Good News For The Vacation Homeless: Luxury Membership Options Emerge Following The Ultimate Escapes Bankruptcy
Demeure's Borgo De Vagli residence, Tuscany
For those of us who have followed the fallout from the Ultimate Escapes bankruptcy, it has been a bumpy ride. I have written about this bankruptcy before on Luxist, but here is a small refresher précis.
Ultimate Escapes was a high end, luxury, non-equity based destination club, and the second largest in the industry. Members paid between $150,000 and $800,000 membership deposit, and many thousands more in annual dues. For those fees, they took vacations to exotic places and stay in exceptional residences, villas and condos. There were over 1400 members when the club bankrupted in mid-September, 2010. It was then the fifth major bankruptcy in five years for the non-equity destination club space. Prior to Ultimate escapes was Tanner & Haley, Lusso, High Country Club, Solstice, and now this. For members, industry watchers and many others, this bankruptcy began a serious re-thinking process. What is the matter?
As with many complex problems, this one appeared easy to solve. Many believed it was the non-equity model on which literally all of the bankrupted clubs were based, and in part, but only in part, it was. The first generation non-equity model was broadly based on a kind of Wild West 2004-2008 YAHOO-type optimism: clubs will certainly grow if -- real estate values would appreciate, and if members continued to join. If this growth hormone were in place, and why shouldn't it be?.. then the members will receive what was promised to them: 80% of their deposits back upon resignation from the club, and the 3 in 1 out option borrowed from the timeshare industry: If three new members joined, you could resign. Simple. Seemed so reasonable in those pre-Madoff times.
And because it seemed so reasonable, and times were so optimistic, many clubs bought properties and others were leased when prices were at an all-time high. Then, suddenly, in October of 2008, the perfect storm appeared: real estate values declined, Bear Stearns and Lehman Bros. deflated. But no matter what, lenders wanted mortgage payments and lessors wanted their rent. With these occurrences, the first generation club model looked like a house of cards, easily toppled by the dark winds of a collapsing economy and potential members' deciding against joining any club, even, as one member said to me, "a church group." Thus, with this last bankruptcy, following much the same process as the others, many felt this was the last gasp for the non-equity based club.
BUT! The model is not dead: it is evolving....
Exclusive Resorts and Quintess, both non-equity club survivors, have moved toward a dues sustainable model, where annual dues cover all travel expenses, and the non refundable portion of membership deposits cover sales/marketing. As Ben Addoms, Founding Member and CMO of Quintess said recently, "We design and operate all of our clubs so that the members dues cover all the operating costs of the club. In the case of DUO ( see more on DUO below), member dues cover operating costs and interest costs associated to the homes."
So, whether thriving, sickly, or merely holding steady, the non-equity destination club model is still with us. Nonetheless,there appears to be much schadenfraude from other destination club members and industry watchers with the Ultimate Escapes demise. The jeremiads are consistent: so much money lost, and so many members left homeless – well, vacation homeless....
But wait! There are a few phoenixes rising from the ashes of misery.
It did not take long to have a number of clubs emerge, not exactly from the shadows, but from backstage to center stage. Some have been in existence before, some are new, but many have made offers to attract the 1400 plus Ultimate Escapes refugee members, many of whom, ironically, had been through one and sometimes two destination club bankruptcies, and/or one acquisition, before. For these reasons, the offerings to UE members emerged as diverse as the new club models themselves. Here are some of them, as of this writing:
Duo by Quintess
Duo by Quintess is the only offshoot club of one of two major successful non-equity based destination clubs, Quintess. (Quintess and Exclusive Resorts are the remaining two non-equity based clubs in the United States.) Duo had been created before the UE bankruptcy, but it came to immediate prominence after UE's demise. I have written about Duo by Quintess in Luxist before. But since my writing, it has become more successful, opening more homes, garnering more members. At a recent Webinar, one of the satisfied members said that he had signed up for 30 nights with the new club, then stayed in one of the New York Duo by Quintess residences, and called from that residence and upgraded to 60 nights.
The Duo /UE member options are:
Charter membership rates beginning at $12,500 and annual dues starting at $14,500. Ultimate Escapes members also have the ability to receive some or all of the membership deposits paid to other failed destination clubs refunded, if they wish to exit the club.
DUO by Quintess residence, Los Cabos, Mexico
I have also written about this club in Luxist., as this was the club that the Ultimate Escapes lender, Capital Source, chose as the major contender to bid for the assets of the demised club. Though there were other bidders, Demeure won, due to the financial stability of the company behind them, Laurence Group from Waterloo, Ontario, and their plan to capture the members, with an unusual hybrid model. This strategy combined multiple areas of member interest: home exchange for vacation credits, home and villa rental options that would combine to create a travel community, made up of those who chose to use the home exchange option or rent directly from Demeure. In addition, members have been recently given the option of purchasing the UE homes optioned by Demeure, for their own use, or, putting the purchased homes into a club rental pool and receiving more travel credits. It has been announced just last week that the UE/Demeure Estate asset purchase has been closed. Thus,many of the most popular UE residences are now in the hands of Demeure, and many of the homes are being bought by ex-Ultimate Escapes members.
The Demeure/UE member options are:
Joining Demeure means that UE members can begin immediately making reservations to many of the properties attached to their former club. According to Demeure, travel planners that members have worked with over the years are also a part of the club, giving members a familiar transition from Ultimate Escapes to their new club. Members are asked to pre-pay annual dues each year roughly equal to the annual dues paid to Ultimate Escapes, with these funds held in escrow, until the member travels.
Demeure Trump Towers Residence, New York
Second Home Destinations
Second Home Destinations, will offer members of Ultimate Escapes a one year trial membership with no membership fee. Using a points based reservation structure, members will be able to purchase up to 16,000 points for stays in the club's portfolio of residences, with properties beginning at roughly 100 points per night.
The four one year trial membership options available to Ultimate Escapes members are:
¥ 4,000 Points: $4,950 Annual Dues
¥ 6,500 Points: $7,700 Annual Dues
¥ 9,500 Points: $10,945 Annual Dues
¥ 16,000 Points: $15,950 Annual Dues
The typical property within the Second Home Destinations portfolio will average approximately 300 points per night, meaning that a member at the 4,000 point level can expect nearly 14 nights of travel.
Crafted by a former Ultimate Escapes member, Boundless Journeys Club doesn't utilize any of the principles used at the now bankrupt club. Instead of a large membership deposit to join, members pay $5,000 in annual dues, providing them discounts at a collection of vacation properties, complimentary travel planning services, local concierge support, and none of the financial worries of having hundreds of thousands of dollars tied to a club. Boundless Journeys also plans high end Galapagos Cruise and African Safari experiences, luxury residences included.
Boundless Journeys, African Safari experience
It is also relevant that the other two clubs in the space, Exclusive Resorts and Abercrombie & Kent Residence Club have made special offerings – not necessarily to the UE members, but to all people interested in membership.
I have written about the Exclusive Resorts offer, as it is giving new members that join before December 15, 2010 a $10,000 gift card for additional services outside of the white glove treatment members typically enjoy. Members can use their card toward tee times, private chefs, spa treatments, and other amenities booked through the club.
Exclusive Resorts Residence,Lake Tahoe
The Abercrombie & Kent Residence Club, the only equity based club we mention in this article, is providing new members with 15 nights of complimentary access to their portfolio of $3 million vacation homes over the first three years of membership. It is also important to remember the strategic alliance recently made between A&K and The Ritz Carlton. I wrote about this Luxist also, allowing the creation of a significant brand partnership, and allowing more significant destinations to be experienced by A&K members as well.
Abercrombie & Kent Villa, Cote d'Azur, France.
With all this said, and for the many who just don't get why people travel this way, the destination cub/ hybrid travel community/ villa rental/home exchange clubs offer a kind of travel that is very seductive. You pay for it, but much is offered and provided. Dedicated concierges, private chefs, experiences not immediately accessed otherwise. These clubs provide more than vacations, they have the propensity to provide a type of personal journey, toward great senses of family community and sanctuary, toward greater individuation. They allow time, the greatest luxury, and the greatest scarcity, to provide space to explore: the destination, the family, children, the significant other, the ocean, the earth, the stars.
( author note: I am grateful to Levi Moe, Publisher and Founder of Destination Club News for helping in the preparation of the member offers section of this article.)