For years, rising tourism in New Orleans has driven a downtown construction boom, thanks in part to generous tax credits that have made it profitable to bring vacant or underutilized historic buildings back into commerce as hotels.
Now, the city is attracting attention from a new sector of the hospitality industry: timeshares, or at least a new version of the half-century-old business model.
A handful of recently restored apartment buildings and hotels that are now listed for sale could likely go this route, according to some hospitality leaders — a shift that’s partly driven by a recent zoning law change that allows timeshares in areas of the Central Business District where they previously faced permitting hurdles.
One property on Elk Place already changed hands — a move that will displace scores of residents at a time when many neighborhoods are feeling squeezed by rising housing costs and the influx of short-term rentals.
“We all had a sense of place and continuity, and ... to purge us for this purpose, for timeshares, just broke any sense of community,” said Peter Scharf, 73, who lived in a one-bedroom apartment at 144 Elk Place for about three years before moving out in April.
“It’s a personal loss to the people that lived there,” Scharf added, “but I think it’s a bigger loss to the city.”
The 17-story Elk Place building was sold in May for almost $27.6 million to Florida-based Bluegreen Vacations, which sells timeshares and manages resorts in the U.S. and the Caribbean.
The 98-unit apartment building, which includes eight levels of parking and a rooftop pool, mostly has two-bedroom units, with some three-bedroom and studio units. It was sold by Baton Rouge developer Mike Wampold, who bought it in 2011 and spent “north of $20 million” to renovate it.
A handful of other CBD buildings, including apartment buildings, are likely to go the same way, local real estate experts predict.
“I hadn’t heard the word ‘timeshare’ in about five years, and all of a sudden, multiple individuals seem to be exploring, and companies are exploring, the potential for timeshares in New Orleans,” said Michael Sherman, a New Orleans attorney who specializes in land use issues. “I don’t know what’s driving this trend, but it is obvious that serious players locally and nationally are exploring this form of vacation opportunity.”
Timeshares are a relatively new trend in the New Orleans hospitality market, experts say, and account for only a small piece of it so far.
However, rather than the traditional model of a timeshare, where vacationers buy a single unit for a specific week each year, Bluegreen allots owners a certain number of points each year, depending on the size of their initial purchase, that can be used for vacation stays at its various properties, with a sliding scale of rates set for different cities. They can also buy additional points at any time.
The company has more than 60 resorts in the U.S. — primarily located in popular vacation destinations, such as Orlando, Las Vegas and Myrtle Beach, South Carolina — and on the Caribbean island of Aruba. It also has another 4,000 locations throughout the world through a partnership with Resort Condominiums International, an Indiana-based timeshare exchange group.
Business is growing rapidly. Last year, Bluegreen had about 210,000 timeshare owners in its vacation club; they had an average household income of $75,000, according to securities filings. That was up from 170,000 owners in 2012.
Timeshare operators say their business offers travelers more amenities than a hotel stay — usually roomier accommodations, with a full kitchen, washer and dryer.
Bluegreen also has a smaller local timeshare property on Decatur Street, called La Pension, which it acquired in 2008.
“The demand for New Orleans has been so significant, and we’ve had such great success with that property that it made sense for us to expand,” said Ahmad Wardak, a Bluegreen spokesman.
In the coming months, as leases expire and are not renewed, Bluegreen plans to renovate 144 Elk Place into a “very boutique type property,” Wardak said.
“It’s a perfect fit for us, because that’s the kind of accommodation that we try for the most part to bring for our members,” he said.
Although the company doesn’t plan to list the units on Airbnb, it’s possible that its customers could.
David Seal, 56, a professor at Tulane University’s School of Public Health and Tropical Medicine, was one of 144 Elk Place’s original tenants four years ago. He renewed his lease in November when rumblings of a potential sale were starting to mount.
“I looked at a lot of places around here and I liked this apartment,” Seal said. “I thought the price was decent. It’s a five-minute walk for me to work, you’re close to the French Quarter, and it’s got balconies, which few places have.”
His two-bedroom, two-bathroom unit costs almost $2,000 a month. But he’s worried about having to pay more somewhere else.
“I think it’s bogus," he said of the timeshare conversion trend, "because it takes three or four buildings of residents who live and work here and displaces us for tourists. It doesn’t say a lot about how the City Council and City Hall feel about residents who actually live and work here.”
Earlier this year, the council approved zoning changes for the CBD that will make it easier for timeshare companies to operate in most areas.
The City Planning Commission’s staff backed the move, arguing in a report that a timeshare “does not possess any more unique characteristics as compared to a hotel, hostel or commercial short-term rental,” which are all permitted uses in the affected CBD areas.
Now, the owners of other CBD buildings are already marketing their properties to suit this new option.
Several buildings, including New Orleans’ oldest "skyscraper," the 11-story Maritime building at 800 Common St., which has 105 apartments, and the Saratoga building at 212 Loyola Ave., with its 155 apartments, could potentially follow suit, according to real estate experts.
Both buildings were recently brought back into commerce by their owner, architect and developer Marcel Wisznia. The Maritime building was renovated in 2010 at a cost of $38.8 million, and the Saratoga a year later at a cost of $41.8 million.
Both renovations benefited from federal and state historic tax credits and, in the Maritime’s case, new markets tax credits, which promote investment in low-income areas.
Both properties also have mortgages insured by the U.S. Department of Housing and Urban Development. Last year, Wisznia came under fire from a local housing rights group for converting many of the units into short-term rentals, which it claimed violated federal rules.
Wisznia declined comment on any potential sale, saying he was “bound by (non-disclosure agreements) not to discuss the future of our two properties at this time.”
The Royal St. Charles, a 143-room hotel at 135 St. Charles Ave. that was fully renovated in 2012, is also for sale and is being marketed as a potential timeshare.
Lenny Wormser, senior vice president at Hospitality Real Estate Counselors, a hotel brokerage firm that is handling the listings, predicts that at least some of the buildings will be converted to timeshares.
“There’s a move afoot to come here in the timeshare business because it’s a permitted use,” he said.
Major hotel brands typically have timeshare companies, including Club Wyndham, which operates three properties in the New Orleans area.
With hundreds of apartment units added in recent years, some developers and real estate experts, including Wormser, say there’s an “oversupply of apartments” in the CBD, which has caused the rental market to soften. At the Elk Place building, for example, the occupancy rate had fallen into the 80 percent range.
At the same time, hospitality industry officials often complain about a lack of available hotel rooms, and they are eager to add more top-of-the-line capacity to the city’s roughly 25,000 rooms.
Taking hundreds of apartments off the market by converting the properties into timeshares would likely lift rental rates as a whole in the CBD and perhaps other neighborhoods.
The CBD's population has grown sharply in recent years, rising from about 1,800 residents in 2000 to more than 2,600 today, according to recent census figures compiled by the Data Center.
Several ongoing apartment and condo developments are underway in the CBD and Warehouse District, aiming to mix high-end units with ground-floor retail space.
“Because of the amount of short-term rentals in a lot of these other downtown buildings, there aren’t necessarily available units to support these people who are being displaced,” said Breonne DeDecker, program manager for the Jane Place Neighborhood Sustainability Initiative, a local nonprofit group that tries to increase the supply of affordable housing.
Scharf agreed, warning that the city is putting increased pressure on residents in order to cater to tourists, a balancing act that could collapse before long if local residents are asked to sacrifice too much.
“The notion that you could kill the goose that laid the golden egg is very real,” he said.