Good News For The Vacation Homeless: Luxury Membership Options Emerge Following The Ultimate Escapes Bankruptcy
Filed under: Luxury Travel & Hotels
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....