Estimated Economic Impact & ROI Analysis

Thunderbird Beach Resort Redevelopment Scenarios

To estimate the potential Return on Investment (ROI) for redevelopment scenarios, we must first estimate the property's potential annual operating profit, also known as Net Operating Income (NOI).

Because final operating projections are not yet available, the following estimates use conservative assumptions typical for Gulf Coast beach resorts, including those in the Treasure Island market.

Market Assumptions

The following baseline assumptions were used for both scenarios:

Average Daily Rate (ADR): $325
Average Annual Occupancy: 75%
Operating Margin: Approximately 35% of room revenue
(Typical for full service coastal resort operations)

Scenario 1: 106 Room Redevelopment

Annual Room Nights

106 rooms × 365 days × 75% occupancy

Estimated Annual Room Nights:
29,018

Annual Room Revenue

29,018 room nights × $325 ADR

Estimated Annual Revenue:
$9.43 Million

Estimated Net Operating Income (NOI)

$9.43M × 35% operating margin

Estimated Annual NOI:
$3.30 Million

Estimated Return on Investment

NOI ÷ Total Investment

$3.30M ÷ $85M

Estimated ROI:
3.9%

As you can see, this return is all below the recommended return of 20% as per the master planner candidates.

Why This Is a Financial Challenge

Typical resort developments require 7% to 10% returns in order to justify construction risk and secure financing.

A 3.9% return falls significantly below common financing thresholds, meaning:

• The project may struggle to obtain financing
• Debt service could exceed cash flow
• The development may not be economically sustainable

Scenario 2: 184 Room Redevelopment

Annual Room Nights

184 rooms × 365 days × 75% occupancy

Estimated Annual Room Nights:
50,370

Annual Room Revenue

50,370 room nights × $325 ADR

Estimated Annual Revenue:
$16.37 Million

Estimated Net Operating Income (NOI)

$16.37M × 35% operating margin

Estimated Annual NOI:
$5.73 Million

Estimated Return on Investment

$5.73M ÷ $110M

Estimated ROI:
5.2%

Additional Revenue Potential for Larger Resorts

Larger resort properties typically generate significant revenue beyond room bookings.

Common additional revenue sources include:

• Food and beverage
• Pool bars
• Events and weddings
• Beach rentals
• Retail shops

These sources often contribute 25% to 40% additional revenue beyond room revenue.

Conservative Additional Revenue Estimate

If we conservatively estimate 30% additional revenue:

Total Revenue
$16.37M × 1.30

Estimated Total Revenue:
$21.28 Million

Adjusted NOI

$21.28M × 35%

Estimated NOI:
$7.45 Million

Adjusted ROI

$7.45M ÷ $110M

Estimated ROI:
6.8%

Direct Comparison

Economic Impact to Treasure Island

In addition to on-property revenue, resort guests generate significant spending in the surrounding community.

Using a conservative estimate of $150 per guest per day spent off property, the difference between development scenarios becomes substantial.

The larger resort could generate over $6 million in additional annual spending in Treasure Island businesses.

This includes spending at:

• Restaurants
• Bars
• Retail shops
• Boat charters
• Fishing guides
• Tours and attractions
• Entertainment venues

This additional spending supports local jobs, sales tax revenue, and tourism activity.

Estimated Annual Visitor Volume

Using the following assumptions:

75% occupancy
2 guests per room

Scenario

Estimated Visitors Per Year

106 Rooms

~58,000 visitors

184 Rooms

~101,000 visitors

What This Means for Local Businesses

The 184 room resort would bring approximately 43,000 additional visitors per year to Treasure Island.

Using the earlier $150 per day off-property spending estimate:

43,000 additional visitors × $150

Estimated Additional Local Spending:
Approximately $6.4 million annually

Summary

The 106 room redevelopment scenario presents significant financial limitations because the land value is high relative to the limited room count. The resulting return on investment falls below sustainable development levels.

The 184 room redevelopment scenario:

• Better utilizes the property
• Reduces cost per room
• Increases revenue capacity
• Generates more visitor traffic
• Creates stronger economic activity for the city

From a financial and economic standpoint, the larger redevelopment scenario represents the most sustainable long term investment option.