Lusso Collection files Chapter 11 bankruptcy

[PerryM]

Well another Destination Club (DC) bites the dust – Lusso Collection is hiding from creditors behind Chapter 11 and will limp along until the investors suck out every penny and leave the members holding the empty bag.

==========================
Here’s the text: (From the Sherpa Report)
Lusso Files Chapter 11
Written by Nick Copley
Friday, 05 December 2008
In another sign of how hard the economy is hitting destination clubs, the boutique club Lusso just filed Chapter 11 today.

The petition for reorganization under Chapter 11 was filed at the Bankruptcy Court for the District of Minnesota, and includes all of the property holding subsidiaries of Lusso.

The club is continuing to operate and members of the destination club may continue to utilize the luxury home properties during the reorganization.

In a short press release the club noted:

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

The club is looking at all its strategic options. It has recently laid off most of its marketing and sales staff, but has retained all the local concierges and member services employees, so that member travel is unaffected. The club had been communicating with its members who were the first to know about this restructuring.
==========================

My prediction for the total collapse of the Destination Club market seems to be right on track – which DC will start drowning next? (Does it really matter?) The DC market has always been built on my definition of a DC:
“8 folks get together and buy a rich guy a condo and then pay him rent to use it”.

The list of bankrupt DCs:

• Tanner & Haley July 2006 (This was the first DC in existence and is now history)
• Premier Destinations, Oct 2007 dumped the DC model for a rental model?
• My Global Playground, Oct 2007
• Portofino Destination Club May 2008
• Yellowstone Club, Nov 2008
• High Country Club, Nov 2008 (Management hasn't got around to filing the paperwork for chapter 11 yet)
• Lusso Collection, Dec 2008

I guess we could start a pool and guess which DC will be next to bankrupt the member's membership fee and flail around trying to keep paying the owners a nice salary while the lawyers fight off the creditors.

So, which DC is next to go bankrupt or alert the members that their membership fees have vanished?

P.S.
I’ve been watching the demise of High Country Club (HCC) and it’s fascinating to observe the members while management royally screws up a perfectly good Ponzi scheme – it’s almost embarrassing that the hundreds of eMails I get from Nigeria, each day, seem better than what HCC has proposed in the last month. We Americans really need to work on our business skills.

Happy Holidays,

 

[TarheelTraveler]

I agree with you PerryM that Lusso will not be the last to have problems. I've always said that many DC's models make absolutely no sense economically. The only way to justify some models is to say that you've got to offer a bargain rate in order to get people in the door and once you have a big enough portfolio, they can actually start charging what it costs to offer the services. In other words, many are start-ups leveraged to the hilt that hope to eventually become self-sustaining.

However, the problems with that sort of model are (i) new DCs were contiually entering the market offering "bargains" forcing clubs to delay raising prices, and (ii) we have an unprecedented economic crisis that has resulted in zero new members for some clubs, the investors and lenders have dried up, some existing members are having financial problems themselves and are resigning and real estate can't be unloaded. It's really a perfect storm that is knocking out the most economically unsustainable models first.

In fairness, My Global Playground and Premier Destinations never got off the ground. I don't think My Global Playground ever had any members. There are actually a number of additional DCs like these that were "launched" but never got any traction. Nevertheless, I agree with your point that a number of DCs have now failed, and we will see more.

My prediction of what happens next is a little different than yours. I predict that a few clubs will be left standing at the end of the day. They will be brand-name, they will have no debt or sustainable debt, and more will be equity because frankly it actually makes sense. Along the way, we'll have some failures and some acquisitions.

We're still very early in the life cycle of DCs. Current DC members are the early adopters and no matter the industry, you are going to have turmoil in the early adopter phase. It is absolutely possible to have a DC that works, and the DC concept is better than any other travel concept to date, so I have a hard time believing that it will go by the wayside entirely. We might be calling it something different when the marketers reinvent it, but the idea of sharing a portfolio of houses makes too much sense.

 

[PerryM]

The con....

I love the idea of a DC and perhaps Ritz-Carlton can pull it off – although I think the words “Destination Club” will not be used by them and any that might survive this rout.

I still fail to understand the logic of buying some guy, over the phone, a condo and then pay him rent to use it but apparently that has a “ring” to it and the fast talking fast acting con men who start many of these clubs know this. If I knocked on your front door and showed you slick, glossy, pictures of a condo that I wanted you to buy for me and then pay me rent to use it I’d bet you’d kick me out the door. But somehow doing this over the phone “rings” – I just don’t understand.

My hope is that when folks do a Google of “Destination Club” they find a few of us who keep shouting that this is just another version of the Ponzi scheme and is doomed to failure. Granted, the “perfect storm” of our moronic government screwing with free markets has royally messed up the real estate and mortgage markets but these DCs were really never designed to last that long. They were designed to be leveraged to the hilt and back loaded so the early members got great benefits that the last members dearly paid them for – the definition of a Ponzi scheme.

As the DC market unravels in real time we need to understand that not ONE state or federal law exists to protect the investments of the members – this is THE key ingredient that lead con men to infest what should have been a great way to vacation with your family.

 

[TarheelTraveler]

Since the DCA has proved to be particularly ineffective, I think regulation will end up being put in place. If the DCA were smart, it would try to put together some model legislation that could be passed rather than a patchwork of regulation that states will probably start passing. This reminds me of what happened with timeshares.

 

[caribbeansun]

The DCA has proven to be pointless. It's particularly telling when you have HCC management recording video in May/08 boasting about their Net Asset Test results - it didn't mean squat.

I think the industry is in big trouble now with another of the big players going down.

People were quite willing to knock off HCC because it's an entry level player but Lusso was something like $425,000 entry fee . Granted the folks buying those are in a different snack bracket than yours truly but still - you have to feel that don't you?

I think the unplanned for piece that puts a lot of clubs at risk are the non-dues paying members on the resignation list (leaving aside the business model issues for now).

It's going to get worse before it gets better and I strongly suspect the term DC will be a thing of the past for any that survive.

 

[PerryM]

Caveat emptor (Latin for be afraid, be very afraid of DCs)

Hawaii, a state that loves to regulate every aspect of their residence’s life, declined to get involved with DCs – there is NO hope of ANY state ever getting involved. (Not enough money to grease the palms of the politicians). So don’t count on our fearless governments to protect DC members.

The sad part of this fiasco is to watch the DC members of these stricken clubs threatened with loss of their membership fee unless they pony up more money and/or settle for second class access to fewer units – all the while paying ever increasing MFs. Do the members go for this or place their names on the resignation list? Not a pleasant way to vacation.

From now on, those of you who calculate the daily fee to stay at a DC, should include a pro-rated amount of your membership fee into that amount; assume the DC is worthless when you get out. When that is done the price of staying at a DC is way higher than VRBO which is a viable alternate if you don’t want to stay at a timeshare. Since Dcs are about 4 years old I'd prorate the membership fee over 4 years - there is NO proof that they will survive any longer.

Conclusion:
Buying a DC is so much more expensive than renting a fantastic villa from VRBO (or other rental places) that DCs are no longer worthy of consideration (certainly not for the gut wrenching risk involved). You have always, and continue to be, been at the mercy of con men who are in it because there are NO laws to get in their way.

Caveat emptor.

 

[tarabell]

post deleted

 

[tarabell]

removed post

 

[ondeadlin]

Perry, I just want to say I enjoy your contributions very much. Don't always agree with them, but don't feel like you expect me to, which is unlike a lot of other posters. Keep up the good work.

 

[pwrshift]

In addition to the shrinking availabilities for vacation time, I think a big fear the members of a failing DC have is turning up with extended family members at a destination that has been padlocked...or unexpectedly removed from the destination list. Several of the HCC members apparently have booked 2009 flights to locations HCC has now abandoned and may not get their airfare back or make changes for alternate locations.

To be honest, Perry, I have the same concerns with VRBO -- what protection does the renter have that the VRBO locations actually look as good as the pictures and that they are going to be 'open for business' when they get there? Have you had any first hand VRBO renting experience?

My timeshares are looking pretty good right now, albeit worth less than I paid but a heck of a lot more than DC members might get back when and if their club crumbles. It could be years before members on the resignation list get their money back, if at all. At least I can book all my TS space 13 months ahead, well in time to get flights on FF miles if needed, and know what to expect when I get there.

 

[PerryM]

Insurance helps...

In addition to the shrinking availabilities for vacation time, I think a big fear the members of a failing DC have is turning up with extended family members at a destination that has been padlocked...or unexpectedly removed from the destination list. Several of the HCC members apparently have booked 2009 flights to locations HCC has now abandoned and may not get their airfare back or make changes for alternate locations.

To be honest, Perry, I have the same concerns with VRBO -- what protection does the renter have that the VRBO locations actually look as good as the pictures and that they are going to be 'open for business' when they get there? Have you had any first hand VRBO renting experience?

My timeshares are looking pretty good right now, albeit worth less than I paid but a heck of a lot more than DC members might get back when and if their club crumbles. It could be years before members on the resignation list get their money back, if at all. At least I can book all my TS space 13 months ahead, well in time to get flights on FF miles if needed, and know what to expect when I get there.

I’ve not rented from VRBO, I have rented out Marriott MountainSide Christmas and New Year’s weeks thru VRBO when we used to own them – had lots of interest and rented them via VRBO.

VRBO does recommend HomeAway Rental Guarantee which is good for the first $5k. This has to do with non-legitimate rental listings and you can either self-insure or get other insurance to cover other things that can go wrong.

I’m sure the normal bell-curve statistics applies to VRBO – 10% a total disaster, 10% far exceeds the renters wildest dreams and 80% being “just right”. This same distribution applies to all forms of vacations.

Beyond that VRBO has the same feedback system as eBay – nothing is foolproof but it probably prods the owners to do a good job renting their units.

Here’s a link to Timber Wolf Lodge villas – I’ve been in them and they are fantastic – just steps from The Canyons where we will be snowboarding New Year’s week this year.

Notice the Guest Comments and you can use them to either call the owner or to ignore this owner. Just like eBay.

DCs are now reaching the point where the fear of our free fall economy forcing DCs into bankruptcy is a very legitimate concern and one that deflates DC ownership.

DCs were looking for the folks who consider their membership fees “Pocket change” and that same irresponsible attitude will destroy them – those folks who care so little about “Pocket change” will be the first ones wiped out – they care so little about the value of money.

Live by the sword, die by the sword; the sword in this case are fools who don’t value money. (I am NOT saying that every DC owner falls into this class)

 

[TarheelTraveler]

Good point, pwrshift. In this economy, who's to say the owner you're renting from can afford his or her mortgage payments.

I think the days of non-equity leveraged DCs are over with. Prospective and current members will demand (or should demand if they're knowledgable) that their monies will be put into real estate that they own (rather than somebody else). The days of trusting some stranger with your money is over with.

 

[PerryM]

Original link

The original link that started this thread.

 

[pwrshift]

Another VRBO location

Is this place to be believed? Wow. Don't like to see no reviews, but it surely looks as good as any Destination Club I've seen. $358 a night! http://www.vrbo.com/203648

Brian

 

[caribbeansun]

There are good properties and there are a lot of crappy properties on VRBO. Unfortunately you have to invest hours of your time wading through them all in order to find a couple that might be possibilities.

I did find a couple that looked okay for OBX and HH but had to spend hours and hours in doing so. As I was looking to travel in shoulder season they were better deals than HCC (if it remains in business).

Finding them was tedious though.

 

[PerryM]

Congratulations...you won a DC villa!

There are good properties and there are a lot of crappy properties on VRBO. Unfortunately you have to invest hours of your time wading through them all in order to find a couple that might be possibilities.

I did find a couple that looked okay for OBX and HH but had to spend hours and hours in doing so. As I was looking to travel in shoulder season they were better deals than HCC (if it remains in business).

Finding them was tedious though.

What’s the alternative? Get into bed with a bunch of fast talking con men that seem to be attracted to DCs or do the work yourself?

This is why timeshares are so great – large corporations and state laws to insulate you from the hucksters who permeate DCs.

Sure you have to do some work and there is the insurance you must get to insulate you from incompetent condo owners but really I would rather go this route versus getting scammed by DCs.

But that’s just one person’s opinion.

DCs are a great idea but sadly the “barrier to entry” is so low that I’m really surprised that there isn’t the “Nigerian Collection” – $100,000,000 villas that you not only pay to become a member but every time you send in your monthly $1,000,000 MF you automatically win a villa.

Really, what's the difference?

P.S.
I'm happy to report that the Nigerian Collection has an "End of Year" sale - the normal $12.5 M membership fee is on sale today for just $400 - if you send a Western Union money gram to:

The Nigerian Collection
Inmate #666
Joliet State Prison
Joliet, IL

Hurry, memberships are limited! (Because of heavy demand, processing your order will take 5 - 10 years, I'm hoping for 5 years with good behavior for our salesrep - he sounds so nice on the pay phone)

Maybe the rumor is true - the Governor of Illinois will become a director? Three of the past Illinois Governors are directors now.

 

[caribbeansun]

I'm just saying that VRBO would be more attractive if there was some manner of stratifying the properties - I have no problem looking at 10-15 but when the #'s in an area get up into the 100+ range it's becomes painful. Try looking at Hilton Head

Just like TS - I only look at 5* and only highly rated ones here on TUG. I don't waste my time with anything rated below an 8 on TUG. At least that reduces the chore of vacationing which seems contrary to the objective.

What’s the alternative? Get into bed with a bunch of fast talking con men that seem to be attracted to DCs or do the work yourself?

 

[PerryM]

I'm just saying that VRBO would be more attractive if there was some manner of stratifying the properties - I have no problem looking at 10-15 but when the #'s in an area get up into the 100+ range it's becomes painful. Try looking at Hilton Head

Just like TS - I only look at 5* and only highly rated ones here on TUG. I don't waste my time with anything rated below an 8 on TUG. At least that reduces the chore of vacationing which seems contrary to the objective.

Sounds like a business venture awaits someone – find 5* villas that are owned by level-headed folks and offer them to dues paying members. If the niche is profitable enough someone will offer this service. Offer an insurance policy with the dues and backup accommodation capability and the folks who pay $400k to a huckster might pay for this service.

In the mean time its back to prospecting for a diamond in the rough – sift thru tons of trash until you find that diamond. Or, the DC model of biting your nails to see if your DC makes it thru the next week without cancelling your reservation(s), or pulling juvenile antics like HCC.

 

[tsproshop]

Why not just form a partnership with 7 other people who want to own a vacation home in a nice resort are (La Quinta or Palm Springs). The house on VRBO in the above post is likely less than 1M. An agreement between owners that there will be no loans against the property will reduce the financial risk.

You could set up a reserve account for utilities, taxes admin. and HOA fees. Find a local prop mgr. to rent out unused weeks...

Any takers?

 

[caribbeansun]

Been there, done that. It sounds easy but it isn't.

In fact I had a group of 6 "signed up" to purchase a $1.1M property which was great until 2 of them backed out and walked away from their deposits leaving the remaining 4 high and dry. Pursuing legal remedies isn't a realistic answer.

Why not just form a partnership with 7 other people who want to own a vacation home in a nice resort are (La Quinta or Palm Springs). The house on VRBO in the above post is likely less than 1M. An agreement between owners that there will be no loans against the property will reduce the financial risk.

You could set up a reserve account for utilities, taxes admin. and HOA fees. Find a local prop mgr. to rent out unused weeks...

Any takers?

 

[PerryM]

Share the wealth...

Been there, done that. It sounds easy but it isn't.

In fact I had a group of 6 "signed up" to purchase a $1.1M property which was great until 2 of them backed out and walked away from their deposits leaving the remaining 4 high and dry. Pursuing legal remedies isn't a realistic answer.

This is the Achilles’ Heel of DCs – the economy slows down and:

1) New members don’t sign up

2) Existing members stop paying MFs

Those two things spell the death of the DC industry – it’s happening right now in real time.

The con men that run these things don’t have the resources nor the management expertise and connections to weather a financial storm that we are now in.

Batten down the hatches and put on your life preservers folks – the storm has just started; 4 more years of this stuff will easily wipe out the DC industry and threaten timeshares too. Remember, it’s time to share the wealth; if you have some you won’t be spending it on DCs.

 

[hipslo]

I'm just saying that VRBO would be more attractive if there was some manner of stratifying the properties - I have no problem looking at 10-15 but when the #'s in an area get up into the 100+ range it's becomes painful.

check out resortquest

 

[GregGH]

Hi

Major thread drift going on here ( & I love it )

VBRO --I wrote them ( like that will do any good - but ) and asked them why they can not filter out entries that do NOT match --if you click 'luxury' - then you should only see the pictures that look like LUXURY - their new on the fly filtering is a major step better (like eBay & carMax, etc ) but they have MANUALLY go thru the listings and visually verify the images to the keyword applied ( like Luxury ) and their sucess rate will improve -I agree with caribbeansun -- it is a long tedious job looking for places in vrbo ---hey -- btw --I find that www.homeaway.com looks much better these days ( why they don;t update vbro is ??? ) -- homeway is parent company

Get a group--- do a search --was a GREAT thread on this last year. The more people - the harder it is to keep together. And some places suck at having a season long enough - just look at Florida. Few places are like Hawaii or Coastal Calif. for a long season.

Perry can take credit for trying to tell us ... I have only a partial pain from HCC.

It is nice to see some discussion come back to non-traditional section of TUG - t has been pretty quiet for a while

Greg

 

[GregGH]

check out resortquest

this web site looses me -- you can't see location on line ?? Or am I really missing something --what makes this special ??

http://www.resortquest.com/vacation-rentals.htm


Greg

 

[hipslo]

this web site looses me -- you can't see location on line ?? Or am I really missing something --what makes this special ??

http://www.resortquest.com/vacation-rentals.htm


Greg

it is similar to vrbo in that all properties are independantly owned. owners then list them with resortquest, which manages the rental process, for a fee. the reason i posted was in response to the concerns about the quality of the units on vrbo and the element of (negative) surprise. resortquest has very specific guidelines for the units to qualify for their various different degrees of rating, and they inspect all of them on a regular basis to be sure that they continue to meet the requirements. the idea is that renters have a better idea of what they are getting because of the rating system. i am mostly familiar with them via what they have available in park city, and they have some very top notch listings (or at least they did last time i checked them out, which was I think around 6 or 8 months ago).


edited to add: I just went to their website and you are right, there seems to be a problem with the search feature. dont know if this is just a temporary glitch or not. like i said, last time i was on the site was some time back, but found it very easy to navigate and was impressed with its rating standards. friends of mine have used them to manage rentals of their beach property in delaware, and other friends have been happy with park city condo rental through them. not sure what seems to be up with the website at the moment.


here is an example of the kind of info they have on properties - i had to fiddle around on google to come to this "through the back door", but when the search feature is working properly its very easy to navigate:

http://www.resortquestsunvalley.com/FeaturedProperties.htm