# Exclusive Resorts Envy



## Steamboat Bill (Mar 29, 2007)

I just received the Exclusive Resorts booklet 2006 Year in Review and their seasonal newsletter.

ER is an impressive Destination Club and it is obvious why they are #1 in the industry. This is high quality indeed.

Unfortunately, the Executive plan costs are high:

$325,000 membership fee + $19,900 annual dues for 25 nights

$16,250 yearly lost opportunity (@ 5%) + $19,900 dues / 25 nights = $1,446 per night

Yes, you too can stay in a $3-4 million dollar house....but at $1,446 per night seems a little steep to me.


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## Shoeshine (Mar 30, 2007)

..........


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## TomCayman (Mar 30, 2007)

Bill,

I like your analysis, where basically you equate this to renting a condo/villa/house, as opposed to a true membership of anything.

As a developer, I wish I had thought of this concept, whereby they use membership money (and institutional capital) to build/buy properties in top areas with OPM (other people's money). They then have the members keep them occupied and to pay for maintenance.

Years later, once they have established the high occupancies of elite guests, they sell the properties for much more than they paid for them, making enormous capital gains, which go 100% to the developers. 

Now, on the positive side for the "members", the price does buy exclusivity. In Grand Cayman, not only does Exclusive Resorts own some residences at the new Ritz Carlton, but they also are currently finishing off building some villas on "Exclusive Island" in the middle of the golf course at that resort. Now that is exclusivity !


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## Laura7811 (Mar 30, 2007)

Bill
I have stayed in one of those 4 million dollar houses in Aspen, while very nice indeed, my sister, who as I have said before is an affiliate member with ER, and looking at a large yearly dues increase next year  They wanted to upgrade their membership to the next level but with the increase have reconsidered.


Us on the other hand are heading to Waikoloa, Hi for 7 nights with HCC
and as you know our cost per night is much less.....

If you have any questions about the property or location, I will try and find out for you........

Aloha, Laura


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## Steamboat Bill (Mar 30, 2007)

Laura

Please post a mini review of the property as I may go next summer.

I am going to Hilton Head April 1-6 and will be at the DVC property and I will visit (not stay overnight) the HCC Hilton Head property as it is free April 4-15th.

Have you discussed my "cost per night" analysis with your sister? I am curious what an ER owner thinks about the cost of HCC vs ER.


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## shagnut (Mar 30, 2007)

Do y'all have more money than brains? :ignore: If I was going to spend that kind of money I'd just buy me a house or a condo. I don't mean to put you down, I am the poorest tugger around here.  I wish I had money so I could be in envy of myself. shaggy


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## Laura7811 (Mar 30, 2007)

No, we have not discussed that, but we should next time we get together. I will print your info and show her. The thing they like about ER is the size of the properties available to them ,they have a larger family than us, and aslo they like to take us with them when we can all get away..

Have a good time in Hilton Head. We have never been there. Never had a reason to go but will go now with HCC some year:whoopie: 

Laura


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## caribbeansun (Mar 31, 2007)

Different people = different priorities
Different wealth = different purchasing decisions

The greater the earnings the lower the marginal utility of the next dollar earned resulting in purchasing decisions that won't fit with your stated economic reality.  Without an appreciation for that different reality making a judgement about intelligence (brains) doesn't seem appropriate.





shagnut said:


> Do y'all have more money than brains? :ignore: If I was going to spend that kind of money I'd just buy me a house or a condo. I don't mean to put you down, I am the poorest tugger around here.  I wish I had money so I could be in envy of myself. shaggy


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## caribbeansun (Mar 31, 2007)

It is a rather nice business model isn't it?  Particularly since they are taking a slice at the front end on the buildout as well as a slice on the ongoing maintenance fees.  I think it's the dipping at the back end that some are finding objectionable.

Speaking of exclusive - any word on timing for Phase IV of Castaways?



TomCayman said:


> Bill,
> 
> I like your analysis, where basically you equate this to renting a condo/villa/house, as opposed to a true membership of anything.
> 
> ...


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## Conan (Mar 31, 2007)

> It is a rather nice business model isn't it?



You read it here first - - if they don't achieve the growth they're hoping for, it's fundamentally a pyramid or Ponzi scheme.


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## hipslo (Mar 31, 2007)

rklein001 said:


> You read it here first - - if they don't achieve the growth they're hoping for, it's fundamentally a pyramid or Ponzi scheme.




Has PerryM changed his username?


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## m61376 (Mar 31, 2007)

hipslo said:


> Has PerryM changed his username?



Haha-but I do think that PerryM has made several good points and, truthfully, made me a bit skeptical that this could be likened to a pyramid scheme.


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## hipslo (Mar 31, 2007)

m61376 said:


> Haha-but I do think that PerryM has made several good points



Completely agree, was just having fun!


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## Steamboat Bill (Mar 31, 2007)

rklein001 said:


> You read it here first - - if they don't achieve the growth they're hoping for, it's fundamentally a pyramid or Ponzi scheme.



ER is NOT a Ponzi scheme.

A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business, named after Charles Ponzi.

http://en.wikipedia.org/wiki/Ponzi_scheme


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## hipslo (Mar 31, 2007)

Steamboat Bill said:


> ER is NOT a Ponzi scheme.
> 
> A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business, named after Charles Ponzi.
> 
> http://en.wikipedia.org/wiki/Ponzi_scheme



Just to clarify, what I "completley agree" with, is that PerryM has made some good points about DC's.  I did not intend to imply that I agree that ER is a ponzi scheme.


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## Conan (Mar 31, 2007)

Of course I'm mostly kidding in calling it a Ponzi scheme, but they make no secret about using the joiners' money to build new resorts to attract new joiners, etc.

If the business ran into trouble, it's unlikely that there would be liquidity to redeem the interests of people who wanted to cash out.


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## travelguy (Apr 2, 2007)

*Destination Club Exit Strategy*



TomCayman said:


> Years later, once they have established the high occupancies of elite guests, they sell the properties for much more than they paid for them, making enormous capital gains, which go 100% to the developers.



Tom,

I'm not sure about the ER exit strategy as it appears to be a cash cow at the rate it's growing (both in terms of members and fees).  I have talked with two other Destination Clubs about their exit strategy and both had solid plans in place.  They believe that the value of a successful DC as a whole will be much higher than the value of it's portfolio.  Since this industry is so new, there is no established value for multiples of earnings but cash flow is still king in business.  A successful DC business model certainly has great cash flow!

The new DCs are also very aware that the large vacation accommodation corporations (ex: Hilton, Starwood, Marriott, et al.) are watching and will eventually get into the DC business.  Most believe that the big corps will buy existing DCs.  The exit strategy of the existing DCs that I've talked to is merger and acquisition, not liquidation of the properties.

All of these exit strategies should be either transparent or good for the members.  Then again, who knows?  The exciting part of this industry is that it's new and evolving!


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## travelguy (Apr 2, 2007)

*Upside Down Pyramid ??*



rklein001 said:


> You read it here first - - if they don't achieve the growth they're hoping for, it's fundamentally a pyramid or Ponzi scheme.



Ummm ... if the debt to equity ratio of a DC improves as it adds members, how is it a pyramid?

I can only comment on the High Country Club business model since I have reviewed only their PPM, financials and projections.  Their debt to equity ratio improves dramatically as membership increases and they pay down the leveraged debt.  Other DCs may be different.  As has been mentioned on this board before, the ER debt to equity ratio may be very low (or non-existent)?


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## Steamboat Bill (Apr 11, 2007)

ER called me the other day to discuss membership....and I wish I had a spare $225k-325k to join and $13k-$20k per year for the MF as this club is AWESOME.

Here are some intersting notes:

They do not require a minimum number of night to reserve, thus you can stay one ro two nights...this is a HUGE bonus as almost all other DCs require a 7 night stay.

They are getting an average of 100 NEW members per month. Their member to home ratio is 6 elite members to one new home.

Their breakdown of new members is as follows:

50% join at the Elite level - $425,000 + $29,900 MF
30% join at the Executive level - $325,000 + $19,900 MF
20% join at the Affiliate level  - $225,000 + 12,900 MF

An Executive member = 2/3 Elite member
An Affiliate member = 1/3 Elite member

Gee...I really want to win Lotto now as this would be my FIRST purchase.

The funny thing is I think they have a temporary FREEZE on new members as they can't buy enough $3-4m houses fast enough to maintain their member to home ratio.


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## vineyarder (Apr 21, 2007)

Just as an FYI, Private Escapes also allows you to book any number of nights from 1 - 14 per stay, and allows arrival and departure on any day.


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## Steamboat Bill (May 21, 2007)

Laura7811 said:


> Bill
> I have stayed in one of those 4 million dollar houses in Aspen, while very nice indeed, my sister, who as I have said before is an affiliate member with ER, and looking at a large yearly dues increase next year  They wanted to upgrade their membership to the next level but with the increase have reconsidered.



The current affiliate annual dues is $19,200...how much more are they going to raise it?


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