Beyond The DC Horizon

From a recent posting on Destination Club Forums:

News from the past weeks are not very encouraging.

Some clubs are raising dues dramatically.

Some clubs are defrauding their members.

Some clubs are bankrupt.

Some clubs are unilaterally changing docs.

All clubs are reducing perks and cutting costs.

All the people backing every club has lost significant money.

Resignation list are such that you will not get your money back anytime soon.

Most clubs have availability problems.

Most clubs have disgruntled members or lawsuits.

Also most club nightly dues are now a lot less competitive with the rest of the industry.

Things have not been looking too positive for the Destination Club Industry lately. This is not news to the industry, as the classic first generation model has been criticized almost since its inception. The only time no one had any qualms was back in 1998, when the idea as first promulgated by Rob McGrath, and was as simple as it was untried: a club that was modeled on a golf and country club, where people paid a membership deposit, annual dues, and then went to enjoy the properties and destinations that the club owned. The idea hit a positive nerve! -- in those who knew about it, and the first club, Private Retreats, out of Telluride, Colorado was wildly successful. Soon thereafter came others - Exclusive Resorts, Private Escapes, High Country Club (HCC), then Ultimate Resorts, Quintess, Solstice, LUSSO and by 2006, the clubs were off and running.

Questions, however, began to arise early, because those who knew BOTH money and hospitality had thought early on that the DC industry was underpricing itself for all the amenities that members wanted and asked for. The underpricing of memberships, the skyrocketing cost of homes, the seduction of leasing, as well as the fluctuations of the real estate market all led to a complex picture than came to a head within the last few years, when many of the clubs lost steam, changed color or dropped out entirely. LUSSO declared Chapter 7, HCC did as well, Ultimate and Private Escapes have been in process of merging for two years, contrary to what was written in media outlets. The merger is supposed to be completed very soon. At best, these events disconcerted the existing as well as potential members of destination clubs. This made selling the DC product all the more difficult, which coincided with the downturn not only of the real estate industry but the general conspicuous consumer economy also.

As of this writing, the industry is working itself out of this Sisyphean quagmire, some better than others. Exclusive Resorts is raising its annual dues, Quintess seems to be holding its own, and Ultimate Escapes is doing a fascinating bit of magic: a reverse IPO with Secure America, making it the first destination club to become a publicly traded company.

However, no matter what happens, getting new members anywhere, for any club, will not be easy. The economy, purchasing priorities, and aspirational mindsets have changed drastically since those sweet, distant Private Retreats days in 1998.

It remains to be seen as to whether people interested in taking seamless vacations will come to destination clubs, or whether they will look into other areas, heretofore not well known to them. There are three models on the horizon that may give the classic destination club product a run for their money. In theory and practice, they have been in existence for years, but have not been as well known, mainly because they do not have well known brands. But they have become better known in the past few years, as those who want to take memorable, amenity-filled vacations in exceptional destinations, but without the trappings of a club contract, have found them.

First, the Villa Rental model. Villazzo is a prime, but certainly not the only, example of a high end villa rental company. Founded a few years ago by a European entrepreneur, Christian Jagodzinski. Christian knew the DC industry well, but could not get the numbers to balance out correctly, or well enough to his satisfaction. “I preferred to stay with the Villa concept,” he says, “because our clients knew what they were getting, they paid for what they used, and the whole thing seemed a lot less complicated.”

The Villazzo Villas are private homes throughout Europe, where private chauffeur transfers, a private helicopter transfer, dedicated concierges, pre-arrival grocery shopping, private chefs, maid service, all computer/fax/printer iPod set ups, are all in the highest-end locales. Prices range per week, between $5000 and $30,000 a night and up.

In addition, Villazzo will soon be launching another component of their business called V-Villas. V-Villas has been designed to offer a more flexible and affordable vacation environment. V-Villas also has an advantage of offering residences in a much broader range of destinations than ever before, with more to come. Multiple V-Villas are already in Mallorca, Ibiza, Saint Tropez, Miami and Capri.

Second, the Private Homes/Hotel model. Time And Place, a relative newcomer to the field, uses the new private homes/hotel concept, which combines the luxury and exclusivity of a private home with the services of the finest hotels in the world. Mitch Willey, founder and President of Time And Place, says, “The concept behind this company is to offer every conceivable service, yet respect and safeguard the privacy of our guests. “Many stay at multiple homes each year, where we take care of their every wish – but they have none of the hassles of home ownership, or risky long-term agreements.” Time And Place also owns some celebrity homes for rent - including Frank Sinatra’s and John Phillips’s Palm Springs homes. Price ranges from $800 to $1700 per night, with celebrity homes being a little higher. People can stay from 2 nights to as long as they wish.

In these two similar models, the distinct advantages lies in what is not expected: no club memberships, no long term contracts, no annual dues, yet with the same or very similar amenities that the highest end destination clubs have: private chefs, cars in garages, pre-arrival grocery shopping, maid service at least once daily, valet services, dedicated concierges, long- or short-term vacations in the highest end destinations.

Finally, the Destination Cellars model, which is less of a club in the destination club sense, and more of a travel/experience enclave for a niche population, mainly oenophiles. According to David Keuhner, President and Founder, business has increased 40% since the beginning of this year. There are three types of memberships, ranging from $10,000 to $80,000. Each membership is designed with a certain number of experiences the client wishes to enjoy over a period of time. Many experiences offer accommodations where clients have access to stay at international wine estates.

Destination Cellars also handles “wine experience” services for companies such as Exclusive Resorts, Merrill Lynch, YPO, Tiger 21, JG Blackbook Travel and MasterCard World and World Elite cardholders globally. In the Destination Cellars family, there are currently over 100 winery partners in 10 countries throughout the world. The most popular areas for clients to visit are Tuscany, Bordeaux, Burgundy, Napa and Sonoma.

These models are not yet changing the face of the Destination Club Industry. Ultimate Resorts, Exclusive Resorts, and others, will surely maintain as they evolve. But these models do show vacation buyer alternatives and choosing among alternatives is what democracy is all about.