2010 Destination Club Review

By: Destination Club News
Date: January 1, 2011

During 2010, we drafted over 300 articles on the destination club industry, chronicling new club launches, ongoing incentives, and all of the sector's many ups and downs. When looking back on the destination club industry over the past year, one day will be highlighted: September 20. Industry powerhouse Ultimate Escapes filed for Chapter 11 bankruptcy, concluding a death spiral that had continued for months, holding members' funds and travel reservations hostage all the while, and drastically reshaping the destination club landscape.

For those looking closely, the writing had been on the wall for quite some time, going back to January of 2009 when Ultimate Escapes charged members a special assessment totaling roughly $16 million. Those that elected not to pay had their upcoming travel reservations removed and their refundable membership deposits stuck in limbo. Begrudgingly, the rest of the Ultimate Escapes members conceded and paid, allowing them to continue traveling with the club.

A year after the special assessment, it appeared that Ultimate Escapes had forgotten their financial troubles, hiring new executives, running multiple redundant offices, and even buying Super Bowl tickets. New membership sales proved increasingly difficult throughout and by the middle of the year, Ultimate Escapes was unable to even make their interest payments to their primary lender, CapitalSource.

For months, the world's second largest destination club followed a similar path, only announcing their "crisis" to members in mid-September. Just over a week later, Ultimate Escapes filed for bankruptcy, sending shockwaves throughout the destination club industry.

Nearly all of the major clubs would create custom offers, officially or unofficially, for the former Ultimate Escapes members. Quintess would expedite the launch of their new club DUO by Quintess. Second Home Destinations, a new club coming out of the bankruptcy at High Country Club, would also introduce a special no membership deposit package. Exclusive Resorts and The Discovery Club created trial membership programs to try to attract the Ultimate Escapes refugees.

Behind the scenes, a relatively new firm was eyeing the assets and members of Ultimate Escapes: Demeure. Using a no ownership model where the property portfolio was largely contributed by members, Demeure would be named the successful bidder for the bankrupt club, purchasing nine former Ultimate Escapes residences.

Despite the calendar showing 2011 and much of the dust settling following the Ultimate Escapes bankruptcy, there remains an abundance of uncertainty moving forward. What will happen to the club members? Will they join another club or abandon the destination club concept? Is there even a remote chance that they will receive any of their membership deposits refunded to them? How will Ultimate Escapes' competitors amend their own structures so that they don't face a similar fate?

While news of the Ultimate Escapes bankruptcy dominated discussions, 2010 did see an abundance of other notable events. Exclusive Resorts surpassed a milestone that no one will reach for years to come while also sending members to every continent on the map. The Abercrombie & Kent Residence Club, Equity Estates, The Hideaways Club, Banyan Tree Private Collection, Destination Cellars, the Ritz-Carlton Destination Club, and many more all announced new partnerships, adding more destinations and services to their respective members. Another smaller bankruptcy kicked off 2010 while more was revealed about the final resting place of one of the biggest destination club bankruptcies in 2009. We selected a handful of items that we identified as the most important throughout the year. Please feel free to learn more about each below.

2010 was bookended by the bankruptcy of a small club and a large one, demonstrating the difficult position that all clubs are in given the state of the economy. Fortunately, the current crop of clubs are taking the lessons learned over the past several years to heart, making sustainability a pillar in their respective models. We cannot stress the importance of analyzing a club's financial position enough if you are considering destination club membership. If you would like help in reviewing destination club membership, request a free copy of our Destination Club Guide.

The adage "hope isn't a business strategy" has never been more true. Too many clubs have relied on the hope that the economy will turn around. That existing members will refer new members. That shortfalls today can be paid tomorrow. Let's see if hope can be replaced by actual change in the coming year.