INSIGHT ON: Economic Development – Lakeside luxury

Posted on Sep 2, 2014 :: Economic Development , Insight On
Sean P. Johnson
Posted by , Insight on Business Staff Writer
The 182-room Blue Harbor Resort has become a popular site for destination weddings and girlfriend getaways since repositioning itself as a lakeside resort. It has also been able to leverage the golf courses of nearby Kohler. Photo Courtesy of Blue Harbor Resort

The 182-room Blue Harbor Resort has become a popular site for destination weddings and girlfriend getaways since repositioning itself as a lakeside resort. It has also been able to leverage the golf courses of nearby Kohler. Photos courtesy of Blue Harbor Resort

David Sanderson likes to say he is in the business of making memories. By all accounts, business is good.

As the general manager of Blue Harbor Resort, Sanderson has been at the helm of a tremendous turnaround of a property some thought was destined to become the proverbial albatross for Sheboygan. Instead, it’s become a symbol of success not only for its owners, but for the community as a whole.

“We’ve are positioning ourselves as the number one resort on the lakefront,” says Sanderson, pointing to a glistening Lake Michigan from the resort’s main lobby. “We’ve been able to diversify the markets we attract.”

The results are impressive.

In 2012, Blue Harbor broke all previous records for reservations and revenue. It subsequently shattered that mark in 2013 and is on pace to do it again this year. In addition to traditional bookings and the waterpark, destination weddings have also become a growing market segment, especially with ties to nearby golf courses and Blue Harbor’s spa.

“We are no longer seen as a waterpark,” Sanderson says. “We are now a lakefront resort that has a waterpark as an attraction.”

Recent developments should continue those trends. The resort’s ownership was simplified earlier this year when Chicago entrepreneur Gerald Forsythe purchased the property outright from his partners, the Massachusetts-based Claremont Properties.

When announcing the changes, Blue Harbor also announced a new round of upgrades for the resort, including upgrades to the fitness center, spa and salon, meeting and event areas, new mini-golf facility and a major expansion of the waterpark. Initially pegged at $1.7 million, the upgrades will likely cost closer to $2 million by the time all of the projects are complete.

Much of the work will begin after Labor Day and should be complete by November, though some projects have already started.

Breaker Bay Waterpark will see a major upgrade this fall when Blue Harbor installs a dual FlowRider, which is a surfing simulator.

Breaker Bay Waterpark will see a major upgrade this fall when Blue Harbor installs a dual FlowRider, which is a surfing simulator.

One of the more significant upgrades will be the addition of a dual FlowRider to the Breaker Bay Waterpark. The FlowRider is a surfing simulator and is expected to increase the attractiveness of the water park to older children, Sanderson says.

The latest round of upgrades follows $3 million invested when Forsythe and Claremont first took over the property in 2011, most of which was spent making interior changes to improve the look and functionality of the resort while also tripling the sales staff and marketing budget.

As leisure travel rebounded following the Great Recession, Blue Harbor was in a great position to take advantage of traveler demand, a trend that continues. Peak season bookings are running above 85 percent occupancy, and the resort is seeing more bookings in the “shoulder” seasons as well, those times of year that are considered off-peak such as January, February and March.

“I know they have had a tremendous July,” says Chad Pelishek, director of planning and development for the City of Sheboygan. “Even with the cold spring and tough winter, they have been doing better than average.”

Certainly, the waterpark helps keep rooms full outside of the busy seasons. But other amenities such as the restaurants, salon and spa and convention center help as well. The convention center, built using a city-created tax increment financing district, can host groups of up to 600.

It’s a great rebound for a property that struggled its first several years.

Blue Harbor was built at a cost of $54 million by Great Wolf Resorts and opened in 2004. Great Wolf operates 11 other water park resorts in nine states and Canada, including a property in Wisconsin Dells. However, the 182-room resort in Sheboygan never met its initial revenue and booking expectations, and Great Wolf sold the property in 2011 for $4.2 million to the partnership that included Claremont and Forsythe.

The resort property was seen as central to Sheboygan’s efforts to revive the Lake Michigan lakefront. Like many cities that developed on the lake, the waterfront and river were critical components of the industrial core. As cities rediscovered the waterfront, they were often confronted with brownfields of abandoned and decaying industrial sites.

Blue Harbor sits on land south of the Sheboygan River and harbor, which was reclaimed from its longtime use housing coal and oil storage facilities. The area’s redevelopment was part of a three-pronged effort that started by restoring the historic fishing shacks along the river as retail sites, then upgrading the harbor, then Blue Harbor site south of the river.

“It’s real easy to sit here six years after the fact and say why things didn’t work at first,” Sanderson says. “The fact is there are a lot of reasons, just like there are a lot of reasons we were able to turn it around, such as the repositioning and an increase in travel spending. It’s just been great we’ve been able to capitalize on the lakefront.”

Leveraging the lakefront has been an important element in the turnaround of Blue Harbor Resort. This past year, the resort began working with a local surf shop to rent watersport equipment on the nearby beaches.

Leveraging the lakefront has been an important element in the turnaround of Blue Harbor Resort. This past year, the resort began working with a local surf shop to rent watersport equipment on the nearby beaches.

Those redevelopment efforts have made tourism one of the leading sectors of the Sheboygan area economy, bringing in millions in new spending and helping to lower the region’s unemployment rate. Tourism spending increased more than 4 percent from 2012 to 2013, according to the Wisconsin Department of Tourism. Visitors spent nearly $200 million in the county in 2013.

“They have been doing really well, and we would expect them to continue that with the ownership changes,” says Amy Wilson, planning and tourism director at the Sheboygan County Chamber of Commerce. “We have been seeing big increases all over the county, even from the first quarter when marketing is limited.”

At the same time, the unemployment rate has fallen dramatically to 5.2 percent from a high of 10.6 percent in 2010, according to data maintained by the Wisconsin Department of Workforce Development.

Along with Blue Harbor and the tourism industry, many other businesses in Sheboygan are seeing positive growth and undergoing expansions, a trend that began a few years ago and is showing few signs of slowing down.

“Tourism has been one of the leaders for us,” Pelishek says. “But going into this year, there were a lot of projects on the table and we are seeing many of them become reality, particularly expansions of existing companies.”

Some of the major undertakings include:

» Acuity Insurance
The Sheboygan-based company hired its 1,000th employee this past June. The company is in the midst of a $130 million, 240,000-square-foot expansion of its corporate headquarters. The company has hired more than 100 employees in the past 12 months and has seen premiums grow by 14.4 percent.

“A lot of companies in our area have continued to expand,” says Dane Checolinski, director of the Sheboygan County Economic Development Corp. “We are actually reaching a pinch-point for housing, which is something that we are going to have to tackle soon.”

» Polyfab Corp.
The company received approval in July to begin a 50,000-square-foot addition to its manufacturing facility. When complete, the $10 million expansion will double the company’s production capabilities and could lead to as many as 35 additional full-time employees. Polyfab is a thermoplastic injection molding manufacturer supplying parts for the gas line, packaging and medical industries.

» Rails to Rails
Work continues to restore the 11-mile rail line from Plymouth to Kohler that was taken out of service by Union Pacific, leaving several manufacturers in Sheboygan County without rail service. The project to restore the line will cost more than $18 million and is expected to be completed by June 2015.

Work crews are now more than halfway through removing the existing track and rail ties along the route, which will be operated by Wisconsin & Southern Railroad when it reopens.