DESTINATION CLUB UPS AND DOWNS

Somewhere, a group of timeshare executives are saying, “We told you so.” For the past several years, leaders in the vacation ownership business have expressed concern over the unregulated nature of the non-equity destination club niche of the resort business. The worry has been that any failure or PR gaffe in the destination club business would taint timesharing, an industry that's still trying to shake the last vestiges of its sometimes-sordid past.

Some of that concern materialized recently as Tanner & Haley, one of the largest and oldest destination clubs, filed for bankruptcy protection in August. And one month later, two smaller clubs, Dream Catcher and Quintess, decided to merge to more quickly build a combined critical mass. The new company, called Quintess, Catch the Dream, has 230 members and owns 38 houses.

What worries timeshare executives and some consumer advocates is that unlike traditional timeshare products, destination clubs lack a solid financial assurance that a member's investment in a club (typically a six-figure membership fee) is secure (destination clubs promise that a large portion — often around 85 percent — of a membership fee is refundable when the member leaves the club).

“I have no problem with the destination club business, but it should carry the same consumer protections as do vacation ownership products,” says Howard Nusbaum, the outspoken CEO of the American Resort Development Association. “Specifically, destination clubs should provide third-party independent assurance that membership fees will be refunded as promised. It could be a bond, insurance, an escrow arrangement or some other vehicle.”

ARDA has been working on model legislation in Hawaii to address this issue. And several destination clubs — BelleHavens and Crescendo — are now touting that membership brings equity ownership and a more secure financial environment.

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