YOU'VE GOT MILLION-DOLLAR lots with 10 million dollar views. Too bad all you can do with them is build on them and sell them. Or is it?

That's a bit of the thought process involved for builders who have added to their business models by developing and building resort properties. Instead of stopping with the sale of the units, the builders have started to spot opportunity for long-term income streams by adding hotel facilities and high-end resort amenities, as well as offering rental programs for owners who want to recoup some of their investment.

Not a market for the meek. Resort properties are, by definition, in highly desirable locations. Sales volume and pricing will be driven in large part by the view and proximity to the area's primary attraction, whether it's a beach, ski slopes, or an endless mountain view. Land with those features is not cheap.

GREAT ESCAPES: Bear Lake Reserve (Centex Destination Properties) has community “fire pits” (near the Greeter's Cottage), where each evening the fire is lit and makings for s'mores are placed there (complimentary) for property owners and renters alike to make and enjoy. But the potential for profit makes the investment attractive. First off, people are spending money to travel. The Travel Industry Association pegs the economic impact of travel in the U.S. at more than $500 billion annually, and luxury spending is strong. The Travel Institute, an industry training association for travel agents, reports that in 2004, Americans spent $440 billion on luxury goods, with that amount projected to increase to $1 trillion by 2010.

The target buyer for resort properties also is projected to remain strong for at least the next decade. MetLife's Mature Market Institute identifies more than 45 million households in the baby boom demographic, with an annual spending power that exceeds $2 trillion. Older boomers, those born between 1946 and 1955, are past the point of spending money on their children on a daily basis and spend 23 percent more than the average consumer on hotels and vacation homes.

A study released March 1, 2005, by the National Association of Realtors shows that a record 2.82 million second homes were sold in the U.S. in 2004, up 16 percent from the previous year. A full million of those were vacation homes, with the remainder listed as investment homes. Plus, a survey on the second home/vacation property market released by Centex Homes in the summer of 2004 indicated that second home buyers were willing to pay an average of $350,000 for a detached unit, a full $100,000 more than the average price of a new single-family home in the U.S. at the time the survey was conducted.

TOWER OF POWER: WCI's Resort at Singer Island, Fla. Centex's study confirmed some long-known buyer preferences. Water is far and away the central draw, followed by walking trails, hiking, a fitness center, boating, and a spa. The overwhelming majority of buyers are interested in a property on or near a beach or at a lake. The five top locations nationwide were coastal: Naples, Marco Island, and the Keys in Florida; the southern South Carolina coast; Maui; and the southern New Jersey and Delaware coasts.

“This is about marketing the amenities,” says Andrew Hannigan, chairman and CEO of Centex Homes, which has plunged into the arena with a nascent Destination Properties unit Hannigan anticipates will contribute as much as $500 million in revenue by 2009. “These properties,” Hannigan says of Centex's activities in Vermont, the Southeast (mainly Florida), the Southwest, and West Coast, “are lifestyle oriented, amenity-rich communities in locations desired most by people in the top 7 percent of U.S. households in income and wealth.”

Centex's survey also produced some surprises, including a relatively low interest in championship or private golf, tennis, or skiing. Plus, respondents indicated a desire to “tune out and relax” as opposed to non-stop activity, evidenced by a high interest in walking trails and hiking, and a willingness to drive long distances to a second home. Nearly 40 percent of respondents said they were willing to travel more than four hours.

The Opportunity As a business strategy, the resort market offers national builders the ability to capitalize on some core competencies—finding great land deals, shepherding projects through the entitlement process, designing product that appeals to specific buyer profiles, crafting successful sales and marketing campaigns, and containing overhead costs through efficiencies of scale. It also creates an opportunity to develop some long-term sources of revenue from not only leasing space to on-site hotels, spas, restaurants, night clubs, banquet facilities, and other services, but also from operating and managing rental programs for owners who want to recoup some of their investment.