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Time-share study recommends conversion

Jenifer Ragland

While a recent study indicates a partial time-share conversion at Embassy Suites Resort is feasible from a market saturation standpoint, the report does not address crucial financial issues.

Prepared for city leaders and paid for by hotel owners KOAR-Tahoe Partners, the study was intended to help the City Council make a decision on KOAR’s controversial proposal to convert 188 of the hotel’s suites into vacation ownership units. The city last year imposed a five-year ban on such conversions in an attempt to protect the $200 million Park Avenue Redevelopment Project.

While RCI, Inc. consultant Richard Ragatz listed negatives associated with a partial conversion, his overall conclusion was that sufficient demand should exist within South Lake Tahoe to recommend the proposal. Planned time-share projects, including the Park Avenue effort, would not be drastically affected by a conversion at Embassy and would not prevent Embassy units from selling, the report said.

Ragatz cites many factors supporting that conclusion, including the hotel’s location next to the casino core, impending redevelopment projects in the immediate area, the many on-site amenities in the hotel including restaurant and lounge, and the opportunity to sell the time-share project to in-house hotel guests.

Throughout the 200-page report, the consultant examines the current time-share market in the United States, California and the Tahoe Basin. He found that almost 2 million tourists annually visit the local area – 75 to 90 percent of whom fit the profile of typical time-share buyers – and 1.7 million households with incomes more than $50,000 live within 200 miles of the South Shore. Coupled with the positive attributes of the Embassy name and the property, those facts indicate there would be enough interested people to absorb the extra 9,588 interval weeks that Embassy would bring.

Additionally, the report notes the history of time-share success in the basin – an estimated $540 million in sales in the past 15 years – the fact that time-share guests pump about 20 percent more into the local community than do hotel guests and that time-share projects generate higher year-round occupancy rates.

Negative factors exist

However, City Manager Kerry Miller said he doesn’t think the report is so conclusive that the city could not go the other way.

“The consultant doesn’t believe there will be market saturation, but he was honest enough about the negatives so that if the council turned down the proposal, they could find basis in the document to back up that conclusion,” he said.

Some of the negative aspects of the project include the small size (500-square feet) of the units and the fact that they are all one-bedroom units; minimal kitchen facilities, closet space and limited window views; a high-rise, high-density hotel ambiance rather than the typical time-share “resort” setting; and potential conflicts between the homeowner’s association and the hotel management entity.

The study also notes problems with the local tourism industry in South Lake Tahoe, including a steady decline in tourist visits, lack of a local airport, low room rates in the area, unpredictability of snowfall and increasing competition for gaming and recreation tourists.

One particularly interesting factor pointed out by the consultant is the potential for competition between The Ridge Tahoe, Signature Resorts and other developers coming into the area to create an overly aggressive and intrusive sales environment.

“It is not anticipated that additional, extensive competition would greatly affect the subject property, assuming the city of South Lake Tahoe properly controlled marketing and sales programs in the community,” the report said. “Potential saturation is much less of a problem than allowed-to-run-rampant marketing and sales activity.”

Miller said the city in the 1980s dealt with overabundant time-share solicitation that caused a negative visitor experience. City Council members most likely would not be interested in repeating that history, he said. While city officials can control such activity within city limits, they have no control over what happens across the state line.

Financial data lacking

What is missing from the report is any hard financial data to help city leaders craft a deal with KOAR, if they decided to entertain the time-share conversion proposal.

Relevant issues include how the city will maintain its Transient Occupancy Tax revenue stream to pay off bond debt if a time-share conversion is allowed, what will happen to the city’s general fund in 30 years when the bond debt is paid off and what kind of public benefit KOAR can afford as part of the deal. The study also did not look at how a bankruptcy at Embassy Suites – which is what KOAR says will happen if they don’t get the conversion – would affect the city’s future bond rates.

“I don’t think the report has specifically answered for us many of the questions we still need to have answered,” Miller said. “As far as the financial side, which may ultimately be the decision-making thing, there is not enough information in the report to make a conclusion.”

But he said that information hopefully will come out at tonight’s meeting through the city’s financial adviser, who is expected to deliver a presentation on the issues.

meeting box:

What: Special City Council meeting on time-share proposal

When: Tonight, 6 p.m.

Where: 1900 Lake Tahoe Blvd.


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