As our best practices
help article points, you should not create reports directly in your app, but rather have a separate class library that contains the reports and is then referenced from your app.
Web Sites are "special" and you need to put classes in special folder called App_Code. However there is no design time available for those classes unless you explicitly right click and choose "View Designer". That is why the Report Wizard does not "kick in" - it is enabled only when a report designer is initially opened and this is not the case with websites.
Another reason to avoid placing reports directly in websites is the fact that its assembly is auto generated with different name every single time containing the App_Code folder in it e.g. App_Code.unch8s_n
. This this makes it impossible to assign a report to a report viewer control in design time.
the Telerik team