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Homes Away From Home

An alternative to hotels, destination clubs offer travelers a myriad of luxe vacation homes all over the world
Larry Olmsted
From the Print Edition:
David Caruso, Jan/Feb 2007

When one thinks about the perfect vacation home, images of a secluded beach or a mountainside retreat often come to mind. The choices are varied and tempting, but finding the perfect property can be daunting. Even if a third or fourth home is an option, you still must deal with the difficult realities of vacation home ownership: maintenance, plowing or mowing, furnishings and, of course, mortgage payments and ever rising property taxes.

Now imagine not owning a second home. Instead, consider having a third, fourth or even a hundredth vacation home, all luxurious and well appointed, yet each intimately familiar from the moment you step in the door. You and your family can go on that annual ski, beach or golf vacation and be able to choose from several great locations for each trip. Imagine having all these homes at your fingertips but never having to deal with lawn care or leaky pipes or finding firewood. That is the promise of the destination club, a popular new alternative to vacation real estate investment, which is attracting buyers at a breakneck pace.

The industry, which is only about eight years old and has just caught fire in the last three, now includes about 20 companies each offering its own version of the destination club dream. All follow the same basic premise: club members pay a large onetime fee—a deposit that is fully or partially refundable—plus annual dues and sometimes nightly fees. Each member is entitled to a certain number of nights per year, depending on the club and level of membership. The club uses the fees to amass a portfolio of vacation homes in myriad locations, and members get to use their nights at a combination of these properties. In its simplest form, the destination club model pools would-be vacation home owners and leverages their capital into multiple homes they all can use.

"I didn't intend to start a club," says Darin Gilson, founder and president of BelleHavens, one of the newer destination clubs. "My wife and I were looking for a second home about six or seven years ago, and then the rational part of my mind took over and I thought, 'How much will we really use it?' and my wife reminded me that 'you can't even take care of one home.' So then I thought, 'Wouldn't it be cool if I could have a house and share it with friends?'

"As I thought about that, I started to realize that we might all get bored always going to the same place. That was the final piece of the puzzle," Gilson says. "I thought, 'Wouldn't it be cool if we had a big group of friends to share a portfolio of different houses in different places?' When I started researching the idea, I had never heard of destination clubs, and Exclusive Resorts and Private Retreats were just getting started. Seeing others doing it actually encouraged me, because I saw some traction in the marketplace for the concept."

The reason the concept has quickly gained traction is because many frequent travelers like to go to varied locations and prefer opulent homes to even the most luxurious hotel rooms. But destination clubs are not for everyone, and before you consider which club to join, the question is whether you should join any. One of the most obvious benefits of these clubs is the homes themselves. A man's home is his castle, while a hotel room is not. Houses have more room for kids and adults, or couples or friends, and they have amenities that few hotel rooms can offer, from fireplaces and private pools to full kitchens, billiard rooms and theaters. Yet if you're a solo traveler or part of a couple, staying at top hotels is probably going to be less expensive and not require an up-front investment, while giving you far more choices and flexibility than even the best and biggest clubs can offer. The destination club model is aimed at those who need or demand more space, typically families with children or adults who routinely travel with other couples, friends or relatives and would require multiple hotel rooms in lieu of a house.

"I did the math and saw that when we go on family vacations, I was spending three-quarters of the club's annual dues for a single week, either on renting a house myself or two hotel rooms," says Ken Schiciano, a private equity investor from Wellesley, Massachusetts, who joined Exclusive Resorts in 2003, and travels frequently with his wife and two young children. "The house versus hotel is a big appeal, but with all the amenities the club offers—the games, home theater, movies—it is also much better than just renting houses yourself. When you rent houses you spend a lot of time trying to determine their quality, and I trusted that the club had done that for me. I also travel a lot for work and thought I could use the city properties for work trips, and I have, in New York, London, San Francisco and Paris."

"It is great for groups traveling together whose only choice at a luxury resort has been multiple rooms, often unconnected. Call any top hotel…they won't guarantee you connecting rooms before you arrive. With a destination club you get a whole house…. That's the value proposition," says Greg Shove, who is both a destination club member and an expert on the industry. Shove joined Exclusive Resorts in 2003, in part because he used to be an executive at America Online, and AOL founder Steve Case is the majority owner of Exclusive Resorts. After he joined, Shove's friends asked him so many questions about the industry that he launched Helium Report, a Web-based research site that he calls "a guide that merges a Consumer Reports approach with luxury lifestyle coverage," and now also covers private jet fractional ownership plans.

Besides the room issue, the second major factor to consider in deciding whether a destination club is a viable option is when and where you really want to go on vacation. One of the major selling points of destination clubs is their flexibility, and the more flexible your travel schedule is, the more you will get out of them. But members with children, who make up a substantial portion of the vacation market, will find that they all want to travel at the same times, over Christmas and spring break. And some travelers don't want to go to different places every vacation but prefer a favorite spot, which is one of the arguments for buying a second home.

"Seasonal availability is a real issue," Shove says. "You're not going to get exactly what you want every time. If your goal is to spend every Christmas week in Beaver Creek, a destination club is not for you. The salesman, eager to move a membership, might imply that you can get what you want, but this is not the case. You need to be flexible on at least one of the parameters: location, schedule or lead time. This is not fractional ownership."

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