By Joshua Schroeder
After potentially the worst downturn in resort real estate history, the industry is beginning to pull itself off the mat. While the past five years have been marked by bankruptcies, workouts and auctions, the market appears to have found a bottom and may be poised for a significant period of slow, but steady expansion beginning in 2013 and 2014.1 Inventories, particularly those of triple A properties, are shrinking and the development pipeline is limited due to still tight, but improving, credit markets and a general real estate hangover among the traditional financiers. However, this does not mean that we are destined to return to the market of the early 2000’s where the investor fueled rally led developers to skip feasibility studies, ignore economic indicators and forget the tastes, preferences and priorities of the end user.
Projects that will be successful in the next cycle will have to challenge conventional wisdom and make development decisions that will defy the industry status quo. Spectacular design, best in class brand affiliation, signature golf courses and other traditional amenities are at best the basic requirements to compete and at worse albatrosses that reflect days gone by and have limited appeal to a market that will be dominated over the next 10 to 15 years by Gen X and Gen Y consumers.
To be truly distinctive, resort communities of the future will need to have new types of residential products, unique combinations of amenities and more diverse services and programming to attract the emerging resort consumer. The psychological impact of the financial crisis, resulting loss of wealth, and massive uncertainty have resulted in long-lasting changes in what drives the decision making process of the 2nd/vacation home buyer.2 As a result, a permanent shift has occurred in resort consumer’s attitudes away from consumerism and towards unique experiences, sustainability, wellness and relationships that simplify and improve their lives. The days where Dad spent six hours on the golf course with his buddies while Mom and kids hung around the house or at the beach are largely over. The emphasis now must be on a diverse set of lower cost, environmentally forward amenities that cater to the entire family and may also provide for managed public access.
The winners in the next generation of leisure properties will realize that standard man-made amenities such as marinas, golf courses, beach clubs and hotels can be built anywhere. They will subscribe to the belief that in order to achieve true differentiation and create lasting value over the long term that next generation resort residences and amenities must improve access, but also enhance unique, non-replicable natural amenities.
So, if you are in the market for a vacation property, don’t let deeply discounted prices mask difficult to fix project concerns such as a limited number of oversized amenities, high homeowner’s fees and expenses, poor design and construction and most importantly a lack of unique non-replicable natural amenities.
Sources: [1] 2012 Cotton Report [2] 2011 Fall Kelsey & Norden Resort Real Estate Survey [3] Fall 2011 Affluent Market Tracking Study [4] 2012 Azul de Cortez Resort Marketing Analysis
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Twitter: @JoshuaSchroede2 and @seeitmarket Facebook: See It Market
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.
