The Well-Heeled, Worldly Home

The views are spectacular, the amenities top-notch, the service nonpareil. No matter which destination club spokesperson you talk to, the word is the product is as good as gold. We're talking about so-called destination clubs, membership organizations that demand a high entrance fee and a hefty maintenance fee and bank on individuals whose net worth is about $3 million.

The atmosphere is rarefied but the field is getting crowded; this young, specialized market is booming. Various players suggest the reason is that travel is hot, the economy is on the mend and the rich are getting richer. In addition, the real estate many such clubs own is appreciating, making these deluxe residences even more deluxe.

Nobody's been burned yet, according to industry insiders and outsiders. But there are worries, because the non-equity residence club field is unregulated. At the same time, moves are afoot to align these clubs with more traditional timeshare, a 30-year-old industry that is regulated and, its proponents say, stable.

Among the best-known destination clubs are Exclusive Resorts, the dominant player; Tanner & Haley (formerly known as Abercrombie & Kent Destinations); BelleHavens Equity Destination Club; and Dream Catcher Retreats.

Already, the field is showing signs of segmenting; one destination club executive speaks of multiple flags within his brand. In addition, several observers say that in time, the membership price — typically $200,000-plus — will come down. For now, the field feels like the Wild West, a land of opportunity and big skies.

Michael Beindorff, the chief operating officer of Exclusive Resorts, says the 1,850-member organization he heads plans to add 100 homes to its 300-residence portfolio this year. Only two years ago, it was 144 homes. “The category has roughly tripled in size from ‘04, when luxury membership sales were about $140 million, to about $450 million,” Beindorff says, citing Ragatz Associates, a vacation industry consultancy.

“We are the dominant player, larger than the rest of the category combined,” says Beindorff. “We've got about 60 percent of all the luxury residence club members out there.”

Bigger isn't always better, suggests Scott Anderson, CEO of Dream Catcher, a destination club with 85 members and 21 properties in 19 destinations. He expects that by summer, membership will be at 100, giving Dream Catcher competitive critical mass. “Exclusive Resorts is the 800-pound gorilla,” says Anderson, and when prospective members are considering a choice between Exclusive Resorts “and us, I say Exclusive is anything but.” At the same time, it's backed by the money of former America Online chief Steve Case and was “second in the space” after Abercrombie & Kent.

Like several other entrants, Dream Catcher stresses its hospitality expertise. At destination clubs, your membership buys you not only time in a home but also the service you expect from a high-level hotel. Nevertheless, not all destination clubs are hospitality-equal for guests, Anderson suggests.

“We manage them from the time they walk out of the front door of their permanent residence until they return: air transportation, groceries in their refrigerators, tee times, restaurant reservations, private tours, creative experiences in the destination that they can't get on their own,” he says, citing 105 years of hotel experience among Dream Catcher's executives.

Once membership reaches 400, Dream Catcher will begin to extend its brand, just like a hotel company, Anderson suggests. Forming one or more such clubs “is taking a page out of the hotel industry, where you have a company that has multiple flags, like Marriott,” he says. “We view our future as having Club Holdings as the parent company, with multiple brands hanging off that infrastructure.” The idea is to “own” early adopters who enter the field at a lower price point, move up to Dream Catcher and, as they age, “wind down in their life and maybe back down the size of their homes.”

Dream Catcher and other destination clubs compete with high-end fractionals like those offered by Ritz-Carlton and St. Regis, he says. The competition isn't timeshare.

Another new entrant, Leading Residences of the World, also stresses its hospitality connections. With Cendant as a strategic partner, Leading Residences caters to “those who want to take their friends and family on golf outings, beach trips or shopping trips,” says Dennis Draper, president and COO. With a membership fee of $325,000 and annual dues of $15,000, Leading Residences targets a wealthy demographic. But unlike its competitors, its deposit is fully insured. “Even if the business fails, which it won't, people are assured they're going to get their money back,” Draper says. “For every three new sales, the fourth sale will be a resale of the resigned membership. But even if we're not selling any memberships at all, you're guaranteed your money back within 12 months.” Liquidity, he suggests, is part of the lure in this “lifestyle purchase.” So is flexibility. The refund is 80 percent.

“We operate this as a hotel, with rooms all over the world,” Draper says. “When the inn is full, members are pretty — what's the right word? — understanding. They know they're a member of a club and they have to share with everybody else.”

At the highest end, consider Yellowstone Club World, a collection of nine resort locations including two French chateaux, a private golf course in Scotland and Tamarindo, a former Starwood golf resort north of Manzanillo, Mexico. Established by billionaire timber magnate Timothy Blixseth, it's affiliated with the Yellowstone Club, an exclusive ski and golf site in Big Sky, MT. Blixseth recently hired longtime Hilton executive Dieter Huckestein to run Yellowstone Club World, where memberships sell for $3 million to $4.5 million and will cap at 150. Annual dues are $75,000. (Current members of Blixseth's posh Yellowstone Club can buy Club World memberships for the relative bargain price of $1.5 million to $2.25 million.)

“You're joining a club whereby you have access to unique destinations,” says Huckestein, who resigned his posts as CEO of Hilton's Conrad Hotels and president of the Hilton Global Alliance only in January. “When you arrive, there will be concierge service, butler service, a walking wine bar, a refrigerator stocked to your liking. And if you don't want to stay in Montana, we can arrange to have one of our jets take you to Tamarindo.” And the membership refund is 100 percent, he says.

“The segmentation of luxury products is going on as we speak, and we are leading the top end of the luxury market, where you buy lifestyle, you get the best you've ever wanted and you have privacy and security,” says Huckestein. “You never wait for a ski lift. You never have to arrange a tee time. There are no lines.

“You get tired skiing very fast because there's no line.”

While destination clubs sell “vacation experiences” — think of them as second homes all over the world's finest places but without responsibilities or mortgages of owned residences — they are so new they aren't regulated. Which troubles some in the vacation travel industry.


The leading issue surrounding destination clubs is regulation, says Steven Peterson, of Salt Lake City law firm Ballard Spahr Andrews & Ingersoll. Are they regulated by timeshare? And if not, are they regulated by some other framework such as seller travel, or travel package sales?

Some destination clubs claim seller of travel designation to say they are regulated, but SOT regulations are simpler and they may be ducking the issue, suggests Peterson, who is a specialist in resort law.

“A destination club typically has a structure similar to a golf country club,” says Peterson, who has represented all kinds of “vacation experience” products, including timeshare, fractionals and non-equity residence clubs. “That means that a person makes a refundable deposit rather than buying a permanent interest in real estate or a permanent, non-deeded interest in a club; they make a refundable deposit to the club sponsor pursuant to which they have the right to reassign whenever they wish and are entitled to receive 80 percent in return.”

The sister product is the private residence club, where one can buy an undivided interest in a condo and where one gets a deed. Such products are registered as timeshare, “and part of the battle is to understand why one high-end product should be regulated as a timeshare — the private residence club — while this other product, the destination club, should not.”

People involved in vacation travel are attempting to forge a consensus “as to how the destination club should be regulated, and the destination clubs are willing to be regulated in what they would call a disclosure approach,” Peterson says.

Regulations regarding timeshare and high-end private residence clubs require that all properties be free and clear of liens, so if you buy a timeshare from Hilton, Starwood or Marriott, you'll get a deed and be assured that the property is unencumbered. By contrast, when you buy a destination club membership, the club sponsors have the right to mortgage the properties; they may have a collection of 50 $3-million homes, “but they will disclose in their documents that there may be mortgages on those properties up to, say, 50 percent,” Peterson says.

These clubs believe such a cushion will satisfy the refund obligation, “so their view is, I will disclose to everyone how my club operates.” That stops short of the timeshare requirements for unencumbered properties, which would “disrupt” the destination club business model, Peterson says. “They clearly do not want to take the membership deposit, buy free and clear property, and in effect guarantee the title integrity of the club assets.”

Howard Nusbaum, president of the American Resort Development Association, says that traditional timeshare with deeds and right to use fractionals without deeds falls under regulatory protection. But the business model of the non-equity residence clubs that cater to the “lifestyles of the rich and famous” haven't been “vetted through the same regulatory consumer and protection channels that timeshare and fractionals have.”

The marketplace has “gotten ahead of the regulatory environment,” Nusbaum says. Research conducted by ARDA has led to the development of principles the association hopes destination club sponsors will adopt.

“Presently, there are different opinions about whether this is a timeshare use plan or not,” he says. “Most state laws say that if you purchase prepaid accommodations for multiple years” in a system that's tied to central reservations, you're in a timeshare plan. Developers of non-equity residence clubs say they're not similarly regulated because “they don't have owner governance that timeshare has and they can change inventory.”

By the end of this summer, ARDA hopes some regulations will be in place. “We are concerned that this business model does not have the adequate consumer protections and regulatory oversight that have made timeshare and traditional fractional development a sound product that's been embraced by the marketplace,” says Nusbaum.


Greg Shove is 44, married, three kids. He made money as an Internet media executive, and he's been a member of Exclusive Resorts for two years. He owns and runs the Helium Report (, a website dedicated to destination clubs. He plans to produce a series of “decision guides for affluent families,” he says.

For now, the Helium Report is an invaluable consumer guide to the expensive world of the non-equity residence club, a world in which Shove feels at home.

“I'm a very typical destination club member,” says Shove. “The meat of the industry is aimed at families who like to travel and vacation and, to some extent, retiring Boomers. Retiring Boomers like it because they want to move around and the houses are big enough for them to entertain their friends. For people in my demographic that have kids under 18, the attraction is as a replacement for four- or five-star resorts.”

He doesn't think the field needs regulation; rather, he says, prospective club members have to be confident that homes will be available. And if they retire or resign their membership, there must be “sufficient capital to repay the refundable component of their membership.”

These clubs operate on a ratio of six to ten members per home, he says. He is not a member of a club other than Exclusive Resorts, but can see why one would be. “Some clubs are specializing, like the Vintners' Club, in wine; some have stronger geographical focus. The best example is Leading Residences of the World, which is attacking the market with a very strong international focus.”

If you're considering destination club membership, drill down far. These developers are unusually entrepreneurial “private investors coming together launching these clubs,” he says. Do deep research and, if possible, interview club officials to gauge its experience in real estate development and hospitality management. “Did they buy beautiful homes in the right location? Can they deliver a consistent and high-quality experience while I'm in the home? These are being proposed as alternatives for either luxury vacation rentals or five-star resorts.

“If you're going to replace those, you have to deliver a comparable experience.”

Visit for more information and related articles.


Find the right place, then build exquisite homes

That's what's necessary for developers of extraordinarily upscale non-equity residence clubs. Money, of course, is a prerequisite.

Due diligence is critical

Club operators should be as forthcoming as possible and offer a trial stay. They also should detail their financial structure and their hospitality management experience.

Regulation is an issue

Such clubs are “vacation experiences,” like timeshare and fractionals. Because they're new, they're not regulated. Many in the business think they should be.

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