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MUSKOKA RESORT AND TOURISM OFFICIAL PLAN POLICY REVIEW

Recommendations Report

Prepared for:

The District Municipality of Muskoka

With funding assistance provided by

Ministry of Tourism, Culture and Sport

July 2013

Tel 416 360 5000 • Fax 416 777 1567 • Email [email protected] • www.pkfcanada.com PKF Consulting Inc. • 8th floor • 30 St. Patrick Street • Toronto • Ontario • M5T 3A3 Tel 604 689 3833 • Fax 604 689 2568 • Email [email protected] • www.pkfcanada.com PKF Consulting Inc. • Suite 1120 • 800 West Pender Street • Vancouver • British Columbia • V6C 2V6 PKF Consulting Inc. is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

PKF Consulting Canada

July 11, 2013

Ms. Samantha Hastings Planning & Economic Development Department District Municipality of Muskoka 70 Pine Street Bracebridge, ON P1L 1N3 Via email: [email protected]

RE: MUSKOKA RESORT AND TOURISM OFFICIAL PLAN POLICY REVIEW – Recommendations Report

Dear Ms. Hastings:

In accordance with the terms of our agreement, PKF Consulting Inc. (PKF) is pleased to submit the attached

Recommendations Report relating to the Muskoka Resort and Tourism Official Plan Policy Review for the

District Municipality of Muskoka. This report should be read in conjunction with PKF’s Background Report

and Interim Options Report, which were issued together in February 2013.

In completing this engagement, PKF has reviewed existing Muskoka Official Plan policies relevant to resorts

and tourist commercial development, researched District concerns, and listened to a wide range of

stakeholder input. This Recommendations Report provides PKF’s recommendations for adjustments to

Resort and Tourist Commercial policies to guide District decision making on a go-forward basis, in light of

market and economic trends impacting the resort and tourism industry. It also presents PKF’s input for a

policy framework that is believed to be fully supportive of future resort development and redevelopment in

Muskoka, and implications of adopting this framework on the District and other stakeholders. Finally, the

report presents an evaluation and subsequent recommendations for the District’s involvement in several

other areas that are creating challenges for the resort and tourism sector in Muskoka.

Yours truly,

PKF CONSULTING INC.

Muskoka Resort and Tourism Official Plan Policy Review Recommendations Report PKF Consulting Inc. July 2013


TABLE OF CONTENTS

1.0 INTRODUCTION ................................................................................................................................ 1

1.1 Study Background .................................................................................................................................... 1

1.2 Study Scope .............................................................................................................................................. 2

1.3 Report Overview ....................................................................................................................................... 3

2.0 TRENDS ANALYSIS ......................................................................................................................... 4

2.1 Introduction ............................................................................................................................................... 4

2.2 Resort and Tourist Demand Trends ........................................................................................................ 4

2.3 Resort Development & Tourism Product Trends .................................................................................... 6

2.4 Trends in the Canadian Accommodation Industry .................................................................................. 9

2.5 Current Muskoka Resort Industry Trends ................................................................................................ 10

2.6 Stakeholder Feedback regarding Muskoka Resort Trends .................................................................... 12

2.7 Summary ................................................................................................................................................... 16

3.0 POLICY RECOMMENDATIONS ....................................................................................................... 17

3.1 Introduction ............................................................................................................................................... 17

3.2 Overall Policy Framework ........................................................................................................................ 18

3.3 Definition of a Resort ................................................................................................................................ 21

3.4 Tests for Assessing Resort Commercial Use .......................................................................................... 22

3.5 Official Plan Amendment Requirement.................................................................................................... 28

3.6 Private Communal Servicing Requirements ............................................................................................ 28

3.7 Mixed Use Development .......................................................................................................................... 30

3.8 Downzoning .............................................................................................................................................. 32

3.9 Summary of Recommendations ............................................................................................................... 34

4.0 RECOMMENDATIONS FOR OTHER CONSIDERATIONS ............................................................. 36

4.1 Introduction ............................................................................................................................................... 36

4.2 Property Taxation ..................................................................................................................................... 36

4.3 Private Cottage Rentals ........................................................................................................................... 39

4.4 Trailer Parks, Campgrounds and Camps ................................................................................................ 41

4.5 Accommodation Sector Financing ........................................................................................................... 43

Muskoka Resort and Tourism Official Plan Policy Review Recommendations Report PKF Consulting Inc. July 2013


5.0 IMPLICATIONS FOR MUSKOKA ..................................................................................................... 45

5.1 Introduction ............................................................................................................................................... 45

5.2 Strengths and Benefits of a Permissive Policy Framework .................................................................... 45

5.3 Challenges and Cautions regarding a Permissive Policy Framework .................................................... 46

Muskoka Resort and Tourism Official Plan Policy Review PKF Consulting Inc. Recommendations Report July 2013 Prepared for: The District Municipality of Muskoka Page 1


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 other

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-laws recognize the importance of tourism to

Muskoka.

In September 2012, PKF Consulting Inc. (“PKF”) was retained by The District Municipality of Muskoka to

conduct a Resort and Tourism Official Plan Policy Review. 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. This work would be used to 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

In addition, Private Cottage Rentals and their impact on the resort sector had been identified as an issue by

resort owners, operators and other industry stakeholders, and this issue has also been considered in this

report.



1.2 Study Scope

The subject Recommendations Report provides recommendations for adjustments to Resort and Tourist

Commercial policies to guide District Municipality of Muskoka decision making on a go-forward basis. This

report should be read in conjunction with PKF’s Background Report and Interim Options Report, which were

issued together in February 2013.

Under the expanded scope of work for the subject study, PKF has completed the following steps:

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 sessions 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;

Consolidation of research and findings in an Interim Options Report;



Presentation of the Interim Options Report to the District Planning and Economic Development Committee, and the six Area Municipality Councils;

Second Stakeholder Workshop presentation and moderated discussion to elicit feedback on alternative policy options; and

Consolidation of research, findings and recommendations into a Recommendations Report.

1.3 Report Overview

The subject Recommendations Report incorporates all stakeholder input, research and findings relevant to

PKF’s evaluation of Muskoka’s positioning within the resort and tourism sector; a review of Muskoka Official

Plan policies; and presents a framework with recommendations to guide District decision making on a go-

forward basis, with respect to updating existing Resort and Tourist Commercial policies.

The report content has been organized around the key questions from the project terms of reference:

What are current and emerging trends that will impact the tourism industry in Muskoka?

Given these trends, what is needed for the successful development and redevelopment of resorts in Muskoka?

Based on the outcomes to the preceding two questions, what would be the operational and economic impacts on resorts of alternative official plan policy options developed in conjunction with District staff?

Other considerations to be explored included municipal property assessment impacts, small resort business re-capitalization opportunities, children’s and other institutional (e.g., schools and churches) camps as a potential growth area, and the impacts of private cottage rentals on the resort sector.

Each of these questions has been addressed within the subject report, under the following sections:

Trends Analysis

Policy Recommendations

Other Considerations (e.g., camps, private cottage rentals, resort taxation, etc.)

Implications for Muskoka



2.0 TRENDS ANALYSIS

2.1 Introduction

Considering the recognized importance of tourism to the Muskoka economy, one of the key objectives of this

project has been to identify current and emerging trends that may have an impact on the tourism industry in

Muskoka, and to assess the needs of both tourists and the development community when considering

Muskoka as a destination for travel and/or investment. The following section provides highlights of these

trends and from a market and economic perspective, including an evaluation of general trends in resort

development and resort ownership models, and affiliated demand trends to resort areas in general, and the

potential implications for Muskoka.

2.2 Resort and Tourist Demand Trends

The dynamics of supply and demand are closely interrelated in the resort industry. What drives resort

development is not only a function of what people want, but also what developers can make financially viable.

In keeping with the District’s original questions – the following section highlights key trends relevant to

demand, i.e. who are today’s tourists, and what do they want.

Financial concerns and economic uncertainty have had a large impact on travel intent:

¾ of travellers in Canada and the US looking for discounts when considering travel options;

Increased tourist interaction with online tools for travel planning has led to more short getaways and last minute bookings;

Travellers expect convenient online booking options that conform to their short-term needs, and

expect good value for their discretionary travel dollars;

Ease of travel and cheap flights to locations outside Canada have made other resort areas (i.e. Caribbean) significant competition for places like Muskoka.

From an activity perspective:

Nature/outdoors and urban/culture imagery have resonated well with consumers considering travel to Ontario – Muskoka is one of the primary regions that springs to mind for travellers to the Province;

About 28% of Canadian pleasure travellers stay at lakeside or riverside resorts, as compared to 24% of U.S. travellers - and there is a correlation between age and intention, with the data overrepresented by people 55 and older who report above-average household incomes;1

1 Travel Activities & Motivation Survey (TAMS) 2006: Canadian Travellers to Ontario and U.S. Travellers to Ontario



People tend to be looking for authentic “experiences” when they travel, as opposed to simple services and amenities.

There appears to be increasing interest in other forms of tourist accommodations:

46% of Canadians now take camping trips as part of their summer vacations;

With gains made in terms of fuel efficiency in recent years, there is an increasing interest in renting or owning RV’s as an alternative to a more fixed second home;

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;

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; and

Winter camping is another growing trend - winter roofed accommodations, including temporary yurts and cabins, are now being offered at seven Provincial parks in Ontario.

New trends in resort vacations include experiences ranging from eco-tourism adventures, spa breaks,

weekend getaways, to fractional ownership. Many of these changes reflect shifting demographic and lifestyle

choices:

Many travellers are looking for an alternative cottage experience – i.e. fractional ownership options in

the form of residences, hotels or clubs afford consumers the opportunity to enjoy a luxury, serviced holiday home without the enormous costs incurred by outright purchase;

Baby Boomers and senior travellers are primary target markets for the resort sector – due to their discretionary buying power, ability to travel off-season and during the week, times when many hospitality properties have higher vacancies;

The traditional two-week annual holiday booked in advance is becoming a thing of the past;

Growing interest in physical health and wellness will continue to support spa and like developments;

Ecotourism, spa and “soft adventures” (e.g., driving tours, trails and walking tours, wildlife viewing,

etc.) are attractive to consumers, as they respond to the public’s heightened concern for the environment; and

Increased interest in all-inclusive and virtual resort products (i.e. online vacation property rental

companies).



What the consumer is predominantly looking for in a wilderness or waterfront Ontario travel experience can

generally be broken down into two types:

1) The traditional resort vacation, and 2) The alternative “cottage” vacation.

The traditional resort vacation would typically include a one or two week stay at a resort hotel or

housekeeping resort property, wherein visitors make use of available facilities and amenities, and tend to

remain on-site. The alternative “cottage” experience involves some level of ownership and right to use with a

range of physical product and ownership structures, including but not limited to:

Full title of a building and land to a single owner (not dissimilar to traditional cottage ownership);

Full title of a single resort unit (with or without land) to a single owner, where multiple physical units

may exist on a single property;

Title to a portion or “fraction” of a unit’s ownership; and

Share in the right to use a resort unit for a select number of weeks.

Owners of this type of resort product today are motivated first and foremost by their “right to use” – as they

provide a way to visit an area, without making a commitment to purchasing property.

2.3 Resort Development & Tourism Product Trends

On the “supply” side, there are a number of resort and other tourism development forms that are continuing to

emerge in Ontario, and have been proposed outside urban areas in Muskoka.

Although there are two general types of resort consumers, resorts that provide an alternative “cottage”

vacation (i.e. offering real estate ownership with personal usage), as opposed to resort hotels focused on

transient rental, have constituted the majority of resort hotel development over the last 5 years. This model

involves joint commercial accommodation and residential real estate development, and is popular with

developers for a number of reasons:

The cost of building a resort hotel today is prohibitive to most hotel developers - market and seasonality conditions make it difficult for properties to perform at levels that support the significant cost of development;



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 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.

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.). It is increasingly difficult for developers to

offer this type of resort. A typical resort hotel has development costs ranging from $300,000 per room, to as

much as $500,000 per room or more. Furthermore, demand trends point to an interest in more diversity of

authentic experiences and

increased ease in travel to other

global locations, which has led to

the development of fractional and

timeshare models.

Resorts present in Muskoka today

represent a range of ownership

structures in the categories of:

Sole, Condominium, Fractional

and “Alternative” ownership.

Alternative ownership models

included corporations with

individual shares held by

individuals.

From a physical perspective, a

traditional resort can look a lot like

a resort that offers an alternative

cottage experience, as the type of

tenure available does not dictate

physical form. Table 2-1 provides an idea of the primary classifications in use in Ontario today.

•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


•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


•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

Country Inns

TABLE 2-1RESORTS OF ONTARIO - RESORT CLASSIFICATION SYSTEM

Resort Hotels

Resort Lodges

Cottage Resorts



Based on previous research conducted by District staff, as well as a brief survey of known fractional resorts in

the Muskoka area conducted as part of this study, the typical resort offered either one or two types of units, in

any of three primary styles: hotel-style rooms, townhome/duplex/triplex units, and/or detached cottage/cabin

units with kitchens. In terms of amenities offered, the survey results were not surprising in that the most

prevalent amenities were water-based: pools and beach access, and only half of the resorts offered food and

beverage facilities. 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. No

one specific amenity was present at all resorts, which is typical of resorts offering fractional ownership.

As mentioned, 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. Given the limited amount of available tourist

commercial waterfront properties, adventure tourism and ecotourism would be considered niche markets with

strong potential in Muskoka. Potential adventure tourism based resorts might focus on ziplines, rock-

climbing, mountain biking, kayaking, canoeing and hiking– i.e. adventures that do not have a significant

impact on the environment - and would need to be located in an area with an appropriate landscape (i.e. rock

cliffs or forested areas). Ecotourism resorts could feature more of a simple alternative camping experience

(i.e. tree houses and yurts), with no defined services.

In terms of other tourism product, current trends include:

RV Parks = to appeal to RV clientele, campground operators have increased their service offerings - some RV Parks are becoming more like country clubs with manicured lawns, and on-site golf courses, clubhouses, swimming pools, water slides, spas, restaurants and summer camps for children.

o RVs are now more fuel efficient fuel efficient and outfitted to provide all the luxuries of home – costs range from $65,000 to over $1.0 Million

Campgrounds = 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

Camps = adventure program additions at day and overnight camps, such as: high and low ropes courses, climbing walls, zip lines, backpacking, mountain biking, kayaking, canoeing, and hiking.



2.4 Trends in the Canadian Accommodation Industry

The accommodation industry is cyclical and vulnerable to economic and travel fluctuations. Major world

events have had direct and significant impacts on the resort industry. For example, following 9/11 in 2001

and SARS in 2003, performance and profit levels tumbled, yet development and investment interest remained

high, especially in Central Canada. 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 sector began to show improvement in 2010, they began to come back and

continued to do so in 2011 and 2012.

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 interest rates are lower than they were in the past, but higher risk assets such as resorts

must pay a premium; and

A greater reliance on sourcing financing from Trust Companies, Credit Unions and Finance Companies as Chartered Banks, which continue to limit their lending to the sector.

Over the last 12 years, accommodation 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.

The difficulty in obtaining funding in today’s investment environment, combined with extremely low profit levels

at resorts in Ontario, indicates that existing assets will have difficulty in generating the necessary capital

required for upgrades. Furthermore, new developments based on traditional debt/equity financing off cashflow

cannot currently be supported, and it is unclear as to whether these conditions will change in the short-term.

As such, development models that generate alternative sources of funds through the sale of units are

required for new development.



2.5 Current Muskoka Resort Industry Trends

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.

It is evident that the trend of people staying in accommodations that match their activity interests continues in

Muskoka – with the majority of travellers interested in boating staying at waterfront resort accommodations.

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 2011. Hence, the total Muskoka accommodation market includes

111 properties, and over 4,000 rooms.

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. 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. Summer represents the peak demand season for the resort market at 43% of overall

demand in 2011, with occupancy levels reaching the 67% range.

According to PKF’s Monthly Trends database, which tracks top-line occupancy and average daily rate

performance for 11 Muskoka resorts, overnight visitation to Muskoka has increased by almost 2% over 2011

levels. This data suggests that demand for Muskoka resorts is returning to 2008 levels, despite continued

economic uncertainty in the tourism sector.

One of the primary questions asked by stakeholders was whether or not there is an “oversupply” of resorts in

Muskoka. The fact that resorts are not reaching capacity during the peak summer months (i.e. 67-70%

maximum) is less a factor in a potential “oversupply” situation, and more a reflection of broader market and

economic factors. 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 throughout Ontario.



It is unclear as to whether Ontario resorts will ever reach previous occupancy levels in the mid to high 50%

range.

Some resorts in Muskoka may require upgraded facilities to meet evolving demand trends, and

accommodations that remain unimproved will have increased difficulty competing with new resorts.

Nevertheless, there is still demand for a range of resort product types in Muskoka. 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 products in Muskoka would have been in the range of 400-800

units over the next 10 years. At these levels, PKF research suggests that the Muskoka accommodation

market could absorb 40-80 new resort units for transient rental and/or sale annually, if their development was

economically viable from a developer’s standpoint.

Another resort supply trend in Muskoka today is that no new resorts have been built on lands where

development rights did not already exist in the past 5 years – there have only been redevelopments of

existing resort properties. The development community has expressed concerns about the financial

implications of replacement reserve fund requirements for site servicing as a negative impact on development

for sites not on municipal services. However, even where properties have access to existing or planned full

municipal services (water and sewer) there have been no significant developments other than the JW Marriott

Resort & Spa “The Rosseau” and the Marriott Residence Inn in Gravenhurst. PKF research points to a

combination of factors for this trend – in part market-driven, as the lending community has been hesitant to

lend to the resort sector; in part a function of economic viability constraints; and in part due to the fact that

developers have been more apt to restrain building activity in recent years. However, it is also due in part to

barriers related to policy, i.e. requirements for local Official Plan Amendments, difficulty in meeting tests for

availability and commercial facilities, and reserve fund requirements for private communal services.

Nevertheless, the resort sector generates $400 Million annually ($50,000 per rental unit), and it is PKF’s

opinion that 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 alternative ownership or

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 at alternative ownership or condominium resort developments, as

opposed to cottage development, suggests strong potential for additional economic impact.



2.6 Stakeholder Feedback regarding Muskoka Resort Trends

In terms of other Muskoka-specific trends, there were a number of stakeholder issues and other factors

identified by PKF that will continue to impact the resort industry.

2.6.1 Resort Owners/Operators

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 (i.e. increased commercial options and density);

Increased competition from private cottage rentals;

o 3,200 resort units are forced to compete with an estimated 2,000 private cottage rental units - There are currently no policies or regulations restricting private cottage rentals

o Resort operators are looking for assistance in regulating unfair competition, i.e. enforcing Zoning By-Laws that ensure unit rental is not permitted at private cottages that are being intentionally being operated as businesses (as opposed to occasional rentals), or introducing a licensing system that is required for private cottage short-term rentals

The need for additional regional and provincial marketing;

Challenges in realizing the value of their asset;

Environmental challenges leading to concerns with future sustainability of resort operations, i.e. low water levels in Georgian Bay;

High levels of property taxes for commercial waterfront properties

o Across the Province, most housekeeping resorts are classified as residential and land is

valued using the sales comparison approach, which creates inequities in places like Muskoka where residential waterfront land values often exceed commercial values; and

o MPAC developed a specific Resort Condominium Property Class, which still sees the property assessed at a residential value with a class specific mill rate, but no Muskoka resorts would qualify.



2.6.2 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. Development stakeholders have also expressed the following

concerns:

Many potential resort users are interested in owning units for their own exclusive use, which is currently not permitted on waterfront resort properties;

There appears to be a difference in how the various municipalities respond to resort commercial proposals (i.e. redevelopment or upgrades to resort commercial properties)

o Some developers point to the need for the District and local governments to take a position regarding future support of resorts as economic drivers in Muskoka;

o Developers have also suggested that District policies will have to be flexible to allow those Area Municipalities who want to continue to support resorts to do so, while allowing other Area Municipalities to establish additional restrictions.

Competitive threat of private cottage rentals needs to be addressed by local municipalities (i.e.

licensing)

For the most part, development stakeholder concerns are related to perceived policy barriers, which have

been considered in the following sections.

2.6.3 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. 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;


complementary development; and

The need for additional regional and provincial marketing.



2.6.4 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;


complementary development; and

Need for additional regional and provincial marketing. 2.6.5 Lake Associations / Ratepayers

Lake Associations and ratepayer stakeholders in Muskoka voiced a number of specific concerns and opinions

regarding:

Safety and security issues, and noise levels infringing on neighbours of both resorts and private cottages being rented out as “income properties”;

Muskoka resorts are in decline because they are losing market share to competing North American and international destinations and have not upgraded their own facilities;

Increased resort development is not guaranteed to bring tourists to Muskoka, but will change and potentially damage Muskoka’s landscape;



Viability of Muskoka to continue to attract tourists, cottagers and residents is dependent on its ability to preserve a unique natural environment;

Potential environmental impacts resulting from intensity of use at lakeside resorts and other tourism

product developments;

Whether a resort development combined with a residential component is really desirable to tourists; and

Implication of capital losses of resorts becoming a burden to local tax-payers.

These stakeholders also expressed specific views on a variety of policy issues as described in the next

section of this report (i.e. issues concerning downzoning, mixed use developments, and servicing

requirements).

2.6.6 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 some local government in a more defined and structured set of policies,

guidelines, criteria and definitions governing resort operations, expansions, and development. Although other

Area Municipalities saw a need for more flexible guidelines at the District level, which would allow for more

distinct interpretation and application at the local level to respond to individual circumstances. There were also

mixed opinions with respect to supporting the retention of the resort commercial land base, versus allowing

the downzoning of resorts to residential use. These issues are considered in the following sections of this

report.



2.7 Summary

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. From a travel demand perspective, resorts in Muskoka can satisfy both types of experiences, and

are expected to continue to be popular with visitors. Muskoka is also expected to continue to benefit from an

aging population with more discretionary income to spend on softer adventure options, and products that tap

into the travel requirements and desires of the seniors market may allow operators to attract demand from this

growing target market during low or off season periods. However, in light of continued economic challenges at

the global level, consumers expect good value for their vacation dollar, and resorts will have to provide a

solid, accessible alternative to the easily accessible last-minute trips to other global resort locations.

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 a unique landscape, and proven interest in adventure /

eco-tourism activities with brands, business tourism with family ambience, and environmental sustainability with modern luxuries.

Tourism trends also point to potential opportunities for development of other overnight tourism products to

attract tourists with varying interests to Muskoka. For example, adventure tourism and ecotourism interests

could be supported at campgrounds and camps throughout Muskoka, and therefore present a potential

growth opportunity for Muskoka’s tourism sector.



3.0 POLICY RECOMMENDATIONS

3.1 Introduction

In addition to the direct market and economic trends that are expected to impact resorts and the tourism

industry in Muskoka over the coming years, there are also impacts that might be generated via changes to the

resort related Muskoka Official Plan policies which could further encourage or further restrict future resort

development and operations.

There are many factors the District should consider when contemplating adjustment to Muskoka Official Plan

policies in this area.

First and foremost is the quantifiable importance of resorts and supporting tourism infrastructure in Muskoka. The resort sector alone generates $400 Million annually ($50,000 per rental unit), and is a significant source of direct and indirect employment in Muskoka.

In addition to creating jobs and economic spinoff for existing Muskoka businesses, resorts have helped to build the character and heritage of the Muskoka landscape. The first resorts were built in direct relation to innovations in transportation. 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.2

Resorts provide access for tourists and other visitors to enjoy Muskoka lakes and waterfront areas,

which are otherwise very difficult to find. They have also helped to introduce future home and cottage owners to the area, and provide access to Muskoka without having to purchase a cottage.

The Muskoka Official Plan recognizes the importance of strengthening the tourism sector, and indicates that

as a principal contributor to the recreation economy, the tourism sector impacts a wide variety of businesses

and economic activities. However, it is also evident that current policy sets when applied in combination are

not necessarily meeting the intended goal of promoting the 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 following section outlines a recommended framework for implementing specific Muskoka Official Plan

policy changes to further support resort and tourism development and operations in Muskoka going forward.

2 http://www.visitmuskoka.com/history2.htm



3.2 Overall Policy Framework

PKF has reviewed existing Muskoka Official Plan policies relevant to resorts and tourist commercial

development, considered District Staff and Council concerns, and listened to stakeholder input. It can be

concluded that in general, existing policies would be considered supportive of resort development and

operations. However, there are some specific policy sets that do impose some level of restrictions, whether or

not that is the intent, and consequently result in challenges for new, existing and redeveloping resorts in

Muskoka. The ability to provide flexibility in the development planning processes through Muskoka Official

Plan policy changes will be required if future resort development is to continue in Muskoka.

The following is a list of Muskoka Official Plan resort and tourist commercial policies that have been identified

by PKF and other stakeholders as barriers to resort and tourism development and operations.

Muskoka Official Plan policy encourages rejuvenation and expansion, yet many resort operators

are faced with restrictions at the local level (e.g., local Official Plan policy restrictions regarding density, difficulty in obtaining building permits, etc.), which limit the ability to generate alternative forms of income through expansion and/or complementary development;

MOP policy discourages the downzoning of resort properties to residential use, yet market,

operating and economic viability issues are creating challenges for some resort operators in realizing the value of their assets.

o Downzoning is mostly an issue for smaller properties, but some large properties may warrant evaluation;

o Many stakeholders support downzoning for smaller properties and greater planning flexibility for local municipalities to determine appropriate land use for resort properties wherein owners can no longer support their operations;

o Some local area municipalities would like to see adjustments to downzoning policies

allowing some level of development to occur in the short-term, recognizing this will result in some loss of the commercial land base.

The ability to provide flexibility in the development model and development process through

Muskoka Official Plan policy changes will be required if future resort development is to occur, since resort development based on traditional debt/equity financing off operating cashflow has not been sustainable for some time, and is unlikely to be sustainable in the future;

Processes related to obtaining a local Official Plan Amendment for new waterfront resorts are creating barriers for some resort developers and could be more streamlined;



Current policies requiring developers to post a 100% replacement reserve plus inflation in order to establish private communal services is financially restrictive – this has been identified by resort developers as the most significant policy barrier;

Existing policies relative to commercial resort definitions and commercial tests are difficult for some resort developers to adhere to, particularly with respect to undefined requirements for resort unit “availability” and provision of “ongoing services and recreational facilities”;

o There is inconsistency in the MOP definition of resort, which permits “all forms of tenure,” and

the requirement for resorts to make units available to the travelling public and make a profit;

Local Area Municipalities differ in terms of their response to commercial resort proposals and this is creating a barrier for resort development - some local government stakeholders are concerned that existing policies at the District level are not specific enough to enable consistent approval of resort development applications, and would like see more defined policies aimed at influencing but still encouraging the nature and type of development, while others would like to see future policies remain broad in order to not to restrict the nature and type of development;

Mixed commercial and residential use at resorts may enhance viability through development profits

for new resorts and redevelopments in Muskoka, although lake ratepayers and other stakeholders have concerns about this approach.

Although it is difficult to create one framework that addresses all policy-related concerns for all stakeholders, a

permissive policy framework at the District level is required if future resort development and operations are to

be encouraged throughout Muskoka. PKF is recommending that a permissive framework be adopted, as

resorts continue to be impacted by market conditions and challenges in economic sustainability. Also, resorts

are important economic generators for Muskoka, and their development should be encouraged because of

the economic spinoffs to other businesses, as well as direct and indirect economic and social benefits (direct

jobs, jobs for suppliers, preservation of Muskoka heritage, public access to the lakes, etc.). It is also

important to recognize that while there are market driven factors influencing the resort sector, there are even

more importantly financial and investment factors, influencing economic viability. It is difficult to develop

planning policy that adequately addresses future market trends in resort development due to ever evolving

concepts and consumer trends. It is even more difficult to develop planning policy that adequately addresses

future investment trends influencing economic viability.

In consideration of these issues, two key factors should be recognized when considering policy adjustments:

Firstly, simply adjusting District policies to be more permissive does not guarantee future development; however, without adjusting current policies resort development in the short to mid- term may be limited.



Secondly, while, the Muskoka Official Plan should provide guidance for Area Municipalities, it should

allow for some flexibility to tailor specific local planning policies to their individual circumstances and requirements.

In addition, in terms of overall encouragement of tourism, Muskoka Official Plan policies should reflect the

need for resorts and other tourist commercial operations to effectively respond to changes in market and

development trends. Building on previous policy objectives, Muskoka Official Plan policies should

generally encourage the growth and diversification of the tourism sector as a primary component of

Muskoka’s economic base including:

The retention and expansion of existing resorts and tourism facilities, and the development of new

resort/tourism facilities in appropriate locations;

Support for existing resorts;

The objective of Muskoka being a year-round destination; The need to support tourist commercial facilities, events and activities such as attractions, shopping,

restaurants, historical sites, recreational activities, trails, parks, water access, to enhance Muskoka as an overall tourism destination; and

Inclusion of flexibility to respond to trends.

In this context, it is recommended that policies at the District level remain broad and strategic, thereby

providing opportunities for the Area Municipalities flexibility to tailor some of their respective policies to local

circumstances.

The following paragraphs set out recommendations for adjustments to Muskoka Official Plan policy in order to

maintain or improve a framework that encourages and supports resort and tourism development. These

recommendations are not intended to direct the specific wording for each policy, but are intended to provide

the key philosophical direction and implications for resort-related policy.

In the following sections we address the basic elements of resort-related policy in the Muskoka Official Plan,

as follows:

1. Definition of a Resort

2. Tests for Assessing Resort Commercial Use

3. Official Plan Amendment Requirement



4. Private Communal Servicing Requirements

5. Mixed Use Development

6. Downzoning

3.3 Definition of a Resort

Within the current Muskoka Official Plan, Policy C.29 A provides a definition of a resort as follows:

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.

The existing policy provides a very broad definition of a resort, which would be considered a positive factor in

encouraging future resort development and operations by not putting any restrictions on the nature and type

of development. The current definition also addresses to some degree tenure and use, since it indicates that

“all forms of tenure” at resorts will be considered.

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 to adopt for planning purposes.

However, there are some commonly accepted characteristics based on the experience offered and general

location of a resort.

One of the questions identified by the District at the outset of the study was: “how could the definition of a

commercial resort respond to emerging trends?” As identified in the previous section of this report, not only

are there new resort development models (i.e. resort-related residential and mixed use) and ownership

models (i.e. fractional, timeshare, condominium, shareholder) emerging in the resort sector, but consumer

vacation trends have also changed (i.e. increased use of online tools for travel planning, more frequent short

getaways, and interest in an alternative “cottage” experience). There is no “ideal” resort model for Muskoka

with respect to physical size and facilities or management set up and availability of units. Thus, implementing

a more detailed definition of resort 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.



In order to encourage opportunities for future resort redevelopment and new resort development on tourist

commercial lands, and to respond to emerging trends, the following should be considered:

The definition of a resort should remain broad, so as to encourage all product types, and all forms of tenure, and/or to allow for the development community to respond to current and future trends in development.

At a broad level the definition of a resort should address the provision of roofed overnight

accommodation, with the provision of a range of services, facilities and amenities offered in a vacation oriented setting.

o Potential criteria for a vacation-oriented setting could include provision of access to a geographically significant attribute (i.e. lake, golf course, ski hill, etc.), or other significant man-made or natural tourism asset.

The definition should differentiate a resort from other overnight accommodation establishments (i.e.

bed & breakfasts, motels, tents and trailer parks), due to the unique attributes of resorts and the issues and challenges impacting operations and development of resorts.

o In order to differentiate a resort from other forms of overnight accommodations, a resort could be defined as a roofed accommodation product that is located proximate to a geographically significant attribute with associated recreation facilities (i.e. lake & boats) or other significant man-made or natural tourism asset, and emphasizes a leisure experience.

The definition should avoid defining the required physical characteristics of a resort. There is no ideal

resort development with respect to physical size or nature facilities. Attempting to provide a detailed definition addressing those components will only result in restricting future development opportunities.

Any specific factors or considerations beyond a broad based definition should be addressed within the Tests

for Resort Commercial Use, with some ability for these tests to be adapted or adjusted at a local Area

Municipality level, provided conformity with the Muskoka Official Plan is maintained.

3.4 Tests for Assessing Resort Commercial Use

Muskoka Official Plan Policy C.29 B 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.

The key components of the existing policy are the identification of tests to assist in ensuring commercial use,

as follows:

1. Availability to the Travelling Public

2. On-Site Management

3. Operated for Profit

4. Provision of Services and Facilities

5. Enforceable Documentation

With a broad-based definition of a resort, there will be a continued need for tests to assess compliance for

commercial use, with some ability for these tests to be adapted or adjusted at a local Area Municipality level.

The existing policy begins to place some restrictions on unit availability to the travelling public at a resort

development (although availability is not defined), but it lacks criteria with respect to who constitutes the

“travelling public,” what facilities are provided in a “commercial setting,” and associated criteria and guidelines

for enforcing requirements and maintenance of commercial elements. As previously identified, this policy

does not meet requirements for those stakeholders that want more specific criteria, and forms barriers for

developers particularly with respect to availability and profit requirements. Consequently, this policy is

considered restrictive to virtually all related stakeholders. With respect to each of these tests, an approach

that will limit restrictions at a District level is being suggested, but is still adequate to define a resort

commercial use.

(1) Availability to the Travelling Public

Under the existing interpretation of Policy C.29 B, as a test for resort commercial use, resort operators are

required to make accommodation units available to “the travelling public”. However, no criteria are provided

for determining who is the travelling public, what is a reasonable level of availability, or the scale or number of

units that need to be available. Enforcement of this model is problematic and there is no assurance that any

level of availability is truly occurring at many of these new alternative ownership resorts.



In order to encourage continued opportunities for resort redevelopment and new resort development on

tourist commercial lands, it is recommended that the concept of the “travelling public” be removed from the

policy and be replaced with a policy mandating that resort units generate a turnover of occasional and

temporary occupants. In this way, arrangements such as rental pools, exchanges, timeshare, or fractional

usage models would be permitted. However, exclusive use of resort units by sole owners should not be

permitted under a resort commercial designation. The framework as proposed should be based on the

following factors:

No exclusive use by a sole owner or other sole user is permitted, in order to restrict stand-alone residential development from occurring in tourist commercial zoning;

Units must generate a turnover of occupants, regardless of the user (i.e. owners, renters, or transient

visitors) through daily or weekly rentals, mandatory rental pools, exchanges, timeshare or fractional ownership;

Occupancy must be occasional and temporary; and

Units should be subject to occupancy time restrictions, which could be on an annual or seasonal

basis, with details to be determined by the Area Municipalities.

By following this approach, Muskoka Official Plan policy would remain flexible with respect to turn-over, but

local Area Municipality Official Plan policies or other documents would likely need to establish occupancy time

restrictions on an annual or seasonal basis. However, this may be difficult to monitor and enforce, and may

require additional allocation of resources.

The rationale for this approach is two-fold:

1. It does provide the development community with a greater level of flexibility in selling units to owners;

2. It recognizes that the range of ownership types/users permitted will result in a stronger level of

economic impact/visitor expenditures than traditional cottage development.

(2) Element of Profit

The current requirement of the existing policy is that to be considered a resort commercial use in the Muskoka

Official Plan, facilities offering accommodations must be operated with the intention of making a profit, which

in turn implies that a financial transaction will take place.



Some resort models may not meet this test, as when there is some form of multiple or alternative ownership

involved, there may be no financial transaction that takes place when guest turnover occurs. For instance, at

numerous existing “fractional ownership” resort developments Muskoka, a purchaser buys a share in a not-

for-profit corporation. Although there is a revenue stream at these resorts (i.e. monthly fees collected to pay

for housekeeping and maintenance services, etc.), there is no direct profit. Similarly, at a “timeshare” resort, 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 order to be more encouraging of short to mid-term development needs, it is recommended that the policy

requirement should be broadened to test for either an element of profit or a revenue stream. If this test

cannot be met, then the test for guaranteed guest turnover must be met in order to ensure commerciality, as

defined above.

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 may limit the level of short to mid-term, and possibly long-term resort

development.

(3) Management Services

Existing policies currently require central management on location at resorts. This has been interpreted as a

requirement for the resort to provide a reception area or office where keys are obtained, problems are

reported, bookings are managed, payments are rendered, and site security is based.

However, 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 discussed, some resort developers are already having trouble meeting this requirement and/or would

prefer an alternate arrangement. For example, some developments may not require or have the need for on-

site management, because there are contractual agreements with housekeeping, central reservations

systems, property maintenance program, etc.



It is recommended that this commercial test be more flexible in recognition of the fact that different operational

arrangements are already in use in Muskoka and elsewhere, and to allow for new models that have not yet

been contemplated. Thus, under a permissive policy framework, it is recommended that the current test is

revised such that resorts may offer either on-site or off-site management, on the condition that that there is a

mechanism in place to ensure that bookings, guest services and site security are provided through formalized

operating relationships. This condition should be reflective of the scale, location and facilities of the resort

and the proximity of management services to the property.

One of the main concerns identified by stakeholders is the potential issue of security breaches, should central

management not be provided on-site. However, a local contact could be available in the same community via

a property management company. Off-site property management companies can provide bookings, guest

services and site security, which are typical management services. The District or Area Municipality may want

to consider a requirement for documentation to demonstrate how services are to be provided by such a

company. Consideration of on-site or off-site management should also need to take into account scale,

location and facilities, since smaller resort operations with few facilities and amenities would have less

management service requirements, as compared to large urban resorts with full service restaurants and

meeting facilities.

The development community would certainly welcome more permissive considerations in Muskoka Official

Plan policy, wherein management of resort units would be flexible. However, the primary challenge in

increasing flexibility to allow for either on-site or off-site management would be the potential inconsistency in

the nature and availability of management services, and the reduced level of on-site 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, scales and locations of resorts that might be

developed, i.e. remote ecotourism resorts vs. large urban resorts, or full service vs. housekeeping resorts.

If the policy remains broad at the District level, then Area Municipalities will have the flexibility to apply

management criteria as required in their own Official Plans.

(4) Ongoing Services and Facilities Provided in a Commercial Setting

The existing commercial tests require basic minimum services. Some examples may include: food and

beverage services, conference services, and recreational facilities such as shoreline, hiking trails, or other



similar amenities, although no criteria are defined. As mentioned in the discussion of the definition of resort,

there are some commonly accepted characteristics based on the experience offered and general location of a

resort; however, services and amenities can vary significantly. For example, a full service resort hotel may

provide a restaurant, spa, and meeting/convention facilities, while a housekeeping resort may only provide

cottage units in a natural setting. Furthermore, there may be enhanced tourism infrastructure in an urban

setting (i.e. retail, foodservice), or in close proximity to a lake or attraction, as compared to a more remote

setting. Of greater importance than specific services and amenities is the availability of those services and

amenities to resort users.

As such, under a permissive policy framework, it is recommended that the policy is retained and clarified to

ensure that a resort offers some level of ongoing services and facilities that are common and available to all

resort users. This may help to prevent development of exclusive services and facilities, which are more

reflective of a stand-alone residential community.

As discussed, having a broader Muskoka Official Plan policy allows the Area Municipalities more flexibility to

apply further restrictions as required in their own Official Plans. For instance, local policies could mandate a

minimum percentage of resort lands to be dedicated to communally available services and amenities.

(5) Documentation Enforceable by Area Municipalities

The existing policy requires certain documentation that demonstrates commercial use and maintenance of the

commercial components of the development. Some local government stakeholders have indicated a need for

more detailed criteria to be added to this test (i.e. development agreements that cover management service

requirements and mandated transaction component, zoning enforcement, usage plans, site plans, etc.).

It is recommended that the requirement for documentation enforceable by the Area Municipalities remain

unchanged, and that maintenance of resort commercial land use continues to be enforced at the Area

Municipality level as they see fit. However, the maintenance of a resort commercial use is also important to

the District, especially from a servicing perspective. Where the District is the approval authority (i.e.

development of subdivisions or condominiums), the maintenance of commercial use may also be included

and enforced in District documents.



3.5 Official Plan Amendment Requirement

The existing policy (C.28) outlines the requirement for an Official Plan Amendment at the local level in order

for new resorts to be established in the waterfront designation. Although Area Municipality feedback points to

a desire for more definitions and criteria, and to enhance existing checks and balances for resort

development, they would prefer that this requirement is removed. At the same time, the requirements for a

local OPA have been perceived by some as a barrier, both financially and in terms of timelines, for new resort

developments, while other stakeholders have suggested that the OPA process is not a true barrier for viable

developments.

In order to enhance opportunities for resort development in Muskoka under a permissive policy framework, it

is recommended that the District eliminate the requirement for a local Official Plan Amendment for new resort

developments on lands not currently zoned for resorts. Adjusting the existing policy to require a Zoning By-

Law amendment as an alternative (which would include a public process) would be sufficient to address the

needs of both developers and municipal stakeholders, because a comprehensive planning process is still

being undertaken through this alternative process.

If this policy is eliminated from the Muskoka Official Plan, it would remain the responsibility of the Area

Municipalities to ensure comprehensive planning processes were being carried out, and that new

developments obtain the necessary Zoning By-Law amendments. In such cases, the District would act as a

“commenting” agency.

3.6 Private Communal Servicing Requirements

The existing MOP policy (H.28) permits private communal services for resort commercial condominium

developments outside of municipally serviced areas subject to a number of criteria, including:

…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.

As previously identified, the requirement for a reserve fund in this policy creates an actual or perceived

financial barrier for resort developers looking to build or redevelop resorts on tourist commercial properties in

Muskoka outside of areas with municipal water and sewer services, particularly when an alternative

ownership model is being considered. When this policy was introduced into the MOP, the purpose of the



reserve fund requirement was to protect the District from any liability in the event of the failure of a private

communal servicing system. However, since that time, the Condominium Act has been revised and now

includes detailed requirements for the establishment and maintenance of reserve funds. More specifically,

the Act now requires that all condominium corporations establish and maintain one or more reserve funds to

be used solely for the purpose of major repair and replacement of the common elements and assets of the

corporation, which would include private communal servicing systems should they be proposed. When

initially setting up the reserve fund, contributions to the fund need to be at least 10 per cent of the budgeted

amount required for contributions to the common expenses, exclusive of the reserve fund.

The corporation must also conduct periodic reserve fund studies to determine whether the amount of money

in the reserve fund and the amount of contributions collected by the corporation are adequate to provide for

the expected costs of major repair and replacement of the common elements and assets of the corporation.

The first reserve fund study must be completed within the year following the registration of the condominium

declaration and description and subsequently at least every three years. Such studies must be conducted by

a person with the necessary expertise, usually a professional engineer, architect, appraiser, surveyor or

equivalent, who has no affiliation with the condominium board or with the corporation.

It would appear that the requirements outlined in the Condominium Act are sufficient to reduce any major

liability risks for the District in the establishment of private communal services for resort commercial

developments. There does not seem to be a need to continue to include a separate reserve fund requirement

and process through policy given the legislative requirements under the Condominium Act.

Therefore, it is recommended that in order to encourage resort growth, the District should eliminate the

requirements for a reserve fund in the Muskoka Official Plan, and rely entirely on the legislative requirements

under the Condominium Act, provided that the land use remains 100% resort commercial. It is believed that

the elimination of this District policy would help to break down the actual or perceived financial barrier for

resort developers considering the condominium model. Under this recommendation, the only outstanding

liability for the District is potential future illegal conversion of the resort commercial use to a residential use.

This is one of the reasons why the tests for and enforcement of a resort commercial use as outlined in the

MOP are so critical.



3.7 Mixed Use Development

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 resorts on tourist commercial

lands or redeveloping waterfront resort properties outside of urban areas. 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,

the Muskoka Official Plan prohibits the use of private communal services for any type of residential

development, due to the requirements under the Safe Drinking Water Act for the District to be responsible for

these systems, and the resulting municipal liability and potential cost to taxpayers. Therefore, 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) District responsibility and liability for

small, remote, private communal systems.

Although the risk to the District is a significant consideration, it is also evident that the most prominent trend in

resort development is the renewed interest in joint commercial accommodation and real estate development

that generates a profit through the sale of land or units for some level of personal use. The cost of building a

resort hotel today is prohibitive to most 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 requires profits from the sale of units that offer some element of personal use.

These profits are used to subsidize the investment in the ongoing resort operation. With the income from unit

sales occurring in supplemental phases of a project, a longer term investment horizon is required from the

developer.

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 using a model where some level of personal use is guaranteed to owners, 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.

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 necessarily be

adhered to.

Additional flexibility in permitted uses might present more opportunities for resort development in the District

overall. As such, in order to be as encouraging as possible to new resort development in Muskoka, it is

recommended that policy be adjusted to permit the concept of mixed resort commercial and resort related

residential (exclusive) uses as a viable option for new resort development and redevelopment of resorts on

tourist commercial lands on in the waterfront designation.

It is understood that there are a number of stakeholder concerns regarding mixed use, such as liability issues

related to private communal servicing, as well as potential changes to waterfront character and the overall

Muskoka landscape/environment. For instance, some stakeholders are concerned that introducing mixed use

to Muskoka may lead to increased urbanization, which takes away from the natural environment on which

Muskoka’s tourism-based economy is founded.

In light of the afore-mentioned considerations, it is further recommended that new mixed use development

should only be considered if the following criteria are met:

The site is determined to be large in scale, in order to ensure the appropriate facilities and amenities can be developed, and to ensure there is sufficient income from the sale of units to support the ongoing resort operations;

Resort commercial uses are developed during the first phase of construction, inclusive of all commercial services and amenities; and

The number of residential units does not exceed the total number of commercial units.

It is recognized that the concept of mixed commercial and resort related residential uses in the waterfront

designation is not fully accepted amongst stakeholders, and that District Staff continue to have significant

concerns, primarily related to servicing. Nevertheless, due to the limited prospects available for resort

developers to secure cashflow in traditional resort models, it is our opinion that the District will restrict resort

development if they do not permit some level of mixed use development, provided it is planned in a

responsible manner.



It should be noted that if the District decides to approve the recommendation of mixed commercial and resort-

related residential use in the waterfront designation, then they will be assuming a liability under the SDWA if

private communal services are proposed to provide services to the residential component of the development.

Thus, the District will need to determine the level of risk that is considered tolerable and then choose the

appropriate servicing arrangement to require through policy. For example, the District may choose to permit

private communal services for mixed resort commercial and resort related residential developments provided

that reserve fund policies are in place. Alternatively, the District may choose to rely completely on

instruments available through the Condominium Act for the establishment of reserve funds, or they may

permit only private individual services for resort-related residential development, thus avoiding the issues of

liability for private communal services.

A recommendation to mitigate risk would be to require a District OPA for private communal servicing on

mixed-use resort development, wherein the District OP would outline the matters that need to be addressed

or criteria that need to be met for private communal services to be considered (i.e. whether the resort portion

is commercial and can guarantee some turnover of temporary and occasional guests, requirements for

reserve funds, etc).

3.8 Downzoning

With respect to downzoning, the existing Muskoka Official Plan policy C.30 indicates that: The down zoning of

resort commercial properties with significant land holdings and frontage on water will not generally be

supported.

This policy was created to help maintain the tourist commercial land base and discourage downzoning of

resort commercial properties to residential uses, since once such lots are downzoned to residential uses the

commercial zoning is unlikely to be restored. The intention of the policy is considered good, as it focuses on

preserving the waterfront tourist commercial land base in Muskoka and preventing the loss of large

commercial properties on the waterfront, which are considered particularly significant due to the importance of

resorts in driving the tourist economy in Muskoka. Larger properties generally provide greater opportunities

for larger and potentially more viable resort projects, with more land to work with and stronger potential

impacts on the local economy. However, smaller properties can be just as significant depending on their

relevant location, heritage value, other types of resorts in the area, extent of the economic spinoffs, etc.



At the same time, resort owners are facing many challenges, such as poor performance levels even during

peak summer months, changing environmental conditions (e.g., decreasing water levels), and difficulty

accessing financing in order to maintain facilities and/or upgrade. Those most affected by these issues are

older, smaller operations that are no longer viable, or resorts with owners of retirement age who may wish to

downzone their resorts to provide retirement income when there is little interest from the next generation in

continuing operation of the resort. In these cases, downzoning to residential use would maximize property

value.

As such, it recommended that the downzoning policy be adjusted to incorporate a two-tier approach based on

property size, wherein operators of small-scale resorts would have more flexibility to downzone, and mid to

large-scale resorts would need to pass more stringent tests relative to future commercial viability. Under this

adjusted framework, the following is a list of potential criteria would need to be met for downzoning:

1. Smaller-scale properties – owner rationale and business case, including consideration for long-term potential of other commercial operations on-site;

2. Mid to large-scale properties – third-party prepared business case and land base tests that might potentially demonstrate: 1) the existing use of a property is no longer viable, 2) alternative permitted uses are not viable, and 3) alternative proposed uses would not have a negative impact on other stakeholders.

It is also evident that small operations may be as valuable to the economy as larger properties. In order to

recognize the importance of smaller resorts or key properties, it is further recommended that the District and

Area Municipalities retain the ability to identify important properties for a higher level of protection regardless

of size. Potential criteria for identifying the importance of particular resorts at the District or Area Municipality

level might include: heritage value, cultural significance, relationship to other resorts, provision of public

access to the waterfront, and proximity to a major Highway or airport, etc.

Under this model, the Muskoka Official Plan remains broad with respect to criteria to define scale, which

would need to be detailed at the Area Municipality level. Area Municipalities may also consider encouraging

large residential properties in appropriate locations to “upzone” to tourist commercial uses.

One concern voiced by some of the Lake Associations is that if downzoning policies are to become more

flexible, newly zoned residential properties may receive similar density levels to those that were applied when

these properties were commercial resorts. However, smaller frontages for linear waterfront lots are not

recommended, as these may unduly increase the number of downzoning applications submitted. An



alternative option would be for resort owners with small frontages to consider “cluster” residential

development to make downzoning worthwhile, within the density provisions set out by the Area Municipalities.

3.9 Summary of Recommendations

Overall, the recommended permissive policy framework is intended to encourage short to mid-term resort

development in Muskoka in a sustainable and flexible manner, such that new models and tenure

arrangements will not be restricted, and a balance between the needs of municipal government authorities,

resort owners, resort development and taxpayers will be met to the greatest extent possible. As such, the

recommended adjustments are generally aimed at making District Muskoka Official Plan policies more

responsive to trends, so that local Official Plans can provide further detail in some cases, if warranted by the

individual Area Municipalities.

The following is a summary of recommendations under a more permissive policy framework:

Leave the definition of resort broad, but differentiate a “resort” from other tourism establishments (i.e. roofed accommodation product that provides a leisure experience, with a geographically significant attribute or man-made/natural tourism asset, and associated recreation facilities);

Adopt a new approach for the tests for resort commercial use:

a. Ensure guest turnover and availability of resort units (i.e. no sole owners/occupants);

b. Broaden the “profit” requirement to test for either an element of profit or a revenue stream. If this test cannot be met, then the test for guaranteed guest turnover must be met – as such availability (for only occasional and temporary occupancy) becomes the primary determinant for ensuring resort commercial use;

c. Tests related to the nature and form of management services and commercial facilities would be considered secondary, and dependent on a mechanism (i.e. property management company) to provide core services (i.e. security, guest services, booking), and consideration of property scale, location, and experience being offered.

Adjust policy to permit the concept of mixed commercial and resort related residential uses as a

viable option for new resort development and redevelopment of resorts on tourist commercial lands on the waterfront, IF they meet the following criteria:

a. The site is determined to be large in scale;

b. Resort commercial uses are developed during the first phase of construction, inclusive of any communal services and amenities; and

c. The number of residential units does not exceed the total number of commercial units.



With respect to private communal services for resorts outside of municipally services areas:

o If the land use remains 100% resort commercial, eliminate the requirements for a reserve fund in the Muskoka Official Plan, and rely entirely on the legislative requirements under the Condominium Act; and

o If there is consideration of mixed resort commercial and resort-related residential uses, policy

should require a District Official Plan Amendment for private communal servicing, based on the recommended criteria.

Eliminate the requirement for a local Official Plan amendment for new resort developments in the waterfront designation, but continue to require a Zoning By-Law amendment;

Adjust the existing downzoning policy to incorporate a two-tier approach based on property scale, wherein operators of small-scale resorts would have more flexibility to downzone, and mid to large-scale resorts would need to pass more stringent tests relative to future commercial viability;

o Encourage the District and Area Municipalities to identify important properties for a higher level of protection regardless of size, based on criteria such as: heritage value, cultural significance, relationship to other resorts, provision of public access to the waterfront, and proximity to a major Highway or airport.



4.0 RECOMMENDATIONS FOR OTHER CONSIDERATIONS

4.1 Introduction

As mentioned, PKF was retained to identify and make recommendations on alternative Muskoka Official Plan

policy options that are effective in supporting the tourism sector as a primary driver of Muskoka’s economy.

This mandate was further expanded to include an evaluation and subsequent recommendations for the

District’s involvement in several other areas that are creating challenges for the resort and tourism sector in

Muskoka, as identified in the following sections.

4.2 Property Taxation

4.2.1 Issues Impacting the Resort Sector

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 of taxes 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 property using either: a. The Income Approach (usually applied to commercial properties), or b. The Sales Comparison Approach (usually applied to residential properties)

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 less depreciation and the sale of comparable properties in

the local market. In the case of commercial properties the concept of business value based on the property’s

income potential is introduced.



4.2.2 Residential Versus Commercial Assessment for Resorts

In general terms, commercial property tax rates in Ontario are higher than residential tax rates. As a result,

commercial properties generally pay more taxes than similarly valued residential properties.

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

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

2000-2011 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 4-1

HOTEL AND RESORT PROPERTY TAXES IN ONTARIO

All Property Types Provincially 2000 2008 2011 2000-2011

% Chg

Revenues per room $50,182 $51,413 $48,411 -3.5%

Property Taxes per room $3,303 $3,049 $2,922 -11.5%

Net Operating Income Per Room $11,994 $9,335 $7,483 -37.6%

Taxes as a % of Revenue 6.6% 5.9% 6.0% Source: PKF Consulting Inc., 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.



For instance, across the Province, MPAC has elected to assess housekeeping resorts as residential, unless

meals are provided twice a day. This means that the land is valued using the sale comparison approach.

This process creates an inequity in jurisdictions such as Muskoka where residential waterfront land values in

most cases far exceed the commercial value of the businesses. In Muskoka, when the sales comparison

approach is used to assess land value at housekeeping resorts, it often results in an increased tax burden for

the property owners.

4.2.3 Resort Condominium Property Class

In an effort to support alternative resort ownership and development models, MPAC has developed a specific

Resort Condominium Property Class, which still sees the property assessed using the sales comparison

approach, 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, because criteria for implementation are restrictive, which ends up providing some operating

advantages to resorts in specific destinations. Criteria include, 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, if any Muskoka resorts would

qualify under these two criteria.

4.2.4 Recommendations

It is recommended that the District take a proactive role with the tourism industry by lobbying the Province and

MPAC to reconsider the inequities impacting the housekeeping sector (i.e. income approach assessments

instead of sales comparison assessments), and to lobby 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 a 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. The extent of this

potential loss may need to be further analyzed by the District.



4.3 Private Cottage Rentals


The impact of private cottage rentals on the resort sector was identified as a key issue by some resort

owners, operators and other industry stakeholders.

The total impact of private cottage rentals on the resort industry is unknown, but is a concern, and will

continue to pose concerns regarding the potential for existing resorts and future resort development in

Muskoka.

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.3

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, documented 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. 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, especially in the Huntsville and Lake of Bays area, are looking for the District to develop

options to restrict this level of competition, particularly in light of the lack of restrictions faced by cottages

being rented as “businesses” on residentially zoned land.

Some of the Lake Associations object to restricting private rental of family cottages, which represent a

traditional cottage activity, as well as a growing part of Muskoka’s tourist economy; however, they are also

concerned with “income properties” that are rented out with absentee landlords, as people renting these

cottages often have no vested in Muskoka, including protection of the natural environment, and respect for

neighbours.

The primary concern is not occasional, traditional private cottage rentals, but continued focused commercial

rental of residential cottages, where unfair competition and potential negative impacts on stakeholders is not

controlled. 3 Telephone interview with Michael Lawley, Executive Director of Muskoka Tourism Marketing Agency – September 24, 2012



Some resort owners also claim that commercial cottage rentals taking place on residentially zoned land

constitute a Zoning By-Law infraction, and that a significant problem for resorts and other cottages is the

uncertainty caused by municipal and district governments failing to enforce those by-laws. It has been argued

that if zoning issues are addressed and the industry is regulated properly, private cottage rentals could in fact

bring more tourism business to Muskoka.

4.3.2 Alternative Options

There are currently no restrictions on private cottage rentals. 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.

Alternative options regarding the regulation of the “business” cottage rentals involve zoning restrictions or the

introduction of a licensing system at the Area Municipal level, thereby allowing “traditional” cottage rentals to

continue unmonitored. For example, other jurisdictions have considered defining “residential” use in the

Zoning By-Law to include occasional and traditional cottage rentals (i.e. Blue Mountains). Others have taken

the approach wherein no private cottage rentals are permitted at all (i.e. Carling Township). Another

approach has been the introduction of a licensing system that is required for all private cottage short-term

rentals (i.e. Wasaga Beach). Implementing one of these options could benefit the resort community by

potentially reducing the number of private cottage units available for third-party rental. However, restricting all

forms of cottage rental would reduce the level of economic impact that is currently being generated by these

rentals.

Furthermore, these options could require enforcement, potentially at significant costs to the Area

Municipalities. Several Area Municipalities have already identified that they do not have the resources to

undertake this type of enforcement.


There is really no role for the District in the matter of private cottage rentals. It is recommended that this

matter be considered by the individual Area Municipalities, with the understanding that zoning by-law

enforcement and licensing would require additional resources for implementation.



Should regulation of private cottage rentals at an Area Municipality level be considered, another concern

raised was the resulting impact on Muskoka’s tourism industry. For instance, would vacationers would be

more apt to frequent resorts, or look for private cottage rentals in other jurisdictions if they were unable to rent

in Muskoka. As previously discussed, the Muskoka consumer is predominantly looking for either a traditional

resort vacation, or an alternative “cottage” vacation, but the breakdown of these tendencies have not been

quantified, and would require further investigation as part of a dedicated impact study.

It is also recommended that when requested, the Area Municipalities follow up on stakeholder concerns

regarding private cottages that are being rented primarily on a commercial basis, enforcing Zoning By-Laws

that prevent commercial rental of units at properties zoned for Residential use.

Alternatively, a provincial-wide study might be commissioned to determine the positive and negative impacts

of private cottage rentals on the resort sector provincially. The District could encourage Resorts of Ontario to

lobby the Provincial government to undertake an analysis of the impact of private cottage rentals in Ontario.

4.4 Trailer Parks, Campgrounds and Camps

4.4.1 Existing Policy Issues

Limited data is available on the total expenditures made by visits to camps, trailer parks and campgrounds in

Muskoka, but they have been identified as an area for tourism growth for Muskoka, based on industry trends.

Stakeholders have expressed an interest as to 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, based

on trends identifying long-term opportunities for these products in Muskoka.

Within the “Tourist Commercial” designation, the Muskoka Official Plan currently permits facilities such as:

accommodations (including: camps, campgrounds, trailer parks), attractions, marinas, commercial retail, etc.

With respect to the subject matter, there are no specific policies to guide development of trailer parks,

campgrounds and camps. Many of the Area Municipalities have developed local policies, most of which are

restrictive with respect to new development of these alternative tourism establishments, either prohibiting

them or requiring an Official Plan Amendment.



The question has been raised as to whether there is a role for the District to provide policy outlining criteria to

assist in the consistent assessment of development projects that incorporate new or redeveloped trailer

parks, campgrounds, and camps.

4.4.2 Issues Impacting 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. Accommodation operators confirm that customers are demanding more choice in price point and

product type (e.g., bed & breakfasts, trailer parks, camps and campgrounds). The more successful trailer

parks, camps and campgrounds 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. Tourism trends point to

potential opportunities for development of other overnight tourism products to attract tourists with varying

interests to Muskoka. For example, adventure tourism and ecotourism interests could be supported at

campgrounds and trailer parks. Furthermore, these products are important contributors to Muskoka’s

economy, by providing more public exposure to the area, and broader social and economic impacts (i.e.

children who attend overnight camps learn new skills, and may one day choose to work or live 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. 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 new camp,

campground or trailer park projects would be economically viable since land value would likely exceed

business value, particularly for waterfront properties.


In order to meet consumer demand, it is recommended that the District should consider flexibility in the range

of products permitted in Muskoka, and that the Muskoka Official Plan should encourage



expansions/renovations of existing properties, and new development or redevelopment of trailer parks, camps

and campgrounds. This recommendation is based on evidence of opportunities for growth, particularly given

that tourism trends point to potential opportunities adventure tourism and ecotourism interests at

campgrounds and camps throughout Muskoka. It is further recommended that any specific policies regarding

the use of trailer parks, campgrounds and camps should be developed at the Area Municipality level, to allow

for flexibility in policy based on local circumstances.

4.5 Accommodation Sector Financing


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.

As the country’s most densely populated Province, with the highest visitation levels in the country, Ontario

hosts an estimated 35% of Canada’s room supply (146,000 rooms). However, profitability in Ontario’s

accommodation sector has eroded from peaks in the year 2000, and has yet to recover. Furthermore, 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.

For the resort industry in Ontario, difficulty in obtaining funding in today’s investment environment is combined

with extremely low profit levels, and the perceptions of a higher level of risk, 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 market-

driven. 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.




There is little that the District can do from a policy perspective; however, it is recommended that the District

look for opportunities to assist the resort sector to find appropriate resources for financing. For example, the

District could partner with RTO12 to lobby the Ministry of Tourism, Culture and Sport for the development of a

domestic resort investment program. There may also be an opportunity for local Chambers of Commerce to

join the Canadian Chamber of Commerce and the Hotel Association of Canada in their grass-roots campaign

to convince MPs of the importance of tourism. The Chambers can also provide assistance for operators to

prepare business plans and look for grant opportunities, while local Economic Development Officers may look

at options within their respective Area Municipalities to provide incentives for development and

redevelopment, i.e. incentives that could either reduce development costs (e.g., reduced development

charges), or enhance the cash flow of the resort operation (e.g., property tax exemptions).



5.0 IMPLICATIONS FOR MUSKOKA

5.1 Introduction

During the review of the existing Muskoka Official Plan relative to Resorts and Tourist Commercial policies

and through stakeholder input, PKF noted that there are some specific policy sets that do impose some level

of restrictions, whether or not that is the intent, and consequently result in challenges for new, existing and

redeveloping resorts in Muskoka. For example, Muskoka Official Plan policy encourages rejuvenation and

expansion, yet many resort operators are faced with restrictions in the more specific policy sets (e.g.,

commercial tests) and at the local level (e.g., local Official Plan policy restrictions regarding density, difficulty

in obtaining building permits, etc.), which limit the ability to generate alternative forms of income through

expansion and/or complementary development. Also, MOP policy discourages the downzoning of resort

properties to residential use, yet market, operating and economic viability issues are creating challenges for

some resort operators in realizing the value of their assets.

It has been identified that changes would be required in Muskoka Official Plan policies to provide more

flexibility in the development planning processes, and more opportunities for existing resort operators to either

rejuvenate their property or realize the value of their asset, if the resort sector is to continue to grow in

Muskoka. Furthermore, implementing more detailed definitions that may not necessarily be applicable to any

new ownership or resort development types that evolve in future, may potentially restrict growth in resort

development in the short and long-term.

As such, PKF has recommended that a permissive policy framework be adopted as the District level.

5.2 Strengths and Benefits of a Permissive Policy Framework

Although it is difficult to create one framework that addresses all policy-related concerns for all stakeholders,

the recommendations under the permissive framework (detailed in Section 3) respond to the fact that:

a) Resorts are struggling in the current market to achieve economic sustainability;

b) Resort developers are facing barriers in making projects work in Muskoka; and

c) Neighbouring Lake Associations and ratepayers have significant quality of life and economic concerns regarding relative to resort development.



One of the District’s initial concerns during this study process was to gain a better understanding of what

people want when they’re travelling to Muskoka, and what the “ideal” resort might look like. PKF has

identified that the consumer is predominantly looking for either a traditional resort vacation, or an alternative

“cottage” vacation. There is no “ideal” resort model for Muskoka with respect to physical size and facilities or

management style and availability of units that can meet these needs. 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.

As such, under a permissive policy framework, which is more flexible in terms of the commercial tests (i.e.

mandating that resort units generate a turnover of occasional and temporary occupants and offers either on-

site or off-site management), eliminates the requirements for an Official Plan Amendment on lands not

currently zoned for resorts, eliminates the District’s requirement for a reserve fund to cover replacement costs

for private communal services at commercial resorts, and permits the concept of mixed commercial and resort

related residential uses under certain conditions, there may be more opportunities for development in the

District overall.

Furthermore, this framework recognizes the challenges in developing planning policy that adequately

addresses future market trends in resort development due to ever evolving concepts and consumer trends,

and recommends that policies at the District level remain broad and strategic. One of the implications of

ensuring that District policies are more broad and strategic, is that the Area Municipalities would continue to

be given flexibility to tailor some of their respective policies to local circumstances, while still maintaining

conformity with the Muskoka Official Plan.

5.3 Challenges and Cautions regarding a Permissive Policy Framework

With any policy framework, there is an inherent requirement for operational monitoring and enforcement, to

ensure policies are being adhered to and criteria are being met. If the local Official Plans include more

detailed criteria in terms of documentation, periodic monitoring would need to be considered, mostly at the

Area Municipality level. The challenge with implementing enforcement and operational monitoring is that it

would involve a financial cost and additional resource allocation. Some Area Municipalities have already

identified some difficulty in enforcing Zoning By-Laws relating to resorts. Under a more permissive District



policy framework, investigation of cost recovery measures for enforcement and monitoring would need to

occur at the local levels as well (i.e. implementing a tax, levy or licensing system for unit holders).

In terms of overall encouragement of tourism, more permissive Muskoka Official Plan policies would assist

resorts and other tourist commercial operations to effectively respond to changes in market and development

trends. However, when considering a more permissive policy framework, it should be recognized that:

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.

It is also recognized that some of PKF’s recommendations may not be supported due to the potential

municipal and taxpayer liability or character concerns. For example, there are a number of stakeholder

concerns regarding mixed use, such as liability issues related to private communal servicing, as well as

potential changes to waterfront character and the overall Muskoka landscape/environment.

In light of these inherent concerns, PKF is recommending that mixed use development only be considered if it

meets certain criteria, i.e. a large-scale site, resort commercial uses are developed in the first phase, and the

number of residential units does not exceed the total number of commercial units.

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