The number of destination clubs operating in the United States increased almost tenfold from mid-2004 to mid-2005. But Dick Ragatz, president of the travel consulting firm Ragatz Associates, has noticed a significant deceleration in the past 12 months. “There have been very few new ones coming into the marketplace,” says Ragatz, whose Eugene, Ore., company has been monitoring the resort industry for more than three decades. “And of the 30 or 35 that were listed on the Internet in mid-2005, there are only about 18 or 20 of them in active sales. A lot of them simply disappeared.”
If the current boom in real estate values proves to be a bubble, more destination clubs—companies that are unregulated as an industry—may vanish. It is therefore essential, says Ragatz, for those considering joining a club to evaluate not only the quality of its services and homes, but also the viability of its business. Exclusive Resorts, the Denver company that helped pioneer the destination-club concept, is an excellent option by both measures.
Exclusive Resorts began accepting its first members in 2003, luring them with the promise of access to multiple vacation residences without the inconveniences of second-home ownership. The company soon attracted the attention of AOL cofounder Steve Case, who purchased a majority stake in the club in 2004 and today serves as its chairman. Exclusive Resorts now has nearly 2,000 members—more than all other destination clubs combined—and estimates the value of its residences at over $750 million.
Such statistics mean little, however, if visiting the club’s homes is not a pleasurable undertaking. Exclusive Resorts maintains a collection of nearly 300 residences in 36 locations, offering distinct yet consistent experiences at all of its locales. On-site hosts at each destination attend to guests in the manner of personal assistants, and the club outfits the properties with nearly identical entertainment systems, kitchen appliances, and other devices so members immediately feel at home. The residences are well located, have an average value of $3 million, and, with the exception of city apartments, range in size from 3,000 to 4,500 square feet.
Exclusive Resorts’ properties include 31 homes in Los Cabos, Mexico; 20 in Scottsdale, Ariz.; 22 in New York City; four in St.-Tropez; and 20 on the Big Island of Hawaii. In December 2005, the club announced its plans for 28 new mountain residences, including 10 each in Vail, Colo., and Deer Valley, Utah. “We are building out our supply within existing destinations more so than we are trying to add destinations,” says Michael Beindorff, Exclusive Resorts’ chief operating officer. “Today, we have three residences in Costa Rica. By summer 2007, we will have 23.”
Members at Exclusive Resorts’ Elite level, which requires an initial fee of $395,000 plus annual dues of $25,000, can spend as many as 45 nights per year in the club’s residences. The company also offers Executive ($295,000/17,500/25 nights) and Affiliate ($195,000/9,500/15 nights) programs, and members at all levels can reserve extra time for a fee. If a member leaves the club, he or she receives an 80 percent refund of the initial deposit once three new members have joined. (The company says that to date all departing members have been refunded immediately.) Exclusive Resorts does not have a membership cap, which the firm claims is an advantage. “If you have 31 homes in Cabo San Lucas, you can offer amenities like kid’s clubs and special events,” says Beindorff, also citing a recent golf clinic put on for guests staying at the club’s Scottsdale properties. “That’s something that when you’ve got 50 or 75 members, you simply can’t do.”
Beindorff believes that Exclusive Resorts’ size—and success—offers another advantage. “We are a very financially stable company,” he says. “We don’t have lines of members that want out of the club and can’t get their money back. I think we’re going to begin to see that there are some clubs out there that have behaved a little irrationally and are going to have a very difficult time between now and the end of 2006.