use has been located on the property for a significant amount of time; b. historic or environmental factors restrict further development; c. the provision of water and sewage disposal servicing required for further development or redevelopment is restricted; d. the property is less than 0.8 hectares (2 acres), OR has less than 120 metres (394 feet) of water frontage; e. the property does not possess water frontage; f. it is demonstrated that the tourist commercial use would not be economically viable in the long run; or g. the portion of the property to be removed from the commercial zone or development permit area is not suitable for development, exhibits development constraints, or is physically or functionally unrelated to the existing operation. F.11 further provides guidance with respect to the types of documentation that could be provided by resorts, including report to demonstrate: a. the reason for the proposed amendment; b. the existing property and potential; c. existing buildings and facilities; d. historic background; e. suitability of the property to sustain a tourist commercial use; f. attributes or liabilities of the property for tourist commercial and recreation use; g. long term financial viability of the property for tourist commercial use; Prepared for: The District Municipality of Muskoka Page 111

129 h. impact of the removal of the land from the Township and Muskoka shoreline tourist commercial land base; and i. other pertinent factors or issues. This level of detail may be appropriate at the Area Municipality level, but would not necessarily be appropriate at the District level. In addition to more detailed requirements for documentation, under an adjusted policy framework, the District might consider identifying the significance of particular resort properties to Muskoka s tourism sector. This may involve consultation with the Area Municipalities to identify what are considered the most significant properties within their own respective land base area, and include specific policies in their local Official Plans relating to these properties. The intent would be to identify lands that would be restricted from downzoning, while allowing others to potentially be considered for downzoning if business case tests were met. Under a more restrictive policy framework, these significant properties / lands would be incorporated into the MOP as well. Incorporating this additional level of Area Municipality consultation would ultimately allow the District to monitor the entire inventory of significant resort commercial properties in Muskoka Summary of Alternative Policy Option Implications There are many possible alternatives for the District to consider, which either encourage or limit resort development in the short to mid-term. As discussed, the level of encouragement of new resort and tourism development is directly related to the level of restrictions imposed by MOP policies, yet some policy choices may be more restrictive or permissive than others under an adjusted policy framework. Ultimately, the District will need to determine how permissive or restrictive they wish to be with respect to development overall. The following list identifies key considerations for the District under an adjusted policy framework for resort and tourist commercial properties: Regardless of which perspective is adopted, further criteria and definitions need to be identified and enforcement will be needed; Allowing alternative forms of tenure and not restricting the nature of product types (including all ranges of built product, services and experiences), would be considered supportive of resort development; Tests for resort commercial use are required and should be retained, however, the mechanism for availability of resort units for third-party rental outweighs all other concerns (i.e. by establishing a minimum level of availability to the travelling public on an annual or seasonal basis), and intuitively includes a test for the motive for profit; Prepared for: The District Municipality of Muskoka Page 112

130 If more definitive criteria are put in place within the tests for resort commercial use, there is little value unless periodic monitoring occurs; however, the costs of monitoring would be significant and Area Municipalities may wish to consider implementation of a tax, levy or licensing on unit holders to cover the cost of this monitoring; Any policy option involving a mix of resort commercial and resort related residential uses would require community and Council acceptance of a) multiple residential uses in the waterfront and b) potential District responsibility and liability for small, remote, private communal systems; The local OPA requirement is intended to ensure that comprehensive planning processes are undertaken, yet adjusting the existing policy to require a Zoning By-Law amendment as an alternative (which would include a public process) may be sufficient to address the needs of both developers and municipal stakeholders; Responsibility for replacement costs associated with the establishment of private communal services must be addressed, yet as long as the land use remains 100% resort commercial, relying on the Condominium Act for reserve funds may be a viable option; The intent of the downzoning policy is good in terms of retaining significant tourist commercial land holdings in the District, yet all existing resorts are being impacted; an alternative could be to permit smaller-scale properties to downzone, provided that owners can demonstrate a rationale and that the properties have not been identified by the Area Municipalities as significant sites in terms of continued commercial use; and to only consider permitting larger properties to downzone if they pass more stringent testing. Prepared for: The District Municipality of Muskoka Page 113

131 EXHIBIT 11-1 ALTERNATIVE POLICY OPTION MATRIX DEFINITION OF RESORT C.29 - In the Waterfront, Rural and Community designations: A.All forms of tenure(1) will be considered for new, expanded or redeveloped resorts within the principles, goals and objectives of this plan. A resort is defined(2) as lodging or other accommodation other than tent and trailer parks. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (1) Forms of Tenure Accepted Sole Ownership Accommodation Units with Rental Component x x x x Sole Ownership Accommodation Units without Rental Component Sole Ownership and Multiple Shareholder Units with Rental Components (i.e. fractional) x x x x Sole Ownership and Multiple Shareholder Units without Rental Components (i.e. fractional) x Multiple Ownership Accommodation Units with Rental Component (i.e. fractional) x x x x Multiple Ownership Accommodation Units without Rental Component (i.e. fractional) x Alternative Ownership Accommodation Units with Rental Component (i.e. timeshare) x x x x Alternative Ownership Accommodation Units without Rental Component (i.e. timeshare) x x Commercial Accommodation Units x x x x (2) Built Resort Product Definition Overnight Accommodation Units Required x x x x Hotel Guest Rooms Required x Food & Beverage Required x Meeting Space Required x LEGEND: Permissive would provide a minimal level of restrictions on development or re-development in order to stimulate short-term development Non-Restrictive would provide a moderate level of restrictions on development or re-development Restrictive would provide a higher level of restrictions on development or re-development, and would limit and/or control short-term development

132 FOUR TESTS FOR RESORT COMMERCIAL USE EXHIBIT 11-1 ALTERNATIVE POLICY OPTION MATRIX C.29 - In the Waterfront, Rural and Community designations: B. Regardless of the form of tenure, accommodation units within a resort development will be: - made available(3) to the travelling public(4), - be operated under central management on location(5) - for profit(6), and - will provide ongoing services(7) and recreational facilities(8) normally provided in a commercial setting. Documentation, enforceable by the municipalities(9), including both zoning and appropriate agreements will require commercial use and maintenance of the commercial components of the development. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (3) Third-Party Rental Availability Criteria Optional x No Defined Availability x Defined Minimum Availability x Full Availability x (4) Use Included in Definition of Travelling Public Exclusive Use by Sole Owner of Unit Exclusive Use by Multiple Owners/Users of Unit x Exclusive Use by Alternative Owners/Users of Unit x Travellers and Vacationers (Including Unit Owners) x x Travellers and Vacationers (Excluding Unit Owners) x x x x (5) Management Considerations Management Optional x Off-site Management Required x On-site Management Required x x x (6) Element of Profit No Transaction or Profit Requirement x Alternative Transactions Required (e.g. ownership exchange programs) x Financial Transactions For Profit Required x x x (7) Ongoing Services No Defined On-Going Services x x Housekeeping x x Reservations x x Security x x Maintenance x x Marketing & Sales x (8) Facilities Provided in a Commercial Setting No Defined Commercial Facilities x Defined Indoor Recreation Required (i.e. fitness centre, games room) x x Defined Outdoor Recreation Required (i.e. shoreline, hiking trails, play area) x x (9) Documentation Enforceable by Municipalities No Documentation Requirement x Undefined Zoning Documentation and Agreements Requiring Commercial Use and Maintenance of Commercial Components x Defined Documentation Requiring Commercial Use and Maintenance of Commercial Components x x Other Considerations - Documentation Provide Guidelines to Define Documentation Requirements for Use x x Provide Guidelines to Define Documentation Requirements for Management and Operations x x Other Considerations - Operational Monitoring No Requirement x x Periodic Monitoring x Detailed Usage/Availability Compliance x LEGEND: Permissive would provide a minimal level of restrictions on development or re-development in order to stimulate short-term development Non-Restrictive would provide a moderate level of restrictions on development or re-development Restrictive would provide a higher level of restrictions on development or re-development, and would limit and/or control short-term development

133 EXHIBIT 11-1 ALTERNATIVE POLICY OPTION MATRIX CONSIDERATIONS FOR NATURE AND SCALE OF NEW RESORTS / REDEVELOPMENTS C.29 - In the Waterfront, Rural and Community designations: C) New resorts, complementary facilities and attractions are encouraged to locate in appropriate locations subject to the following issues being satisfactorily addressed: i) the scale, size, and density of development(10), ii) compatibility of use, iii) site characteristics, iv) water quality, v) protection of shorelines, vi) preservation of the quality of the natural and cultural heritage, vii) impact on Heritage Areas and Provincially significant wetlands, viii) servicing, ix) access as it relates to District facilities. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (10) Scale, Size and Density of Development No Defined Criteria x x Equal to or less than allowable density x Equal to or less than existing density x Other Considerations - Phasing and Mixed Use Sole Ownership Accommodation Units with Rental Component x x x x Sole Ownership Accommodation Units without Rental Component Multiple Ownership Accommodation Units with Rental Component x x x x Multiple Ownership Accommodation Units without Rental Component Alternative Ownership Accommodation Units with Rental Component x x x x Alternative Ownership Accommodation Units without Rental Component x Development of Mixed Use (Sole/Multiple/Alternative Ownership Resort Commercial and Resort-related Residential Units in conjunction with Traditional Resort Hotel Units) Requiring Hotel Developed in First Phase x SERVICING REQUIREMENTS FOR MULTI-UNIT RESORT CONDOMINIUM DEVELOPMENTS H Where property has been registered by way of condominium description, private servicing may be permitted where: a) the sewage works... Where property has been registered by way of condominium description, private servicing may be permitted where: a) the sewage works have been built or upgraded to a standard satisfactory to the Ministry of the Environment and the District Municipality; b) an authorized and enforceable agreement is registered against the title of each unit within the condominium: i) requires the establishment and administration of a reserve fund to ensure that adequate revenue is available to repair, maintain, replace and upgrade the works as required. The reserve fund for capital replacement shall provide for one hundred (100) percent value of the works plus the cost of inflation within a period not greater than ten (10) years(11)... H.28.2 same policy with respect to water works Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (11) Financial Reserve Requirements for Servicing No Requirement x Full Requirement x x x LEGEND: Permissive would provide a minimal level of restrictions on development or re-development in order to stimulate short-term development Non-Restrictive would provide a moderate level of restrictions on development or re-development Restrictive would provide a higher level of restrictions on development or re-development, and would limit and/or control short-term development

134 EXHIBIT 11-1 ALTERNATIVE POLICY OPTION MATRIX PLANNING REQUIREMENTS FOR NEW RESORTS / REDEVELOPMENTS C.28 - New resort development may only be established in the Waterfront Designation by amendment to the Local Official Plan(11). Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations Restrictive Policy Considerations (12) Requirement for Official Plan Amendment Zoning By-Law Amendment x x x x Local Official Plan Amendment x x x Muskoka Official Plan Amendment x Other Considerations - Viability/Business Case Requirements No Requirements x Undefined Requirements for Assessment of Loss to Commercial Land Base x Owner Business Case x Third-Party Business Case x Third-Party Market Impact Assessment x LEGEND: Permissive would provide a minimal level of restrictions on development or re-development in order to stimulate short-term development Non-Restrictive would provide a moderate level of restrictions on development or re-development Restrictive would provide a higher level of restrictions on development or re-development, and would limit and/or control short-term development

135 DOWNZONING OPTIONS EXHIBIT 11-1 ALTERNATIVE POLICY OPTION MATRIX C.30 - The preservation of the quality tourist commercial land base fronting on water is essential to the long term health of the local tourism industry of Muskoka. The down zoning of resort commercial properties with significant land holdings and frontage on water(13) will not generally be supported. In extenuating circumstances down zoning may be considered where the impact of the loss of the commercial land base(14) has been analyzed and it is demonstrated that it would not negatively affect the critical mass of the tourism infrastructure and land base in Muskoka. Existing Policy Framework Adjusted Policy Considerations Permissive Policy Considerations (13) Scale of Property on Waterfront Criteria Downzoning on Large-Scale Properties Permitted Downzoning on Mid-Scale Properties Permitted x Downzoning on Small-Scale Properties Permitted x x Downzoning Discouraged x No Downzoning Permitted (14) Considerations for Addressing Downzoning Impacts No Defined Criteria x x Owner Land Base Test & Business Case Third-Party Land Base Test & Business Case - Existing use no longer viable - Alternative permissable uses not viable - Alternative uses impact other stakeholders (i.e. rate-payers) On Small-Scale Properties On Mid-Scale and Large-Scale Properties On All Properties LEGEND: Permissive would provide a minimal level of restrictions on development or re-development in order to stimulate short-term development Non-Restrictive would provide a moderate level of restrictions on development or re-development Restrictive would provide a higher level of restrictions on development or re-development, and would limit and/or control short-term development Restrictive Policy Considerations x On All Properties

136 12.0 PROPERTY TAXATION POLICY CONSIDERATIONS 12.1 Introduction The issues surrounding property assessment and property taxation across the province are complex, and become even more so when the specific factors impacting hotels, resorts and other tourist commercial properties such as camps and campgrounds are introduced. From the perspective of the owners and operators of these businesses the primary concern is the actual dollar amounts incurred annually which impact both their operating cashflow and ultimately the value of their business. These amounts are driven by three primary factors: 4. The determination of Asset Class (i.e. Commercial, Residential, Institutional etc.) 5. The Assessed Value of the business 6. The Tax Rates applied to this value in order to arrive at the overall property tax amount For the most part, the tax rates applied are driven by the governing municipalities and are based on their ongoing operating and capital requirements. There is limited ability to address this component of taxation without an overall evaluation of taxation across all asset classes within the governing jurisdiction. The determination of Asset Class and the determination of Assessed Value, fall within the mandate of the Municipal Property Assessment Corporation (MPAC), which is the provincial agency mandated to administer the provincial wide property assessment system. The Asset Class is determined by reviewing a range of factors including physical facilities and attributes as well as property use. The Assessed Value is determined by a range of factors including replacement costs and the sale of comparable properties. In the case of commercial properties the concept of business value based on the property s income potential is introduced. In general terms, across the province, commercial property tax rates are higher than residential tax rates. As a result, commercial properties generally pay more taxes than similarly valued residential properties Hotel and Resort Assessment Hotels, resorts and other tourist commercial properties such as marinas and trailer parks are classified as commercial properties and are subject to the specific assessment procedures for that asset class. Largely Prepared for: The District Municipality of Muskoka Page 114

137 driven by determining business value based on the property s income potential supported by comparable sales and replacement cost analysis. The impact of property taxes on hotel and resort operations in Ontario is significant. Current taxes approximate almost $3,000 per room provincially. That reflects about $30,000 per room in value for the average property. Based on these figures a 10% reduction in property taxes for a 100 room property would represent a $300,000 increase in value. While property taxes for hotels and resorts have decreased over the period by over 10%, they have not declined at the same rate as operating profits or value with net operating income down by almost 40%. TABLE 12-1 HOTEL AND RESORT PROPERTY TAXES IN ONTARIO All Property Types Provincially % Chg Revenues per room $50,182 $51,413 $48, % Property Taxes per room $3,303 $3,049 $2, % Net Operating Income Per Room $11,994 $9,335 $7, % Taxes as a % of Revenue 6.6% 5.9% 6.0% Source:, Trends in the Hotel Industry 2012 With the introduction of new product and new ownership types within the resort sector specifically, along with the mix of uses on site, the determination of asset class and the application of valuation procedures have become clouded. The specific concerns of the resort sector and other tourist commercial properties in Muskoka parallel these issues including a number of disparities within resort sector in the determination of assessment. A number of notable factors include the following: Housekeeping Cottage Resorts MPAC s specific policies in determining Asset Class differentiates Housekeeping Cottage Resorts on a number of factors including whether meals are provided or not to users. If meals are provided, than the Asset is classified as Commercial and subject to commercial tax rates. If meals are not provided, the Asset is classified as Residential and subject to residential tax rates. In either case the lands are valued as residential waterfront and the on-site structures on the basis of replacement costs or comparable sales. Prepared for: The District Municipality of Muskoka Page 115

138 In discussions with representatives of MPAC, they indicate that this approach to residential land valuation for housekeeping resorts is not driven by their current use. It is driven by their potential future use. MPAC identifies these properties have a land value above their current use as they could be acquired by a group of individuals for personal cottage use, potentially downzoned and re-developed for cottage use, or might redeveloped for fractional development. In jurisdictions such as Muskoka where waterfront land values far exceed the commercial value of the businesses, even with lower residential tax rates the overall property taxes incurred are higher than they would be under a commercial assessment. This has an even more significant implication for housekeeping resorts offering meals where commercial tax rates are applied to residential land values. Timeshare and Condominium Hotel MPAC has specific policies addressing the determination of Asset Class and Assessment for Timeshare properties. Within the definition of timeshare they include a wide range of ownership and usage types such as deeded and right to use timeshare weeks, vacation clubs, vacation points and fractional ownership units. In each case, the units themselves are classified as residential and valued on the basis of comparable sales. While not detailed in the policies the responsibility for these taxes is that of the unit owner(s). As many of these developments have a mix of other commercial and recreational uses, the balance of their property is also subject to determination of appropriate asset classes and assessments with the responsibility for these taxes based on ownership which may be an individual third party or in some cases a condominium corporation. With respect to the classification and assessment of individual units as residential, further complications arise in commercial rental pool operations where the higher commercial tax rates are applied to what in most cases is a higher residential value. To alleviate this inequity MPAC allows unit holders to qualify for residential tax rates by providing a declaration that their unit is not available for transient rental. This essentially takes the unit out of rental inventory. This has an impact on both the viability of the resort management company as well as reducing the product offering in the destination itself. In an effort to address this issue, MPAC developed a specific Resort Condominium Property Class, which still sees the property assessed at a residential value, but taxed at a class specific rate determined by the Prepared for: The District Municipality of Muskoka Page 116

139 municipality; allowing for a more consistent tax base within this property type, regardless of whether they are available for transient rental or not. However, it should be recognized that the Resort Condominium Property Class is not necessarily reflective of a property s zoning. The concern is that this classification and valuation approach has not been implemented uniformly across the province, providing some operating advantages to resorts in specific destinations. Further there are concerns that the criteria for implementation are too restrictive. This includes, among other factors, the requirement for the resort to be in a community with a population of no more 10,000, and for the condominium units to be in a resort property that includes or is adjacent to a ski hill and a golf course. Few Muskoka resorts would qualify under these two criteria. In March 2010, District Staff submitted a report supporting changes to the Provincial Assessment Act to address these concerns, and suggesting compromises related to the education portion of the tax bill. This has not resulted in changes to the act provincially and the situation remains unchanged Implications for Policy Considerations If there is an identified need to facilitate property tax changes, the District will need to take a proactive role with the tourism industry by lobbying the Province and MPAC to reconsider the inequities impacting the housekeeping sector (i.e. commercial assessments instead of residential assessments). Furthermore, the District could also consider lobbying for MPAC to loosen restrictions within the Resort Condominium Property Class. Both changes would have a direct positive impact on existing properties and future development, although any loss of tax revenues to the District and Area Municipalities would also need to be considered. Prepared for: The District Municipality of Muskoka Page 117