How is the destination Club market holding up?

[BocaBum99]

I think someone posted this question elsewhere but not answered...is there any way the membership fees and dues of a DC can be written off against other income? I suspect not as it's like joining a golf club, but perhaps there are other roads.

On what basis would this be deductible?

 

[TarheelTraveler]

VRBO.com is the logical next step for displaced DC members. They have 110,000 vacation rental homes/condos that easily match HCC villas and probably some of the $300k+ DCs.

Something comparable to a DC could probably be built from those owners if they wanted.

There probably are chat rooms that have VRBO experts who can help folks get into the DC like units that timeshares can’t address.

No up front cash to worry about.

Of course the key question is: What will replace DCs as the hot new gimmick to get involved with?

I still like the DC idea and as the DC universe unravels maybe one of the guys in the industry will put together a real DC that is 100% equity based and is 100% transparent and is a co-op where the investors get to reap the rewards and the management company gets paid to manage the thing.

It will have to be called something else since DC’s are about to join Timeshares in the list of phrases that make folks point at you, smile, and say “You bought what?”

A couple of thoughts from my perspective:

I'm a DC member and I've also rented on VRBO and otherwise. I can tell you that I would never go back to renting unless I had to. I think most who have experienced both would say the same thing. See, for example, http://www.destinationclubforums.co...roperties-vs-membership-destination-1102.html

Your proposed DC is actually pretty close to the A&K Residence Club, if you look at the details. Members own 100% of the real estate debt free, A&K owns the management entity that runs the thing and collects a management fee in order to pay for the expenses in doing so. They also market the memberships and get a commission for selling any in order to pay their marketing costs and hopefully some level of profit if they sell enough. Dues are used to pay for the taxes, insurance, HOA dues and are intended to actually reflect the costs. Transparency is a focus. The whole structure just makes a lot more sense than the non-equity clubs out there. I actually think there's a market for a lower priced club using the same structure, especially now that one irrational competitor has been forced to become sustainable (no offense to any HCC members here).

However, I agree with your thoughts generally (and have previously over the years on DCs in general). There are way too many irresponsible DCs out there, and it makes it difficult for those trying to do it right, as you've always got someone out there selling some underpriced product that on it's face looks the same, but will likely be bankrupt in a few years. I'm starting to think that regulation is the only way to go, since the DCA has no teeth and has been incapable of really accomplishing much.

I don't think equity DCs, in of themselves, are the pancea. You can run an irresponsible equity DC just like you can an irresponsible non-equity DC. You can still leverage up the thing and underprice the deposits and dues and still have financial problems. However, as a general matter, (i) equity DCs tend to be run with more tranparency (probably only partially because it's equity though), (ii) you have "ownership" of the underlying real estate, so you've got a leg up in the event there is a problem, and (iii) you tend to have stronger legal and financial rights as a shareholder or partner as opposed to a contract which gets thrown out the window in the event of a merger or financial problems (this is the reality in contrast to what is sold by the non-equity DCs).

Running a DC is incredibly expensive and with most DCs, the dues just aren't enough, so I agree that you can't just assume a DC is flush with cash. Based on economics and that there aren't new member deposits coming in to be "poached," I would expect at least two of the higher end clubs will have to come clean and overhaul their basic structure and dues. I've always said you can't have $4M houses, low deposits and dues, low house to member ratios with great availability, and incredible services and be sustainable. I would argue that you can't be sustainable for the long term even with new members and appreciation, and without, things come to a head much sooner.

 

[BocaBum99]

The biggest issue in this market is that consumers do NOT treat their money like it were an investment. If they did, they would never do it.

I heard all of the arguments about how the rich throw money at lots of luxury products without thinking twice about it and this really puzzled me. If anything, high net worth people should know better.

Why would anyone want to provide an unsecured interest free loan to anyone for the right to rent vacations from that person at or above the market rate? Especially when that loan cannot be called unless 2 other members come in? Ponzi scheme is written all over this one.

This was about as clear an example of a sure fire money losing strategy I've ever seen.

I just hope owners in dead DCs don't try to throw good money after bad trying to save a very poor business model.

 

[tombo]

I know and like Bill – let’s not lump a member of a DC whose one and only responsibility was to buy a membership, pay the dues, and use that membership to his benefit.

We’re all grownups here and “Due Diligence” is a theme that runs throughout TUG – I know for a fact Bill did his due diligence and HCC made a lot of sense to him – I believe Bill has already gotten more out of HCC than he put in. (If you look at the rental rates he would have had to pay to stay at the same exact villas).

Bill is the kind of guy who shares his experiences and that’s what he did – his adventure into the world of DCs – I for one, can’t fault Bill for simply sharing his experiences with us and I distinctly remember him warning that DCs aren’t for everyone.

I think an examination of the DC market is worthy of discussion and to those stuck in this horrible mess I, for one, can only throw in my 3¢ worth and secretly say to myself (Wow, I almost stepped into that one).

Bill constantly told me and others that HCC was the best thing since sliced bread. Bill has gotten many more people to invest in HCC than he would like to admit. I have asked Bill many times if he worked for HCC since he was like an advertisement for HCC here on TUG. Bill would post on every thread on TUG about how great HCC was. If someone on the buying selling thread asked about HGVC or Mariott, Bill would say why buy that when you could join HCC? Feel free to look at Bill's past posts if you think I am kidding.
I am a salesman and have never promoted my product harder in my locale than Bill pushed HCC on TUG. Bill still has a prolem admitting that HCC and all DC's are a bad idea.

Bill not only tried to make HCC fit every one, he proposed financing HCC with home equity loans. If you think I am wrong I will be glad to direct you to his thread where he proposed the home equity loans as a great way to join HCC. I said repeatedly that HCC and other DC's were a bad risk and he scoffed me and acted like I was stupid. Bill was the biggest HCC salesman on TUG and even now when it is obvious that HCC is folding he still wants to get people to pay money to keep the fiasco going. Bill is now and always was wrong about HCC! HCC and all DC's are a bad deal for all but the owners. Feel free to defend HCC, DC's, and Bill at your own peril. All of the these are just wrong.

 

[PerryM]

Play a little louder please...

I can’t speak for Bill but we all know he’s a nice guy – he is enthusiastic about his beliefs and promotes his positions – that’s the essence of a chat room.

In the case of DC’s I was in Bill’s shoes 1 year before him and he took my place – he put his money where is mouth is and bought a HCC membership. I was 180° opposed to Bill by then and we have had many lively discussions – again exactly what a chat room is all about – discussions.

I am 100% convinced that HCC has been a winner for Bill – he has gotten more out of the villas he has used than the membership fee and MFs he paid. For Bill HCC is a success and if it goes belly up he will be sad but better off for doing so.

Can anyone want more?

This is why I classify DCs as a variant of a Ponzi scheme – if new members don’t buy higher priced memberships the scheme collapses and the members have nothing but the savings over renting the identical villas.

DCs are too leveraged and if HCC had stuck with a equity model they would find the new membership fees cheaper by 25% - assuming their villas have taken a hit of 25%. The members could not squawk since everyone’s real estate has taken a hit.

But 95% of the DC industry took just a greedy approach – sell high priced memberships and the members have nothing in return – except salesreps’ promises which are worthless.

Nothing can save the DC industry now and folks can’t get out and they are on the Titanic after it hit that iceberg – everyone telling the band to play a little louder while the water slowly rises.

I’ve given up informing folks on chat rooms about new opportunities – there really isn’t anything in it for me as I’ve learned. That’s exactly what’s happening here when we ridicule folks for posting their blog of their adventures in timeshares or related events.


We are on thin ice when we invite folks to Blog their experiences here and then criticize them for doing so.

 

[caribbeansun]

It's called marginal utility and has nothing to do with knowledge I suspect.

I heard all of the arguments about how the rich throw money at lots of luxury products without thinking twice about it and this really puzzled me. If anything, high net worth people should know better.

 

[AwayWeGo]

A Penny Saved Is A Penny Earned.

I heard all of the arguments about how the rich throw money at lots of luxury products without thinking twice about it and this really puzzled me. If anything, high net worth people should know better.

Shux, if I weren't thrifty I wouldn't be rich.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[caribbeansun]

Since you are Canadian the US posters on this thread won't understand this.

The annual fees are not deductible in any fashion unless you are able to prove you are using the time for business purposes or to earn taxable income.

The deposit is likely considered to be personal use property which would allow you a rather marginal write-off upon it going to zero value. If memory serves it's capped at $1,000 capital loss.

Regrettably the HCC documentation clearly indicates that this was not an investment and therefore treatment as a capital loss won't be accorded. Although you agreement may be different.

IF on the other hand HCC did grant the concession of allowing equity in the club which may seem to be advocating I think you'd have an argument to say that it is indeed an investment and then when the deposit proves to be unreturnable (if that's the case and I believe it will be but you may not) then you would be able to write off the entire loss.

If you have one of the earlier HCC memberships that allowed some form of equity appreciation there might be an argument to be made for capital loss treatment as well.

If you believe you advanced an unsecured, non-interest bearing loan - no deduction for you since it didn't have the potential to earn taxable income or taxable gains.

Lots of variables out there, some of which haven't as yet been determined. You don't say if you actually have an HCC membership so I don't know if your question was hypothetical or not.

Regardless, you should ask your tax advisor before filing your tax return.

I think someone posted this question elsewhere but not answered...is there any way the membership fees and dues of a DC can be written off against other income? I suspect not as it's like joining a golf club, but perhaps there are other roads.

 

[Steamboat Bill]

I am 100% convinced that HCC has been a winner for Bill – he has gotten more out of the villas he has used than the membership fee and MFs he paid. For Bill HCC is a success and if it goes belly up he will be sad but better off for doing so.

I’ve given up informing folks on chat rooms about new opportunities – there really isn’t anything in it for me as I’ve learned. That’s exactly what’s happening here when we ridicule folks for posting their blog of their adventures in timeshares or related events.

We are on thin ice when we invite folks to Blog their experiences here and then criticize them for doing so.

I NEVER recommended people taking out a Home loan to pay for a DC membership or timeshare.....NEVER. I did however post a news release that this was an option as it was an official new release.

Yes, I have had GREAT value of my HCC membership, just like I have had with my DVC, Westgate, and even Marriott timeshares. I don;t want to rub it in that I am WAY beyond break even with my HCC membership as it is disrespectful to someone that has not traveled as much as I have.

If HCC goes bust, I will be sad, but not devastated. The money is not an issue as it is a small number for me. It really was something that provided great value and opportunity for me and I will MISS the travel opportunities as I will have to find a replacement.

For the record - I HAVE NEVER RECEIVED ONE PENNY PAYMENT FROM HCC

When I found out about HCC (thanks to PerryM) and experienced it firsthand, I loved it and wanted to help spread the news......shame on me.

Before TUG, I was VERY active on DIS and was very passionate about DVC and thought it was a great investment (yes investment). At the old prices, I bought well over $100,000 in DVC points. At the new prices (from the developer) I can't justify it as an investment anymore and think people are better renting from a current owner.

I started to SLOW down my TUG posting a month or two ago when I approached the 4,000 post mark as people just seemed to find offense in anything I posted about....and I mean anything. If I posted about window washer rates, speeding tickets, overweight people, HCC, etc......someone (or many people) began to make personal attacks on me. No big deal at first, but started to increase a few months ago.

I WAS a Moderator on TUG and even INVENTED this non-traditional forum and RESIGNED as a moderator several months ago......nobody even noticed or sent me a PM.

I resigned as a moderator as TUG was no longer interesting or fun anymore as the personal attacks and online BS was tiresome. I even thought of killing off Steamboat Bill as an online suicide, but figured that thread would get deleted fast. I just wanted to go back and be a regular member and not have every post examined for offensive material.

I could EASILY log off, create a new screen name and take a new identity....perhaps something like "Sweet Old Lady" and nobody would know.

HCC is NOT dead yet...there is still a small sliver of hope left and if it does survive or get bought out or continue in a modified form, I will be VERY happy.

I have seen the DC light, but the light is dimming and/or changing locations and if HCC FAILS, the entire industry should not be condemned no more than if Westgate fails the entire timeshare industry should not suffer.

I also find it ironic that Timeshare companies are the Sleeziest people I have ever met and have ripped off billions of dollars, yet nobody is calling this a ponzi scheme or SCAM.

There would be no timeshare resales if there were no SUCKERS that bought from a developer and why are TUGers so proud to post they bought a super cheap timeshare on eBay when someone may have gone bankrupt just to get out of the financial obligation of the week you just bought. This is plain offensive.