Tourism Planning Taskforce Report - Western Australian Planning ...

Chapter 6Term of Reference 3clear to the taskforce that there is anincreasing trend to operate such facilitieswithout mandatory-pooled management toavoid capture as managed investmentschemes. This has the potential to underminethe value of strata schemes as a financing toolfor tourism development, due to theinadequacy of management structures andresulting outcomes.Project financingThe financing benefits of the use of strataschemes for tourism developments areachieved through distribution of investmentrisk, achieving secure pre-sales, financesecurity and reduced equity requirements.Their use also can assist early profitrealisation. This is achieved through enablingthe subdivision and sale of components of theland or buildings that make up a tourismdevelopment on a real estate basis, asopposed to profit being derived from theongoing operation of the development. (Seeterm of reference 1). It is these financialbenefits that have assisted in strata schemesbecoming the dominant mechanism forfinancing tourism developments.This approach has resulted in a predominanceof projects based on the construction of unitsfor individual sale to residential investors, withthe management rights disposed of to a thirdparty, and the developer having no furtherinterest in the property. This system ofdevelopment and management also has thepotential to shift the emphasis in developers’considerations from those factors required toprovide a sustainable tourism facility, takinginto account market conditions, to thoseissues that will result in a rapid sale of unitsand reduced holding costs.The development industry sees the marketingadvantages of strata schemes, being able tosell a title, as significant over other forms ofproject financing and acknowledges that this,in part, relies on tapping into the residentialreal estate market and selling a lifestyleimage. It is on this basis that sectors of theindustry see requirements for pooledmanagement and/or compliance with ASICrequirements for managed investmentschemes as undesirable, as residentialinvestors are discouraged, reducing theirpotential sales market. The outcome of this isargued by developers as a reduced ability todevelop projects profitably.6.3 Tourism issuesassociated with stratatitlingTourism WA has been examining the effect ofstrata schemes on tourism development for anumber of years. While it acknowledges thebenefits for financing of developments, it hasidentified concerns in respect to some projectswith the tourism product delivered, and theirsustainability as tourism operations. (SeeAppendix 5).Tourism WA has had considerable feedbackregarding the adverse consequences of stratadevelopments with inadequate managementframeworks. An example commonly cited iswhen units are not under the exclusive controlof the tourism manager/operator under apooling arrangement and they are obliged tolet units on a basis that has each physical unitoccupied for an equal period so that there isequal revenue distributed to each unit owner.This can result in the more appealing unitsbeing left empty, while visitors wanting theseunits are informed that only the less appealingunits are available. Visitors either book intoalternative accommodation or arrive, becomedisappointed with the operation of the resortand do not return to the area.When refurbishment and maintenance are notundertaken through a contractual process,under the control of the tourismmanager/operator, and instead are left with, orrequires the authorisation of, the unit owners,situations occur where disputes arise as to theneed for replacement of a product or thespecification of the replacement or repair. Thisleads to inconsistent standards across adevelopment and visitor dissatisfaction.Visitors frequently compare what they receivefor their money with what other visitorsreceive, with equality in this area criticallyimportant to visitor satisfaction.Equality also is important with internal fit-outs.When fit out standards are not consistent,visitor dissatisfaction will occur, eg a unitowner may fit a unit out with atop-of-the-range television/DVD and stereoTourism Planning Taskforce Report47