With most timeshares focusing on middle-class family vacation needs, a former timeshare developer named Rob McGrath saw a niche market in the luxury timeshare market, and decided to launch clubs targeting affluent families that want the benefits of second home ownership. These clubs, known as Destination Clubs, basically use the same model as a timeshare. In exchange for a one-time upfront membership fee, and annual membership dues, a member is able to access a roster of luxury vacation homes around the world, which can be booked based on availability and reservation priorities.
What Can Destination Club Members Expect?
- Access to 3-5 bedroom homes (smaller condos in city locations), either on resort properties or near key locations – ski resort, beach, etc.
- Vacation homes are owned and managed by the club or leased by the club, and are for the exclusive use of club members
- Members get 14 – 42 days of home usage at different homes across multiple locations.
- Booking homes is done in advance and on a “space available” basis, and there is a system in place to handle the demand for holiday or peak periods.
- Members can expect high service levels including: pre-departure planning, on-location concierge services and daily home cleaning service.
- Furnishings, appliances and audio-visual equipment that would be considered “luxury class,” such as Viking stoves, jacuzzi tubs, and flat-panel TVs.
Equity Clubs vs. Non-Equity Clubs
Non-equity club members will enjoy the same hospitality and benefits of the club, but they will not have the opportunity to participate in any of the real estate appreciation taking place in the homes featured at the resort. Their up-front payment is a deposit, which is refunded by at least 80% upon resignation from the club. Of course there are some exceptions to this, but typically they can expect to receive 80-100% back with no adjustment from the initial sum.
Whereas a down payment on timeshare is not really an investment, the up-front payment associated with equity Destination Clubs can be considered an investment, or at least a reduction in the cost of making up the up-front payment. Upon resignation from the club, the refund of the initial fee is adjusted to reflect the vacation home value or the increases in the fee for the new member.
A popular variation of equity vs. non-equity ownership is the “hybrid” model. A hybrid provides an upside benefit that is tied to either the value of a club membership, or the value of the home portfolio when a member resigns.
Potential Issues with Destination Clubs
Destination Club ownership can be great for those that are able to afford its high costs, but what happens when there are more people giving up their Destination Club ownership than people joining? This situation of losing more customers than gaining presents an issue for the refundable aspect of Destination Club ownership; the refundable portion of the membership fee has no assurances that it will ever be paid. This could create a situation in which the Destination Club goes into the red and is not able to repay resigning customers, causing the system to collapse.
Another issue concerning Destination Club memberships is that there are no destination club specific real estate laws to protect Destination Club members. Agreements concerning memberships are covered by all other aspects of law including contract law, but owners may have very little legal recourse if an issue arises. Timeshares and other forms of fractional ownership have many consumer oriented laws to protect their investment.