Special report: Last resorts: High lake property values taking toll on Minnesota vacation tradition

DETROIT LAKES, Minn. - During the late 1940s, in the carefree years after World War II, American families had the time and money to take summer vacations.

High on their list of places to go was Minnesota's lake country.

Sixty years ago, 4,000 resorts dotted the state.

Today, the land of 10,000 lakes has fewer than 1,000 resorts, and it's losing more every year.

Topping the reasons: a meteoric rise in the value of lakeshore property.

That can mean higher taxes for resorts at the same time the traditional family vacation is taking a back seat to work and other activities that place heavy demands on parents and children.

Faced with rising costs and shrinking profits, resort operators see the potential windfall of selling their land and the option becomes hard to resist, said Tom Day, vice president of government affairs for the Minnesota Resort and Campground Association.

"We've been losing close to 100 resorts a year," Day said. "This is the biggest issue facing the hospitality and tourism industry in the state right now."

Resorts that rent cabins or campsites by the night or week are going to seasonal arrangements, while many seasonal campgrounds are selling out to take advantage of soaring property values, Day said.

"The true ma-and-pa resorts are being run out of business," he said. "Those that are a little bigger in size and have the capabilities to expand are doing that. So the big are getting bigger and the small are disappearing."

Jerry Smith, a real estate agent who handles lakeshore property in the Pelican Rapids area, agreed.

"The taxes are getting so high and with the price of gas and stuff, they can't make a living doing it, unless they're real big," he said.

"The small resorts - a family operation - they're simply doing it because they want to do it, rather than trying to make any money."

Nearing the end

Dick Pettit and his wife, Lynn, decided to quit the resort business five years ago.

They sent letters to their campers at Ridgewood Resort on Long Lake, a few miles west of Detroit Lakes, telling them the campground would close at the end of the 2005 season.

Forty years working in the resort industry have left Dick Pettit with a tan George Hamilton would envy.

But it was hard-earned.

For proof, just try finding him.

Here's a hint: Follow the sound of the tractor.

Pettit, 68, takes care of 120 acres of land the couple own, 25 of which comprise the resort.

Soon, however, it will all be annexed into the city of Detroit Lakes.

"Then we will develop the property (for private housing) and probably invest a million dollars in roads and sewer, which you can't recoup with camping," Dick Pettit said.

Taxes have also been a drain, he said.

"Our real estate taxes now are well over $30,000, which is probably 15 to 17 percent of our gross income," Pettit said. "When we first started, our taxes were around $4,000. It's gotten to be a real bite."

Smith said he knows the dynamics resort owners like the Pettits are experiencing.

"I can certainly understand why they're selling out," he added. "I used to be part- owner of one (resort), and the land is much more valuable than the business would be."

When the Pettits purchased Ridgewood in the late 1970s, it had 160 sites for campers and tents and 22 cabins.

Guests paid by the night or week.

Within a decade, the campground, known for years as Tom and Jody's, went exclusively to seasonal renting for RVs.

"They (weekly campers) would make a reservation, stay for one night and if the weather was bad they'd pull out. You wouldn't get any rent from them," Lynn Pettit said.

Offering RV campers an attractive rate to stay from May to October was the way to go, she said.

"They start to look at it as their own little private place and they take better care of it," she said.

As the Pettits get ready to shutdown Ridgewood, they are preparing to set up a 150-unit RV condominium association on 120 acres of land they've agreed to buy on Little Cormorant Lake.

Renters at Ridgewood will get first shot at buying into the association, with RV sites starting at about $25,000.

"We were kind of sorry we had to get out of the business and felt we were dumping our customers; some of these people have been camping here for 30 years," Dick Pettit said, adding that 130 people have already signed up to move to Little Cormorant.

"There's an overwhelming need for nice camping facilities."

Access drying up

Fewer resorts mean fewer people can enjoy Minnesota's lakes, said Dan Berg, owner of Lakecrest Resort on Long Lake and a member of the Becker County Resort Preservation Task Force.

"There's no question resorts add a whole dimension to people's ability to go out and enjoy the lakes in Minnesota," Berg said. "The people who can afford it are buying up property and building big, expensive homes."

Rising property values have the dual effect of boosting taxes while providing a financial incentive for resort owners to sell out, Berg said.

Another factor hurting the business is the way people take - or don't take - vacations, he said.

"Families are so busy that they're not finding time to go on vacation," Berg said.

Many resorts, including his own, are still taking reservations for August, he said.

Resort operators say their season doesn't really get going until July and winds down when families begin preparing for school in mid-August.

Five years ago, the Legislature modified a law that required schools to open after Labor Day, a move that hurt resorts, Berg said.

Under the new law, which was intended to give school districts more flexibility, schools may not start before Sept 1.

Labor Day falls on Sept. 6 this year, which under the old law would have meant an extra week of heavy traffic for resorts.

While the Sept. 1 starting date is less beneficial to resorts than the Labor Day rule, the Minnesota Resort and Campground Association supports the current law because it fears any further changes will result in zero protections for resorts.

The last week of summer is often the make-or-break week for resort operators, Berg said.

"At the end of the season, you look at what you can generate in income and balance that against your expenses," he said. "For many people, that means they decide to liquidate the resort and walk away."

Berg said a survey four years ago counted 44 resorts in Becker County. He estimated the number is closer to 30 today.

Wakanda Resort on Island Lake 16 miles east of Detroit Lakes sank into history last summer when owner Ed Theisen sold the resort's cabins and restaurant.

In turn, the new owner sold the seven cabins and six RV sites as individual lots, said Theisen, who owned the resort for four years.

Taxes, the short summer season and pressure to keep rental rates below $900 a week prompted his decision to sell, he said.

"The cash flow is not there," Theisen said. "When we sold out, we broke even just to get out of the situation."

Otter Tail County still has 150 to 160 resorts, but is losing them at a rate of about six a year, County Assessor Bob Moe said.

Closings have a chilling effect on local economies, Berg said.

In Becker County, resort goers generate $15 million in economic activity, according to a study done by the resort preservation task force.

"As the resorts go away, that economic impact is lost and there's no other business to replace it," Berg said.

Lake versus country

While the horizon looks cloudy for many resorts, the future appears sunny for Pelican Hills RV Park and Campground, owner Dave Aaberg said.

"We're kind of going against the trend," said Aaberg, who started the Otter Tail County resort "from scratch" in 1991 with his wife, Maggie.

The couple recently added 85 new sites - bringing the campground's total to 155.

A new community room gives guests a place to socialize and the campground's store offers many amenities.

The resort - across a two-lane road from the public boat landing on Pelican Lake's northwest shore - is near the water but has no direct access to it.

"I don't think we could do this on the lake," Aaberg said.

"This piece of property on a lake? We could not afford it. You'd have to get such high rent you'd be way out of the market," said Aaberg, who rents sites by the season.

The decline in resort numbers is likely to continue, he predicted.

"There are too many people out there willing to pay big bucks for the property. And because of the short season, you can't get the cash flow," he said.

Aaberg is on a first-name basis with a good share of his renters, some of whom have been coming to Pelican Hills for nine years.

Many of the campground's RVs are dolled up with picket fences, flower pots and mini decks.

Over time, Aaberg said, campers tend to graduate to larger and larger units. "We call it RV disease," he said.

Although many people prefer lakeside camping, the option is quickly disappearing, Aaberg said.

"They (campers) are finding the resorts on the lake are full and have a long waiting list, or are closing," Aaberg said.

Now, he said, people are just glad to have a place they can go to get away from it all.

"I had a lady tell me, 'I just gotta think different. Instead of going to the lakes, I'm going to the country that's near the lake.' " Aaberg said.

Readers can reach Forum reporter Dave Olson at (701) 241-5555