When the Pronghorn resort’s developers announced earlier this year they decided not to build a five-star hotel, as they originally planned, Richard McElyea, of the San Francisco-area resort consulting firm Economic Research Associates, was not surprised.

The economics of building a luxury hotel in Central Oregon have never made sense, McElyea said. While Pronghorn’s developers blamed a lack of tourists on the Sept. 11 attacks, McElyea said the downturn in tourism that stemmed from the attacks ended some time ago.

”9/11 has come and gone and most places have rebounded significantly,” McElyea said. ”You sort of wonder whether they really had any intention of building a really high-end hotel.”

The financial formula for resorts, especially in Central Oregon, makes it far easier for developers to make money by selling home lots compared to building five-star hotels, Mc-Elyea said, since houses pose far less risk and generate much more immediate profits.

”If you look at the history of Oregon’s two most famous resorts, Sunriver and Salishan (Spa and Golf Resort on the coast), where they made their money was all in real estate,” McElyea said.

A resort developer can pocket revenue from a home site sale as soon as the lot is sold, while spending just the cost of bringing utilities and roads to the site. But a hotel takes a much greater upfront investment – as well as continuing operating and maintenance costs.

Jon Peterson, of Anacortes, Wash.-based Peterson Economics, said a hotel with 65 percent average occupancy – 10 percent above the Central Oregon average occupancy rate – will break even on operation costs, but won’t make enough money to pay back the $50 to $75 million investment it takes to build it.

That’s a big reason why resorts are abandoning hotel plans in favor of time shares, he said. A 40 percent occupancy rate for time shares can still make developers money, he said.

”With time shares, you collect all the money upfront and then charge homeowner’s association fees,” Peterson said. ”You make almost all your profit upfront.”

A state law that requires developers to build one overnight lodging unit for every two homes won’t help the region’s resort market either, Peterson said. Although building more rooms at new resorts might attract a few more visitors, the primary consequence of having too many overnight units will be an industry that can’t make money, Peterson said.

”For the most part it just makes lodging tougher and tougher,” he continued. ”It might mean people spend less on upkeep and maintenance and the quality might go downhill.”