A view of Las Vegas' CityCenter complex at night. James Marvin Phelps / Flickr

CityCenter never had it easy.

MGM Resorts International announced plans to build the $4 billion development in 2004 during the height of Las Vegas’ boom. By the time the project wrapped up four years later, its construction budget had ballooned to almost $10 billion and the city was sinking into a historic recession that almost forced the project into bankruptcy.

Though MGM officials felt pressure to mothball the complex, they trudged ahead and opened CityCenter in 2009. In the years since, the complex has been called a failure, a Tower of Babel, a sign of Las Vegas’ hubris and a symbol of what can go wrong.

But CityCenter appears to have turned a corner. It posted an all-time earnings record during the first quarter of this year and helped boost MGM into the black.

MGM reported its best results since the beginning of the downturn five years ago.

During the first quarter of 2013, CityCenter reported a cash flow of $93 million, three times the amount it pulled in the year before. Net revenue generated at Aria, Vdara, Crystals, the Mandarin Oriental and numerous residential units rose 32 percent, to $315 million.

Strip analyst Chris Komanowski of CB Richard Ellis said it isn’t unusual for high-end hotels to take a couple of years to find their footing.

“This (time frame) is really where a luxury property is beginning its life as a stabilized business,” Komanowski said. “That typically takes time.”

Analysts attribute CityCenter’s success to a rebounding tourism market. Last year, a record 39.7 million people visited Las Vegas.

The Strip in general also is making more money than it ever has. Gambling revenue soared to $696 million in February, the highest single-month total ever recorded. Consumer confidence is rising, and visitors are beginning to spend more.

Still, many local resorts continue to struggle. Komanowski pegged CityCenter’s specific success to a growing number of visitors who demand high-end options when they visit Las Vegas.

“You have kind of a different animal attracting different people,” Komanowski said. “They’re looking for more luxury amenities.”

And today’s tourist does much more than gamble. More than 69 percent of casino visitors in the past year ate at fine-dining restaurants, 55 percent saw a show or concert and almost 45 percent visited a club, according to the American Gaming Association. CityCenter offers all those options.

“The trends are positive,” Komanowski said. “We expect extended and steady growth.”

CityCenter’s journey from the red was not an easy one.

MGM announced in 2004 it would partner with Dubai World to build the hotel-condo complex. Economically, the year marked one of the best in the Strip’s history. Visitation numbers surpassed 37 million, an increase of 2 million from the previous year, and continued to grow.

The project initially was estimated to cost $4 billion. In late 2005, MGM upped it to $5 billion. The following year, the price tag jumped to $7 billion.

By late 2008, CityCenter’s construction budget peaked at $9.3 billion — just in time for the recession.

“It created chaos for us,” CityCenter President Bobby Baldwin said.

A few months later, on the heels of Wall Street warnings, MGM launched a cost-cutting program that slashed the building budget to $8.9 billion. It wasn’t enough. When MGM released its annual report in 2009, operators feared they wouldn’t have enough cash to pay off their debt. They worried bankruptcy would delay CityCenter’s opening.

MGM pushed forward anyway, delaying the opening of the Harmon Hotel to save about $200 million. Clark County officials halted work on the 49-story hotel-condo project in 2008 because of construction flaws.

MGM and Dubai World later announced they would scrap plans for the Harmon’s top-floor condos and cap the building at the 26th floor. Today, the Harmon remains closed, mired in lawsuits.

During the same time, MGM’s stock plummeted from $99.75 a share to $1.89 a share.

“(CityCenter) couldn’t have opened at a worse time,” Komanowski said. “The property appeared with a lot of difficulties.”

Baldwin said MGM invested so much money into CityCenter, there was no way the project could have been mothballed or stalled.

“There was no stopping for us,” Baldwin said. “Looking back on it, it wouldn’t have made any difference if we opened it earlier or later. We would have ended up in about the same spot.”

Many experts agree. Although MGM’s business plan was good, its timing was not.

“They were knee-deep in it,” said Yale Bock, a stock analyst with YH&C Investments. “Then, everything changed — land values, moods, construction costs, gas prices.”

CityCenter has managed to build its equity to about $294 million, but it still owes about $1.5 billion, a 5-to-1 debt-to-equity ratio. Baldwin couldn’t say for certain how long it would take the development to make that money back.

“We have a long way to go,” he said. “Everything is on the move. It’s part of a slow rise. It’s something you see all around Las Vegas.”

(c)2013 the Las Vegas Sun (Las Vegas, Nev.) Distributed by MCT Information Services. 

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The exterior of the Frank Lloyd Wright-designed Arizona Biltmore Resort & Spa. / Arizona Biltmore Resort & Spa

Billionaire investor John Paulson has put a real estate unit of his hedge fund into bankruptcy to thwart a lawsuit by a lender that claims it is owed tens of millions of dollars related to the recent sale of several luxury resorts.

According to filings late Wednesday in Manhattan bankruptcy court, MSR Hotels & Resorts Inc. sought Chapter 11 protection from creditors to sell its remaining assets and wind down.

A bankruptcy filing often halts litigation against a debtor.

Daniel Kamensky, MSR’s treasurer and a partner at a Paulson & Co. affiliate, said in an affidavit that protection was necessary because of the “baseless” lawsuit filed last month by Five Mile Capital Partners against MSR’s directors, which he said reflects the lender’s “scorched-earth” tactics.

“The REIT now seeks to end Five Mile’s continued terrorization of directors that the court has previously found acted in good faith,” he wrote.

MSR in February won court approval to sell four resorts to the Government of Singapore Investment Corp. sovereign wealth fund for $1.5 billion, including assumed debt, court papers show.

The resorts included the Arizona Biltmore Resort & Spa in Phoenix; the La Quinta Resort & Club PGA West in La Quinta, California; the Grand Wailea Resort Hotel & Spa in Maui, Hawaii; and the Claremont Resort & Spa in Berkeley, California.

But Five Mile, which said it lent $50 million to an MSR affiliate, accused MSR directors of having conflicts of interest that prevented them from getting the best prices for trademarks, logos and other intellectual property.

Its lawsuit seeks $58.7 million representing sums owed, including interest and costs, plus at least $100 million for breach of fiduciary duty, gross negligence and corporate waste.

David Friedman, a lawyer for Five Mile, called the bankruptcy case a “cheap litigation tactic” designed to shield directors from liability, and destined to fail.

“For someone from Paulson to accuse someone of terrorism, when all we’re doing is litigating a commercial dispute, should offend anyone who understands the meaning of the word,” he said in a telephone interview with Reuters.

Five Mile is evaluating its options, Friedman added.

A spokesman for Paulson declined to comment.

MSR said it intends to use Chapter 11 to sell intellectual property for the Biltmore, La Quinta and Grand Wailea resorts.

On Wednesday, MSR urged a federal district judge to dismiss the Five Mile lawsuit. It said the lawsuit was designed to get around earlier court rulings that Five Mile did not like, and said MSR directors had met their obligation to maximize value.

The other MSR directors sued by Five Mile were Michael Barr and Jonathan Shumaker, who are both also partners of a Paulson & Co. affiliate, and Mohsin Meghji.

MSR said it had about $785,000 of assets and $59.2 million of liabilities as of March 30.

Paulson rose to fame when he made $15 billion by betting against subprime mortgages ahead of the U.S. housing collapse.

But his assets under management have fallen to about $18 billion from $38 billion in early 2011 because of lagging performance and investor redemptions. His gold fund has fallen about 47 percent this year, according to performance data provided by a person familiar with the fund.

The case is In re: MSR Hotels & Resorts Inc., U.S. Bankruptcy Court, Southern District of New York, No. 13-11512. The earlier bankruptcy case is In re: MSR Resort Golf Course LLC et al in the same court, No. 11-10372. The Five Mile lawsuit is Five Mile Capital SPE B LLC v. MSR Hotels & Resorts Inc. et al, U.S. District Court, Southern District of New York, No. 13-02920.

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Jumeirah Group president and CEO Gerald Lawless singled out Canada, which has prevented Emirati airlines from landing more than six flights per week into the North American country despite years of lobbying by Dubai-based airline Emirates Airline and the UAE national carrier Etihad.

“Governments around the world should stop supporting these so-called legacy airlines,” Lawless said. “We don’t need hotel rights to build a hotel in Toronto so why should our airlines need flight rights to fly to Toronto if that’s what they want to do if the airline meets all safety standards, so legacy airlines should not be supported anymore by their governments.

“The hotel industry depends on airlift to bolster its business; we don’t have airlift, we don’t have customers.”

Canada’s refusal to increase Emirati landing rights led to a breakdown in the diplomatic relationship two years ago, which only began to thaw last year.

Both countries imposed visa restrictions on each other’s citizens until the decision was reversed in February.

However, there is no sign of Canada increasing Emirati landing rights. The UAE also has suffered from Germany’s refusal to allow Emirates landing slots at Berlin’s new airport. Berlin Mayor Harald Wolf last year claimed the national carrier Lufthansa had lobbied the German government to deny Emirates’ request.

“The Berlin government was, and is, in favour to open the airport to Emirates and give them the possibilities to have direct flights,” Mayor Wolf said.

“But the difficulty is the federal government. They are very restrictive. They [the Federal Government] have had a very strong lobbying from Lufthansa not to strengthen Emirates.”

Bahrain also has been accused of propping up its national carrier, Gulf Air, at the expense of Bahrain Air, a privately run airline that went into voluntary liquidation in February blaming the government for demanding immediate payment on past government debts.

Bahrain Air CEO Russell Nuttall accused the government of favouring Gulf Air, its direct competitor.

Minister of Transportation Kamal Ahmed is a board member of the national carrier, which Nuttall said was a conflict of interest.

© 2013 ITP Business Publishing Ltd. All Rights Reserved. Provided by Syndigate.info an Albawaba.com company. 

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Cubs chairman threatens to move team from Wrigley. / Associated Press

Chicago Cubs Chairman Tom Ricketts for the first time threatened to move the team out of Wrigley Field if it doesn’t receive government approval for more signs in the outfield, including a giant video scoreboard.

“I’m not sure how anyone is going to stop the signs in the outfield, but if it comes to the point that we don’t have the ability to do what we need to do in our outfield then we’re going to have to consider moving,” Ricketts said at Wednesday morning event at the City Club of Chicago where he was the guest speaker. “It’s a simple as that.”

His comments significantly raised the stakes in Ricketts’ proposal to spend $300 million renovating Wrigley Field as the project seeks approval from the City Council. Since his family purchased the team in 2009, Ricketts has repeatedly said they intended to preserve the 99-year-old ballpark for future generations.

Two weeks ago, the Cubs, Mayor Rahm Emanuel and 44th Ward Ald. Tom Tunney agreed to what the parties called a “framework” of plan to renovate the stadium and develop land around it. The framework included more night games, a video scoreboard in left field and additional advertising throughout the ballpark. In addition, the Cubs agreed to work with residents in the Wrigleyville neighborhood to increase security after games and find more off-site parking to decrease congestion in the area. Many details remain to be finalized but Ricketts said at the time all sides are “together on this.”

But on Wednesday he changed his tune, perhaps indicating his frustration with long negotiations and opposition from rooftop businesses surrounding the stadium to more outfield signs.

His remark about moving came in response to a guest in the audience at Maggiano’s restaurant who asked “What if opponents stop the signs in the outfield?”

Speaking to the media afterward, Ricketts attempted to clarify his comments about moving.

“The fact is we are committed to try to work this out. We’ve always said that we want to win in Wrigley Field, but we also need to generate the revenue we need to compete as a franchise. Having the ability to put video boards and signs in the outfield is very important to us.”

Ricketts estimated that outfield signs could increase revenue by about $20 million.

Beth Murphy, one of the rooftop club owners who attended the breakfast, said, “I don’t know where he is going to move. They come to Wrigley Field because it’s an old ballpark, and it’s in a neighborhood. Look at this team.”

The team’s renovation proposal, made public earlier Wednesday, calls for re-creating green terra-cotta canopies, along with the windows and wrought-iron fencing, that graced parts of Wrigley’s exterior in the 1930s, according to drawings released to the media Tuesday.

At the same time, Crane Kenney, president of the team’s operations, insisted the team needs to make more money to compete, thus the proposed addition of more than 41,000 square feet of signs to the stadium’s interior and surrounding neighborhood.

The plans call for a 6,000-square-foot, three-panel video screen atop the left field wall that would be topped by lights illuminating the power alleys in right and left field. There also would be a 1,000-square-foot sign in right field and four new signs ringing the outfield. Those include two new LED signs akin to the one introduced in right field last year.

While all that, if approved, would change the interior look of the stadium, the area just beyond Wrigley also would take on a different, and far more commercial, appearance. Advertising would adorn a proposed seven-story hotel at the northwest corner of Clark and Addison streets and six-story retail-office building on the triangular parcel west of the stadium. They would be linked by a walkway over Clark with its own sign.

Nonvideo, or static, ads would top the 91-foot-tall hotel, as well as the clock tower on the office building. A three-panel video screen would be placed on the office building, inside the plaza, where seven obelisks would carry more static ads. Banners featuring team sponsors would hang from the hotel, facing Clark.

Change also would come to the southeast corner of the stadium, where the site of the Captain Morgan Club would be replaced with a two-story structure topped by signs and a deck.

Add in the updated concourses, expanded bathrooms, improved player areas and outdoor terraces, and the broader idea is to give the stadium modern amenities, create a town square for Wrigleyville and generate more revenue, both to cover the cost of the renovation and provide revenue for team development, Kenney said.

“We have to generate new revenue,” he said. “We have to catch up to our large-market competitors on ballpark revenues, so this project has to work from a financial perspective as well.”

Tribune reporters Hal Dardick and Bill Ruthhart contributed

(c)2013 the Chicago Tribune. Distributed by MCT Information Services.

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The Kaua'i cliffs look over pristine ocean in Hawaii. / Hawaii Tourism Agency/MCT

The number of visitors coming to Hawaii in the first three months of the year surged 7.1 percent to 2.1 million, but tourism officials said Thursday the industry’s growth will likely slow later in 2013.

Nearly 10 percent more travelers arrived in the islands from western U.S. states compared with January through March of last year, the Hawaii Tourism Authority said. The number of travelers from Japan climbed 5 percent.

Mike McCartney, the state tourism agency’s CEO, said he expects to see more moderate growth in coming months.

“Spending and arrivals have been on the upswing, but there has been a decrease in visitor average length of stay for markets like U.S. West and Canada, which could be an indication that visitors may be reaching their spending threshold,” McCartney said in a statement.

A reduction in the number of direct flights from the East Coast and a weakening Japanese yen may also slow growth, he said.

The agency plans to continue luring business travelers for meetings and encouraging visitors to travel to the neighbor islands. It intends to continue supporting the addition of direct flights to Hawaii from South Korea, China, Taiwan, Australia and New Zealand while maintaining marketing efforts in the U.S. mainland, Canada and Japan.

“Due to the fragile nature of the tourism economy, the HTA understands the importance of sustaining and diversifying global market share in an industry based on discretionary spending,” McCartney said.

Visitors spent $3.9 billion in the state from January through March, up 7.6 percent from the same quarter last year. The biggest increase came from western U.S. travelers, who spent 18.7 percent more, and eastern U.S. visitors, who spent 8.3 percent more.

Tourism arrivals hit a record 8 million last year as a recovering global economy, strong yen, stable oil prices and the addition of more direct flights encouraged more people to visit the islands.

The previous record of 7.6 million was reached in 2006, before the Great Recession.

The tourism agency said last month it expects 8.5 million people will visit Hawaii this year.

Copyright (2013) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. 

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The company released its first quarter results today, and its operating profit in North America fell 22.5% to $5.5 million on a sluggish revenue increase of 5% to $30.2 million.

“The decrease in operating profit was a result of increased expenses related to sales force expansion, hotel booking platform development, traffic acquisition and subscriber marketing,” Travelzoo stated about its North America business.

Travelzoo’s Groupon-like Local Deals business has lost some of its luster over the past year, and the company acquired Perfect Escapes in 2012 as the basis for its first foray into hotel transactions.

Chris Loughlin, Travelzoo’s CEO, stated today: “We continue to develop our new hotel booking platform, which we plan to roll out later this year.”

Travelzoo’s combined first quarter net income for North America and Europe increased 49% year over year to $5.6 million as revenue climbed 7% to $42.2 million.

Looking at its results in Europe, Travelzoo’s operating profit there was flat, increasing from $2.4 million in the first quarter of 2012 to $2.5 million in the first quarter of 2013.

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Glacier National Park in Montana. Meredith Rendall Photography / Flickr

The way — and amount — Big Sky Country markets itself to potential visitors has changed a lot in 25 years.

Back in the 1980s, a magazine ad might have been the best way, or at least the industry standard, to draw new visitors to Montana, but today a smartphone app or snappy Facebook page is a more likely way for the Montana Office of Tourism to connect with travelers passing through the state.

“Right now it’s about mobile, making sure we have all of our marketing and all of our websites in a mobile friendly (format),” said Jeri Duran, the administrator for the Montana Office of Tourism.

“As the statewide industry has evolved, so too has the Montana Office of Tourism’s marketing,” said Mary Paoli, public relations manager for Voices for Montana Tourism, an industry coalition and advocacy group. “In 1987, three major TV networks and household magazines like Life and Time dominated. Today, Montana marketers reach travelers with highly-targeted advertising campaigns, mobile apps and social media engagement.”

The shift appears to have paid off: The number of out-of-state visitors in 2012 — and the amount of money they spent — was nearly triple what it was in 1988.

In 1988, 3.38 million nonresidents visited Montana and spent a total of $583.3 million (that’s about $1.14 billion in 2013 dollars), according to information provided by Voices of Montana Tourism.

Last year 10.9 million nonresident visitors came to the state and spent $3.2 billion — about 7.3 percent of the state’s gross domestic product, according to the latest numbers from the Institute of Tourism and Recreation Research at the University of Montana in Missoula.

That set a record for the number of nonresident travelers visiting the state and for nonresident traveler spending, which increased 12.6 percent compared to the previous year.

Connecting with more travelers starts with identifying what it is that actually attracts people to Montana, Duran explained.

The first reason people come to Big Sky Country is obvious, she said — it’s Montana’s spectacular and unspoiled natural beauty.

The second thing that draws people to Montana are the state’s small, charming towns, which Duran says give people an obvious place to stay while they explore the Great Outdoors.

After that, it’s that visitors want to experience the things that make Montana unique — things like Native American culture, Montana-made goods and specific restaurants and bars, she said.

Understanding that what travelers are really after has shaped the way the Office of Tourism markets the state to visitors, Duran said.

“We’ve sort of labeled it the ‘geo-traveler,’ and what that means is that they really want to experience a sense of place, of the culture,” she said. “They really want to live kind of like a local. People want to hear from other people, not the company or not the person doing the selling. They want to hear about the experience from other people who have visited.”

One of the ways the Montana Office of Tourism has connected with travelers is through its “Get Lost” smartphone app, which uses cellphones’ GPS systems to — with just the tap of the screen — show what destinations are in your immediate area.

Duran says the app connects people with destinations in Montana they “would never know about driving by on the freeway.

“That was very focused on highlighting those out-of-the-ordinary, off-the-beaten-path experiences and that really allowed us to partner with actual businesses and trails and get very specific with visitors about what there is to do around the state,” she said.

One of the Office of Tourism’s latest marketing campaigns features videos of real visitors interacting with the wild experiences Montana has to offer.

“It’s actual video of somebody going to Yellowstone Park and seeing a grizzly bear for the first time, so it’s just a random stranger that we’ve found,” Duran said. “We are really trying to go that direction — let other people sell Montana and the great experiences that they’ve had. Our biggest responsibility overall is to inspire somebody to come to Montana with more of that, ‘Wow, that’s amazing. I really want to go there.’”

According to some industry insiders, the lodging tax, which was passed in 1987, and its contribution to marketing the state as a travel destination is a big part of why Montana is able to attract so many more visitors.

The tax allows hotels and the like to charge customers a 4 percent sales tax that is then pooled and used to market the state as a travel destination. In 2003, an additional 3 percent lodging tax was added.

Just before the original lodging tax passed, Montana was in the bottom few states in the country in state-funded tourism marketing and only spent about $2 million in 2013 dollars a year trying to attract out-of-state visitors — and the money came directly out of the state’s general fund, said Stuart Doggett, executive director of the Montana Lodging and Hospitality Association, who testified before the state Legislature in favor of the tax in 1987.

In fiscal year 2013, the Office of Tourism is projecting having about $15.4 million to work with.

The lodging tax is great for economic development in Montana, Doggett said, adding that “the $3.2 billion that nonresident visitors bring in really matters. It’s bringing new dollars into our economy.”

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Officials say a Carnival cruise ship that had been disabled for days in the Gulf of Mexico has broken away from its moorings in a Mobile, Ala. shipyard.

The U.S. Coast Guard tweeted Wednesday afternoon that high winds are likely to blame for the Triumph becoming dislodged.

Due to strong winds in Mobile, Carnival Triumph, which was docked @ Mobile shipyard, broke away from its moorings. US Coast Guard is on site

— Carnival Cruise Line (@CarnivalCruise) April 3, 2013

Carnival spokesman Vance Gulliksen says the ship drifted and is resting against a cargo vessel. Gulliksen says tug boats and U.S. Coast Guard officials are on the scene.

The Triumph was disabled Feb. 10 by an engine fire that stranded thousands of passengers onboard for days in the Gulf.

It has been docked in Alabama since being towed to port.

Copyright (2013) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Fox News’ Shepherd Smith comes in with some video and his distinctive voice:

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U.S. Airways CEO Doug Parker announcing the planned merger of AMR, with U.S. Airways, as members of the Allied Pilots Association and U.S. Airways Pilots Association listen. Mike Stone / Reuters

American Airlines shouldn’t let the paint dry on that new livery design: Incoming American CEO Doug Parker, who currently heads US Airways, told employees the livery issue is “one of the integration issues we need to work through…”

Remember all that talk in the days before the merger announcement that US Airways was fine with it? Well, that spin seems to have come to a dead stop when Parker confided with US Airways employees.

Parker recently conducted meetings with flight attendants and pilots, and the livery issue was raised in question and answer sessions by employees in both meetings, which took place recently in Charlotte and Phoenix. Videos from the meetings were posted on a US Airways employees website and they were transcribed for SEC filings (1 and 2).

Parker was asked if a plan is in place to change American Airline’s new livery, assuming the merger is approved, probably in August, September or October. Here’s an excerpt from what Parker told flight attendants about the livery issue

Parker: “There’s no plan yet. That’s one of these integration issues we need to work through and I really don’t know what the answer to this is because right now. Again, two separate companies. They are painting airplanes in that scheme that they rolled out, and, you know, when it comes time where we actually have one airline, we should decide whether or not we want to keep…

 

“We are going to have to paint three hundred and fifty of our airplanes of course, in some scheme, so we will need to at that time assess what’s the best thing to do to paint all the airplanes. I really don’t have the answers. It may be just to keep painting them the way American’s painting them.

 

“Maybe we need to do something slightly different than that, it may be something dramatically different than that. I really don’t know the answer Steve. I’m not trying to dodge the question, I just… we just don’t know the answer.

 

Probably the best way for me to say it is this, had we done the merger a year ago, before they started painting airplanes, I think we probably would have said, let’s just go make them all look like the existing American fleet, you know. We will just paint ours to look like that. Maybe we would have thought about doing something combined, but probably not. So that’s one way to think of it.

 

“And if we would have done the merger a year from now and they already had all their airplanes painted, we probably would have said, let’s just paint all of ours like theirs. The only reason this is an issue now is because they just did it right in the middle, which kind of makes it confusing. So, that gives us an opportunity, actually, to decide if we are going to do something different because we have so many airplanes to paint. But I don’t know the answer yet.”

 

The paint job created a lot of controversy, and some US Airways employees, as well as American employees, aren’t big fans of the redesigned livery.

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Duluth, Minnesota, is getting a handle on vacation rentals by requiring permits and regulating use. Randen Pederson

Joel and Joy Johnson made a bit of history this month when their application for an interim-use permit was OK’d by the Duluth Planning Commission in Minnesota.

The couple was adhering to new city rules for what are commonly known as vacation home rentals. They own a duplex on Park Point that they rent out for short-term rentals, and they were the first on a growing list of owners applying for the permit.

It means $1,000 more in fees, but Joel Johnson said something needed to be done to regulate the growing use of private homes for tourism in the area.

“There are some who don’t pay sales tax, don’t have inspections,” he said. “They think it’s an easy way to make money.”

Vacation rentals differ from traditional lodging because renters take a key and are basically on their own. There are little to no in-stay services and managers are often off-site.

The new city rules require owners to provide key information to renters so that they have a minimal impact on the residential areas where most vacation rentals are found.

The permits also help the city define and identify how renters are operating their property, distinguishing between long-term rentals and the unique vacation types.

“Some were following, some were not,” Keith Hamre, director of city planning, said of the old rental rules and how short-term renters used them. “Some didn’t know they needed to.”

With the new rules, “you’re going to know who’s doing what,” said Bill Burns, who has a rental in front of his home on Park Point.

State focus

The new local rules reflect the consensus reached by a statewide task force formed in 2008 to study the burgeoning vacation rental market. The focus was to “ensure that vacation home rentals operating as businesses are a safe lodging alternative that are managed and regulated on a level playing field with other lodging options.”

While some clamored for statewide blanket rules, the task force, under the direction of the Minnesota State Legislature and Explore Minnesota Tourism, recommended that state law be more definitive in including vacation rentals and that local rules be developed.

“We ran across that report,” Hamre said of the permit-creation process that began last summer. Planners tried to find examples of rules across the country to follow as “best practices,” Hamre said.

In Duluth, as in other places, vacation rentals had been regulated by the same rental rules used by landlords renting long-term.

The task force recommended state and local laws with specific language on shorter-term vacation rentals, which pose unique problems of parking, noise and unfamiliarity with local rules — an example being vacationers on Park Point unaware of when the beach is closed.

Duluth renters are now required to give vacationers a detailed accounting of local rules and to inform neighbors of their business. They also are required to be up to building code and to be current on tax payments.

Significant complaints about behavior at properties will be tolerated only twice before a permit is revoked.

Avoiding problems

Johnson said he agrees that his business should be regulated like other lodgings and said he is careful to avoid the problems of noise and disruption. His rental, near his Lakehead Boat Basin business on the 1000 block of Minnesota Avenue, is set off from residential homes.

He said he also doesn’t have decks where people might gather outdoors and draw the attention of neighbors.

The new Duluth rules enforce a five-night minimum on rentals from June 15 to Sept. 15, the peak of tourism. The rest of the year, the minimum is two nights.

Most of the owners who responded in public comments to the city since it began forming the new rules support making the stays longer in the peak outdoors time in the city. They said in comments to the Planning Commission that longer stays are usually a draw for families who tend to be more respectful to neighborhood concerns.

“They respect the five nights,” Hamre said. “They don’t want to turn (the property) over as often.”

In December, the City Council approved the ordinance covering the interim-use permits. Vacation rental operators have until April 30 to apply for permits. The Planning Commission recommended council approval for four businesses March 12, and it has four more on its agenda Tuesday.

The new rules evolved as more vacation home renters have become involved.

“I don’t think they asked enough of us,” Johnson said of the early process.

He’s still wondering how the number of people allowed in a rental will be handled. A formula had been reached matching that number to bedrooms, but Johnson asked about those with lofts or what to do with people visiting guests at a rental. He said some renters have people over for holiday occasions and he wondered if that would be a violation of the occupying rules and vehicle restrictions.

The Planning Commission has discretion to tack on special requirements with each permit it examines. In the first batch approved earlier this month, it wrote in on Park Point permits that renters needed to be directed to beach access points to deter trespassing.

The trend

In 2010, Arthur Frommer, of the well-known travel guide that bears his family’s name, called vacation homes the “most pronounced trend in travel.”

Hotels and resorts still claim the majority of travelers — 43.6 percent, according to a study compiled in 2011 by HomeAway, a national company that lists vacation rentals. Nearly 20 percent of stays are with friends and family. Next are vacation rentals, with 12.2 percent of the market.

While the use of bed and breakfast facilities is more widely known, they have only 2 percent of the market.

HomeAway and other property-listers see a lot of room for growth. That’s because studies show that many people still don’t think of vacation rentals when they plan a stay. That is changing, and the growth in Duluth sparked the need for more regulation. HomeAway lists more than 60 Duluth rentals on its website and 357 in the region.

Hamre said the city has identified up to 40 properties in the city proper that would fall under the new definition, which it calls “vacation dwelling units.”

Doug Sabo, who also applied this month for a permit on a home on Park Point, is new to the process. He decided to rent his property out last year and just learned of the new rules while making preparations.

He said he travels a lot and uses rentals when he goes.

“It feels a lot more comfortable,” he said. “There’s more of a home feeling.”

Like many people who rent, he and his partner, Lorri Hanna, wanted to increase their income by using their property for vacationers.

He said he doesn’t mind the regulations. They’ll be a good way to avoid problems that have historically plagued Park Point as residents deal with long and short-term renters on the narrow sand spit between Lake Superior and the Duluth-Superior harbors.

Joel Johnson said the Park Point Breeze, a community newsletter, once did an informal survey and found that half of the homes there were considered rentals of some type.

Sabo said many of the worries about vacation rentals come from a historical enmity between permanent residents and renters. He said the new rules will help his type of renting from riling neighbors and are likely to weed out noncompliant landlords.

When Sabo’s permit came before the Planning Commission earlier this month, two nearby residents spoke about Park Point being inundated with rentals and the accompanying noise and other factors ruining the quality of life there.

They seemed reassured by the rules in the new permit process — especially the length of stay requirement — and buoyed by the fact that they can report disturbances and have a voice in how the businesses are run.

“The structure is good,” Sabo said of the new rules.

City takes it on

City Planner Kyle Deming, in researching the trend across the country, wrote in a memorandum to the Planning Commission in October that the nature of vacation rentals — almost always located in residential areas — create special problems: noise, parking and unfamiliarity with local rules.

Similar to the long-term rentals, the vacation homes will be subject to city code and violations will be dealt with, Hamre said.

“They’ll be found noncompliant and go through the violation process,” he said.

“It’s going to be tough,” Joel Johnson said of enforcing the use of permits. But the new rules will give the city a tool, he said, when complaints come about properties that may be operating without proper permission.

Some Duluth owners of traditional lodgings, like bed and breakfasts, had urged city planners to better define and regulate vacation homes. Many chimed in on the ordinance the city was building and said they were satisfied with the end result.

Mike Wilmes of Duluth, owner of a hospitality management and consulting company, was one of the people concerned that vacation homes were slipping under the radar compared to hotels. Wilmes, also a board member with the Minnesota Lodging Association, said there had been “growing concern with our members who strive to provide clean, comfortable and safe accommodations.”

In the end, Wilmes praised the city for its work.

Up the shore

Deming’s research included a look at the only specific vacation rental ordinance in the region, in Lake County.

The Lake County Board of Commissioners voted in a permit process in 2011 that defined what a rental property is and allowed them in areas along the North Shore where they previously weren’t allowed. People wanting to rent a home in those areas have to apply for an interim license, meaning it is subject to the county Planning Commission for review each year.

While the county had been sorting out the rental ordinance, there had been a moratorium on all vacation rentals for two years. Operators needed to file for a conditional-use permit. The moratorium was said to be put in place to protect renters from homes and cabins that don’t meet specific codes. The county Health Department had been seeking more definition on what to look for when inspecting buildings intended for vacation rental.

The Minnesota Vacation Rental Association backed the opened zoning, opposing “regulations on vacation rentals that unreasonably distinguish the short-term rental of private housing in a way that infringes on individual property rights.”

LeRoger Lind of Castle Danger, north of Two Harbors, has been a staunch opponent of the Lake County measure, saying it will ruin the quality of residential living along the North Shore.

“My opinion hasn’t changed,” he said. “It’s basically changing residential areas into commercial areas.”

There have been similar complaints across the country when it comes to allowing vacation rentals in residential areas.

Places like Duluth have lived with the reality of vacation rentals for years under the less-specific rental rules, and there isn’t much choice in keeping them out now, Hamre said. They’re part of the tourism culture developed in the city, he said.

“They were already here, and we wanted them to operate in an appropriate fashion,” Hamre said. “They’re part of the ambassadors of our community.” ___

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