Halogen Guides Real Estate

Boston Celtics Coach Doc Rivers Partners With Ultimate Escapes

2009-07-02T16:26:18-07:00

NBA coach Doc Rivers is partnering with destination club Ultimate Escapes to raise money for Shepherd’s Hope, a non-profit organization of volunteers that provides access to health care for the uninsured. Through Ultimate Escapes signature Ultimate Giving SM program, individuals will have the chance to bid, via a series of eBay auctions, on six extraordinary packages including a VIP Golf Experience with the world champion coach in Orlando and a VIP Celtics package during the 09/10 season.

The first auction closes July 4, and includes three offerings that will grant winners access to a collection of luxury homes usually reserved for members of the club: a VIP Golf Experience with Doc Rivers in Orlando, a five-night stay in a London home and a five-night stay in a private residence in Turks & Caicos. As part of the Ultimate Giving. initiative, all proceeds from the auction will be donated to the charity of Doc Rivers’ choice, Shepherd’s Hope.

Abercrombie & Kent Offer New Trial Membership Vacations

2009-06-17T09:56:48-07:00

The luxury residences of the Abercrombie & Kent Residence Club are offering a new family deal for a trial run. This trial membership will enable potential members to choose from the club’s portfolio of multi-million-dollar residences in their beach, mountain and golf destinations.

Residences are around 4,000 square-feet, with four bedrooms and four bathrooms. Among the advertised destinations are Turks & Caicos, Deer Valley and Kiawah Island.

The trial membership includes the full range of Abercrombie & Kent Residence Club services, including a global experience manager to orchestrate and manage your stay and provide expert travel recommendations, private transportation to each residence, pre-arrival grocery shopping and a destination host who will help trial members plan excursions and activities.

Additional amenities include behind-the-scenes private tours of the Turtle Hospital at the South Carolina Aquarium, the opportunity to ski with an Olympian in Sun Valley or the chance to meet an artist at the Jackson Hole Center for the Arts.

For a limited time, Trial Membership in the Abercrombie & Kent Residence Club is available for $1,400 per night. [[Abercrombie & Kent]]

Nuggets Coach George Karl on Ultimate Escapes

2009-05-29T13:45:51-07:00

As the playoffs wend their way to what we at HalogenLife hope will be a worthwhile finish (we still can’t get over how thrilling those Celtics-Bulls games turned out to be), we’re reminded of Nuggets coach George Karl’s affinity for Ultimate Escapes destination club.

He happens to globetrot by way of the club each summer. (It’s convenient for him, as it’s a Colorodo-based travel group.) An avid golfer, Coach Karl hits the links at one of the 50 UE locales worldwide&mash;conveniently, they offer free memberships to some of the top golf courses in the country.

“Ultimate Escapes is the perfect travel option for my lifestyle; the homes’ size and decor is beyond impressive and the Escape Planners make each trip flawlessly ideal,” he says. “I look forward to working with the Escape Planners and the entire team to continue their remarkable levels of success.”

Karl is but just a few of the sports figures that are members of Ultimate Escapes, others include Hall of Fame Quarterback Steve Young, Team USA Manager Davey Johnson, University of Illinois head basketball coach Bruce Weber, golf broadcaster David Feherty, and Chicago Bears Offensive Coordinator Ron Turner.

“Go big or go home” is something of a mantra for George Karl. His vacation provider offers a slightly different sentiment: Go big, then go home.

Distinctive Holiday Homes Offers New Membership Promo

2009-05-11T12:23:05-07:00

For the next 60 weeks, Distinctive Holiday Homes (DHH) is offering a limited-time-only promotion for new members amounting to $40,000 per membership week, in addition to annual fees on any current personal plan.

Over the next 60 weeks, of this limited offering is available to current members to upgrade, former members of failed destination clubs and the general public. After that time, DHH will accept referrals from the then-current members for new memberships.

An example of the promo: A custom four bedroom Lake Tahoe property is now five membership days for one week stay; this was previously seven membership days for one.

Additional DHH international destination properties are located in Auckland and Queenstown, New Zealand; Noosa, Australia; Kailua, Hawaii; Lake Tahoe, California; Beaver Creek, Colorado; Megève, France; and Tuscany, Italy.

For more information, visit DHH online.

Survey Says: Market Bleak for Private Residence and Destination Club Owners

2009-05-07T17:23:52-07:00

The potential market for vacation homes, including full ownership and private residence and destination clubs, has declined substantially since 2007. Contributing factors include losses in net worth and a negative 12-month outlook for the economy and personal income among the wealthiest 10 percent of US households surveyed in March 2009.

The American Affluence Research Center (AARC) has been studying this market and publishing findings every two years since 2005. The Spring 2009 survey report includes relevant comparisons to the 2007 survey results. About 60 percent of the affluent target market indicates no familiarity with either the private residence or destination club concepts, which represents little or no change from the 2007 survey. Familiarity with the concepts does vary by demographic segment of the affluent. The latest report is based on the responses of 640 men and women from households with an average income of $290,000, an average net worth of $3.1 million, and average investable assets of $1.4 million. The average age is 56 and 58% are males.

Among those familiar with the concept, 72 percent did not name a brand of private residence club with which they are familiar and 82 percent did not name a brand of destination club with which they are familiar. The majority did indicate recognition of one or more of the nine brands listed for each concept.

The incidence of access to wholly-owned vacation homes and time share, private residence club, and destination club units was essentially the same as in 2007. Reported plans to seriously consider purchase of one of these options during the next 12 months are about half what they were in 2007, with further declines projected over the next 24 month period.

Abercrombie & Kent Residence Club Hosts First Annual Meeting

2009-05-07T15:37:57-07:00

The Abercrombie & Kent Residence Club, an equity destination club that still has a fresh-paint scent (it launched in September 2008) held its first annual meeting in Chicago on April 28. Two members were elected to the board of directors.

“Our company works on behalf of the members, who own the club under our equity model,” said Geoffrey Kent, founder, chairman and chief executive officer of the Abercrombie & Kent Group. “From the beginning, we made a commitment to provide members with financial transparency, regular reporting, and inclusive governance. The annual meeting exemplified the dedication we have to openly communicating timely information to members, including current audited financial figures and our plans for growth.”

The meeting provided n opportunity for members who had only communicated online to meet in person and share their experiences. “From my perspective, the most valuable thing about the annual meeting was the opportunity to meet and socialize with other Club members and hear about their experiences.”

The Abercrombie & Kent Residence Club is the largest equity-based club in the destination club industry. Members own the club and have direct input into how club resources are used. All the residences are owned debt-free and A&K manages the club on the members’ behalf.

Membership includes a broad range of vacation travel options around the globe, from African safaris, to cruises on the Nile, to adventures in the Galapagos. Memberships are currently available. For more information, visit www.akresidenceclub.com .

Ritz Carlton Launches Destination Club

2009-04-30T18:09:08-07:00

The Ritz Carlton has a history steeped in luxury as we all know. When the celebrated hotelier Cesar Ritz redefined the hotel experience in Europe through his management of The Ritz Paris and The Carlton in London, his influence took with Americans in search of a vacation stay on a higher plateau. For more than 80 years his legacy has served as both Ritz Carlton and Marriott hotels’ guiding light.

Twenty five years after setting a new timeshare standard by becoming the first branded hospitality company to enter the vacation ownership market, Marriott International Inc., is now entering the destination club industry.

This week the hotelier unveiled a new Ritz-Carlton Destination Club, which makes Marriott the first branded hospitality company to enter the milieu of vacation ownership opportunities.

The newly launched Ritz-Carlton Destination Club represents an extension of the Ritz-Carlton Club name and reputation. The project aims to continue the hotel chain’s presence in the vacation market and merge it with the high-end fractional ownership industry.

The new equity-based private membership program now offers two choices: Home Club Membership, which is identical to the former Ritz-Carlton Club fractional ownership program that provided titled ownership to a property members can use throughout the year, or a new deeded Portfolio Membership, which affords members the opportunity to experience a variety of premier destinations and accommodations.

“The Ritz-Carlton Destination Club provides the discerning few with a new level of privilege and freedom when they travel,” said Peter J. Watzka, executive vice president and chief operating officer for The Ritz-Carlton Development Company, Inc. “Over the last decade of establishing a second-home alternative for our current Ritz-Carlton Club members, we developed intimate and rewarding, one-to-one relationships. With this commitment to deliver luxury vacation experiences, we evolved the brand to the new Ritz-Carlton Destination Club by blending the attributes of luxurious vacation homes with a heightened, flexibility while also maintaining the exclusivity our members have come to expect.”

Members with a Home Club preference can take advantage of up to 35 days of pre-reserved access at their specific club annually, and can also use a portion of their time at other locations on a reciprocal-use basis in accordance with reservation procedures. Home Club prices range from the low $100,000s to the low $800,000s.

What sets this destination club apart from its peers at this point is projected convenience. This annual allotment of currency is used to reserve accommodations based on travel dates and size of residence, which would allow more flexibility for a member who prefers a different experience each time they travel. When choosing from the collection of residences, each is assigned a varying nightly point value.

An initial Portfolio Membership, which is priced from $120,000, comes with 5,000 club points, but additional interests can be purchased in 2,500 club point increments. The new Hotel Exchange Program also enables members who purchase a Portfolio Membership to utilize a portion of their club points at participating Ritz-Carlton hotels and resorts worldwide.

The Ritz-Carlton Destination Club is an equity-based luxury travel program where Members select either a Home Club Membership which provides a titled residence and usage at a property they can return to every year, or a deeded Portfolio Membership which affords the opportunity to discover a wide variety of locations and experiences. It’s a tough economy, and destination clubs are all taking a hit. Ritz Carlton’s gambling on their reputation as well as on audacity: if this works, a new player, with a new concept, enters the market.

Destination Clubs Take a Different Approach

2009-04-15T09:07:08-07:00

Destination clubs are feeling the economic pinch just like the rest of us. With a backlog of members looking to terminate their contracts, clubs have gotten creative about addressing the issue. Here’s a quick rundown.

Clubs may elect to allow current members the ability to resell their membership on the open market. Quintess Luxury Vacation Club has taken a different approach. The destination club launched a new program for prospective members to take the club on a virtual “test drive.” The new program enables prospective members to get the full experience without putting a hefty sum. It’s less of a commitment that way, according to Quintess. At the end of the trial year, if the prospective member decides to take the plunge, the usual membership deposit is paid over a period of three to six years.

Another approach destination clubs are taking is from a world viewpoint: With wealth comes great responsibility; philanthropy is the new green.

According to Giving USA: The Annual Report on Philanthropy, in 2007 people gave approximately $300B to charity, with the average change rate during a recession has been a drop of only 1%. Adam Capes, CEO of Equity Escapes, announced, “Over the past 2-1/2 years, since our inception, we’ve donated nights held by our management company to numerous charities and non-profits to help them raise money. And our trips have raised around $100,000 per year for different causes in 2007 and 2008. 

The Society For Leisure Enthusiasts, called The Society, is an international portfolio of more than 5,000 luxury vacation rentals for travelers who wish to experience the benefits of a destination club (concierges, private chefs, airport transfers, etc.) without the membership fees. Founded in 2008 by two Oxford University graduates, the Society is becoming known as much for their charitable successes as it is for the high-end vacation home and villa rental program. The Society’s philanthropic arm is called Vacation Homes for Charity.

Abercrombie & Kent Residence Club, an equity-based destination club, is famous for encouraging experiential travel focused on preserving the natural and cultural heritages of communities around the world. As a result the club has supported global causes focused on education, conservation and health.

Entering Las Vegas: A Gamble That Can Pay Off

2009-04-06T11:25:34-07:00

Las Vegas, Nevada is certainly a place where one can lose his shirt. But in the current economic climate, it’s also becoming a more desirable place for one to hang his hat. After the housing bubble started to leak, previously prohibitively priced homes have dropped in value. Sin City, it would seem, can also be nicknamed Bargain City. How big a bargain?

The National Association of Realtors says the median Las Vegas home price declined from $317,400 in 2006 to $181,700 as of last December. That’s a decline of 44 percent. In addition, many of the houses and condos once owned by high rollers have been sold off or seized by lenders. Real estate value for some properties has been reduced by 80 percent.

This is hardly irregular for the city, which has consistently had one of the highest foreclosure rates in the country. And in light of an anemic U.S. job market, there’s little change in sight. Nevada’s unemployment rate has reached double-digits. In a recent Labor Department report, the number of laid-off workers collecting state unemployment benefits jumped to 669,000 in the week ending March 28, the highest since Oct. 2, 1982.

Prospective buyers are flocking to Las Vegas to poach the abandoned properties. Second-home buyers and investors are considering real estate purchases to either rent or flip for future buyers when the economy improves. Several potential investors are from Singapore, Italy, Ireland, Mexico, England, Canada and Australia.

Condos that at one time cost $250,000 in prime locations are now listed at $54,000 to $74,000. According to the Standard & Poor’s Case-Schiller home index, Nevada’s real estate has dropped by more than 32 percent. For perspective, Tampa prices are down 23.3 percent and Boston and Cleveland have shown a less dramatic downturn: They’ve fallen 7.3 and 5.2 percent, respectively.

The lowest month for new-home closings was January 2009, when 249 properties sold. One in 60 homes is in some stage of default, which is the nation’s highest foreclosure rate. Vegas is offering more than just ownership opportunities; hotel prices are at bargain basement prices as well (rooms at the Trump are going for $79 on a weekend night). Flights are cheaper than they have been in years and even casino food is being discounted.

This puts a new spin on the old saw, “The house always wins.”

Equity Estates Boasts Growth Despite Economy

2009-02-20T08:37:38-08:00

As destination clubs scramble for new members and grapple with depreciating home values, the boutique Equity Estates club announced significant growth in the last quarter of 2008. Membership interests in the club—which are available only to accredited investors (read: $1 million in assets or $200,000 in yearly income)—grew by $2.5 million in December, according to a press release yesterday.

Equity Estates is a true equity-based destination club, in which members buy shares of a real estate mutual fund, with the hope of property appreciation. While non-equity based clubs have seen a recent upheaval and rash of bankruptcies, the more conservative debt-free clubs like Equity Estates and Abercrombie & Kent Residence Club appear well-positioned to ride out a recession.

Equity Estates has an estimated 60 members that own a stake in eight properties, worth $1 million to $6 million. The most recent club acquisition, confirmed this month, is a 5-bedroom oceanfront residence in Hilton Head, S.C. Full shares in the club cost $325,000 [update: $350,000], which gets members 30 nights of use each year at the club’s homes.

What's Up with Destination Clubs: Part 3 of 3

2009-02-17T17:19:03-08:00

The recent implosion of some destination clubs and the budget shortfall of Ultimate Escapes has club members on edge. Reporters are intrigued (see the New York Times and Wall Street Journal coverage) and observers seem generally skeptical. All for good reason.

For the past three years, we have covered the industry and informed consumers on how to evaluate a destination club and all the potential high-end vacation home alternatives. It has not always been easy as these are private clubs, and full financial disclosure in particular has been elusive. That’s partly why we have never outright endorsed clubs, handed out awards, or sold club memberships. We do, however, accept advertising from destination clubs, fractional residence developers and luxury hotels.

As a member of Exclusive Resorts for over four years and recently facing renewal of our annual contract, I did what any other member or prospect of a club should do:

Evaluated our club usage over the past 12 months and calculated our real cost-per-night, and general satisfaction with our experiences.

Spoke with other members that I knew to get their impressions. Most were optimistic, but not all of them.

Studied recent club communications – in the case of Exclusive Resorts, it was a comprehensive annual report.

Talked to executives at the club in person, with particular attention to the methodology, timing and results of their recent net asset test.

Like any due diligence, it’s a combination of art and science. I’ve decided to renew our membership and hope for more great vacations in doing so, knowing that there are risks, especially in this worsening economic environment. All destination clubs need access to capital to get to a profitable point; just as developers need access to debt to build properties before they are all sold.

While you won’t see us publish awards or hand out star ratings, we hope to instead arm you with the right questions to ask when looking at the alternatives, from the debt-free model of Abercrombie & Kent Residence Club to the boutique model of Quintess, to the fractional model of The Ritz-Carlton Club.

Ultimate Escapes Pulling Through

2009-02-11T18:16:01-08:00

As destination clubs across the board are fighting to stay above water, Ultimate Escapes looks like it just might keep its strong position in the niche industry. The club recently asked its members to pony up about $22 million to cover some operational budget shortfalls for the coming year. CEO Jim Tousignant told us that $16 million to date have been committed by about 900 members. “We feel very satisfied with the results,” said Tousignant.

What becomes of members who haven’t paid?

The total assessment charge breaks down to about $18,000 per member, which doesn’t necessarily come easily in the current economic environment.

“A small number of members are under severe economic challenges,” said Tousignant. “A lot of members clearly want to stay involved but need to wait.”

Ultimate Escapes set their fee deadline to Feb. 5, after which any member who didn’t begin payment would have their reservations wiped, and their membership deemed inactive. Tousignant expects that many inactive members will revive their membership in the upcoming weeks. Roughly 20% of last year’s membership base is currently not active.

What’s Up with Destination Clubs: Part 2 of 3

2009-02-10T16:02:19-08:00

Most members of destination clubs or buyers of fractional real estate tend to have very positive feedback about their experiences. We think that this trend will accelerate as the economics of second home whole ownership comes under increasing scrutiny by the prospective owner. But surveying a member of a recently-failed destination club, or a buyer in an incomplete fractional development will yield different results.

If the demand for shared-cost vacation homes continues to accelerate, however, we will see several models develop to meet that demand, as entrepreneurs respond to the perceived opportunity:

Destination clubs remain viable, but the current shakeout highlights the need for more transparency and disclosure, as well as an operational model that approaches break-even at a realistic membership sales level.

The debt-free model has reemerged with the launch of Abercrombie & Kent Residence Club. A debt-free model deserves consideration, as the real estate assets are owned outright by the members. This model, often referred to as an equity club, should gain traction now that a major luxury travel brand is putting its muscle behind it.

Fractional real estate developments work for consumers that want to stay in one primary location. We think this solution will see renewed growth based on an ability for owners to get access to different locations via a network. Leading luxury brands like Ritz-Carlton Residences are well positioned to offer this.

New twists on the luxury home rental solution are coming to market—and we expect more—as owners of five-star properties in prime locations decide to offer their homes for rent or lease. Entrepreneurs realize that there is a demand for more luxury and consistency than most rental options currently offer. Villazzo is one such option, and we hope to see more.

For some families, it might be a blend of the above options. In the cases of destination clubs and fractional real estate, we have always believed that the consumer needs to treat the buy-in not as a financial investment, but a lifestyle one with real risk. Not all destination clubs have survived, and likewise not all real estate appreciates in value.

Abercrombie & Kent Residence Club Has Lusso Offer on the Table

2009-02-05T12:52:10-08:00

As destination club the Lusso Collection awaits a Feb. 11th court date on bankruptcy proceedings, several competing clubs have made transition offers to Lusso’s management. But according to Abercrombie & Kent Residence Club president Jarvis Slade, his club’s proposal did not make it to Lusso’s members.

Some Lusso members allegedly discovered the offer through the Chapter 11 case’s Unsecured Creditors’ Committee, and contacted Slade, saying that the Abercrombie & Kent proposal was not shared.

“We along with several other clubs made proposals over the last 30 days,” said Slade. “But from our understanding, the Abercrombie & Kent proposal was not shared with the Lusso membership base.”

Slade seemed confident in his club’s offer, which he plans to communicate directly in a conference call with Lusso members tonight at 7:00 PM CDT. “We have the availability for the members,” said Slade. “The equity model is the one true sustainable destination club model moving forward.”

Lusso members interested in the conference call with Abercrombie & Kent may contact Christian Banovich at 630.725.3400 ext. 284 to obtain the call-in number and password.

Questions Loom Around Lusso Bankruptcy

2009-02-04T14:37:57-08:00

Some questions are doomed to be left unanswered amid the muck of recent bankruptcies in the destination club industry. In December of last year, destination club the Lusso Collection filed for Chapter 11 bankruptcy, issued a brief statement to its members, and has since remained publicly silent. Our emails to the club’s management have gone unanswered, but a few updates have circulated through the courts nonetheless.

Number of leased homes higher than expected

After the bankruptcy filing, a court document surfaced from members looking to get audited financials from the Lusso Collection management before handing over their next round of dues. The document, filed in the United States Bankruptcy Court for the District of Minnesota, claims that of the 26 Lusso property interests, only 5 were owned outright. The remaining properties consisted of 7 operating leases (short-term, not to finance), 11 capital leases (ownership of the asset is transferred to the lessee at the end of the lease term), and 3 non-subsidiary LLCs that control properties (who knows; financing members?).

Financing members allegedly did not pay initial deposits or yearly dues

The court document filed by the ad hoc committee of members also stated that certain financing members of the club (members who acquired or maintained properties) were perhaps not subject to any deposit or yearly dues agreements. The club had an estimated 150 members in total who paid refundable deposits of $425,000, and annual dues of $28,000. It is still unclear what has become of the member deposits.

What’s Up with Destination Clubs: Part 1 of 3

2009-02-03T09:41:49-08:00

Almost three years ago, we wrote:

The question for all destination clubs is, “what would happen in a tougher economic environment, or worse yet, an economic meltdown?” Of course that is harder to predict, but you can get an impression now of how a club is managed financially. Ask to see audited financial statements that show the value of the real estate portfolio (minus debt) when compared to membership refund obligations. Ask about operating deficits and their access to capital to fund that. Ask for a list of members, from which you will call three or four to discuss their club experiences.

Sadly, the meltdown for many industries has come within the last six months (equity and debt markets frozen, consumer spending pulled back), so the destination club shakeout is brutal—and accelerating.

The big questions for destination clubs

Does the consumer still value and appreciate the experience?

It seems like the answer is generally yes, but the destination club model is not for everyone due to price, availability, and other factors. But satisfaction in these clubs tends to be high according to the clubs (as you would expect) and according to members that we have talked to over the years.

Is the business model proven?

Not yet. We don’t know of any club that has announced profitable operations, so they will continue to require access to capital to fund growth. Any current member or prospect needs to ask some obvious questions, including:

Is the club experience right for me, and does the expected cost-per-night fit my budget?

An expected cost-per-night should be calculated based on expected usage, cost of capital, and other factors. Use our online calculator as a starting point.

Is the club providing enough information for me to assess if it can repay its member refund and debt obligations?

I have asked these questions myself over the last six months, as we have been members of Exclusive Resorts for over four years now, and our annual membership is coming up again for renewal. More to follow.

Abercrombie & Kent Residence Club Looks Ahead

2009-02-05T11:29:14-08:00

The story of Abercrombie & Kent Residence Club has thus far been short but action-packed. Since its inception in September, the equity-based destination club has absorbed members from two former destination clubs, and has appeared to weather the slouching economy surprisingly well.

Remaining calm

“There is no debt on the club’s homes,” said
Abercrombie & Kent Residence Club president Jarvis Slade in a recent interview. Built on the principle of real estate equity, Abercrombie & Kent Residence Club rolled-in previous equity-based clubs Crescendo and BelleHavens. Club member deposits go towards purchasing homes without mortgage debt, a conservative approach and a departure from the typical destination club model. The Abercrombie & Kent Residence Club currently owns 17 homes plus a number of leased villas and trade agreements with Stein Hotels for member use.

What does the club expect in 2009?

The club currently has an estimated 150 members, most of which were absorbed with the Crescendo and BelleHavens acquisition. However new membership sales have dropped considerably across all clubs since September. “Fifty to 100 new members in 2009 would be outstanding, based on what’s going on in the current economic conditions,” said Slade.

Slade’s club additionally reaps the corporate support of veteran travel company, Abercrombie & Kent, giving the young destination club a relative safety net. Slow sales and consumer caution in the next year could broadside most destination clubs.

Nonetheless Slade said the club just acquired seven new homes in the last year at locations like Turks and Caicos, Hawaii, and Snowmass. Based on member input, additional development is planned for the Mayan Riviera in Mexico.

Decision Time Draws Near for Ultimate Escapes Members

2009-02-03T11:26:56-08:00

Ultimate Escapes members are on their toes this week, as the destination club expects all 1200+ members to shell-out about $22 million to keep the club in business. If a member doesn’t meet the Friday deadline for payment, their membership will become inactive. To facilitate member concerns, Ultimate Escapes is operating a FAQ section in the members-only part of their website, which attempts to address member concerns.

Ultimate Escapes members: Ask questions

It’s good advice for any club member and we’ve recommended it from day one; grill your club on the specifics of their financial situation and their plan moving forward. If you’re an Ultimate Escapes member and missed the management conference call, here’s what you should be asking before Friday:

What options did you look at to cover budget shortfalls and why did you choose the assessment charge approach?

Is the assessment financing enough or is more capital needed, and if so, when?

What do members get in return for the assessment?

Have you done everything possible to reduce operating costs?

You bought Tanner & Haley from bankruptcy, so you know the mistakes not to make. What happened at Ultimate Escapes in the past year to lead to this tight financial situation?

What percentage of members need to vote “yes” on the assessment for the club to continue operations?

Do you think the current club model is viable?

Rash of Bankruptcies Turns Heads

2009-01-28T09:37:33-08:00

Fractional Residence Spotlight: Sandcastles

2009-01-27T13:15:12-08:00

Michelle Higgins of the New York Times put it best: “The Caribbean is on sale.” Struggling real estate markets and consumer caution are hitting the luxury travel sector hard, even in the peak travel season of late winter. But wary consumers are exactly the crowd that Bobby Gibson’s company Sandcastles is looking to attract.

An off-shoot of the 20 year-old Villas Caribe upscale villa rental network, Sandcastles appeals to would-be owners looking for an equity interest in a luxury villa. A considerable amount of time goes unoccupied in Villas Caribe’s 3000-home network throughout the Caribbean and Mexico. Gibson rhetorically asked us, “how can we address an ownership option for the empty periods in some of these homes? Fractional ownership really stuck out based on the usage patterns of a lot of our clients.”

What’s for Sale

Three residences with 1/10th (or about 5 weeks) fractional ownership interests are available through Sandcastles. The clear deal of the three, called Villa Paradise, costs $298,000 for 6-bedrooms, 4000 sq. ft., four patios (including one on the rooftop), a private pool, and lots more. It’s beachside in Playa Paraiso, Riviera Maya, and includes a jet ski.

The Las Pergolas home is the next most-economical at $430,000, but consider what you get: 5 bedrooms, 6 bathrooms, and 11,993 sq. ft. overlooking the Bay of Banderas in Puerto Vallarta. Las Pergolas is also appointed with an SUV and an infinity pool.

Sandcastles’ premium offering is the Dulce Suenos home, with a 1/10th ownership priced at $599,000. The 4-bedroom, 4.5-bathroom home sits on 100’ of oceanfront property in Isla Navidad, Costa Alegre. Some generous amenities for this specific home include a full staff, a Grady White Marlin 30’ yacht, a Land Rover LSE, infinity pool, and list really goes on.

What You Get

All of Sandcastles’ homes include full concierge and private chef services in addition to the residence-specific amenities. Ownership also gets you discounted rates at about 80 homes within the Villas Caribe network. Trades are not available, per-se, however Gibson told us that Sandcastles can facilitate trades if there is a mutual interest.

The Halogen Guides Take

Sandcastles has an additional appeal for current owners stuck with a multi-million dollar villa; they can fractionalize unused time at the home. This means they can build a new ownership structure that lets you keep your ideal usage period and not have to pay for the rest of the time that the home sits unused.

The discounted rates from Villas Caribe is a nice touch, too. While there are only 80 homes for fractional owners to choose from, it’s a worthwhile competitive edge. Competing destination clubs have extensive locations within the Caribbean as well, so be sure to compare your options.

Ultimate Escapes and the $22 Million Dollar Question

2009-01-24T10:37:33-08:00

Ultimate Escapes’ management held an interactive conference call Thursday night in which about 800 members heard-out the destination club’s decision to charge a one-time $22 million fee spread across all current members. The call closed with a member Q&A session. The fee is designed to cover heavy losses in real estate value and a sharp decline in new membership sales.

“One hundred percent of this [assessment] charge is slated to pay for the operational costs of the club,” said CEO Jim Tousignant. “We think it’s a one-time measure to deal with an absurd market measure.”

What options did Ultimate Escapes look at?

The alternative to a one-time assessment fee would be a permanent increase in annual dues; a move that members of Quintess recently agreed to. Tousignant said that a permanent increase in dues is not necessary for Ultimate Escapes members, nor in the best interest of the club over the long term. However, dues increases are integral to the destination club business model, and as the club matures (a topic we’ve covered in-depth in our decision guide to destination clubs), it’s unlikely that Ultimate Escapes wouldn’t follow suit. Annual dues are not technically the crux of a destination club’s success though.

“There is a false understanding in the industry of operating solely on annual dues; sales are necessary in even the best of times,” Tousignant said. He also mentioned that the $22 million one-time charge takes into account a projected drop in sales over the next year, and would cover those sales losses if they arise.

Reductions in operating expenses

Ultimate Escapes undertook staff layoffs and cut salaries in the last two months, and according to Tousignant, the senior management bore the highest pay cuts. In November, competing destination club and industry leader Exclusive Resorts announced a 10% reduction in its workforce to reign-in operational costs. Tousignant said Ultimate Escapes’ recent staff reduction was slightly higher. In addition to staff reductions, the club also reduced its mortage interest on some properties, and significant cuts have been made in marketing and headquarters costs.

Pending merger still lingers

Ultimate Escapes spawned from the $200 million merger of previously-competing destination clubs Ultimate Resort and Private Escapes. While the merger’s completion was officially announced last summer, additional delays put off the final close on the deal. “The market crash created issues with the lender and caused a delay,” said Tousignant. In a worst-case scenario, Private Escapes and Ultimate Resort would likely go back to operating under their respective previous names. Pending merger paperwork has not affected the combined club’s home reservation schedule, or the 1,200 members’ access to those homes. The merger is expected to close in mid-2009.

What’s next?

If a significant percentage of members pay the assessment fee (which Tousignant seemed confident in), Ultimate Escapes plans to expand their reciprocity program, which was mentioned to us in November. Tousignant said, “it gives affluent consumers who are buying whole ownership resort residences or fractional homes a chance to experience our club through an exchange program. Our hope is that many of them will become buyers of club memberships. Our members can stay at [their] homes, and developers pay us substantial fees.” The club already has an agreement in place with resort developer Cappella.

We encourage our readers and Ultimate Escapes members to share their thoughts, so feel free to weigh-in below.

Ultimate Escapes Asks Members to Pony Up $20 Million

2009-01-21T06:36:24-08:00

It’s high-time for annual financial assessments among destination clubs, and the 2009 outlook for Ultimate Escapes seems to be leaving more questions than answers. The club is seeking about $20 million from its members to cover an operating budget shortfall; a move that has understandably generated a considerable amount of buzz on the destination club forums. Many of the details have unfortunately been kept under wraps, but there’s no shortage of speculation on the forums.

Ultimate Escapes is currently the second-largest destination club, with about 1,300 members. The third-largest destination club, Quintess, made a similar move in mid-December, asking its members (including the ones on their resignation list) to pay higher annual dues to ensure the club’s health moving forward. The members approved the decision in mid-December.

When we spoke with Ultimate Escapes’ management in November of last year, all indicators pointed to good financial health in the club. We are currently reaching out to the club’s management to discuss the contrasting details of the 2009 assessment.

One Key Looks Locked Down

2009-03-31T16:13:02-07:00

Financial woes seem to have locked down travel club One Key, as the hybrid villa rental and destination club’s website sits in ominous limbo.

One Key offered a travel card program for pre-paid stays in one of about 250 homes. While One Key positioned itself as a destination club, the company did not own any real estate, but rather tapped into an extensive network of luxury villas that aren’t typically available on the rental market. Typical destination clubs, however, own a sizable portion of the real estate used by their members, and lease the rest.

One Key did not charge a refundable membership deposit like most destination clubs either, and instead relied on travel card sales ranging from $34,900 to $84,900. Membership deposits are part of the backing force for a club’s financial security, but a recent rash of club woes have shown that membership deposits are not a ticket to a club’s solvency.

Our call to One Key went unanswered at press time, so it is unclear what specifically forced the company to cease operations. It is also unclear whether or not current members will get to used their remaining prepaid nights, which were marketed with no expiration date.

What's Next for Quintess?

2009-03-31T16:10:37-07:00

Destination club members have recently sent our comment boards abuzz with speculations on the coming year. Shortly after our interview with Ultimate Escapes’ Jim Tousignant, Halogen Guides asked Quintess CEO Ben Addoms about what his destination club is planning for 2009.

What factors will ensure a destination club’s success through the economic downturn?

Addoms: This is a very complicated question as it depends on the stage of development that a destination club is in today. More mature clubs like Quintess need to ensure that their operating costs and sales and marketing costs are in line with much lower 2009 new membership sales projections and that their real estate portfolios are sized appropriately. All clubs will need the support of their members and equity investors for the next several years to survive the downturn and thrive as the market returns to normal. Quintess is positioned well because it has such support from both its members and investors. There are clearly opportunities for industry consolidation and some very attractive real estate options that hold the possibility of making existing clubs product offerings even more attractive. Winners will be innovative and develop new partnerships to drive new membership sales and create more value for existing members.

Is Quintess reaching out to Lusso members or in discussions with the club to pick up some of their properties?

Addoms: Quintess is currently engaged in discussions with several destination clubs and due to the need for these discussions to remain confidential we cannot comment at this stage.

Is Quintess cutting operational costs, as Exclusive Resorts and others have, or are the reductions in other operating expenses?

Addoms: Quintess made both staff and operating cost reductions to reflect expectations of slower growth in 2009. Overall the club reduced its staff in sales, marketing, real estate, and operations and is taking steps to reduce its property portfolio operating expenses as well. We believe that the club is in a position to continue to deliver exceptional service and value to our members based on the changes we have made.

One member on our website wrote in a comment, “Supposedly, 88% of the [Quintess] membership has voted to have their dues increased, in some cases by almost double and 88% have voted to have people on the resignation list be made to pay their dues while they wait to get some amount of their deposit back.” Is this true? If so, which dues will increase, and will all members be equally affected?

Addoms: Quintess recently asked its members to agree to pay higher annual dues going forward to ensure the club can continue to thrive, and this included members on the club’s resignation list. These proposed changes were approved mid-December by the members. The changes endorsed by the vast majority of members ensure that Quintess can continue to offer exceptional service and access to the largest high-end home portfolio in the destination club space to both current and new members regardless of current market conditions.

Are Quintess’ property acquisitions going forward as planned for 2009?

Addoms: Quintess continues to look for great real estate to add to the club’s property portfolio. The size of the portfolio and its growth in the coming year will be a function of club membership growth and member feedback and demand for both existing and new destinations.

Exclusive Resorts Remains Confident

2009-01-12T10:45:36-08:00

Exclusive Resorts ran some good financial news up the flag pole last week. In an email to its members, the 3,500-member destination club previewed their annual financial report, which is scheduled for release in its entirety at the end of January. A third-party re-appraisal of Exclusive Resorts’ real estate and financial balance sheets has found that the club “continues to remain in compliance with the Net Asset Test as of December 31, 2008,” according to the letter sent to club members.

A net asset test for a destination club is a straightforward way of measuring the club’s cash and real estate holdings versus its membership deposit obligations. Details on the net asset test and other financial indicators can be found in our Decision Guide to Destination Clubs.

Destination clubs members and industry watchers alike have been keeping a close watch on club resignation lists and financial solvency. The recent bankruptcy of Lusso Collection generated a considerable amount of buzz, and begged no shortage of questions for the remaining destination clubs. It’s a likely relief for members that the industry’s largest club, Exclusive Resorts, is confident moving forward even after trimming 10% of its workforce. “We’ve reduced marketing expenses and corporate overhead, but not our services,” said Exclusive Resorts representative Ian Arthur. “We’ve added over 60 properties this year. We’re moving forward in the business.” Arthur added that despite the economic downturn in the second half of 2008, Exclusive Resorts acquired over 350 new memberships last year.

Hawaii's High-End Real Estate Takes a Hit

2008-12-22T18:54:17-08:00

Single-location vacation resorts may be cornered into serious problems. Just look at the 13.1 percent decline in home values over the last year in Hawaii. Candace Jackson of the Wall Street Journal writes that exclusive hot-spot Hualalai on Hawaii’s big island has 50 homes and lots on the market, and reported half their sales volume of 2007. The celebrity magnet resort once had a two-year waiting list. It appears that consumers are looking for a deal, even in high-end markets.

The diversified home portfolios of destination clubs are an obvious counterpoint to the single location of resort real estate. Similar buy-in costs (typically $100,000 and up) and annual dues put the two options on the same playing field. However, destination club members have a dramatically wider variety of homes and locations to choose from. Industry giant Exclusive Resorts has over 350 homes in 40 destinations, and Ultimate Escapes offers nearly 300 homes to its members in over 150 locations.

But destination clubs are not immune to the same real estate woes as typical resorts, even on the ultra-high end. The highly selective Yellowstone Club boasted mogul members like Bill Gates and had over a $1 million buy-in cost, yet filed for Chapter 11 bankruptcy. Any smart buyer in this market should do their due diligence and weigh their vacation home options. Our decision guide is a comprehensive place to start.

Lusso Collection Files for Chapter 11 Bankruptcy

2008-12-05T16:17:59-08:00

Destination club the Lusso Collection filed for Chapter 11 bankruptcy today in the U.S. Bankruptcy Court for the District of Minnesota. The boutique destination club, which has more than 150 members and homes in 16 locations, will operate through the reorganization, and members will still be able to book stays at the club properties.

“The current national financial crisis has resulted in a precipitous drop in new member enrollments and a significant contraction in the availability of debt financing, which has affected the club’s ability to acquire new properties and service existing obligations,” the company said in a statement.

The move by Lusso Collection is just the latest sign of how the economy is impacting destination clubs. This fall, High Country Club announced a plan to reorganize its membership and raise dues. Even the largest destination club, Exclusive Resorts, has been impacted by the economy—this fall, the club laid off 10% of its workforce in order to trim costs.

Tough economic times undoubtedly lead to challenges for destination clubs. Clubs are facing resignation requests from members while also seeing less success in attracting new members or external financing. The silver lining for a well-financed club during an economic downturn is that it can purchase luxury real estate at very attractive prices. Large destination clubs often get deals from developers seeking to sell multiple units to a single club, but now the incentives are even better. For consumers, a destination club is still, in many cases, a cheaper alternative to buying a second home, especially when real estate prices are stagnant or falling, making home ownership less appealing. But before investing in a club, consumers should be sure to ask about the club’s financial stability and member resignations, among other due diligence issues.

Tips for Buying a Fractional in a Recession

2008-12-03T15:10:41-08:00

With housing prices still searching for their bottom, it’s no wonder that some buyers are planted firmly on the sidelines. But there is good news amid all the gloom. If you’re looking to buy a fractional residence, you have more options and negotiating power than ever. Keep these tips in mind during your hunt.

Search out lower prices

While there is no single index that tracks fractional prices, anecdotal evidence shows that developers are beginning to lower asking prices on projects. Take Resort Equities, the fractional residence developer that has homes Tuscany, Hawaii and Lake Tahoe, among other locations. This fall, it dropped the asking price on four shares of condominiums at the Lake Tahoe ski resort, Northstar-at-Tahoe, and managed to get several offers. Also this fall, the developer of the Ranch on Soda Rock in California’s Sonoma County lowered the price from $300,000 to $250,000 for a one-tenth share of a three-bedroom home set on a vineyard. The developer is also offering to cover taxes and dues for the first year, an incentive package totaling $15,600.

Negotiate on everything

It’s the fractional industry’s well-guarded secret. Prices are negotiable. Will every development be open to chopping the price of a share? No. But many of them will be amenable to tossing in financial incentives that can get buyers to the closing table. “It is a buyer’s market, and developments are willing to work with you,” says Paula Gold-Nocella, the owner of Global Quarters, a fractional real estate brokerage. She’s seen properties accept lower deposits, agree to stagger payments for a share or even offer to cover one year’s worth of dues in order to close the deal. The key? Ask for it.

Consider Europe

The dollar has been on a charge against the Euro since mid-summer, which is good news for buyers interested in fractional residences in Tuscany and Paris. Shares priced in Euros represent the biggest chance to save. Take Fractional Paris, which is now selling one-twelfth shares of a two-bedroom apartment in the Marais for €120,000. Earlier this year, the first six shares of the home sold for the equivalent of $189,600, but buyers now would pay just $152,400.

Fractional developers that price shares and yearly fees in dollars are also beginning to take steps to lower annual dues to reflect the newfound strength of the dollar. This fall, Resort Equities lowered the annual dues for its home in Tuscany from $19,000 to $16,000. If a European project hasn’t adjusted its annual dues yet, use that as a negotiating point, pointing out that the dollar goes more than 20% farther in Europe than it did this summer.

Look to bigger developers if you need financing

Securing financing remains a sticking point for fractional purchases, and companies like NextStar Funding are no longer offering mortgages for one-off fractional homes. If you need a mortgage to buy, your best bet is to look at larger fractional developments with multiple homes rather than small developers carving up slices of single homes for sale.

Get more tips on buying a fractional vacation home by downloading our Decision Guide to Fractional Residences.

Q&A with Ultimate Escapes’ Jim Tousignant

2008-11-24T17:18:41-08:00

Destination club Ultimate Escapes recently extended an offer to High Country Club members and announced plans to give real estate agents and travel agents a commission for member sign-ups. We caught up with CEO Jim Tousignant to talk about the challenges for destination clubs now and his club’s newest exchange partnership with a resort developer.

Ultimate Escapes just announced plans to offer commissions to real estate agents and mortgage brokers. Why are you tapping into this market?

Tousignant: High-end brokers have very large, affluent customer bases. We were starting to get calls from real estate agents and mortgage brokers—a network of professionals who are reaching the same target demographic that we want to reach. We’ve never done a formal program for third-party agents. With this program for real estate agent and brokers, we are paying 4% commission on the cost of a membership. On our most expensive plan, that totals $18,000.

Why are you reaching out to High Country Club members?

Tousignant: We got a number of member inquiries. We are always respectful of the other clubs, and I know the principals of High Country Club. As they were putting out their plan to reorganize, we opted to let that process take its course. But as the weeks went by and the plan went through a number of iterations, it became more clear to us that the plan, as crafted, was unlikely to pass. So we extended the offer to their members in a low-key way, with no advertising.

How are you appealing to those High Country Club members who might be frustrated with the destination club model?

Tousignant: I understand members who are frustrated and angry. I very much feel for anyone in that circumstance. I’ve dealt with hundreds of such members from Tanner & Haley. One thing we tell them is they can join a club that is being run in a sustainable way. How do you buy million-dollar homes in a club and then charge $20,000 or $30,000 to join? We have always charged a legitimate membership fee. You have to charge a proper membership fee to join and charge proper dues. You can’t overpromise.

Are you expecting any members will join?

Tousignant: We knew the demographic of the customer base at Tanner & Haley had already paid a deposit of $250,000 to $1 million when we made an offer to them. But it’s not clear to me that this is the same demographic that can afford or even wants to spend more money on a membership. If we don’t bring on any or many members, we don’t lose anything. Rather, it demonstrates our forthrightness as a club.

How are you expanding the property portfolio?

Tousignant: We have introduced a new affiliate reciprocity program with luxury resort developer Capella. It gives affluent consumers who are buying whole ownership resort residences or fractional homes a chance to experience our club through an exchange program. Our hope is that many of them will become buyers of club memberships. Our members can stay at Capella homes, and developers pay us substantial fees.

How is the club adjusting to the economic downturn?

Tousignant: We are managing our costs and trying not to be all things to all people. We are well positioned. We have recurring revenue from our membership fees. We’ve been paying down debt obligations. We don’t agree that real estate values have come down 30, 40 or 50%—any club that says that may have overpaid for properties.

I’m cautiously optimistic. This is the worst global economic crisis that I have ever seen. There are always ups and downs, but this market has aggressively pressed down. We have people in our pipeline very interested in wanting to join the club, but the consumer confidence piece is huge for this industry.

Exclusive Resorts Offers Way to Try Out Destination Club

2008-11-24T17:12:51-08:00

Exclusive Resorts is the latest destination club attempting to entice potential members by giving them a preview of club life.

In mid-November, the club launched its Sponsored Guest program, which offers potential members four- and seven-night stays at an Exclusive Resorts’ home. The program isn’t free—a four-night vacation costs $5,900, while a seven-night stay is $8,900—but members who join the club within 30 days of the trip can have the cost applied toward the membership deposit. Vacations are available in five locations: Los Cabos, Grand Cayman, Puerto Vallarta, Scottsdale and Costa Rica. These destinations have some of the largest inventory of Exclusive Resorts-owned homes. Guests can book travel until the end of February, but stays during major holidays will not be available.

The club, which announced the program in its November member newsletter, is also hoping to tap into its network of members for referrals. Current members who refer a friend who books a trip before the end of the year will also receive a bonus four-night trip. The move by Exclusive Resorts comes as other clubs are also giving non-members a way to try out the club. Earlier this month, Ultimate Escapes announced it was giving out 18 free three-night trips. Quintess also has a trial-use plan for members who have completed membership documents but have not yet submitted their deposit or annual dues. Prospective members can book a three- to seven-night trip for $2,000 per night and have the cost of the trip applied to the first year’s dues if the traveler joins the club within 15 days.

Considering taking up a destination club on its trial offer? First, download our Decision Guide to Destination Clubs.