How is the destination Club market holding up?

[BocaBum99]

Just curious since anything with real estate in it seems to be down these days.

 

[Steamboat Bill]

Here are some of my observations:

Exclusive Resorts is booming and adding lots of new members and homes, they are the 800 pound Destination Club Gorilla.

Ultimate Escapes is buying everyone up and just finished a $200m merger with Private Escapes and will probably try to buy another club.

Quintess is expanding after a $120m investor got involved and their members are very happy.

High Country Club is at 375 members and actively growing and adding some great properties. I went to their two Hawaii properties over the summer and the Maui property was UNREAL.

Equity Estates is an up and coming "equity club" and may be the only true equity play in the market and is very interesting.

A&K is about to market heavily for new members and will be a major force to recon with very soon.

DHH contiues to add choice properties and many international ones and they are adding a second 60-80 yacht for their members and just bought a nice home in Hawaii.

Lusso also is adding many choice homes and is more boutique in nature and has very happy members.

-----------------

There are lots more "Destination Club specific" info (not too many timeshare people there) and "Destination Club Posters" on the www.DestinationClubForums.com site as they focus only on DCs and have gotten very popular lately.

 

[caribbeansun]

Real estate values are down and DC initial deposits are up - seems to work.

 

[Veras Group Jim]

We are also seeing a boom in the DC market outside the US. Clubs like Hideaways and the Oyster Circle are growing well, and Botiga (new club) has a strong initial position.

A&K is poised to become a major player. Great offerings, great branding. Only the ongoing lawsuits to slow them down, but doesn't seem to be happening.

Banyan Tree remains the only real offering in Asia, to my knowledge. But there is, I think, very high demand for an Asian-based player. Can't wait to see some enterprising group launch that.

M Private Residences and Diamante Luxury Residence Collection are two Canadian firms, both seeing success.

Dream Circle Destinations operates in South Africa, and have a compelling initial offering.

With the strength of several other currencies against the dollar, we are seeing more Canadian, European, and even Asian buyers in US-based DCs as well.

 

[GregGH]

Hey Boca and other readers of this thread

Don't the lack of activity on this folder in TUG fool you into thinking not much is happening - a lot of posts have gone to the DC forum -- kind of a shame since lots of TS users are ripe for an upgrade

Greg

 

[TarheelTraveler]

Here are some of my observations:

Equity Estates is an up and coming "equity club" and may be the only true equity play in the market and is very interesting.

A&K is about to market heavily for new members and will be a major force to recon with very soon.


-----------------

There are lots more "Destination Club specific" info (not too many timeshare people there) and "Destination Club Posters" on the www.DestinationClubForums.com site as they focus only on DCs and have gotten very popular lately.

Very nice summary, Steamboat Bill. Just one comment. I would call Equity Estates the only true "investment play" in the U.S. DC market rather than the only true equity play. A&K is absolutely a 100% true equity club in my opinion. All of the real estate is owned 100% by the members. It's not sold as an investment though, whereas Equity Estates is.

I think the international DC space is about the only place an upstart DC can make some headway unless it's a brand name at this point.

 

[short]

Hype or fact.

Lots of companies are doing fabulously right up until they file BK. I would be hesitant to place much faith in company hype.

The key is to look at their current financials and budgets and more importantly understand what you are reading.

Short

 

[BocaBum99]

Lots of companies are doing fabulously right up until they file BK. I would be hesitant to place much faith in company hype.

The key is to look at their current financials and budgets and more importantly understand what you are reading.

Short

I agree. I haven't seen anything posted on this thread that gives me a good idea either way. I guess I'll have to attend one of those private screenings and do my own due diligence. It wouldn't be hard to figure out their health by simply looking at their balance sheet and income statements over the past two years and compare their new member forecasts with their future business plans.

 

[TarheelTraveler]

The DC experience is simply amazing, and I wouldn't go back to traveling any other way, but it certainly pays to do heavy due diligence. Some DCs have great financials, business models and financial and marketing support. Others are essentially DOA, despite being very attractive on their face.

 

[Bourne]

Here are some of my observations:

Exclusive Resorts is booming and adding lots of new members and homes, they are the 800 pound Destination Club Gorilla.

Ultimate Escapes is buying everyone up and just finished a $200m merger with Private Escapes and will probably try to buy another club.

Quintess is expanding after a $120m investor got involved and their members are very happy.

High Country Club is at 375 members and actively growing and adding some great properties. I went to their two Hawaii properties over the summer and the Maui property was UNREAL.

Equity Estates is an up and coming "equity club" and may be the only true equity play in the market and is very interesting.

A&K is about to market heavily for new members and will be a major force to recon with very soon.

DHH contiues to add choice properties and many international ones and they are adding a second 60-80 yacht for their members and just bought a nice home in Hawaii.

Lusso also is adding many choice homes and is more boutique in nature and has very happy members.

-----------------

To keep things in perspective,

Portofino bit the dust. Chaper 7 no less without any other club bailing it out.

That said, it has been a great year for DCs. The top 5 clubs are managed well and are growing at a steady clip.

 

[caribbeansun]

Really??? I thought M was kind of dead in the water based on the stale material on their website.

M Private Residences and Diamante Luxury Residence Collection are two Canadian firms, both seeing success.

 

[LAX Mom]

What happened to Bellehavens? I received some info on their program and I recall they had some equity built into the ownership. Are they still around?

edited because I just did a search on this forum. It seems Bellehavens has merged with another club to form the new A&K Residence Club.

 

[TarheelTraveler]

LAX Mom - NeilGoBlue who posts on this forum and destinationclubforums.com can tell you more about the Bellehavens merger with Crescendo into the A&K Residence Club if you're interested (he was a Bellehavens member). To my knowledge, he was very pleased with Bellehavens and has been very happy with the A&K enhancements. As a member from the Crescendo side, I'm thrilled with the new club as well. Great equity structure, finances, houses and management.

 

[Veras Group Jim]

Really??? I thought M was kind of dead in the water based on the stale material on their website.

Maybe you are seeing something we haven't, CS--what stale material are you referring to?

Thank you,

Jim

 

[NeilGoBlue]

If you have any questions about the merger..let me know..

I'm a very satisfied former Bellehavens member and now a very satisfied AK member..

 

[Veras Group Jim]

If you have any questions about the merger..let me know..

I'm a very satisfied former Bellehavens member and now a very satisfied AK member..

I have to say, I have also been very impressed with the attention to detail A&K is putting into their new product. SherpaReport wrote a great article recently on Geoffrey Kent's involvement as well. They have great homes, and a great comprehensive offering. It will be exciting to watch (and contribute) to their growth over the next years.

Jim

 

[Bill4728]

From Street Talk

Rancho Mañana Ventures, LLC filed for Chapter 11 voluntary bankruptcy in Phoenix on August 13, listing debt of $10 million to $50 million and assets of $1 million to $10 million. The company did not file an affidavit citing reasons leading to the bankruptcy.

Rancho is a privately-held development company formed specifically to create the $30 million, 39 residence Rancho Mañana Private Residence Club. This is the same group which created the awardwinning Franz Klammer Lodge in Telluride, Colorado, a pioneer project in fractional resort real estate ownership.

Also from Street Talk

Another Destination Club has gone bankrupt, apparently the victim of underfinancing and poor financial management.

Portofino Destinations Club called itself one of the largest companies in the luxury residence club industry, offering its members guaranteed access to a growing collection of luxury $2 million dollar average price residences in some of the world’s most exciting and sought out vacation travel destinations.

 

[pwrshift]

The security of the membership fees and how they are spent with private companies has always concerned me. An equity position in a DC does appeal to me more than handing hard-earned cash over to a private company to spend as they want ... even with promises to give 80% of it back if your resign. Even then, if the DC fails, what chance would you have getting any of it back?

 

[TarheelTraveler]

From Street Talk


Also from Street Talk

The Portofino bankruptcy is not a surprise to anyone with friends in the industry. There have been rumors floating around for at least a year or two about concierges and contractors not getting paid in a timely manner. Several DCs wanted to buy them out, but for whatever reason management was not reachable or interested.

There have been many posters on this forum (mainly members of non-equity DCs) that have poo-poohed the advantages of equity DCs, essentially saying they are overpriced or fringe models. I would instead argue that they are priced realistically and sustainably, don't practice the bait and switch, and will be common place long term as they are much more consumer friendly. The new larger players entering the market are choosing that model. The whole idea is to enjoy your incredible vacations, not worry about your membership deposit.

 

[caribbeansun]

I tend to agree with Tarheel in the longer term.

Presently the pain isn't sufficient to discourage the purchase of a non-equity club plan however as those entrance fees increase over time it will be a greater and greater disincentive to join a non-equity club.

 

[Veras Group Jim]

The Portofino bankruptcy is not a surprise to anyone with friends in the industry. There have been rumors floating around for at least a year or two about concierges and contractors not getting paid in a timely manner. Several DCs wanted to buy them out, but for whatever reason management was not reachable or interested.

There have been many posters on this forum (mainly members of non-equity DCs) that have poo-poohed the advantages of equity DCs, essentially saying they are overpriced or fringe models. I would instead argue that they are priced realistically and sustainably, don't practice the bait and switch, and will be common place long term as they are much more consumer friendly. The new larger players entering the market are choosing that model. The whole idea is to enjoy your incredible vacations, not worry about your membership deposit.

I absolutely agree with your post, TT. Anyone who joined Portofino in the past few years would have been nuts, not to mention a little oblivious to anything anyone else was saying. That said, when you're a representative at a DC, that sort of talk can sound a little like badmouthing the competition, so it's hard to do effectively.

There have also been enormous changes in the industry, for the better, over the past 3-4 years. Portofino fell victim very early on to trying to compete with the media spends of Exclusive Resorts and Private Retreats, and sacrificed asset acquisition to do so.

The costs of destination clubs add up quickly, and with the thin margins that are necessary to operate a sustainable club, you have to be very mindful in your marketing spend and staffing costs. Portofino was decidedly overly agressive the first, and when more competition entered the market, they were toast.

 

[Veras Group Jim]

The security of the membership fees and how they are spent with private companies has always concerned me. An equity position in a DC does appeal to me more than handing hard-earned cash over to a private company to spend as they want ... even with promises to give 80% of it back if your resign. Even then, if the DC fails, what chance would you have getting any of it back?

The growth of redemption protection models has been interesting over the past couple years.

LUSSO Collection has the DepositTrust program. Ultimate Escapes, the Member Assurance Program. Exclusive Resorts, I suppose, just has a billionaire...

The growth of third-party trust models has been, from my point of view, very encouraging. Hard to evaluate though, as you have to wait for a DC to fail to do so.

Bottom line: there is significant legal and financial review members should perform at even the most seemingly stable companies. Then again, I would certainly recommend that for any major investment.

 

[TarheelTraveler]

The growth of redemption protection models has been interesting over the past couple years.

LUSSO Collection has the DepositTrust program. Ultimate Escapes, the Member Assurance Program. Exclusive Resorts, I suppose, just has a billionaire...

The growth of third-party trust models has been, from my point of view, very encouraging. Hard to evaluate though, as you have to wait for a DC to fail to do so.

Bottom line: there is significant legal and financial review members should perform at even the most seemingly stable companies. Then again, I would certainly recommend that for any major investment.

Safety of the deposit in my view is still one of the most important issues in the industry. I view it as four general sets of structures from a safety perspective:

1. A&K in my view has built the most conservative and safe structure. I'd honestly say this even if I wasn't a member. They've had the benefit of hindsight and history with T&H to really fix the past issues in the industry. Fairly high deposit used to buy properties 100% debt free. Dues that are actually commensurate with the costs to run a DC. All properties owned 100% by the members without debt. Fully transparent financially and operationally. Solid books and backing.

2. Other equity clubs like Equity Estates (and I believe M Residences) that are positioned as investment vehicles (like the old Crescendo). Members own equity in the club, but so does management. To the extent they are putting money into the club to grow the club, they are essentially diluting the members interest in the underlying real estate. If the club does well, members can do well. If club doesn't do well, then you've got some issues. Still would be difficult to go to zero though.

3. "Trust," "member assurance programs" and similar programs like Lusso and UE. The idea is to put members ahead of unsecured creditors. Problem with that is you're still behind secured creditors. A club can just increase the leverage on their properties if their member sales slow down or if they are not charging enough in dues. All that needs to happen is a refinance of the properties. Other than vendors, I would expect most DC debts to be secured debts, as any lending institution will want to have collateral. Still, however, better than nothing. At least you're ahead of vendors and the investors of the DC.

4. Other DCs with merely contractual rights for the members have the most risk in my view (e.g., T&H and Portofino members were in this boat). You put money in and the DC owes you nights. As long as the DC is running fine, no problems. If not and the entity can't make it, you're stuck with nothing in a liquidation or a merger with worse contract terms. ER is set up like this, but at least they're steamrolling with members. Still won't share financial info though for whatever reason.

As Jim points out, prospective and current members need to do their due diligence, particularly on the cash flow and whether the economics really make sense. Nothing is free. The lower the member deposit and dues, the more expensive the houses and included services and nights, the worse off the DC probably is from a financial perspective.

 

[vivalour]

The growth of redemption protection models has been interesting over the past couple years.

LUSSO Collection has the DepositTrust program. Ultimate Escapes, the Member Assurance Program. Exclusive Resorts, I suppose, just has a billionaire...

Bottom line: there is significant legal and financial review members should perform at even the most seemingly stable companies. Then again, I would certainly recommend that for any major investment.

Just wondering how forthcoming DCs currently are to Jim and his group, as well as to prospective new members re their club's financials, cash flows, and sources of capital. Anyone seeing more transparency -- or less??? Interesting to re-visit this topic now -- what a difference a month makes!

 

[BocaBum99]

With all the hedge funds having great difficulty with the current financial crisis, how can anyone be bullish on the DC market? I'd fear for my membership deposit.