# Destination Clubs - General Discussions on Membership



## Steamboat Bill (Feb 11, 2007)

I am creating this thread for the discussion of Destination Club memberships. 

I have moved several posts to this thread as their original location was off topic to the original post.


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## PerryM (Feb 14, 2007)

*Wait Grasshopper*

I find it ironic that on TUG:

1) I seem to defend RCI (Who I don't like)
2) I discourage DC ownership (Which I really kind of like)

I scratch my head every once in a while how this happened.

I started the HCC postings on this thread: Perry's first HCC post

Back then I just stumbled on DCs, knew little, and alerted folks to pay attention – they might offer them something.

*Ironically, I now warn folks to what DCs are – a house of cards.*  The transformation from enthusiastic to pessimistic occurred as I learned more about DCs and the DC industry as a whole.

I will be the first to admit that on July 19, 2006 had been 2 weeks earlier, I would be an owner of HCC!  How is this possible?

2 Weeks earlier the price for a Private membership was $30k and you got back 80% of the CURRENT membership fee.  I would have taken the gamble, knowing what I know now, and bought.  I don’t lose sleep over that kind of money with those risk to reward ratios.

It’s just like buying from the timeshare developer – you know “Don’t buy from the developer, buy resale”.  Well there is a great time to buy from the developer – its brand new Marriott resorts on Day One – you are virtually guaranteed to break even in just 5 or less years (3 years was our experience).

*I would recommend to all folks considering HCC to NOT buy.*  You heard it here from me – wait.  Why?

It takes 24 hours to cook up a new DC.  HCC can simply, in 1 day, take the legal boilerplate documents and MS Word will replace HCC with another name – print it out and we have a brand new DC.  Investors are buzzing around like bees.  As far as I know there are NO real estate laws to abide by or other legal restraints - cook one up every other day if you want.

That DC will offer the same start up terms – low membership fees and *80% - 100% return of the CURRENT membership fee.*  This new DC could pop up in the Helium Report tomorrow – wait until then.

If you just can’t pass up the artificial price increase (sounds like the timeshare spiel “Friday has a price increase coming – buy now”) here is what I would recommend:

1)	Ask HCC for an insurance policy, performance bond, that you will get back the 80% of the membership fee if you or the club terminate business.  They should have no problems doing this.

2)	Ask that the above insurance policy, or performance bond, be executed if 1 year has lapsed from the time you submit your request to sell back your membership.

3)	Ask HCC that *a 100% penalty fee *be added to the performance bond (double your money back) if HCC either goes out of business in 30 years or has no new members for 6 months.

If HCC refuses to do the above, ask why not?

If they say it costs too much, ask what the price of the performance bond would be and you then buy it.  If that additional cost makes the HCC numbers seem to expensive, wait for the next one.

As I’ve stated before, the hurtles the DCs have imposed upon themselves are self inflicted and are easily corrected – if they want to.

P.S.
Think of the performance bond as travel insurance.  You buy travel insurance to cover risk on your vacation – the risk here is the 80% of the membership fee, which is $60k (on 5/1/07) and $40k (3/1/07).  There is PLENTY of risk with DCs – get an insurance policy to shift the risk to someone else.  That someone else will demand assurances from the DC - they have the clout to do it, you don't.


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## Bourne (Feb 14, 2007)

The days of new DCs popping up like crazy are over. 

The industry has now reached a consolidation phase. This is evident from the fact that 
1. The association is being set up with some basic regulations in place. 
2. There are more consolidations taking place than new startups showing up. 
3. Even if startups do show up, they have to scale the business and a greater level from start up with investor funding. The days of 5-10 property startups is over. 

Every industry comes with risks. The bottom line is that DC is not the same as timeshare. One is a club membership and other is equity/ownership. To compare DC to an investment from a growth/loss prespective is like saying ...

1. I am not going to stay at St Regis Rome for 750+ a night on my next vacation because the money would be better used in a vacation ownership. Why waste money when you know you are loosing all of it after a 7 night stay. Asking the hotel to transfer a part of ownership to me because I paid the rent is not going to happen just because they provide accomodation. 

2. Similarly, when I pay for a round of golf, I do not ask for a fraction of ownership of the course. If I buy a club membership, it entitles me to play for free out there but I still do not have ownership. 

*
With DCs, you are technically paying for usage of property/service and not the property itself. It is a membership and not ownership.  *

For the record, I bumped into HCC in the spring of 06 through Flyertalk. At that time, the membership cost was half with a 80% of futureprice clause. You might consider it an investment. With 8 properties and 90% of them in ski locations, it did not make sense to me at that time. Now that they are in the growth phase, the numbers & locations add up.


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## Steamboat Bill (Feb 14, 2007)

PerryM said:


> I find it ironic that on TUG:
> 
> 1) I seem to defend RCI (Who I don't like)
> 2) I discourage DC ownership (Which I really kind of like)
> ...



Perry....did you hit your head while snowboarding....are you smoking something......any new medical conditions affecting you lately?

Yes....I give you props in your original TUG thread about HCC...I only wish I joined when you first posted....I ended up paying $$$$ more as I joined in December and they would not offer my the great prices you posted about!!!

However, I think you need to clarify your opinions to both HCC and the entire DC industry. Are you against just HCC or the entire industry?

Perhaps I am looking at the DC industry and HCC (my personal choice) thru rose-colored glasses....and the world currently looks fantastic from my point of view. 

Perhaps I am like that dude in the Martix movies that regretted taking the RED pill and found out that life outside the Matrix sucked and wants to return and live life as a king.

In my life....I have always been a risk taker...early adopter....willing to take calculated risks....and it has served me well.

With the DC industy.....I decided to take the pill and join....and so far the future looks so bright I gotta wear shades!!!!!

I always respect and look forward to your posts.....even if we disagree....want to try my rose colored glasses on?


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## Steamboat Bill (Feb 14, 2007)

Bourne said:


> Every industry comes with risks. The bottom line is that DC is not the same as timeshare. One is a club membership and other is equity/ownership.
> 
> When I pay for a round of golf, I do not ask for a fraction of ownership of the course. If I buy a club membership, it entitles me to play for free out there but I still do not have ownership.
> 
> ...



That was well said.....I have many friends who paid big bucks to join golf clubs...a frind of mine paid $250,000 just to join Trump International golf club in WPB....I think is a very beautiful course...but I perfer to play at semi-private and public courses for less than $100 per round.


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## hipslo (Feb 14, 2007)

Steamboat Bill said:


> Perry....did you hit your head while snowboarding....are you smoking something......any new medical conditions affecting you lately?
> 
> Yes....I give you props in your original TUG thread about HCC...I only wish I joined when you first posted....I ended up paying $$$$ more as I joined in December and they would not offer my the great prices you posted about!!!
> 
> ...




I think Perry has secretly joined HCC, is happy with the current properties and sees no need for additional locations, and doesnt want to have to compete with other potential owners for reservations!  Either that or the founders have somehow crossed him in a prior life!


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## PerryM (Feb 14, 2007)

*Show me the proof!*

Bill,

I’m an investor; I run numbers all day long on various investments.  When the numbers don’t make sense I don’t invest – a very simple plan.

The numbers for timeshares makes sense and we own them.  The numbers for condo-hotels make sense and we own them too.  Our two homes make sense and we are home owners.  The stock market makes a whole lot of sense and we invest there too.

DCs on the other hand, make no sense at all; HCC in particular.  When I first learned of them I instantly liked the idea of a DC – I can see becoming a member if the numbers make sense.

I challenge anyone here to make the numbers make sense!  Now I don’t need access to secret plans, just public numbers that HCC has published – I’ve run them in various posts and they don’t add up.

So someone show me how 8 memberships of $50k each is going to buy a $850k condo?  Is the MF paying the mortgage on the 50% of the condo that’s not accounted for?  Do the investors have a magic way of turning lead into platinum?

I sure can’t figure it out and I’ve spent many hours trying.  Someone show me, in black and white, how this DC is going to survive?

Once someone shows me how all this works, the next hurtle is safety – with hundreds of millions in a DC, just what keeps the investors from pulling the plug and making millions?  I know the salesreps say that that would never happen, but show me proof that there are any protections for the members.

Conclusion:
A DC is not a religion where blind faith is justification to make important decisions.  A DC, and HCC in particular, needs to backup their claims with tangible documents; where is the proof that HCC’s numbers actually make sense and where is the proof that members have protections from rascals that could run off with the deeds to the condos/homes?

So far the only answer to my questions is the typical salesreps “Trust us”.

We all know that timeshares salesreps distort reality to make a sale – are we saying that the DC salesreps don’t do the same?


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## Steamboat Bill (Feb 15, 2007)

PerryM said:


> Bill,
> 
> I’m an investor; I run numbers all day long on various investments.  When the numbers don’t make sense I don’t invest – a very simple plan.
> 
> ...



You bring up the golden rule for most "true financial advisors"....KISS. Invest in what you know and don't buy a stock that you don't understand from the talking heads on CNNfn or chase last year's champ (of course I missed investing in google). After making a ton of $ in the 1990's...I sold most of my stocks before the meltdown. I now invest in ETF and dividend stocks...nothing sexy...just send me a check.

I agree that smart timeshare buying makes sense (or dollars) and I currently have a paper loss of over $100k from my hotel condos in Whistler (but I am holding until 2010 Olympics) and that explains my current distrust of the condo-hotel industry.

I posted a potential answer about HCC business plan on this thread
http://tugbbs.com/forums/showthread.php?p=284875#post284875

I am not trying to convince everyone to join HCC....let the rich lazy people do that...as I said....TUGers would give me competition for booking the best weeks at the best resorts while the rich folks don't even use 100% of their allotment.

Perhaps you will never be convinced HCC is the real deal....only time will tell. Perhaps I will loose 100% of my money ($30,000) but what the heck....I have lost MORE than that in stocks, real estate, dumb investments, etc. But at the end of the day (or year), my averages from all profits relized from stocks, real estate, timeshares FAR outweigh a few duds. I have friends that run BILLION dollar hedge funds and they don't always pick 100% winners.

HCC represents to me a new trend in travel and I want to be onboard as an early adopter. I simply think that you may be over analyzing this (or I may be too optomistic). Either way....I see HCC as a PERFECT fit into my current and future travel plans. You know prices will begin to rise and in a year or two HCC may have 300-500 members and a ton of new properties. 

I can't justify a $425,000 membership in ER, a $2 million Viking yacht, $300k Bentely, or a $3 million jet like some of my friends are buying.....but at $30k...I can join a Destination Club like the big boys....I don't even bother to discuss timeshares with them as it is a foreign concept to them.


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## PerryM (Feb 15, 2007)

*And that's the way it is.....*

Bill,

The only reason the DC operates the way it does now is that it returns obscene profits for the investors; same with the timeshare industry.  I really have no problem with this at all.

I am shouting a Clarian call that DC’s can NOT be compared to timeshares, fractionals, other forms of fractional ownership, condo-hotels, or whole ownership

I fear that there is confusion as to exactly what that DC is so I’ll recap it again (for the most general case of DC memberships):

•	Your membership fee goes to someone who then uses your money to buy himself a condo.  You get use of his condo for your vacations.

•	The cost of the condo/home is inflated – the DC owner adds in a hefty profit on top of the real estate value.

•	The MFs you pay may contain mortgage payments to highly leverage the money you just spent for a membership.  That mortgage payment is in the name of the owner of the DC; you simply pay his bill.  So not only is the DC owner not putting in a penny for his condo he is buying one that even you can't afford without financing it.

•	Your membership fee is not secured with ANY kind of collateral – you don’t get a deed, you don’t get an insurance policy – your membership fee can easily be lost.

•	If you want to exit the club, there is a very good chance you can’t.  The industry standard of 2 in/1 out means that 2 new members must be found before you can exit.  If bad press hits the industry or specific DC, no new members may ever join again.

•	When you do finally exit the club, you get back 80 cents on the dollar you paid – the owner of the DC keeps the other 20% 

•	DCs have only been around 5 years – what proof exists that they will last 5 more years?  90% of all new business fail in 10 years – you don’t really think that DCs are immune from that statistic do you?

•	The numbers supplied by the DC just don’t make a lick of sense.  The survival of the DC seems to be something that must be taken on blind faith and not with generally accepted accounting principals

If you do your due diligence and the above are of no concern and the loss of the membership fee would not cause a hardship, then by all means buy a membership if you want.

Conclusion:
I, for one, can’t see this as anything but an emotional decision backed up with no proof that the DC can survive 10 years.  This is nothing new, many folks buy a car that is totally illogical for their needs - its an emotional purchase.


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## Steamboat Bill (Feb 15, 2007)

*HCC press release*

This is an interesting press release from Helium Reports.

We posted a story last week about the growth of High Country Club. The destination club reached the 200 member milestone, in part due to a deal that waived dues for new members for six months - not one of our favorite tactics, in terms of the impact on the income statement.

We received a response from Christian Kirschner, the CEO of the club. Some excerpts here:

We agree that offering a discount on dues is not feasible long term. Our free dues incentive lasted 45 days (mid-November through December) with the purpose of keeping our momentum through the holidays. In fact, we added 15 new members in January at our standard pricing after the incentive concluded and did not honor it past December 31st. 

We will be increasing our membership pricing again in 2007. March 1st our Affiliate Membership will increase, May 1st our Private Membership will increase, and on July 1st our Group/Private Membership will increase. We are well underway with our plan to raise our pricing to the $100k pricing within the next couple of years.


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## Rancher (Feb 15, 2007)

*Destination Club Values*

I have been reading posts for awhile on destination clubs and on High Country in particular. My main concern with them is what security do you have after giving them your money. At least with timeshares or fractionals you have a deeded property so that if they do go broke you would receive at least some money from the sale of the property. It doesen't seem that you have this same security with High Country. From what I gather they own the deeds to the property and so they will either benefit from the increase in property values or realize all of the assets when and if they are liquidated. It seems like a win win situation for them as members pay off the mortage for them and they may end up with the properties debt free. Am I missing something here or is everything in their favour. On top off paying off their mortages they also receive over $200 a night to stay in their properties. Could you not rent for the same price and save the $40K to 50K upfront fees.


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## PerryM (Feb 15, 2007)

*Salesrep's Math is needed*

"We’re going to The Club", is a phrase that rings in the hearts and minds of rich folks.  The exclusive club, where common folks serve the drinks and mop the floors, is a place where like minded folks like to go and hang out with other like minded folks.

Same with DCs for the large part.  The ones that cost $200k and above filter out the folks who aren’t the wheeler dealers, the folks who never made it into “Who’s Who”.

HCC is a common folks version of the same kind of club – it will raise their membership fee at a predefined time and put pressure on folks to join before “The price rises again”.

*DC’s have all the ear markings of a scheme that we all know is too good to be true and later we will look back and ask “What were we thinking”.*

I’m still waiting for someone to show how HCC makes their club work – it sure can’t be with the information so far released to the public.  I think there is a *Salesrep’s Math* needed to make HCC and other DCs viable.  Just like the timeshare salesrep uses Salesrep’s Math to justify buying a timeshare from him and financing it at 13.99% for 10 years – the numbers he shows always seem to make sense.


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## Bourne (Feb 15, 2007)

PerryM said:


> Bill,
> 
> The only reason the DC operates the way it does now is that it returns obscene profits for the investors; same with the timeshare industry.  I really have no problem with this at all.
> 
> I am shouting a Clarian call that DC’s can NOT be compared to timeshares, fractionals, other forms of fractional ownership, condo-hotels, or whole ownership



Exactly the point. They cannot be compared to other products that you mentioned because each one of them is based on a ownership model. 

Having keys to a car for usage does not mean you own it. Leasing a car is different from buying a car. That said, there is a market for leasing products and services. 



> I fear that there is confusion as to exactly what that DC is so I’ll recap it again (for the most general case of DC memberships):
> 
> •	Your membership fee goes to someone who then uses your money to buy himself a condo.  You get use of his condo for your vacations.



True. That is the business model. Similar to the monthly dues you pay to drive a car on lease. 



> •	The cost of the condo/home is inflated – the DC owner adds in a hefty profit on top of the real estate value.



I do not believe that statement is true. The cost of the condo is irrelevant in a non-equity membership model. The company own the property and all the profits belong to them. It would make a difference with *Bellhavens* where the investors are buying the property at a location and *price* of their choice without any control from actual members who will end up "owning" part of it. This is the model where fudging of numbers can happen. 



> •	The MFs you pay may contain mortgage payments to highly leverage the money you just spent for a membership.  That mortgage payment is in the name of the owner of the DC; you simply pay his bill.  So not only is the DC owner not putting in a penny for his condo he is buying one that even you can't afford without financing it.



Yes, in the charter and growth phase, the MFs are used for servicing the mortgage. In the long run, these funds are strictly used for maintenance and upkeep. 

No, the owner put a big chunk of cash in the properties initially because no one is going to sign up with 0 properties in place. Even a bare minimum amount of 10 properties will cost the DC 8(HCC) - 25(ER) million dollars to start up. Again, the initial 50-100 members pay the highly discounted membership fees that puts extra burden of cash on the DC. HCC uses 55K as the average membership cost for its calculations but the intial 100 members paid way less than that. The DC's cough up that extra cash to finance/service the mortgage of more properties. 



> •	Your membership fee is not secured with ANY kind of collateral – you don’t get a deed, you don’t get an insurance policy – your membership fee can easily be lost.



If you do not do your due diligence, chances are that you are not going to see that money again. The financial health and growth of the company is key because it takes approx. 10 - 30 million to stabalize the business. That is why I would avoid buying into a club that gives you appreciated future price value of the initial deposit. They are akin to T&H's goofy marketing tactics of renting a comparable property if one was not available and paying for green fees etc. Talk about coughing up 1-2 mil every week to fulfill a contractual demand on top of other costs. The appreciation of deposit may sound like an investment but it is not. The risk is higher if you consider it an investment because you have to buy in a phase where the growth and stability is uncertain. 

As it is a membership plan, you do not own anything. No title, deed or insurance policy. Geez, when you lease a car, the company owns the deed and title and makes *you* pay for the insurance. 



> •	If you want to exit the club, there is a very good chance you can’t.  The industry standard of 2 in/1 out means that 2 new members must be found before you can exit.  If bad press hits the industry or specific DC, no new members may ever join again.



Given the growth of the industry, you have a very good chance of exiting. Club membership plans have this model and have existed for decades. There will always be bad apples in any industry. That is what CH11/13 laws are for. Even Donald Trump has filed for bankruptcy. That did not kill the hotel-condo or the casino industry. Bottomline is that you have to do your due diligence. Everything has a risk associated with it. You have to find your spot. 
Saying that no member may join again is an *over-exaggerated* statement given the growth in 2006 in the light of T&H's bankruptcy. 



> •	When you do finally exit the club, you get back 80 cents on the dollar you paid – the owner of the DC keeps the other 20%



True in most cases. No one is cheating you. It is a clause on the contract. If you factor it in cost per night and are comfortable with the price, go for it. Else, stay away as it is not a product for you.



> •	DCs have only been around 5 years – what proof exists that they will last 5 more years?  90% of all new business fail in 10 years – you don’t really think that DCs are immune from that statistic do you?



The largest DC is backed by Steve Case. Bill Gates is a member in Yellowstone club. These guys do not throw their money around. IMHO, the richest people in this world are the most astute about spending money beyond a certain dollar amount. Similar to Bill seeing value in Yellowstone club and Steve in Exclusive Resorts, I see value in HCC.  IMHO, DC as an industry is here to stay because it provides value to a unique and targeted segment. 

90% of all new business fail in 10 years. This statement is being used as an over-exaggeration. 90% of timeshare, hotels, airlines, car rentals, fractional ownerships, hotel-condos etc. compaines did not fail in the first 10 years.   



> •	The numbers supplied by the DC just don’t make a lick of sense.  The survival of the DC seems to be something that must be taken on blind faith and not with generally accepted accounting principals



Depends on the accounting principals you are applying. All non-equity based DCs use leverage. What may seem as numbers not adding up is actually bank's money. 

I use the same concept with my rental properties. They may show a loss on paper but a conservative appreciation of 5% offsets that loss by 4-5 times the amount.  If you are buying a property outright, IMHO, you are playing it too conservative. In Real Estate business, almost every one uses leverage. Nothing gets built without it. 



> If you do your due diligence and the above are of no concern and the loss of the membership fee would not cause a hardship, then by all means buy a membership if you want.



Do your due diligence. Factor in 20% loss of membership fees over years of usage for nightly cost. If it makes sense and is within your risk tolerance level, then consider buying it. 



> Conclusion:
> I, for one, can’t see this as anything but an emotional decision backed up with no proof that the DC can survive 10 years.  This is nothing new, many folks buy a car that is totally illogical for their needs - its an emotional purchase.



DCs are here to stay based on my reasoning given above. They survived 5 years and have big money backing them now. The dissolution pf the industry is improbable as nothing is impossible. 

90% of emotional purchase decisions result in a loss..whether as a direct loss or loss of opportunity. WYSIWYG.


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## PerryM (Feb 16, 2007)

*My DC revisited...*

Ok, let’s revisit my DC I created on paper:

I bought a $1 M condo in Park City, UT.  I put down $200k and have a mortgage – it’s in my name.

I find 8 folks who want to pay $125k each to buy me my condo.  I pay off the mortgage and get back my $200k.  I now have a free and clear deed to my condo.

My 8 members haggle over who gets to use it when – and they pay me 8% of $125k or $10k MF each per year.  I get $80k each year to fix the place up and pay the electric bill and pay a company to come in each Saturday for 2 hours to clean the place.

They get 1 holiday week each and 2 reservations, an additional 3 weeks can be booked 90 days ahead of time – off season time.

1 year goes by and my new condo appraises out to $1.15 M, 15% increase in the last year.  I now look to buy a condo, in Deer Valley, 3 miles away and my new membership fee is $145k ($1.15/8) and the new MF is still 8% or $11,600 for the original 8 members and for the 8 new ones.

I use condo #1 as collateral to buy the new condo and then find 8 folks who each pay $145k each. I pay off the loan and now I own 2 condos each valued at $1.15 M.

So now my DC is worth $2.3 M and I paid nothing to get them.  1 year goes by and Park City again appreciates 15% and my 2 condos are now worth $2.65 M.  I’ve made enough and liquidate the DC.  Here is what I made:

$2.65 M – 80% of the condo #1 $1 M = $800k – 80% of condo #2 $1.15 M = $920k = $930,000.

I’m a happy camper.

However, what really happened was this:

I really only paid $750k for the first condo and $800k for the second.  I padded the sales price by a total of $250k + $350k.

I really made $930k + $350k = $1,280,000.


*What did my members get?*
My first 8 owners got 2 years of vacations:
Year 1 they paid $10,000 in MF and year 2 they paid $11,600 = $21,600 + the 20% loss on their investment or $25,000 = total cost of $46,600.

They each got 6 weeks of long term reservations  (3 each year) for a total cost of $7,766 per vacation.

My second 8 owners got 1 year of vacations:
Paid $11,600 in MF + 20% loss on their investment or $29,000 = $40,600 for 3 long term reservations or $13,533 for each week.

The Silver Baron Park City MLS  in Deer Valley sells for $1 M (2BR) and can be rented for $1,475 per night in holiday season = $10,325 per week to rent Silver Baron Rentals 

Normal ski season is $1,060 per night or $7,420 for a week.

Here is a Silver Baron in VRBO - this is a 3BR and only wants $1,100 per Holiday night and $850 normal ski days.

*To recap:*

First 8 members paid $7,766 per week and renting costs $7,420 normal ski week and $10,325 holiday week.

Second 8 members paid $13,533 per week and renting costs $7,420 normal ski week and $10,325 holiday week.

The first 8 members got a decent deal, the second 8 members paid much more than renting.


*Conclusion:*
Renting is probably cheaper than buying me 2 condos and netting me $1.28 M in 2 years for a few weeks work.  I suspect that VRBO is a viable alternative to HCC at least.  I suspect that the high end DCs are the same way – renting costs about the same or is cheaper than a DC.

Now if I had mortgaged my 2 condos and netted 80% of the $2.65 M and played the Pork Belly market and lost the bacon (That’s a Future joke – I used to actually trade Pork Belly Futures) ($2.12 M) then my 16 owners lost everything.

Someone show me where HCC and the other DCs can’t play the Pork Belly Market!

*There are NO safeguards in the DC industry; the same high rollers that start these things live their lives the same way – “All or nothing" - and it's your money they are playing around with, not theirs.*


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## BocaBum99 (Feb 16, 2007)

Steamboat Bill said:


> On March 1, 2007, High Country Club will have a new pricing structure:
> 
> The buy-in price for an Affiliate Memebership increases from $30,000 to $40,000 and the MF increases from $4,800 to $5,400, but you get an extra 4 night of use.
> 
> ...



This methodology is incorrect.  You forgot to include guaranteed depreciation into your calculation.  If you put money into a money market account, the principle amount is virtually guaranteed to be returned.  Not so, with a DC.  So you need to determine a reasonablue use period and depreciate your asset thereby increasing your annual usage.  Also, I wouldn't use 5%.  8% or more would be more in line with the risk you are taking.

And, this assumes that you absolutely will use 100% of your allocated time every year.  Probably won't happen.  90% occupany would be more reasonable, especially given the competition you will face for prime weeks.


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## Steamboat Bill (Feb 16, 2007)

BocaBum99 said:


> This methodology is incorrect.  You forgot to include guaranteed depreciation into your calculation.  If you put money into a money market account, the principle amount is virtually guaranteed to be returned.  Not so, with a DC.  So you need to determine a reasonablue use period and depreciate your asset thereby increasing your annual usage.  Also, I wouldn't use 5%.  8% or more would be more in line with the risk you are taking.
> 
> And, this assumes that you absolutely will use 100% of your allocated time every year.  Probably won't happen.  90% occupany would be more reasonable, especially given the competition you will face for prime weeks.



I partially agree with you.

True, I never accounted for the GUARANTEED immediate loss of 20% into my HCC $ per night calculations I posted because it would have required too many calculations and I simply assumed that someone would continue their membership for 20-30 years, etc and pass the membership down to their kids when they pass away (insert joke here). 

I did, however, run some calculations myself before I joined and here is a brief summary.

I previously calculated the current HCC affiliate membership (21 nights use) at = $300 per night.

So here are some modified scenarios based upon an immediate loss of 20% on a $30,000 membership fee = $6,000 loss.

If you are a member for 3 years = $2,000 loss per year = $95 per night additional cost. Thus the TRUE cost per night would be $395.

If you are a member for 5 years = $1,200 loss per year = $57 per night additional cost. Thus the TRUE cost per night would be $357.

If you are a member for 10 years = $600 loss per year = $28 per night additional cost. Thus the TRUE cost per night would be $328.

If you are a member for 15 years = $400 loss per year = $19 per night additional cost. Thus the TRUE cost per night would be $319.

As you can see the LONGER you are a member, the LESS impact the 20% loss has on your cost per night. I think, realistically, that I will be a HCC member for 12 years as the kids will be in college then and my wife and I will only need to stay in studios or a 1 bedroom unit. There is also a real possibility that we will be so SPOILED with the HCC accommodations that I will NEVER give up my membership….only time will tell. Be that as it may, the cost per night is still CHEAP in my book for the type of accommodations they provide. 

As a comparison, I have been a 'happy" DVC member for 6 years and will also continue that membership for another 12 years or so, although I will probably reduce the number of points I own. The current TRUE cost (lost opportunity cost + MF) for DVC AKL is about $9 per point/per year and it takes 268 points to stay in a standard 2 BDR unit in the Dream (non-holiday/non-prime week) season = $2,412 per week = $344 per night. A holiday week would be $590 per night (ouch!....but it beats rack rates)….Thus, my HCC membership is actually CHEAPER than DVC and the HCC quality blows DVC away (no comparison here folks).

I have always used 5% in all my calculations for lost opportunity costs as this is a pretty standard no-brainer rate. Yes, the historical average of the stock market has been 11% per year, home mortgages have a 7-8% historical average and you pay taxes on any investment (I also never included that in any of my calculation)….but this really complicates things….go to www.bankrate.com and 5% CD are pretty standard…..If you use 8% (as you suggest) and are in a 35% tax bracket…you still only net 5%.

As far as use is concerned…that is a personal responsibility. All my calculations assume 100% usage. Thus, if you don't use a week or two….it will increase your cost per night. I think it is safe to assume that most TUGers that join HCC as an Affiliate Member will use MOST of their allotment (anything less would be considered an infraction and may get you booted off TUG). The DC data for Private Members shows that rich people only use about 70% of their allotment…but that would be better discussed in another thread.


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## Steamboat Bill (Feb 16, 2007)

PerryM said:


> "We’re going to The Club", is a phrase that rings in the hearts and minds of rich folks.  The exclusive club, where common folks serve the drinks and mop the floors, is a place where like minded folks like to go and hang out with other like minded folks.
> 
> Same with DCs for the large part.  The ones that cost $200k and above filter out the folks who aren’t the wheeler dealers, the folks who never made it into “Who’s Who”.



I sent HCC an e-mail asking for some answers to the original post question and your threads asking for a bond, insurance policy, guarantee, etc...it may take a day or a week for them to provide an answer, but I will post it here.

I really like your analogy about "going to the club" as I live in Boca Raton and 100% of all my "local" friends are members of some type of club...be it in a gated golf community, Boca Raton Resort, DC, TS, etc.....it is certantly an interesting perspective on life.

I have never fully understood why people would fork over $50k to join the Boca Raton Resort (http://www.bocaresort.com/) and that only allows them to attend parties, have dinner, play tennis and golf (for an extra fee of course), and hang out at the beach or pool. I simply reserve a room (using my AAA discount) and get a room there (or go as a guest of friend) and enjoy the same things for much less.

However, the networking opportunities I see are amazing and that is what they are after....rich people like to hang out with other rich people and they have a better opportunity of expaning their business contacts at a "Club" like the Boca Resort than they can at the local "YMCA".

That is a sad fact of life....that the rich (or wanta be's) want their kids to date and hang out with other rich people. Yes, this may be shallow, superficial, etc....but that is they way it is. 

Most of my friends (including myself) send their kids to private schools (K-12) and pay about $15,000 per kid, per year....However, I know one person (an attorney) that chose to join the Boca Resort and send his kids to the local public school because he could not afford both....sad.


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## Bourne (Feb 16, 2007)

PerryM said:


> Ok, let’s revisit my DC I created on paper:
> 
> I bought a $1 M condo in Park City, UT.  I put down $200k and have a mortgage – it’s in my name.
> 
> ...



You are still missing the most critial piece of the any DC based model. 

*You can buy the first condo down for 200K. However, no one will pay you $145k for three weeks of usage for your condo. Reason, it is only one property. You do not have the critical mass to attract that kind of money *

If you could, I would be the first to start one by leveraging all my rental properties. So would a lot of mom and pop businesses. 

Now, If you had 8-10 condos under your name with downpayments, people would be willing to pay 20-25K to try out the waters till you scale to 25+ properties. 

If you do not beleive the above, you are effectively saying that ALL DC companies are being headed by morons who left a lot of money on the table. i.e. 100K-300K per member to be exact.


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## Steamboat Bill (Feb 16, 2007)

In reality, PerryM has made an interesting proposal....except it would NOT be classified as a Destination Club...it would be a Fractional Condo. 

I also agree that Destination Clubs need variety and diversity to attract members that are willing to pay top dollar. When I first heard about HCC last year, I did NOT join as they only had 6 properties all located in Colorado. Now that they have 25 properties in places I really want to visit...I joined. Money was not the issue....the choices of properties were!

Here are my brief impressions of the differences:

Full ownership condo = usually one owner and one location

Hotel-condos = a hybrid between a condo and a hotel room, usually one owner and one location

Fractionals = usually 6-12 shared owners in one location, can be a condo, townhouse, home, boat, plane, car, etc

Personal Residence Club = a group of fractional condos with trading between different locations

Destination Club = a bunch of properties owned by a corporation with dues-paying members that can use the properties

Timeshares - we all know what these are!


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## Steamboat Bill (Feb 16, 2007)

PerryM said:


> I suspect that VRBO is a viable alternative to HCC at least.  I suspect that the high end DCs are the same way – renting costs about the same or is cheaper than a DC.



Yes, VRBO is always an option and requires $0 membership fees.

I (personally) would choose VRBO vs joining a higher cost Destnation Club like Exclusive Resorts because I don't have $325,000 to join and the $1400 average cost per night is too rich for my blood.

However, HCC is priced right for me (currently at about $300 per night)....is cheaper than VRBO and offers me consistant quality and easy bookings.

I actually get a headache when I try to filter all the options on VRBO....and I eventually give up. I like redweek.com much better.


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## PerryM (Feb 16, 2007)

*Did I miss anything?*

Ok, 9 of my close friends, who can easily afford buying $1 M condo in Maui, Ft. Lauderdale, Vail, Orlando, etc each put down $200k and take out a loan for $800k – this is no big deal.

Now we pool the 10 condos and start the “*What A Deal*” DC – takes 30 days and we are up and running.  Getting the legal documents is simple – one of us joins HCC and a high school kid punches the documents into MS Word (They may already be in MS Word and we don’t need the kid).

All in 30 days, with 10 investors.  This addresses Bourne’s and Bill’s concerns as far as I can see.

Notice that no where along the line did we need any sort of license or special training – just me and my 9 good friends.

This is exactly what ALL DCs are – a bunch of guys cooking up a way to make themselves  wealthy, with NO money of theirs at risk.

I hire some slick salesreps that I’ve met over the years and they work for commission – no cost to us.  I contact a cleaning service near the condos and they spend 2 hours every Saturday or Sunday between Noon and 2 PM to clean the condo.  The keys to the condo are sent via FedEx with the directions to the condo and all the rules the member must abide by.

I hire a person, working out of their home, to answer the phone and run a MS Excel spreadsheet to keep track of reservations.  I charge 8% of the current membership fee - money is put into reserves to keep my condo in great shape - same with my 9 friend's condos.  There is some left over money to throw a bunch of parties celebrating what a great scheme we cooked up.

Ta-Da – A new DC has entered the market in 30 days.

Now each of my friends get’s their $200k back and their name is still on the deed.  I allow them to sell their condo at any price they want to other folks who might want in on this great deal.  There is a document that the investors sign stating that the condo is to be occupied by the members for, say, 20 years.  We don’t alert the members of this fact – 20 years from now anyone of the condos can be sold and the 8 folks are kicked out and get 80% of their original investment back.

Did I miss something?


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## Bourne (Feb 16, 2007)

Yup. 

With 10 properties, each friend has put in 200K of his money and 800k of mortgage. 

The DC market out there will only pay you 20K per member at best to sign up after the initial setup. I did document this fact in my previous post. That is 20K*6 = 120K in capital that covers half of your down payment. The dues of 5K*6 = 30K will not even cover taxes, insurance, HOA fees, assesement, cleaning per week, sales rep commision. Forget using it for paying down the mortgage. 

So you have 80K of your capital still locked up and have a 65K/year mortgage bill staring at you. I don't think even one friend of yours is going to sign up for that deal. 

It is the investors that pay the money while trying to drive up sales and increase the price of membership to the point where it works exactly like you describe. The investors risk their capital during the charter and growth phase hoping they make a decent return at the end of the day. Just like any other business.


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## PerryM (Feb 16, 2007)

*Did the Twilight Zone spawn DCs!*



Bourne said:


> Yup.
> 
> ...
> The DC market out there will only pay you 20K per member at best to sign up after the initial setup.
> ....



I have no clue what this means.



In my example, folks are beating down the doors to snap up DC’s – mine is just $125k versus $200k - $5M.

Isn’t that what is happening now?  DC’s are charging $200k+ and exploding like crazy.  Mine is just $125k and I should sell them like hotcakes.  The salesreps I have are the finest money can buy.  90 minutes with them at a Denny’s will have you whipping out your check-book to buy into my great DC.


Seriously, the scenario I’ve portrayed could be up and running in 30 days, sales would, of course, have to have the typical “Today only” stuff and heck, I’d even throw in some cheap gifts like the timeshare folks do.

I can hustle this DC from a Denny’s and not be a real estate agent, I don’t need to be bonded, certified or anything – heck, I could be on furlough from a federal prison and make the sale.

Folks seem to be leaving logic aside and as I’ve called for here – *the numbers mean nothing to the members* – there are no numbers for them to review.  These DC’s are being sold on emotional basis and hard numbers don’t mean a thing.

So, for today only, I’ll throw in a beach towel with every $125k membership sold.  Heck, I’d finance your membership with 13.99% per year simple interest for 10 years and turn that business over to my uncle Vito.  ($125k * 13.99% * 10 years/120 = $2,500 per month) 

The DC’s exist in the Twilight Zone since mathematically they just don’t exist.


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## Bourne (Feb 16, 2007)

The number listed above is cost of purchase at a specifc time in the life(Time and Number of Properties) of a DC. 
Private Escapes PE
Exclusive Resorts ER
High country Club HCC

HCC - .75ys in business - 750K properties - 20K membership fees
HCC - 1.5 yr in business - 1 mil property. - 40K  membership fees
PE   - 1 yrs in business - 750K property - 25K membership fees
PE   - 4 yrs in business - 1.25 Mil property - 100K membership fees
ER -  1 Yr in business - 2.5 Mil property - 195K membership fees
ER -  5 Yrs in business - 3.5 mil propperty - 395K membership fees

You cannot charge a premium right up front without setting up a brand name or track record. The market will not support it. Why would anyone buy HCC at 100K when PE has a better track record and more number of properties.  The earlier you buy, the cheaper it is. Along with it comes the risk of failure or stagnant growth. 

There is a price point in the industry for each level of cost, quality and amount of risk involved. At the end, the lower the risk, higher the price. You have to pick your own spot on the graph.


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## Steamboat Bill (Feb 16, 2007)

Let me address a few of PerryM's concerns....remember I am not the DC industry's spokesman:

1. When you do finally exit the club, you get back 80 cents on the dollar you paid – the owner of the DC keeps the other 20%

I compare this to the NORMAL profit built into a business. Sure, I wish it was less…or even 0%....but that is the going rate…..I did not set it and I can't change it If you ever shop at Costco, they are proud to advertise that they charge a maximum mark-up of 15%. What about buying an automobile….I'm sure there is more profit than 20%. What about Nike shoes being manufactured by kids in third world countries for 5c per hour? One of my good friends bought a Marriott Grande Vista 2 BDR platinum week from Marriott for $28,500….gee he can now get $14,000 resale and lose 50%. Imagine if Marriott advertised that we only want a 50% profit.

2. If you want to exit the club, there is a very good chance you can’t. The industry standard of 2 in/1 out means that 2 new members must be found before you can exit.

Imagine if everyone at NationsBank or PayPal wanted to immediately withdraw 100% of their bank accounts in cash at the same time? It could not be done….people would freak out. The DC business is no different.

3. It takes 24 hours to cook up a new DC.

You may indeed be able to do that…might I suggest a better name than "What a Deal DC"…how about "Blue Sky DC"…."Harvest Moon DC"….something with a little more pizzazz?

4. DCs on the other hand, make no sense at all.

That may be your opinion, but to Steve Case (AOL past chairman) and a few other billionaires…it is a great business. Turbocharged fuel injection engines make no sense to me….but I am sure they make Porsche's run faster at the race track. Hedge Funds make no sense to me…but I have met five different hedge fund managers and they are all have a net worth in excess of $10m….one in particular is a billionaire.

5. Where is the proof that members have protections from rascals that could run off with the deeds to the condos/homes? Your membership fee is not secured with ANY kind of collateral – you don’t get a deed, you don’t get an insurance policy – your membership fee can easily be lost.

This is a slightly true statement today….however, the top DC's are forming a coalition to run yearly audits to make sure they are financially solid. I would imagine that the IRS and legal system would also be interested in any rascals if this happened.

6. The cost of the condo/home is inflated – the DC owner adds in a hefty profit on top of the real estate value.

I have seen no visible proof of this, how did you make this conclusion?

7. Renting costs about the same or is cheaper than a DC.

I personally find this to be not true….It costs me $300 per night to stay at Black Bear in Deer Valley as a HCC member and it would cost between $800-1200 per night if I rented.

8. I hire some slick salesreps that I’ve met over the years and they work for commission – no cost to us.

This is a 100% false statement regarding the DC sales rep vs a timeshare sales rep. I have spoken to the top 10 DC's and all the sales reps were extremely professional….a nice departure from the vultures that work in the timeshare industry. I have never been offered some free gift to evaluate a DC and nobody tried to trap me into a 90 minute presentation or sucker me in with a misleading promotion.

9. In my example, folks are beating down the doors to snap up DC’s – mine is just $125k versus $200k - $5M.

If it is as easy as you describe…I suggest you start your own DC!


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## Steamboat Bill (Feb 16, 2007)

*Destination Club Doomsday Scenario Calculation*

I have created ---> *The Destination Club Doomsday Scenario Calculation* (just for PerryM)

OK….I decided to assume the worst…..PerryM is correct and the DC industry is a scam designed to steal my hard earned money and wants to run off with 100% of my deposit money.

Assume that the (buy-in fee + yearly MF) divided by (total nights allocated) = cost per night of use.

I did not add the lost opportunity cost of the initial investment as this assumes a worst case scenario….a total melt down in the DC industry…but that would probably add another $50-70 per night to the cost depending on what % you use.

Current HCC Affiliate Membership (before March 1, 2007):
$30,000 purchase price, $4,800 annual dues, 21 nights usage

Year 1 - $30,000 + $4,800 = $34,800 lost = $1,657 per night
Year 2 - $30,000 + $9,600 = $39,600 lost = $942 per night
Year 3 - $30,000 + $14,400 = $44,400 lost = $728 per night
Year 4 - $30,000 + $19,200 = $49,200 lost = $585 per night
Year 5 - $30,000 + $24,000 = $54,000 lost = $514 per night
Year 6 - $30,000 + $28,800 = $58,800 lost = $466 per night
Year 7 - $30,000 + $33,600 = $63,600 lost = $432 per night
Year 8 - $30,000 + $38,400 = $68,400 lost = $407 per night
Year 9 - $30,000 + $43,200 = $73,200 lost = $387 per night
Year 10 - $30,000 + $48,000 = $78,000 lost = $371 per night

Therefore, in a WORST case scenario….I estimate that I am at the break-even point around year 4….and these calculations assume I get screwed and loose 100% of my deposit.


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## Bourne (Feb 16, 2007)

Based on what it costs to rent comparable homes/condos, my break even point is the 2nd year.


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## PerryM (Feb 17, 2007)

*Wacky is the only word that comes to mind...*

The DC world makes the wacky world of timeshares seem almost normal!

Billionaires are no better at investing money than Joe 6-pack.  Just because a billionaire decides to put some money into a venture does not make that venture foolproof.  Wealthy folks make just as many dumb mistakes as we do – they just have more 0’s added to the loss.  Someone show me a study to backup the idea that billionaires make better investment decisions than normal folks – I’ve never seen such a report.  Until then I’m going to assume they are just as human as we are.

Billionaires do, however, know how to hedge their bets.  If a billionaire invests in something you better believe he knows how to make sure his butt is taken care of before anyone else.   This I believe explains why a billionaire would invest in a DC – they got special considerations that no other member gets.  The name recognition does NOT come free – they are skillful negotiators and their support has all kinds of strings attached.

It’s like any superstar indorsing any product – they get paid for it, one way or the other.  Their endorsement is better looked at as a sales event than an investing event.


*A DC is a great investment for the investors *– the numbers I keep coming up with are astronomical.  Sadly the members have the opposite experience – they have no protection to the money paid for the membership fee.

I’m guessing that since it’s so easy to cook up a DC, a co-op will eventually start – one where the members do own the deeds and participate 100% in any real estate appreciation.  I know that I’d be an instant member if ALL the benefits of BOTH the investor AND member were rolled into one.

In my paper DC, if ALL the proceeds went to the members I would need to hold lotteries, like some condo-hotels, to sell memberships – the demand would be that great.

In the case of HCC, the numbers lead one to the conclusion that the long term survivability of the DC is very questionable.  But there is so much profit on their side that they will keep expanding until one day a horrible headline may appear in the Wall Street Journal that will shock the members back to reality.  Then try to get out of the deal and that little phrase “2 in/1 out” will cause you to realize that you made a very questionable decision.

So until then, go ahead and buy some guy his own condo, make the MFs on his condo, pay the taxes on his condo, lose 20% of your money in his condo, don't participate in real estate appreciation in his condo, and have no protection, what so ever, that he will live up to his end of the deal.  I just can't go along with such a lopsided deal.


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## Carl D (Feb 17, 2007)

I agree with Perry. The numbers don't make sense.
It doesn't matter what kind of business it is; You can't just say "don't compare it to timeshares". That doesn't cut it.

The fact is, 2+2 MUST = 4, no matter what kind of business model you run. In this case, they seem to be trying to sell you on the premise that 2+2=8.


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## Bourne (Feb 17, 2007)

To each his own. 

Figuratively speaking, one of us is going to be vacationing in 1-2mil dollar residences with loved ones overlooking Times Square or Wailea Coast and a private chef fixing up dinner in the background. The other will be be looking back at a lost opportunity to buy the aforementioned at a steep discount.

On the flip side, one of us will be be staring at a 30K loss while the other will be laughing all the way to the bank. 

It is a personal tolerance of risk for greater reward. I put my money where my mouth is. 

3-5 years. Time will tell. Enough said.


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## Steamboat Bill (Feb 17, 2007)

Bourne said:


> It is a personal tolerance of risk for greater reward. I put my money where my mouth is.
> 
> 3-5 years. Time will tell. Enough said.



I agree with Bourne.

I have enjoyed this debate with PerryM and I am now 100% CONVINCED that I made the BEST decision for me and my family by joining HCC.

PerryM may feel the exact opposite as me…and that is the cool thing about this forum…..we can both agree that we disagree on this topic.

DC's are NOT for everyone….just like TS, fractionals, PRC, condo-hotel, VRBO, full ownership, etc. there are many options that are available to travelers today and this is not a one size fits all situation.

If PerryM decided to start a "DC co-op – one where the members do own the deeds and participate 100% in any real estate appreciation where ALL the benefits of BOTH the investor AND member were rolled into one." I would probably want to be one of the first investors.

Either way….I think we both have squeezed enough juice from this topic and the TUGers will have to decide for themselves if DC's fit into their travel portfolio.

I will be in Park City (staying at the Westgate Resort in the Canyons) next week and will visit one of PerryM's favorite restaurants "Grub Steak!"…..hopefully I will agree with his suggestion as my favorite steak houses are The Capital Grill, Morton's, Abe & Louies, and Ruth Chris.


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## travelguy (Feb 17, 2007)

*"To DC or Not To DC, That is the Question!”*

*IMHO:*

*Discussion, Debate or Rant?*
Up to this point, I have stayed out of the recent debate of Destination Clubs, their “numbers”, how much the DC Investors make, if the DC members will lose everything, etc., etc., etc. What was once an informative discussion forum has taken a downward spiral into a “weeks vs. points” type rant by one individual.

*Educated, Amused and Saddened!*
I have been educated by some of the thought provoking topics, amused by the discussion, and saddened by some of the blatant misinformation about Destination Clubs (intentional or unintentional). The fact that I spent months of due diligence, fact checking, and spreadsheet crunching before joining a Destination Club (High Country Club) should tell you where I stand on this issue.

*Make Your Own Decision!!!*
I’ll simply recommend this advice to anyone observing this debate … Call your Destination Club of choice, sign whatever non-disclosure agreement they would have you sign, get ALL the information you can from them, talk to the DC execs including the financial officer, create your own projections, run the idea by your accountant and …. _make a decision on your own! _You’ll have the peace of mind that you made your decision in the manner required for an expense of this amount (notice that I did not say “investment” so as to avoid that whole argument). 

*Posters and Haters and Lurkers, OH MY! *
I understand that this is a public forum and that the posting of personal opinion is encouraged. However, _WE GET IT ALREADY!_ I’ll make a simple request of the ranters and flamers that have been hijacking the posts of questions and discussions about the aspects of Destination Clubs – PLEASE ALLOW TUGGERS INTERESTED IN DCs TO ASK QUESTIONS and get factual responses instead of getting flamed or ignored due to the personal agendas that some of these threads have become. 

I thank you for your indulgence in reading my post.


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## PerryM (Feb 17, 2007)

*Why worry about ALL the facts when spending $200k?*

The great thing about debating a topic is that *the facts always decide who is right and who is “Less than right”.*

Discussing DC’s is very similar to discussing RCI and II – they are ALL steeped in mysterious inner workings that we can only guess at.  The DC industry as taken up the business plan of RCI and II – keep the members in darkness and ask that we trust their salesreps - completely.

The simple fact is that we are given a few facts and must guess at how the inner workings actually work in HCC and most/all the other DCs.

The web sites of these DCs are really nice – the dreams of taking great vacations all over the world are designed to provoke the emotions in the potential buyer.  So if  anyone needs to see the various offerings of all the DCs then they are but a mouse click away.

However, if you want do to the proper due diligence, the hallmark of TUG, then you must somehow figure out how the DC actually works – how long you can expect to use the DC and what happens if a “worst case scenario” happens – that’s what due diligence is all about.

I will continue to point out to folks that there is NOT enough information released to the public to do proper due diligence, maybe a cursory version, but not a real due diligence.

If this does not bother an investor, then these little pesky topics and questions can be ignored.  It’s your money to do with as you wish.

But if you really want to do due diligence we have not been given the information do make the proper decisions, especially in the area of safety of your investment.  Maybe you have signed non-disclosures to learn this, but it’s a mystery to me at least.

The DC, and specific DC’s like HCC can easily provide these facts, formulas, and procedures so we can make a full blown due diligence.

Until then, we will just have to believe the word of that DC salesrep over the phone.  I think we know that they are cut from the same cloth as the timeshare salesreps and we have hundreds of examples how those folks 1) Don’t know what they are talking about, 2) Misinformed 3)  lie

If Doug has called for an end of the debate concerning due diligence, I for one, owe it to myself and others to demand the truth.  So far the DC has not given us all the truth and facts.

Just as you probably wished that someone yelled "Get out!" To you when you sat in the 90 minute timeshare sales presentation think of my warnings the same way - you are NOT getting ALL the truth by the DC industry - you heard it from me at least.

P.S.
If you’ve not figured out how II and RCI work internally, then the years of analysis here and the hundreds of folks involved in this debate should convince you that unless the DC releases their secrets to our scrutiny we will NEVER guess as to how the DC really operates and whether they survive to next year.

In the Case of II or RCI only a few hundred bucks is at stake, in the case of a DC its big big bucks.

As long as the DCs refuses to provide all the facts of their operation you can count on endless battles just like RCI has sparked.  There will be endless debates about secret formulas and procedures.  You guys really didn’t think it would be any different did you?  I’m waiting for the lawsuit folks to invade the DC market – that will be a riot!


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## Steamboat Bill (Feb 17, 2007)

PerryM said:


> I’m waiting for the lawsuit folks to invade the DC market – that will be a riot!



Well...I believe there were several lawsuits when Tanner and Haley went bankrupt. Guess what...the members still used the properties, just like Delta still flew their jets when they went bankrupt. I'm not sure that that is an accurate comparison, but I am not completly aware of the details of the T&H meltdown.

Helium Report recommends destination clubs own at least 70% of their portfolio (HCC owns 88% of their properties). Indeed, a key factor in the demise of Tanner and Haley was the club's use of the opposite strategy: leasing more than 70%. This was probably the single greatest factor in the demise of T&H along with guarantering a particular resort will always be available for members (no DC does this anymore).

Increasingly, destination clubs are submitting themselves to a third-party independent audit of real estate values. A "Big 4" accounting firm verifies the club has sufficient net assets to refund member deposit obligations. Details of this NEW program will be released before the summer. HCC has indicated that they intend to participate with this yearly audit.

One simple correction to PerryM's last post is the $200,000 memberships.....so far myself and 3 other TUGers joined HCC and the buy in was only $30,000.

HCC will be of particular interest to TUGers as this is the most affordable DC out there. I am not aware of any TUG mermber that is a member of Exclusive Resorts.

Perhaps PerryM will never be satisified with NOT knowing all the secrets of the DC industry....but just like II and RCI....if you can use it to your advantage...then fantastic. 

I, for one, voted to join HCC and explore the world of DC's. As much as I enjoy discussing this club, I still prefer to have lazy rich folks join than educated TUGers as my TUG-honed skills will serve me well to snag the great DC reservations.


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## taffy19 (Feb 17, 2007)

Steamboat Bill said:


> I, for one, voted to join HCC and explore the world of DC's. As much as I enjoy discussing this club, I still prefer to have lazy rich folks join than educated TUGers as my TUG-honed skills will serve me well to snag the great DC reservations.


:rofl: 

I love reading this thread.  If I had to start all over again, I would look into this too.  If you have had several beautiful vacations, you have almost had your initial investment back if you had to pay rack rates for these accommodations or the high rental rates of these very expensive beautiful homes.  We could not afford going there nor would I want to pay these high rates anyway so the club sounds like a good alternative but there may be a risk like PerryM stated.  If you lost your initial investment, it would be like you have paid the full rack rates instead of the club discount.

We own our timeshares now and will keep them.  They feel to us like a home away from home as we return so often but they are not near that quality but we love them anyway because the ocean is just as beautiful from where we see it.   

The club here is more like "house swapping" to me because there are so many nice places to choose from and it seems to be a lot simpler to to make the reservations too.  You don't have to deal with exchange companies so that is a big plus and you are not competing with so many others but will that change in the future?  I hope not.


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## travelguy (Feb 17, 2007)

*Destination Clubs - General Discussion on Memberships*

Bill,

Excellent idea to start this thread and move the appropriate posts here.  This move is in the spirit of my previous post.  Now if we can just keep from saying the same things over and over and over and over again .....


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## PerryM (Feb 17, 2007)

*Cold water*

*I think that a list of “Pros” and “Cons” of DC ownership should be started.*

The Pros are positive things the DC community, salesreps, and actual owners report.

The Cons are negative things the DC community and salesreps will never report, with owners reporting negatives as experience grows.  (I’m assuming the DC isn’t all rosy as the salesreps keep telling us)

This would be a great, concise, guide to DC ownership.

The Helium Report is but a mouthpiece for the DC industry, in my opinion – just look at the ads, no one here expects the Helium Report to bite the hand that is feeding it do they?  

So I’ll start my own list of “Cons” and add to it as I come across new information.  The first Con will be:

*1)	The Helium Report itself – it appears to be bought and paid for by the DC industry.  Information given is but a recombining of sales bullets from sales brochures of the DC industry.  Be very wary of “Impartial” articles that always seem to favor the DC industry.*

So if this is the place to post, I’ll be addressing mostly the Cons of DC ownership.  Sometimes I’ll present the Pros from the developer side and invariably is will be to the Con of the owner.

So before I start my list, let me recap my opinion of the DC industry, just to make it clear:

I like the concept of a DC.  I think it offers a lot to BOTH the investors and members of the DC.  Given the right circumstances I probably will join a DC at some later date – when the Pros outweigh the Cons.  I’m using all the Due Diligence tools I’ve developed for timeshares and am adapting them for a DC – with the idea that one DC will eventually make my “Buy” list.

I understand the criticism aimed towards me, it merely enforces my suspicion  – *I’ve been smitten by investments that turned sour before and I wish there was someone throwing cold water in my face and yelling “Wake up to reality”.*

I will be posting one point, either Pro or Con per thread I guess as I have time to gather information and evidence.  Move them around if you like.

This is all about Due Diligence – not emotions; it's very easy to spot the difference.


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## caribbeansun (Feb 18, 2007)

I know they are stating this BUT lets consider a few things here

What value do they assign to the property?  
Should it be fair market value based on comparable sales?
How do you get reliable comparables on such high priced properties?
Should it be based on liquidation value since we are talking about a "net asset" to meet an obligation upon windup?
How do they determine what are reasonable disposition costs in the event of windup?  Receiver costs, legal fees, discharge costs for debt, etc...

Who do they rely on to provide the "market" value of the real estate?  Accounting firms don't normally have real estate appraisers on staff (at least from what I am used to seeing).

For those clubs that refund a %'age of current membership value - I trust everyone can see how you can't have membership fees increasing in value if real estate isn't growing at the same rate - or is declining much like it is in many locations today.  Quantifying the obligation is rather easy but the net asset piece is anything but easy.

The cost to revalue their portfolio every year would be rather significant woudlnt' you think?

In order to rely on such an audit it would be essential to understand the underlying elements in the report - without that you're no better off.  An while I agree it will provide some comfort I am skeptical about it's value to the membership.





Steamboat Bill said:


> Increasingly, destination clubs are submitting themselves to a third-party independent audit of real estate values. A "Big 4" accounting firm verifies the club has sufficient net assets to refund member deposit obligations. Details of this NEW program will be released before the summer. HCC has indicated that they intend to participate with this yearly audit.


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## PerryM (Feb 18, 2007)

*Con #2 – the DC membership fee isn’t based upon real estate!*

Caribbeansun,  has brought up an excellent topic – what value is that DC membership based upon?  Both getting in and out of the DC.

This is like shopping for a new car and looking at the sticker price and basing your buy decision upon that figure.

There are plenty of sources to point out that the sticker price is phony – a sales gimmick in most cases.  You can easily find the Invoice Price of that car and add $100 bucks and the dealer might take it.  Included in that Invoice Price is already a lot of fat the dealer already gets.

So when a DC says that it buys $850k condos – is there a real estate appraisal to backup that claim?  Cost’s $300 - $500 to get one and this topic could be ended.

So, where is the proof that the membership fee you pay has ANY reflection of reality?  This is like taking the word of the timeshare salesrep as to the worth of the unit he is selling.

So I’ll add this to my “Con” list:

Con #2 – the DC membership fee isn’t based upon real estate!

(I will renumber the list as time goes on)

Isn’t that the whole idea of a DC – you are buying a membership to a real estate club?

I know that I could be wrong – there might be a DC that shows you the real estate appraisals of ALL the condos/homes in the Club.  Yearly appraisals would, of course, need to be done since this critical number is what the DC is based upon.

P.S.
An excellent project, for someone, is to take HCC's condos/homes and use Zillow to come up with an estimate of the REAL purchase price of those units.  County records can be searched and the exact selling price and owner can be found.

Most of the hurtles a person faces doing Due Diligence are imposed by the DC industry themselves - we can "Reverse Engineer" what they do internally if we want and post that knowledge for others to use.

Sounds like the DC is already spinning many of these topics for action "Down the road" - which will never occur.


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## travelguy (Feb 18, 2007)

*My Response*



PerryM said:


> If Doug has called for an end of the debate concerning due diligence, I for one, owe it to myself and others to demand the truth. So far the DC has not given us all the truth and facts.


 
Reader be warned, no “IMHO” today! Also, a preliminary apology to all other readers for the tone of my following reply to PerryM.

*Doug is NOT CALLING FOR AN END OF THE DEBATE CONCERNING DUE DILIGENCE!!!* 

PerryM - If you have done your Destination Club due diligence like you have read my post, then it makes sense how clueless you are about the Destination Club business model.

The entire purpose of my post is to ENCOURAGE people considering Destination Club membership to do as much due diligence as possible. For those following this discussion, and the one poster who appears to be comprehension challenged, I’ve highlighted the parts of my post that encourage due diligence:



travelguy said:


> *Make Your Own Decision!!!*
> I’ll simply recommend this advice to anyone observing this debate … *Call your Destination Club of choice, sign whatever non-disclosure agreement they would have you sign, get ALL the information you can from them, talk to the DC execs including the financial officer, create your own projections, run the idea by your accountant and …. make a decision on your own! You’ll have the peace of mind that you made your decision in the manner required for an expense of this amount *


 

I offered no personal opinion at all in my post and stated that I had already made the personal decision to become a High Country Club member as a disclosure.

I really don’t know why you continue to tilt at windmills that do not even exist! Do you have some hidden agenda? Are you bitter about not buying into High Country Club at the introductory discounted rate? Whatever your reasons for your rants, DO NOT ACCUSE ME OF SAYING THINGS I DID NOT SAY. If you are going to come at me in my little corner of the world then prepare yourself for a verbal beat-down!


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## Steamboat Bill (Feb 18, 2007)

Gentlemen....lets make this an intelligent debate and not get personal.

PerryM - there should not be any criticism directed towards you…this is, after all, a simple difference of opinion on the Destination Club industry.

I have not encouraged anyone to join any DC that costs $200,000-$500,000….this is a major decision for someone. However, I believe that there is a short and small window of opportunity for TUGers to join HCC as this is the BEST deal going…assuming you want to join a DC.

I also feel that any discussion on the DC industry should have separate discussions on Exclusive Resort and High Country Club as they are going after diffeent markets and are at different stages of their development. Nobody tries to compare the value of a WorldMark timeshare with a Four Seasons timeshare even though an occasional lucky trade will allow a WM owner to stay in a 4S.

The Helium should be both a Pro and a Con as they do provide a valuable "clearing house" resource to find information on all the Destination Clubs. They also provide member reviews (all 50 of them are perfect scores BTW), and a map of various locations. The Con is that they are NOT critical enough of any club and don't really don't post any hardball type information…mainly softballs. With the failure of T&H, the Helium should be much more objective and harder reviewing on the clubs.

As to how a DC assigns a value to a property, I just assumed it was based on what they paid for the property. As time goes on, it may be difficult to get a 100% true assessment of each properties increased or decreased value and is perhaps not that important as long as the club continues to purchase or maintain properties in their targeted price range.

Inflation should make the future interesting for DC members. For example, if a DC buys a $1m property now and assumes an 8% increase in value….in 6 years, the property will be worth about $1.5m and be above the targeted price range of the club. I am not sure how they will address this in the future. 

I also disagree with your Con #2 – the DC membership fee isn’t based upon real estate!....If you compare Exclusive Resorts (buys $3-4m properties) with High Country Club (buys $850k-$1m properties): there is a direct relationship to the fact that ER charges a much higher membership fee than HCC. I would also argue that HCC "currently" has set an artificially low membership fee to rapidly grow the club.

As to the multiples statements regarding "the HCC numbers don't make sense" I am in partial agreement. On the surface, using the old school valuation of a business, perhaps the DC model does not fit. This does not mean that it is not or will not be a successful business, it simply means that the current initial membership pricing is too low and must be raised to assure success of the business. This is the exact road map the Exclusive Resorts has blazed. This is a similar path the Google has taken…get the users first and the cash will follow. Is it risky…sure it is. However, history has demonstrated that modern day business success requires a certain element of risk.

I have taken the position that HCC represents "Tremendous Value" to me and my family. Their properties and locations are top notch, their reservations system is a breeze, the cost per night (based upon my own metric) is about $300 per night, and I simply love the concept and with a $30,000 membership fee…it is a drop in the bucket for me and represents a small rounding error when I calculate my net worth.

Can someone do better than HCC….perhaps, but not me. I own DVC, Marriott MMC, Westgate Park City, condo hotels, condos, homes, etc. and HCC appears to be the best bang for the buck in all my vacation properties. 

Will I cry if HCC goes bust….sure….but it will not be because I lost $30k…it will be because I won’t have access to their properties for such a low cost per night. Besides, I think the likelihood of HCC succeeding and becoming the #2 or #3 largest DC is far greater than the odds that they fail. I feel lucky that I joined within the first year of their existence and look forward to many wonderful trips.

I have already booked NYC for New Years Eve, will probably book a beachfront Turks & Caicos this summer, may go to Deer Valley in the Spring, and will probably visit Tuscon, Italy and Maui next year….hard to argue with that plan. I can't match that with my DVC, Marriott or Westgate timeshares...and all together I have spent 3x on timeshares than I have joining HCC. I am strongly considering selling all my timeshares and focus on HCC and VRBO...but I still love DVC and Marriott is so inexpensive to maintain.


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## m61376 (Feb 18, 2007)

Despite the occasional animosity noted, as a newbie here I wanted to thank you guys for taking the time and putting in the efforts to discuss and even argue. I find the concept intriguing but, like Perry M's analysis, find the concept of laying down 30k for what is, essentially, a bag of promises in return a little daunting and perhaps a little too risky. Bill (and others) it may very well be true that a few years down the road you will be chuckling at the rest of us, enjoying luxurious vacations without the hassle of making reservations; on the other hand, if HCC doesn't fulfill its promises and the lack of real equity becomes increasingly apparent, Perry may sit smugly, hopefully resisting the urge to say, "I told you so." At any extent, I have learnt a lot from these discussions and, instead of just lurking, wanted to thank all of you for your educating posts.


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## Steamboat Bill (Feb 18, 2007)

m61376 said:


> Despite the occasional animosity noted, as a newbie here I wanted to thank you guys for taking the time and putting in the efforts to discuss and even argue. I find the concept intriguing but, like Perry M's analysis, find the concept of laying down 30k for what is, essentailly, a bag of promises in return a little daunting and perhaps a little too risky. Bill (and others) it may very well be true that a few years down the road you will be chuckling at the rest of us, enjoying luxurious vacations without the hassle of making reservations; on the other hand, if HCC doesn't fulfill its promises Perry may sit smugly, hopefully resisting the urge to say, "I told you so." At any extent, I have learnt a lot from these discussions and, instead of just lurking, wanted to thank all of you for your educating posts.



Here-here!....thanks for the thanks!

Can I interest you in some Florida swampland??? The speculators in 1920 would be rolling over in their graves if they saw today's prices.


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## hipslo (Feb 18, 2007)

m61376 said:


> Despite the occasional animosity noted, as a newbie here I wanted to thank you guys for taking the time and putting in the efforts to discuss and even argue. I find the concept intriguing but, like Perry M's analysis, find the concept of laying down 30k for what is, essentially, a bag of promises in return a little daunting and perhaps a little too risky. Bill (and others) it may very well be true that a few years down the road you will be chuckling at the rest of us, enjoying luxurious vacations without the hassle of making reservations; on the other hand, if HCC doesn't fulfill its promises and the lack of real equity becomes increasingly apparent, Perry may sit smugly, hopefully resisting the urge to say, "I told you so." At any extent, I have learnt a lot from these discussions and, instead of just lurking, wanted to thank all of you for your educating posts.



Well said, totally agree!


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## m61376 (Feb 18, 2007)

Steamboat Bill said:


> Here-here!....thanks for the thanks!
> 
> Can I interest you in some Florida swampland??? The speculators in 1920 would be rolling over in their graves if they saw today's prices.



Haha...we all know real estate can be a great investment, but it can be tricky too. My gut feeling is you are probably right, but my conservative side agrees with Perry....    At least after reading this discourse I feel semi-competent to look through HCC's paperwork that is sitting on my desk.


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## PerryM (Feb 18, 2007)

*Great!*



travelguy said:


> ...
> *Doug is NOT CALLING FOR AN END OF THE DEBATE CONCERNING DUE DILIGENCE!!!*
> ...



That's great; I shall not disappoint those who view DCs with a lot of healthy skepticism.


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## PerryM (Feb 18, 2007)

*Con #3 – DCs don’t honor the Theory Of Equals!*



Steamboat Bill said:


> ...
> 
> As to how a DC assigns a value to a property, I just assumed it was based on what they paid for the property.
> .....
> ...



ALL DC’s work on the principle of  “Theory Of Equals” (TOE)

Basically the TOE states that the membership fee I pay today will ALWAYS equal the membership in the future.  This fundamental principle MUST be honored or the Club will implode – which is a very likely outcome of DCs.

In my DC club I created on paper, my membership fee was based on something real – the appraised value of the condo I bought and divided by 8 owners.  I buy a $1 M condo (appraised at $1 M, I could have snookered the previous owner into buying it for $850k)

8 owners are needed to buy that condo, or $125k each.

Fast forward 5 years and 15% appreciating real estate and the same condo now appraises out to be $1.75 M.  So when a new condo is to be added to my DC club it MUST be at $1.75 M, divide by 8 and the new membership fee is $220k.

This is how the TOE works – I get to use a new condo worth $1.75 M because MINE is worth $1.75 M.

As far as I know the TOE is not a guiding light of ANY DC – but it MUST be or the owners will start to cheat and, instead of a $1.75 M condo, the owners will start sneaking in $1.25 M condo but still charge $220k per membership.

So I’m now going to add Con #3 – DCs don’t honor the Theory Of Equals!

If any DC club want’s to step up and offer real estate appraisals to backup their increase of Membership Fees, please forward those copies to me.  BelleHavens may do this, but I don’t think the other DCs do.

SO if the TOE is not used, the owners can easily cook the books and we have no way to insure that the Club is adding new condos that are equal to the one we bought into.

The telling sign of the TOE is yearly real estate appraisals which are open to inspection to the members.


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## m61376 (Feb 18, 2007)

Perry- I follow your logic and am also troubled by what seems to be the sale of a "promise" rather than a piece of something tangible. However, how can a club operate on the TOE in real estate purchases across different locales and even countries, given the variability of pricing? For example, a 1 million condo in a prime location in a condo building in NYC may only be a nicely appointed 1 BR apartment, where that same 1 million might translate into a 3 or 4 bedroom luxury townhouse elsewhere. Are the clubs generally purchasing equivalent type accomodations or generally spending the same money at each location and just purchasing what the market dictates in each area for that purchase price? If the latter, then I understand what you are saying when you maintain that purchases down the road have to be price adjusted for the rate of appreciation of previously acquired properties. I am just not sure how equivalencies between different areas (and different property values) are determined.


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## PerryM (Feb 18, 2007)

m61376 said:


> Perry- I follow your logic and am also troubled by what seems to be the sale of a "promise" rather than a piece of something tangible. However, how can a club operate on the TOE in real estate purchases across different locales and even countries, given the variability of pricing? For example, a 1 million condo in a prime location in a condo building in NYC may only be a nicely appointed 1 BR apartment, where that same 1 million might translate into a 3 or 4 bedroom luxury townhouse elsewhere. Are the clubs generally purchasing equivalent type accomodations or generally spending the same money at each location and just purchasing what the market dictates in each area for that purchase price? If the latter, then I understand what you are saying when you maintain that purchases down the road have to be price adjusted for the rate of appreciation of previously acquired properties. I am just not sure how equivalencies between different areas (and different property values) are determined.




The price of a stock or condo or car reflects all the known knowledge of the “Market” at the moment – both the buyers and the sellers.  Price is the ONLY measure we have to “Value” or “Worth” of ANY item or service in a free market.

So it matters little whether the condo in question is in Siberia, Maui, or New York – the price of the condo represents its worth.  Two identical condos, one located on the ski slopes and another located 15 miles from the slopes will reflect the worth of the ski in/out over the one out of sight of the same mountains in the real estate appraisals of each.

So if the initial condos average $1 M each, then their future real estate appreciations reflect “Equal” values of new condos added to the DC.  You can’t start with a $1M condo, wait 5 years when it is appraised at $2 M and allow the owners to sneak in a cheap knockoff worth only $1.25 M, but charge $2 M/8 = $250k a membership fee.  The earlier members MUST have new condos added worth exactly what their condos are worth or the whole thing falls appart.

This is exactly what is happening to WM this very second – NO real estate appraisals have ever been done in 20+ years and the developer is adding cheaper and cheaper condos to make more profits.

This fundamental principle, TOE, must be adhered to or the DC will implode.

I suppose that a DC can cook up any kind of weird secret rules that make the owners richer and threaten the DCs survivability – sadly we can only guess – it’s all a big secret.


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## caribbeansun (Feb 19, 2007)

Ahhhh, but what if the price they paid for the property isn't actually fair market value - what if they've built in a 20% profit into each property coming in and now with the downturn in the market those properties are no longer worth 120% of original FMV?  (please note I'm assuming these properties are coming in front-end loaded).



Steamboat Bill said:


> As to how a DC assigns a value to a property, I just assumed it was based
> on what they paid for the property.



I don't understand "old school" valuation of a business - it's either based on net assets or it's based on a cash flow/earnings basis.  All businesses have risk regardless of the model you use.  However, businesses that base a business model on significant growth as the vehicle for backend funding large leverage obligations are riskier than most - both for the company and for it's "members".

The real question should be is the risk < reward.  In your case it is, others might not agree.  Indeed the concept I'm thinking that comes into play here is the marginal utility of another dollar of earnings - the more you have the higher your threashold for pain.



> As to the multiples statements regarding "the HCC numbers don't make sense" I am in partial agreement. On the surface, using the old school valuation of a business, perhaps the DC model does not fit. This does not mean that it is not or will not be a successful business, it simply means that the current initial membership pricing is too low and must be raised to assure success of the business. This is the exact road map the Exclusive Resorts has blazed. This is a similar path the Google has taken…get the users first and the cash will follow. Is it risky…sure it is. However, history has demonstrated that modern day business success requires a certain element of risk.


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## caribbeansun (Feb 19, 2007)

My understanding is that they are spending comparable dollars upon entry.  

Two issues seem to come from this that I hadn't thought of previously - if all properties are purchased at the same time then this is less of an issue.  Of course that isn't and can't happen so properties purchased later will have to be more expensive which will eat up some of those increasing membership fees that were to be used to reduce leverage going forward.  

The second issue is what happens to the relative demand for locations if there is considerable appreciation in one are and not in another - not that we think in these terms when vacationing but somewhere it has to enter the though process wouldn't you think?

So what do you do with your NYC condo that's gone from $800k to $1.6M in 10 years vs. your  $800k  Mexican property that's now worth $950k.  This could potentially really mess with travel demand patterns for properties at some point in the future.





m61376 said:


> Are the clubs generally purchasing equivalent type accomodations or generally spending the same money at each location and just purchasing what the market dictates in each area for that purchase price? If the latter, then I understand what you are saying when you maintain that purchases down the road have to be price adjusted for the rate of appreciation of previously acquired properties. I am just not sure how equivalencies between different areas (and different property values) are determined.


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## Bourne (Feb 19, 2007)

caribbeansun said:


> My understanding is that they are spending comparable dollars upon entry.
> 
> Two issues seem to come from this that I hadn't thought of previously - if all properties are purchased at the same time then this is less of an issue.  Of course that isn't and can't happen so properties purchased later will have to be more expensive which will eat up some of those increasing membership fees that were to be used to reduce leverage going forward.
> 
> ...



Good point. Based on ER's structure, a DC would normally build out first creating a set of multiple locations. After that point, they do add new locations but 90% of the focus is to increase the depth of availability. i.e. mre properties at the same location. for example, ER has 35+ properties in Cabo but 7+ in Paris. Demand and supply. As for the price, 10 years from now, the DC would have grown enough to have a critial mass of locations. They may buy a property at NYC for $1.6M and Cabo at ~ 1.0M effectively averaging out at 1.2 - 1.3 mil. This is close to the base appreciation(5%) of 800K over 10 years.

During the growth phase, DCs use a 6:1 or 8:1 member property formula. This is however a benchmark and not etched in stone(in a contract). In the stablization phase,they have enough inventory to allow them to focus on fulfilling demand at peak times in peak locations. i.e. Buying properties where needed which may or may not correspond to 6:1 or 8:1 member property formula.


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## PerryM (Feb 19, 2007)

*Con #4; DCs use no Generally Accepted Club rules*

The more time I take to organize what’s wrong with the DC industry the more worried I am about even taking an introductory teaser rate for $30k or less.

Right now each DC cooks up any rules of operation it wants – this would be akin to every corporation cooking up any accounting rules they want and then posting the results for folks to buy their stock.

The timeshare industry is heavily regulated – WM for instance, can’t sell WM credits in Hawaii – it’s against the real estate laws of Hawaii to sell a timeshare that is not based upon a deed.

We all know that those loveable salesreps sit around cooking up all kinds of sales gimmicks that are goofy, unethical, and sometimes illegal – but that’s what they do for a living.

Just what proof does anyone have that their DC follows some kind of posted guidelines for how to price and handle DC memberships?  I’m assuming that everyone thinks that the salesrep over the phone is a good guy and would never, ever, mislead or lie to you.  But is there anything in writing that specifically outlines how they do price those memberships and 5 years from now what your membership is worth compared to the membership rates then?

Being timeshare folks we are always on the lookout for the “Great Deal” buy a $50k timeshare for $10k.  However does this work in a DC?

Those introductory teaser rates of $30k for HCC and the 80% return on FUTURE membership rates are sure bargains.  The unfortunate part is that you all know that future owners are going to make up for those teaser rates.  Teaser rates are NOT part of a TOE accounting system.  You pay full price always.  The 80% of the original or future membership rates is not part of TOE – that comes out of the owners pockets – that’s fine.

So which DC will be the first to publish their secret accounting system and ask that it be the standard that all other DCs operate under?

P.S.
Under a DC based upon TOE accounting principles there are NO bargains – the future price of a membership is based upon the appreciating real estate of the existing condos/homes in the club.  If real estate takes a plunge future membership rates could actually drop in price – this is perfectly ok with TOE.  I doubt that the DCs are planning for this.  (That price increase that is just a week away - is it based upon accounting principles or just a made up sales gimmick .  If you don't know the answer - why not?)


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